UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2022~~2023

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File Number: 001-40901

LUCID DIAGNOSTICS INC.

(Exact Name of Registrant as Specified in Its Charter)

Delaware		82-5488042
(State or Other Jurisdiction of		(IRS Employer
Incorporation or Organization)		Identification No.)


~~One Grand Central Place~~360 Madison Avenue
~~60 E. 42nd Street~~
~~Suite 4600~~25th Floor
New York, NY~~10165~~		~~10165~~10017
(Address of Principal Executive Offices)		(Zip Code)

~~(212)~~(917) ~~949-4319~~813-1828

(Registrant’s Telephone Number, Including Area Code)

Securities registered ~~under~~pursuant to Section 12(b) of the Exchange Act:

Title of each Class		Trading Symbol(s)		Name of each Exchange on which Registered
Common Stock, $0.001 par value per share		LUCD		The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of ~~“large~~”large accelerated filer”, “accelerated filer” , “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated filer	☐	Accelerated filed	☐
Non-accelerated filer	☒	Smaller reporting company	☒
		Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(c) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November ~~10, 2022~~9, 2023 there were ~~39,108,245~~44,667,304 shares of the registrant’s Common Stock, par value $0.001 per share, issued and outstanding (with such number of shares inclusive of shares of common stock underlying unvested restricted stock awards granted under the Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan as of such date).

TABLE OF CONTENTS

			~~Page~~
		Page
	Part I - Financial Information

Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets (unaudited) as of September 30, ~~2022~~2023 and December 31, ~~2021~~2022		1
	Condensed Consolidated Statements of Operations (unaudited) for the three and nine months ended September 30, ~~2022~~2023 and ~~2021~~2022		2
	Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) (unaudited) for the three and nine months ended September 30, ~~2022~~2023 and ~~2021~~2022		3
	Condensed Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, ~~2022~~2023 and ~~2021~~2022		5
	Notes to Unaudited Condensed Consolidated Financial Statements		6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		1821
Item 4.	Controls and Procedures		2629

	Part II - Other Information

Item 1.	Legal Proceedings		2630
Item 5.	Other Information		2630
Item 6.	Exhibits		2630
	Signature		2731
	Exhibit Index		2832

Part I.I - Financial Information

Item 1. Financial Statements

LUCID DIAGNOSTICS INC.

and SUBSIDIARIES

(a majority-owned subsidiary of PAVmed Inc.)

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands except number of shares and per share data - unaudited)

	September 30, 2022			December 31, 2021			September 30, 2023			December 31, 2022
Assets:
Current assets:
Cash	$	26,934		$	53,656		$	24,050		$	22,474
Accounts receivable		31			200			21			17
Prepaid expenses, deposits, and other current assets		2,882			3,447			3,232			1,865
Total current assets		29,847			57,303			27,303			24,356
Fixed assets, net		1,499			971			1,284			1,592
Operating lease right-of-use assets		2,002			—			1,594			2,008
Intangible assets, net		3,950			—			1,929			3,445
Other assets		1,078			725			1,134			1,108
Total assets	$	38,376		$	58,999		$	33,244		$	32,509
Liabilities, Preferred Stock and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,102		$	1,490		$	994		$	1,056
Accrued expenses and other current liabilities		1,128			1,113			3,326			1,447
Operating lease liabilities, current portion		860			—			1,128			962
Senior Secured Convertible Note - at fair value								14,490			—
Due To: PAVmed Inc. - MSA Fee and operating expenses		6,610			1,657			10,286			4,960
Total current liabilities		9,700			4,260			30,224			8,425
Operating lease liabilities, less current portion		1,143			—			464			1,037
Total liabilities		10,843			4,260			30,688			9,462
Commitments and contingencies								-			-
Stockholders’ Equity:
Preferred stock, $0.001 par value, 20,000,000 shares authorized; no shares issued and outstanding as of September 30, 2022 and December 31, 2021		—			—
Common stock, $0.001 par value, 100,000,000 shares authorized; 37,016,225 and 34,917,907 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively		37			35
Preferred stock, $0.001 par value, 20,000,000 shares authorized; Series A Convertible Preferred Stock, issued and outstanding 13,625 at September 30, 2023 and no shares issued and outstanding at December 31, 2022								13,625			—
Common stock, $0.001 par value, 200,000,000 shares authorized; 42,329,864 and 40,518,792 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively								42			41
Additional paid-in capital		110,643			96,608			128,800			121,081
Accumulated deficit		(83,147	)		(41,904	)		(139,911	)		(98,075	)
Total Stockholders’ Equity		27,533			54,739			2,556			23,047
Total Liabilities and Stockholders’ Equity	$	38,376		$	58,999		$	33,244		$	32,509

See accompanying notes to the unaudited condensed consolidated financial statements.

~~LUCID DIAGNOSTICS INC.~~

~~and SUBSIDIARIES~~

~~(a majority-owned subsidiary of PAVmed Inc.)~~

~~CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS~~

~~(in thousands except number of shares and per share data - unaudited)~~

2022 2021 2022 2021

Three Months Ended
September 30,

Nine Months Ended
September 30,

2022 2021 2022 2021
Revenue $ 76 $ 200 $ 265 $ 200
Operating expenses:
Cost of revenue
1,626

144

1,996

144

Sales and marketing 3,930 918 11,121 2,627
General and administrative 5,660 3,458 18,223 7,793
Amortization of acquired intangible assets 505
—

1,144

—

Research and development 2,704 2,190 9,024 5,814
Total operating expenses 14,425 6,710 41,508 16,378
Net loss from operations (14,349 ) (6,510 ) (41,243 ) (16,178 )
Other income (expense):
Interest expense - Senior Unsecured Promissory Note — (447 ) — (594 )
Other income (expense), net — (447 ) — (594 )
Loss before provision for income tax (14,349 ) (6,957 ) (41,243 ) (16,772 )
Provision for income taxes — — — —
Net loss $ (14,349 ) $ (6,957 ) $ (41,243 ) $ (16,772 )
Net loss per share - basic and diluted $ (0.39 ) $ (0.49 ) $ (1.15 ) $ (1.19 )
Weighted average common shares outstanding, basic and diluted 36,405,945 14,114,707 35,767,857 14,114,707

~~See accompanying notes to the unaudited condensed consolidated financial statements.~~

LUCID DIAGNOSTICS INC.

and SUBSIDIARIES

(a majority-owned subsidiary of PAVmed Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF ~~CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)~~

~~for the THREE AND NINE MONTHS ENDED September 30, 2022~~OPERATIONS

(in thousands except number of shares and per share data - unaudited)

Shares Amount Capital Deficit Total
Common Stock
Additional
Paid-In
Accumulated
Shares Amount Capital Deficit Total
Balance as of June 30, 2022 35,994,667 $ 36 $ 105,003 $ (68,798 ) $ 36,241
Exercise - stock options - Lucid Diagnostics Inc. 2018 Equity Plan 5,327 — 6 — 6
Stock-based compensation - Lucid Diagnostics Inc. — — 3,280 — 3,280
Stock-based compensation - PAVmed Inc. — — 291 — 291
Vest - restricted stock awards 169,320 — — — —
APA-RDx - Installment Payment 82,618 — 188 — 188
Issuance - Committed Equity Facility, net of deferred financing charges 680,263 1 1,766 — 1,767
Purchase - Employee Stock Purchase Plan 84,030 — 109 — 109
Net loss — — — (14,349 ) (14,349 )
Balance as of September 30, 2022 37,016,225 $ 37 $ 110,643 $ (83,147 ) $ 27,533

Common Stock
Additional
Paid-In
Accumulated
Shares Amount Capital Deficit Total
Balance as of December 31, 2021 34,917,907 $ 35 $ 96,608 $ (41,904 ) $ 54,739
Exercise - stock options - Lucid Diagnostics Inc. 2018 Equity Plan 964,716 1 693 — 694
Stock-based compensation - Lucid Diagnostics Inc. — — 10,371 — 10,371
Stock-based compensation - PAVmed Inc. — — 880 — 880
Vest - restricted stock awards 169,320 — — — —
CapNostics, LLC transfer — — (211 ) — (211 )
APA-RDx - Installment Payment 199,989 — 427 — 427
Issuance - Committed Equity Facility, net of deferred financing charges 680,263 1 1,766 — 1,767
Purchase - Employee Stock Purchase Plan 84,030 — 109 — 109
Net loss — — — (41,243 ) (41,243 )
Balance as of September 30, 2022 37,016,225 $ 37 $ 110,643 $ (83,147 ) $ 27,533

	2023			2022			2023			2022
	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Revenue	$	783		$	76		$	1,388		$	265
Operating expenses:
Cost of revenue		1,634			1,626			4,522			1,996
Sales and marketing		3,837			3,930			11,996			11,121
General and administrative		4,320			5,688			15,049			18,465
Amortization of acquired intangible assets		505			505			1,516			1,144
Research and development		1,615			2,704			5,334			8,815
Total operating expenses		11,911			14,453			38,417			41,541
Operating loss		(11,128	)		(14,377	)		(37,029	)		(41,276	)
Other income (expense):
Interest income		116			28			330			33
Interest expense		(149	)		—			(405	)		—
Change in fair value - Senior Secured Convertible Note		(3,021	)		—			(3,520	)		—
Loss on issue and offering costs - Senior Secured Convertible Note		—			—			(1,186	)		—
Debt extinguishments loss - Senior Secured Convertible Note		(26	)		—			(26	)		—
Other income (expense), net		(3,080	)		28			(4,807	)		33
Loss before provision for income tax		(14,208	)		(14,349	)		(41,836	)		(41,243	)
Provision for income taxes		—			—			—			—
Net loss	$	(14,208	)	$	(14,349	)	$	(41,836	)	$	(41,243	)
Net loss per share - basic and diluted	$	(0.34	)	$	(0.39	)	$	(1.01	)	$	(1.15	)
Weighted average common shares outstanding, basic and diluted		41,862,805			36,405,945			41,558,979			35,767,857

See accompanying notes to the unaudited condensed consolidated financial statements.

LUCID DIAGNOSTICS INC.

and SUBSIDIARIES

(a majority-owned subsidiary of PAVmed Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

for the THREE AND NINE MONTHS ENDED September 30, ~~2021~~2023

(in thousands except number of shares and per share data - unaudited)

Common Stock
Additional
Paid-In
Accumulated
Shares Amount Capital Deficit Total
Balance as of June 30, 2021 14,114,707 $ 14 $ 3,677 $ (23,641 ) $ (19,950 )
Stock-based compensation - Lucid Diagnostics Inc. — — 2,717 — 2,717
Stock-based compensation - PAVmed Inc. — — 56 — 56
Net loss — — — (6,957 ) (6,957 )
Balance as of September 30, 2021 14,114,707 $ 14 $ 6,450 $ (30,598 ) $ (24,134 )

	Shares		Amount		Shares		Amount		Capital		Deficit			Total
	Preferred Stock				Common Stock				Additional Paid-In		Accumulated
	Shares		Amount		Shares		Amount		Capital		Deficit			Total
Balance as of June 30, 2023		13,625		13,625		41,853,603	$	42	$	127,107	$	(125,703	)	$	15,071
Stock-based compensation - Lucid Diagnostics Inc. 2018 Equity Plan		—		—		—		—		1,032		—			1,032
Stock-based compensation - PAVmed Inc. 2014 Equity Plan		—		—		—		—		220		—			220
Vest - restricted stock awards		—		—		84,660		—		—		—			—
Conversions - Senior Secured Convertible Note		—		—		115,388		—		166		—			166
Purchase - Employee Stock Purchase Plan		—		—		276,213		—		275		—			275
Net loss		—		—		—		—		—		(14,208	)		(14,208	)
Balance as of September 30, 2023		13,625	$	13,625		42,329,864	$	42	$	128,800	$	(139,911	)	$	2,556

Common Stock
Additional
Paid-In
Accumulated
Shares Amount Capital Deficit Total
Balance as of December 31, 2020 14,114,707 $ 14 $ 294 $ (13,826 ) $ (13,518 )
Stock-based compensation - Lucid Diagnostics Inc. — — 6,045 — 6,045
Stock-based compensation - PAVmed Inc. — — 111 — 111
Net loss — — — (16,772 ) (16,772 )
Balance as of September 30, 2021 14,114,707 $ 14 $ 6,450 $ (30,598 ) $ (24,134 )

	Preferred Stock				Common Stock				Additional Paid-In		Accumulated
	Shares		Amount		Shares		Amount		Capital		Deficit			Total
Balance as of December 31, 2022		—	$	—		40,518,792	$	41	$	121,081	$	(98,075	)	$	23,047
Stock-based compensation - Lucid Diagnostics Inc. 2018 Equity Plan		—		—		—		—		5,014		—			5,014
Stock-based compensation - PAVmed Inc. 2014 Equity Plan		—		—		—		—		845		—			845
Vest - restricted stock awards		—		—		303,980		—		—		—			—
Conversions - Senior Secured Convertible Note		—		—		115,388		—		166		—			166
APA-RDx - Termination payment		—		—		553,436		—		713		—			713
Issuance - At-The-Market Facility, net of deferred financing charges		—		—		230,068		1		283		—			284
Purchase - Employee Stock Purchase Plan		—		—		508,200		—		551		—			551
Issuance - Series A Preferred Stock		13,625		13,625		—		—		—		—			13,625
Issue common stock - vendor service agreement		—		—		100,000				147		—			147
Net loss		—		—		—		—		—		(41,836	)		(41,836	)
Balance as of September 30, 2023		13,625	$	13,625		42,329,864	$	42	$	128,800	$	(139,911	)	$	2,556

LUCID DIAGNOSTICS INC.

and SUBSIDIARIES

(a majority-owned subsidiary of PAVmed Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (DEFICIT)

for the THREE AND NINE MONTHS ENDED September 30, 2022

(in thousands except number of shares and per share data - unaudited)

	Shares		Amount		Capital		Deficit			Total
	Common Stock				Additional Paid-In		Accumulated
	Shares		Amount		Capital		Deficit			Total
Balance as of June 30, 2022		35,994,667	$	36	$	105,003	$	(68,798	)	$	36,241
Exercise - stock options - Lucid Diagnostics Inc. 2018 Equity Plan		5,327		—		6		—			6
Stock-based compensation - Lucid Diagnostics Inc.		—		—		3,280		—			3,280
Stock-based compensation - PAVmed Inc.		—		—		291		—			291
Vest - restricted stock awards		169,320		—		—		—			—
APA-RDx - Installment Payment		82,618		—		188		—			188
Issuance - Committed Equity Facility, net of deferred financing charges		680,263		1		1,766		—			1,767
Purchase - Employee Stock Purchase Plan		84,030		—		109		—			109
Net loss		—		—		—		(14,349	)		(14,349	)
Balance as of September 30, 2022		37,016,225	$	37	$	110,643	$	(83,147	)	$	27,533

	Common Stock				Additional Paid-In			Accumulated
	Shares		Amount		Capital			Deficit			Total
Balance as of December 31, 2021		34,917,907	$	35	$	96,608		$	(41,904	)	$	54,739
Balance		34,917,907	$	35	$	96,608		$	(41,904	)	$	54,739
Exercise - stock options - Lucid Diagnostics Inc. 2018 Equity Plan		964,716		1		693			—			694
Stock-based compensation - Lucid Diagnostics Inc. 2018 Equity Plan		—		—		10,371			—			10,371
Stock-based compensation - PAVmed Inc. 2014 Equity Plan		—		—		880			—			880
Vest - restricted stock awards		169,320		—		—			—			—
CapNostics, LLC		—		—		(211	)		—			(211	)
APA-RDx - Installment Payment		199,989		—		427			—			427
Issuance - Committed Equity Facility, net of deferred financing charges		680,263		1		1,766			—			1,767
Purchase - Employee Stock Purchase Plan		84,030		—		109			—			109
Net loss		—		—		—			(41,243	)		(41,243	)
Balance as of September 30, 2022		37,016,225	$	37	$	110,643		$	(83,147	)	$	27,533
Balance		37,016,225	$	37	$	110,643		$	(83,147	)	$	27,533

See accompanying notes to the unaudited condensed consolidated financial statements.

LUCID DIAGNOSTICS INC.

and SUBSIDIARIES

(a majority-owned subsidiary of PAVmed Inc.)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands except number of shares and per share data - unaudited)

	2022			2021			2023			2022
	Nine Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2023			2022
Cash flows from operating activities
Net loss	$	(41,243	)	$	(16,772	)	$	(41,836	)	$	(41,243	)

Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization expense		1,321			3			1,870			1,321
Stock-based compensation - Lucid Diagnostics Inc.		10,371			6,045
Stock-based compensation - PAVmed Inc.		880			111
APA-RDx: Issue common stock - settle installment payment		427			—
Stock-based compensation - Lucid Diagnostics Inc. 2018 Equity Plan								5,014			10,371
Stock-based compensation - PAVmed Inc. 2014 Equity Plan								845			880
Change in fair value - Senior Secured Convertible Note								3,520			—
Loss on issue - Senior Secured Convertible Note								1,111			—
Debt extinguishment loss - Senior Secured Convertible Note								26			—
APA-RDx: Issue common stock - settle termination payment								713			427
Issue common stock - vendor service agreement								23			—
Changes in operating assets and liabilities:
Accounts receivable		169			(200	)		(4	)		169
Prepaid expenses and other current assets		171			(954	)		(1,262	)		171
Accounts payable		(388	)		781			(62	)		(388	)
Accrued expenses and other current liabilities		16			136			1,878			16
Accrued CWRU License Agreement Fee		—			(223	)
Due To: PAVmed Inc. - operating expenses, employee related costs, MSA Fee		2,849			2,688			5,326			2,849
Due To: PAVmed Inc. - Interest Expense - Senior Unsecured Promissory Note		—			594
Net cash flows used in operating activities		(25,427	)		(7,791	)		(22,838	)		(25,427	)

Cash flows from investing activities
Purchase of equipment		(705	)		(38	)		(46	)		(705	)
Payments - Acquisition		(3,200	)		—
Asset acquisition								—			(3,200	)
Net cash flows used in investing activities		(3,905	)		(38	)		(46	)		(3,905	)

Cash flows from financing activities
Proceeds – issue of preferred stock								13,625			—
Proceeds – issue of Senior Convertible Note								10,000			—
Proceeds – issue of common stock – Committed Equity Facility		1,807			—			—			1,807
Proceeds – issue of common stock – At-The-Market Facility								284			—
Proceeds – exercise of stock options		694			—			—			694
Proceeds – issue common stock – Employee Stock Purchase Plan		109			—			551			109
Proceeds – Due To: PAVmed Inc. - working capital cash advances		—			7,739
Net cash flows provided by financing activities		2,610			7,739			24,460			2,610

Net increase (decrease) in cash		(26,722	)		(90	)		1,576			(26,722	)
Cash, beginning of period		53,656			111			22,474			53,656
Cash, end of period	$	26,934		$	21		$	24,050		$	26,934

See accompanying notes to the unaudited condensed consolidated financial statements.

LUCID DIAGNOSTICS INC.

and SUBSIDIARIES

(a majority-owned subsidiary of PAVmed Inc.)

NOTES TO ~~UNAUDITED~~ CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(amounts in these accompanying notes are presented in thousands, except number of shares and per-share amounts.)

Note 1 —~~Summary Description of the~~The Company

Description of the Business

Lucid Diagnostics Inc. ~~and Subsidiaries, referred to herein as~~(“Lucid”, “Lucid Diagnostics” or the “Company”) is comprised of Lucid Diagnostics Inc. and its wholly-owned subsidiaries, inclusive of LucidDx Labs, Inc. and CapNostics LLC. Lucid Diagnostics Inc. is a majority-owned subsidiary of PAVmed Inc., as discussed below.

~~The Company operates in one segment as~~ a commercial-stage medical diagnostics technology company focused on the millions of patients with gastroesophageal reflux disease ~~- “GERD” - which is~~(“GERD”), also known ~~variously~~ as chronic heartburn, acid reflux or simply reflux, - who are at risk ~~for~~of developing esophageal precancer and cancer, specifically highly lethal esophageal adenocarcinoma (“EAC”). Lucid is a majority-owned subsidiary of PAVmed Inc. (“PAVmed”).

The Company believes that its flagship product, the EsoGuard Esophageal DNA Test, performed on samples collected with the EsoCheck Esophageal Cell Collection Device, constitutes the first and only commercially available diagnostic test capable of serving as a widespread tool for the early detection of esophageal precancer in at-risk GERD patients.. Early detection of esophageal precancer allows patients to undergo appropriate monitoring and treatment, as indicated by clinical practice guidelines, in an effort to prevent progression to esophageal cancer.

EsoGuard is a bisulfite-converted next-generation sequencing (NGS) DNA assay performed on surface esophageal cells collected with EsoCheck. Cell samples, including those collected with EsoCheck, as discussed below, are sent to our laboratory, for testing and analyses using our proprietary EsoGuard NGS DNA assay.

EsoCheck is a FDA 510(k) and CE Mark cleared noninvasive swallowable balloon capsule catheter device capable of sampling surface esophageal cells in a less than a five-minute office procedure. It consists of a vitamin pill-sized rigid plastic capsule tethered to a thin silicone catheter from which a soft silicone balloon with textured ridges emerges, when inflated, to gently swab surface esophageal cells. When vacuum suction is applied, the balloon and sampled cells are pulled into the capsule, protecting them from contamination and dilution by cells outside of the targeted region during device withdrawal. The Company believes that this proprietary Collect+Protect™ technology makes EsoCheck the only noninvasive esophageal cell collection device capable of such anatomically targeted and protected sampling.

EsoGuard and EsoCheck are based on patented technology licensed by Lucid ~~Diagnostics Inc. entered into a patent license agreement with~~from Case Western Reserve University (“CWRU”)~~, captioned the Amended and Restated License Agreement, dated August 23, 2021 (“Amended CWRU License Agreement”)~~. The Amended CWRU License Agreement is a successor to and replaced in its entirety the previous CWRU License Agreement, dated May 12, 2018. The Amended CWRU License Agreement terminates upon the expiration of certain related patents, or on May 12, 2038 in countries where no such patents exist, or upon expiration of any exclusive marketing rights granted by the FDA or other U.S. government agency, whichever comes later.

The Amended CWRU License Agreement (as did the predecessor CWRU License Agreement) provides for the exclusive worldwide license of the intellectual property rights for the proprietary technologies of two distinct technology components - the “EsoCheck Cell Collection Device” referred to as “EsoCheck®”; and a panel of proprietary methylated DNA biomarkers, a laboratory developed test (“LDT”), referred to as “EsoGuard®”; and together are collectively referred to as the “EsoGuard Technology”. See the Company’s consolidated financial statements for the year ended December 31, 2021, Note 3, ~~Patent License Agreement - Case Western Reserve University~~~~, as included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 as filed with the SEC on April 6, 2022, for a further discussion of the Amended CWRU License Agreement.~~

On February 25, 2022, LucidDx Labs, Inc. entered into an asset purchase agreement (“APA”) with ResearchDx, Inc. (“RDx”), an unrelated third-party - “APA-RDx”. Under the APA-RDx, LucidDx Labs Inc. acquired certain assets from RDx to be combined with LucidDx Labs Inc. purchased and leased property and equipment to establish a Company-owned Commercial Lab Improvements Act (“CLIA”) certified, College of American Pathologists (“CAP”) accredited commercial clinical laboratory capable of performing the EsoGuard® Esophageal DNA assay, inclusive of DNA extraction, next generation sequencing (“NGS”) and specimen storage. See Note 6, ~~Asset Purchase Agreement and Management Services Agreement~~~~, for a further discussion of the APA-RDx.~~

~~Since its inception, the Company has advanced the proprietary technologies underlying~~ EsoGuard and EsoCheck ~~from the academic research laboratory~~have been developed to commercial diagnostic tests and devices with scalable manufacturing capacity. The Company is presently focused on expanding commercialization across multiple sales channels, including: the communication and education of medical practitioners and clinicians of EsoGuard; and establishing “Lucid Diagnostics Test Centers”provide an accurate, non-invasive, patient-friendly test for the ~~collection~~early detection of ~~cell samples using EsoCheck. Recently, the American Gastroenterological Association~~EAC and Barrett’s Esophagus (“~~AGA”~~BE”), including dysplastic BE and ~~the American College of Gastroenterology (“ACG”) updated its clinical practice guidelines~~related pre-cursors to now support Lucid’s EsoCheck Cell Collection Device and EsoGuard Esophageal DNA Test as an acceptable alternative to endoscopy.Both guidelines expand the addressable market opportunity for these products to now affirmatively include screening women. The AGA updated guideline further expands the target population for the first time to include asymptomaticEAC in patients ~~who otherwise present~~ with the certain risk factors. Additionally, the Company is developing expanded clinical evidence to support insurance reimbursement adoption by government and private insurers. Further, the Company is also pursuing development of other products and services, including EsoCure™, an esophageal ablation device. The ability of the Company to generate revenue depends upon the Company’s ability to successfully advance the commercialization of EsoGuard, while also completing its clinical studies to accelerate the adoption of insurance reimbursement. There are no assurances, however, the Company will be able to obtain an adequate level of financial resources required for the long-term commercialization and development of its products and services.chronic GERD.

Prior to its initial public offering (“IPO”) of its common stock, the operations of the Company were funded by PAVmed Inc., inclusive of providing working capital cash advances and the payment of certain operating expenses on-behalf-of the Company. Additionally, certain operations of Lucid Diagnostics Inc. continue to be managed by personnel of PAVmed Inc., for which Lucid Diagnostics Inc. incurs expense according to the provisions of a Management Services Agreement between Lucid Diagnostics Inc. and PAVmed Inc. See Note 4,

~~Related Party Transactions~~Liquidity~~, for information with respect to the Management Services Agreement; and Note 5,~~ ~~Due To PAVmed Inc.~~~~, for further information with respect to amounts owed to PAVmed Inc. by Lucid Diagnostics Inc.~~

The Company is subject to all of the risks and uncertainties typically faced by medical device and diagnostic companies that devote substantially all of their efforts to the commercialization of their initial product and services and ongoing research and development activities and conducting clinical trials. The Company expects to continue to experience recurring losses from operations and will continue to fund its operations with debt and equity financing ~~transactions.~~transactions, including current obligations on the Company’s existing convertible debt which in accordance with management’s plans may include conversions to equity and refinancing our existing debt obligations to extend the maturity date. Notwithstanding, however, with the cash on-hand as of the date hereof and committed equity sources of financing, conversion and refinancing of existing convertible notes, the Company expects to be able to fund its operations and meet its financial obligations as they become due for the one year period from the date of the issue of the Company’s unaudited condensed consolidated financial statements, as included herein in this Quarterly Report on Form 10-Q for the period ended September 30, ~~2022.~~2023.

Note 2 — Summary of Significant Accounting Policies

Significant Accounting Policies

The Company’s significant accounting policies are as disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 as filed with the SEC on ~~April 6, 2022,~~March 14, 2023, except as otherwise noted herein below.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of ~~Lucid Diagnostics Inc.~~the Company and ~~Subsidiaries~~its subsidiaries have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), and applicable rules and regulations of the United States Securities and Exchange Commission (“SEC”), and include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. ~~Lucid Diagnostics Inc.~~The Company is a majority-owned consolidated subsidiary of PAVmed, ~~Inc.,~~ which has a majority equity ownership interest and has financial control of ~~Lucid Diagnostics Inc.~~the Company. The Company manages its operations as a single operating segment for the purposes of assessing performance and making operating decisions.

As permitted under SEC rules, certain footnotes or other financial information normally required by U.S. GAAP have been condensed or omitted. The balance sheet as of December 31, ~~2021~~2022 has been derived from audited consolidated financial statements at such date. The accompanying unaudited condensed consolidated financial statements have been prepared on the same basis as the Company’s annual consolidated financial statements, and in the opinion of management, include all adjustments, consisting only of routine recurring adjustments, necessary for a fair ~~presentation~~statement of the Company’s unaudited condensed consolidated financial information.

The consolidated results of operations for the three and nine months ended September 30, ~~2022~~2023 are not necessarily indicative of the consolidated results to be expected for the year ending December 31, ~~2022~~2023 or for any other interim period or for any other future periods. The accompanying unaudited condensed consolidated financial statements and related unaudited condensed consolidated financial information should be read in conjunction with the ~~Lucid Diagnostics Inc. and Subsidiaries~~Company’s audited consolidated financial statements and related notes thereto as of and for the year ended December 31, ~~2021~~2022 included in the Company’s Annual Report on Form 10-K as filed with the SEC on ~~April 6, 2022.~~March 14, 2023.

All amounts in the accompanying unaudited condensed consolidated financial statements and ~~these~~the notes thereto are presented in thousands of dollars, if not otherwise noted as being presented in millions of dollars, except for shares and per share amounts.

~~Reclassifications~~

Certain prior-year amounts have been reclassified to conform to the current year presentation, which includes presenting costs of revenue within operating expenses on the statements of operations, in the unaudited condensed consolidated financial statements and accompanying notes to the unaudited condensed consolidated financial statements. The impact of the reclassifications made to prior year amounts is not material and did not affect net loss.

Use of Estimates

In preparing the unaudited condensed consolidated financial statements in conformity with U.S. GAAP, management is required to make estimates and assumptions that affect the reported amounts of assets and the determination of corresponding carrying value reserves, if any, and liabilities and the disclosure of contingent losses, as of the date of the consolidated financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Significant estimates in these unaudited condensed consolidated financial statements include those related to the estimated fair value of debt obligations, stock-based equity awards and intangible assets. Other significant estimates include the estimated incremental borrowing rate, the provision or benefit for income taxes and the corresponding valuation allowance on deferred tax assets. Additionally, management’s assessment of the Company’s ability to continue as a going concern involves the estimation of the amount and timing of future cash inflows and outflows. On an ongoing basis, the Company evaluates its estimates and assumptions. The Company bases its estimates on historical experience and on various other assumptions believed to be reasonable. Due to inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in these estimates.

~~Leases~~

~~The Company adopted FASB ASC Topic 842,~~ ~~Leases~~~~, (“ASC 842”) effective December 31, 2021.~~

All significant lease agreements and contractual agreements with embedded lease agreements are accounted for under the provisions of ASC 842, wherein, if the contractual arrangement: involves the use of a distinct identified asset; provides for the right to substantially all the economic benefits from the use of the asset throughout the contractual period; and, provides for the right to direct the use of the asset. A lease agreement is accounted for as either a finance lease (generally with respect real estate) or an operating lease (generally with respect to equipment). Under both a finance lease and an operating lease, the Company recognizes as of the lease commencement date a lease right-of-use (“ROU”) asset and a corresponding lease payment liability.

~~Note 2 — Summary of Significant Accounting Policies~~~~- continued~~

A lease ROU asset represents the Company’s right to use an underlying asset for the lease term, and the lease liability represents its contractual obligation to make lease payments. The lease ROU asset is measured at the lease commencement date as the present value of the future lease payments plus initial direct costs incurred. The Company recognizes lease expense of the amortization of the lease ROU asset for an operating lease on a straight-line basis over the lease term; and for financing leases on a straight-line basis unless another basis is more representative of the pattern of economic benefit. The operating ROU asset also includes any lease incentives received for improvements to leased property, when the improvements are lessee owned. For improvements to leased property that are lessor owned, the Company includes amounts the Company incurred for the improvements as ROU assets which are amortized on a straight-line basis over the life of the lease.

The lease liability is measured at the lease commencement date with the discount rate generally based on the Company’s incremental borrowing rate (to the extent the lease implicit rate is not known nor determinable), with interest expense recognized using the interest method for financing leases.

Certain leases may include options to extend or terminate the agreement. The Company does not assume renewals in determination of the lease term unless the renewals are deemed to be reasonably certain at lease commencement. As well, an option to terminate is considered unless it is reasonably certain the Company will not exercise the option. The Company elected the practical expedient to not recognize a lease ROU asset and lease payment liability for leases with a term of twelve months or less (“short-term leases”), resulting in the aggregate lease payments being recognized on a straight line basis over the lease term. The Company’s leases with a commencement date prior to January 1, 2022 were short-term leases and therefore did not require recording a ROU asset or lease liability at December 31, 2021. Additionally, the Company elected the practical expedient to not separate lease and non-lease components.

Revenue Recognition

Revenues are recognized when the satisfaction of the performance obligation occurs, in an amount that reflects the consideration the Company expects to collect in exchange for those services. The Company’s revenue is primarily generated by its laboratory testing services utilizing its EsoGuard Esophageal DNA tests. The services are completed upon release of a patient’s test result to the ordering healthcare provider. Revenue recognized is inclusive of both variable consideration in connection with an individual patient’s third-party insurance coverage policy and fixed consideration in connection with a contracted services arrangement with an unrelated third party legal entity. To determine revenue recognition for the arrangements that the Company determines are within the scope of ASC 606, Revenue from Contracts with Customers, the Company performs the following five steps: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize revenue when (or as) the entity satisfies a performance obligation.

Note 2 — Summary of Significant Accounting Policies - continued

The key aspects considered by the Company include the following:

Contracts—The Company’s customer is primarily the patient, but the Company does not enter into a formal reimbursement contract with a patient. The Company establishes a contract with a patient in accordance with other customary business practices, which is the point in time an order is received from a provider and a patient specimen has been returned to the laboratory for testing. Payment terms are a function of a patient’s existing insurance benefits, including the impact of coverage decisions with Center for Medicare & Medicaid Services (“CMS”) and applicable reimbursement contracts established between the Company and payers. However, when a patient is considered self-pay, the Company requires payment from the patient prior to the commencement of the Company’s performance obligations. The Company’s consideration can be deemed variable or fixed depending on the structure of specific payer contracts, and the Company considers collection of such consideration to be probable to the extent that it is unconstrained.

Performance obligations—A performance obligation is a promise in a contract to transfer a distinct good or service (or a bundle of goods or services) to the customer. The Company’s contracts have a single performance obligation, which is satisfied upon rendering of services, which culminates in the release of a patient’s test result to the ordering healthcare provider. The Company elects the practical expedient related to the disclosure of unsatisfied performance obligations, as the duration of time between providing testing supplies, the receipt of a sample, and the release of a test result to the ordering healthcare provider is far less than one year.

Transaction price—The transaction price is the amount of consideration that the Company expects to collect in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties (for example, some sales taxes). The consideration expected to be collected from a contract with a customer may include fixed amounts, variable amounts, or both.

If the consideration derived from the contracts is deemed to be variable, the Company estimates the amount of consideration to which it will be entitled in exchange for the promised goods or services. The Company limits the amount of variable consideration included in the transaction price to the unconstrained portion of such consideration. In other words, the Company recognizes revenue up to the amount of variable consideration that is not subject to a significant reversal until additional information is obtained or the uncertainty associated with the additional payments or refunds is subsequently resolved.

~~Note 2 — Summary of Significant Accounting Policies~~ ~~- continued~~

When the Company does not have significant historical experience or that experience has limited predictive value, the constraint over estimates of variable consideration may result in no revenue being recognized upon delivery of patient EsoGuard test results to the ordering healthcare provider. As such, the Company recognizes revenue up to the amount of variable consideration not subject to a significant reversal until additional information is obtained or the uncertainty associated with additional payments or refunds, if any, is subsequently resolved. Differences between original estimates and subsequent revisions, including final settlements, represent changes in estimated expected variable consideration, with the change in estimate recognized in the period of such revised estimate. With respect to a contracted service arrangement, the fixed consideration revenue is recognized on an as-billed basis upon delivery of the laboratory test report with realization of such fixed consideration deemed probable based upon actual historical ~~experience~~experience.

Allocate transaction price—The transaction price is allocated entirely to the performance obligation contained within the contract with a customer on the basis of the relative standalone selling prices of each distinct good or service.

Practical Expedients—The Company does not adjust the transaction price for the effects of a significant financing component, as at contract inception, the Company expects the collection cycle to be one year or less.

Financial Instruments Fair Value Measurements

FASB ASC Topic 820, Fair Value Measurement, (ASC 820) defines fair value as the price which would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at a transaction measurement date. The ASC 820 three-tier fair value hierarchy prioritizes the inputs used in the valuation methodologies, as follows:

	Level 1	Valuations based on quoted prices for identical assets and liabilities in active markets.

	Level 2	Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets which are not active, or other inputs observable or can be corroborated by observable market data.

	Level 3	Valuations based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.

The Company evaluates its financial instruments to determine if those instruments or any embedded components of those instruments potentially qualify as derivatives required to be separately accounted for in accordance with FASB ASC Topic 815, Derivatives and Hedging (ASC 815).

Note 2 — Summary of Significant Accounting Policies - continued

The recurring and non-recurring estimated fair value measurements are subjective and are affected by changes in inputs to the valuation models, including the Company’s common stock price, and certain Level 3 inputs, including, the assumptions regarding the estimated volatility in the value of the Company’s common stock price; the Company’s dividend yield; the likelihood and timing of future dilutive transactions, as applicable, along with the risk-free rates based on U.S. Treasury security yields. Changes in these assumptions can materially affect the estimated fair values.

As of September 30, 2023 and December 31, 2022, the carrying values of cash, and accounts payable, approximate their respective fair value due to the short-term nature of these financial instruments.

Fair Value Option (“FVO”) Election

Under a Securities Purchase Agreement dated March 13, 2023, the Company issued a Senior Secured Convertible Note dated March 21, 2023, referred to herein as the “March 2023 Senior Convertible Note”, which is accounted under the “fair value option election” as discussed below.

Under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 815, Derivative and Hedging, (“ASC 815”), a financial instrument containing embedded features and/or options may be required to be bifurcated from the financial instrument host and recognized as separate derivative asset or liability, with the bifurcated derivative asset or liability initially measured at estimated fair value as of the transaction issue date and then subsequently remeasured at estimated fair value as of each reporting period balance sheet date.

Alternatively, FASB ASC Topic 825, Financial Instruments, (“ASC 825”) provides for the “fair value option” (“FVO”) election. In this regard, ASC 825-10-15-4 provides for the FVO election (to the extent not otherwise prohibited by ASC 825-10-15-5) to be afforded to financial instruments, wherein the financial instrument is initially measured at estimated fair value as of the transaction issue date and then subsequently remeasured at estimated fair value as of each reporting period balance sheet date, with changes in the estimated fair value recognized as other income (expense) in the statement of operations. The estimated fair value adjustment of the March 2023 Senior Convertible Note is presented in a single line item within other income (expense) in the accompanying consolidated statement of operations (as provided for by ASC 825-10-50-30(b)). Further, as required by ASC 825-10-45-5, to the extent a portion of the fair value adjustment is attributed to a change in the instrument-specific credit risk, such portion would be recognized as a component of other comprehensive income (“OCI”) (for which there was no such adjustment with respect to the March 2023 Senior Convertible Note).

See Note 10, Financial Instruments Fair Value Measurements, with respect to the FVO election; and Note 11, Debt, for a discussion of the March 2023 Senior Convertible Note.

Reclassifications

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update (“ASU”) No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The updated guidance requires companies to measure all expected credit losses for financial instruments held at the reporting date based on historical experience, current conditions, and reasonable supportable forecasts. This replaces the existing incurred loss model and is applicable to the measurement of credit losses on financial assets, including trade receivables. The guidance was adopted by the Company on January 1, 2023. The adoption of the ASU did not have an impact on the Company’s unaudited condensed consolidated financial statements.

Note 3 — Revenue from Contracts with Customers

EsoGuard Commercialization Agreement

The Company entered into the EsoGuard Commercialization Agreement, dated August 1, 2021, with its former commercial laboratory service provider, ResearchDx Inc. (“RDx”), an unrelated third-party. The EsoGuard Commercialization Agreement was on a month-to-month basis and was terminated on February 25, 2022 upon the execution of an asset purchase agreement (“APA”) dated February 25, 2022, between LucidDx Labs Inc., a wholly-owned subsidiary of ~~Lucid Diagnostics Inc.,~~the Company, and RDx, with such agreement further discussed in Note 6, Asset Purchase Agreement and Management Services Agreement.

Note 3 — Revenue from Contracts with Customers - continued

Revenue Recognized

In the three ~~months~~ and nine months ended September 30, ~~2022,~~2023, the Company recognized ~~total~~ revenue of $76783 and $~~265~~1,388, ~~respectively. For the three month period ended September 30, 2022, the Company recognized revenue~~respectively, resulting from the delivery of patient EsoGuard test results. Revenue recognized from customer contracts deemed to include a variable consideration transaction price is limited to the unconstrained portion of the variable ~~consideration as the Company did not estimate expected variable consideration given the lack of historical experience and objective reliable actual reimbursement data. In addition to the~~consideration. The Company’s revenue ~~recognized during~~for the three ~~month period~~months ended September 30, 2022 was $76, resulting from the delivery of patient EsoGuard test results. The Company’s revenue for the nine ~~month period~~months ended September 30, 2022 was $265, and includes $~~189~~ ofthe activity described for the three months ended September 30, 2022, along with the revenue recognized under the EsoGuard Commercialization Agreement, which represented the minimum fixed monthly fee of $100 for the period January 1, 2022 to the February 25, 2022 termination date as discussed above. The monthly fee was deemed to be collectible for such period as RDx has timely paid the applicable respective monthly fee. ~~In the three and nine months ended September 30, 2021, the Company recognized total revenue of $200~~ ~~and $200, respectively, under the EsoGuard Commercialization Agreement.~~

Cost of Revenue

The cost of revenues principally includes the costs related to the Company’s laboratory operations (excluding estimated costs associated with research activities), the costs related to the EsoCheck cell collection device, cell sample mailing kits and license royalties.

In the three and nine months ended September 30, ~~2022,~~2023, the cost of revenue was $1,634 and $4,522, respectively, and was primarily related to costs for our laboratory operations and EsoCheck device supplies. The Company’s cost of revenue for the three months ended September 30, 2022 was $1,626 and was primarily related to costs for our laboratory operations and EsoCheck device supplies. ~~For~~The Company’s cost of revenue for the nine months ended September 30, 2022 ~~the cost of revenue~~ was $1,996, ~~including $369~~ ~~reflecting~~and includes the activity described for the three months ended September 30, 2022, along with the costs attributable to delivering the services under the EsoGuard Commercialization Agreement for the period January 1, 2022 to February 25, 2022. ~~In the three and nine months ended September 30, 2021, the cost of revenue was $144~~ ~~and $144, respectively, which solely related to the EsoGuard Commercialization Agreement.~~

Note 4 — Related Party Transactions

Case Western Reserve University and Physician Inventors - Amended CWRU License Agreement

Case Western Reserve University (“CWRU”) and each of the three physician inventors (“Physician Inventors”) of the intellectual property licensed under the amended and restated patent license agreement with CWRU, dated August 23, 2021 (the “Amended CWRU License Agreement”), each hold a minority equity ownership interest in Lucid Diagnostics Inc. The expenses incurred with respect to the Amended CWRU License Agreement and the three Physician Inventors, as classified in the accompanying unaudited condensed consolidated statement of operations for the periods indicated are summarized as follows:

Schedule of Incurred Expenses of Minority Shareholders

	2023		2022		2023		2022
	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Cost of Revenue
CWRU – Royalty Fees	$	42	$	4	$	76	$	13

General and Administrative Expense
Amended CWRU – License Agreement - reimbursement of patent legal fees		343		—		732		209
Stock-based compensation expense – Physician Inventors’ restricted stock awards		—		275		180		819

Research and Development Expense
Fees - Physician Inventors’ consulting agreements		5		15		15		32
Sponsored research agreement		—		4		—		6
Stock-based compensation expense – Physician Inventors’ stock options		52		52		157		151
Total Related Party Expenses	$	442	$	350	$	1,160	$	1,230

2022 2021 2022 2021

Three Months Ended
September 30,

Nine Months Ended
September 30,

2022 2021 2022 2021
Cost of Revenue
CWRU – Royalty Fee $ 4 $ 10 $ 13 $ 10
General and Administrative Expense
CWRU – License Agreement - Amendment Fee - Milestone III — 10 — 10
Stock-based compensation expense – Physician Inventors’ restricted stock awards 275 273 819 637

Research and Development Expense
CWRU License Agreement - reimbursement of patent legal fees — 82 209 195
Fees - Physician Inventors’ consulting agreements 15 8 32 22
Sponsored research agreement 4 — 6 —
Stock-based compensation expense – Physician Inventors’ stock options 52 56 151 114
Total Related Party Expenses $ 350 $ 439 $ 1,230 $ 988

As of September 30, 2023, the Company had an outstanding payable of $820.

Note 4 — Related Party Transactions - continued

PAVmed Inc. - Management Services Agreement

The Company’s daily operations of are also managed in part by personnel employed by PAVmed, ~~Inc.,~~ for which ~~Lucid Diagnostics Inc.~~the Company incurs a service fee, referred to as the “MSA Fee”, according to the provisions of a Management Services Agreement (“MSA”) with ~~PAVmed Inc.~~PAVmed. The MSA does not have a termination date, but may be terminated by the ~~Lucid Diagnostics Inc.~~Company’s board of directors. The MSA Fee is charged on a monthly basis and is subject-to periodic adjustment corresponding with changes in the services provided by PAVmed ~~Inc.~~ personnel to the Company, with any such change in the MSA Fee being subject to approval of the boards of directors of each of ~~Lucid Diagnostics Inc.~~the Company and ~~PAVmed Inc. On August 11, 2022, the~~PAVmed. The respective ~~Company’s~~companies’ boards of directors approved a ~~sixth~~seventh amendment to the MSA to increase the MSA Fee to $~~550~~750 per month, ~~from~~effective January 1, 2023, which was entered into by PAVmed and the Company on May 9, 2023. During the three months ended September 30, 2022, MSA fees were $550 per month. During the six months ended June 30, 2022, MSA Fees were $390 per month, with such increase effective on a prospective basis that commenced July 1, 2022. Pursuant to the sixth amendment, the parties agreed PAVmed Inc. may elect to receive payment of the monthly MSA Fee in cash or in shares of common stock of the Company, with such shares valued at the volume weighted average price (“VWAP”) during the final ten trading days of the applicable month (subject to a floor price of $~~0.70~~ ~~per share). However, in no event will PAVmed Inc. be entitled to receive under the MSA, as amended, more than~~ ~~7,709,836~~ shares of common stock the Company (representing 19.99% of our outstanding shares of common stock as of immediately prior to the execution of the sixth amendment). The shares that may be issued under the MSA, as amended, are being offered and sold in transactions exempt from registration under the Securities Act of 1933, as amended, in reliance on the exemption afforded under Section 4(a)(2) thereof.month.

The MSA Fee expense classification in the unaudited condensed consolidated statement of operations for the periods noted is as follows:

Schedule of MSA Fee Expense Classification in ~~Unaudited Condensed Statement~~Statements of Operations

2022 2021 2022 2021

Three Months Ended
September 30,

Nine Months Ended
September 30,

2022 2021 2022 2021
Cost of Revenues $ — $ 40 $ — $ 40
Sales & Marketing 330 352 713 971
General & Administrative 891 254 2,175 872
Research & Development 429 224 1,102 627
Total MSA Fee $ 1,650 $ 870 $ 3,990 $ 2,510

	2023		2022		2023		2022
	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Sales & Marketing		109		330		327		713
General & Administrative		1,621		891		4,729		2,175
Research & Development		520		429		1,694		1,102
Total MSA Fee	$	2,250	$	1,650	$	6,750	$	3,990

~~Note 4 — Related Party Transactions~~ ~~- continued~~

The classification of the MSA Fee as presented above is based on the PAVmed ~~Inc.~~ classification of employee salary ~~expense.~~expense and other operating expenses. In this regard, PAVmed ~~Inc.~~ classifies employee salary expense as ~~cost-of-revenue for employees engaged in service delivery under the EsoGuard Commercialization Agreement, and~~ sales and marketing expenses for employees performing sales, marketing, and reimbursement activities and functions, general and administrative, and research and development except for those employees who are engaged in product and services engineering development and design and /or clinical trials activities, for which such employee salary is classified as research and development expense.

~~Other Related Party Transactions~~

Lucid Diagnostics Inc. previously entered into a consulting agreement with Stanley N. Lapidus, effective June 2020 with such consulting agreement providing for compensation on a contractual rate per hour for consulting services provided. In July 2021, Mr. Lapidus was appointed as Vice Chairman of the Board of Directors of Lucid Diagnostics Inc. Lucid Diagnostics Inc. recognized general and administrative expense of $8 ~~and $~~21 ~~in the three and nine months ended September 30, 2021 in connection with the consulting agreement.~~

Note 5 — Due To PAVmed ~~Inc~~Inc..

The aggregate Due To: PAVmed Inc. for the periods indicated is summarized as follows:

Schedule of ~~Senior Unsecured Promissory Note~~

CapNostics, LLC Transfer PAVmed Inc. OBO Payments Employee-Related Costs MSA Fees Total
Balance - December 31, 2021 $ — $ 620 $ 1,037 $ — $ 1,657
MSA fees — — — 3,990 3,990
On Behalf Of (OBO) activities — 1,114 — — 1,114
ERC - Payroll & Benefits — — 7,178 — 7,178
CapNostics, LLC transfer 2,105 — — — 2,105
Cash payments to PAVmed Inc. — (1,598 ) (5,496 ) (2,340 ) (9,434 )
Balance - September 30, 2022 $ 2,105 $ 136 $ 2,719 $ 1,650 $ 6,610

~~CapNostics, LLC~~

~~On October 5, 2021, PAVmed Subsidiary Corp, a wholly-owned subsidiary of PAVmed Inc., acquired~~ ~~100%~~ ~~of the outstanding membership interest of CapNostics, LLC (“CapNostics”), an unrelated third-party, for total (gross) purchase consideration of approximately $2.1~~ million in cash, paid at the closing of the transaction. Subsequently, effective April 1, 2022, PAVmed Subsidiary Corp and the Company entered into an agreement pursuant to which PAVmed Subsidiary Corp assigned to Lucid Diagnostics Inc. ~~100%~~ ~~of the membership interest in CapNostics, LLC, resulting in the recognition by the Company principally of an acquired defensive technology intangible asset, and a $2.1~~ ~~million payment obligation~~ Due To: PAVmed Inc. Additionally, Lucid Diagnostics Inc. was also assigned on a prospective basis effective April 1, 2022, the consulting agreement with the previous principal owner of CapNostics, LLC. The transfer was accounted for as entities under common control. See Note 9 - ~~Intangible Assets, net,~~ ~~with respect to the transferred intangible asset.~~

	MSA Fees			Employee- Related Costs			PAVmed Inc. OBO Payments			Total
Balance - December 31, 2022	$	1,650		$	3,026		$	284		$	4,960
MSA fees		6,750			—			—			6,750
ERC - Payroll & Benefits		—			1,382			—			1,382
On Behalf Of (OBO) activities		—			—			841			841
Cash payments to PAVmed Inc.		(2,250	)		(309	)		(1,088	)		(3,647	)
Balance - September 30, 2023	$	6,150		$	4,099		$	37		$	10,286

~~EsoCure License Agreement with PAVmed Inc.~~

EsoCure has been in development as an esophageal ablation device by PAVmed Inc., with the intent to allow a clinician to treat dysplastic BE before it can progress to EAC, a highly lethal esophageal cancer, and to do so without the need for complex and expensive capital equipment. In April 2022, following the approval from both the Company’s and PAVmed Inc.’s boards of directors, the companies entered into an intercompany license agreement (“EsoCure License Agreement”), pursuant to which the Company was granted the rights to commercialize EsoCure, a technology under development intended for the treatment of dysplastic Barrett’s Esophagus. The EsoCure License Agreement, includes a royalty arrangement whereby the Company will pay PAVmed Inc. a 5% ~~royalty on all EsoCure sales up to $100~~ ~~million per calendar year, and an~~ ~~8.0% royalty on annual sales in excess of $100~~ ~~million per calendar year. The Company is obligated to reimburse PAVmed Inc. for any ongoing development costs and cumulative patent expenses associated with the licensed technology.~~

Note 6 — Asset Purchase Agreement and Management Services Agreement

Asset Purchase Agreement and Management Services Agreement - ResearchDx Inc.

Through its wholly-owned subsidiary, LucidDx Labs Inc. (“LucidDx Labs”), the Company entered into an asset purchase agreement (“APA”) dated February 25, 2022, with ResearchDx, Inc. (“RDx”), an unrelated third-party - “APA-RDx”. Under the APA-RDx, LucidDx Labs Inc. acquired certain assets from RDx which were combined with ~~LucidDx Labs Inc. purchased and leased~~other property and equipment to establish a Company-owned CLIA certified, CAP accredited commercial clinical laboratory capable of performing the EsoGuard® Esophageal DNA assay, inclusive of DNA extraction, next generation sequencing (“NGS”) and specimen storage. Prior to February 25, 2022, RDx provided such laboratory services at its owned CLIA-certified, CAP-accredited clinical laboratory. In connection with the execution and delivery of the APA-RDx, LucidDx Labs Inc. and RDx entered into a separate management services agreement (“MSA-RDx”), dated and effective February 25, 2022, pursuant to which RDx provided certain testing and related services for the Laboratory.

The total purchase price consideration payable under the APA-RDx is a face value of $3,200 comprised of three contractually specified periodic payments. The APA-RDx is being accounted for as an asset acquisition, with the recognition of an intangible asset of approximately $3,200, which is included in “Intangible assets, net” on the accompanying unaudited condensed consolidated balance sheet, as further discussed in Note 9, Intangible Assets, net.~~In the three and nine months ended September 30, 2022, a total of $1,000~~ ~~and $3,200, respectively, of cash was paid with respect to the periodic payments.~~

~~Additionally, the APA-RDx requires~~Termination of Management Services Agreement and Modification of Other Payment Obligations - ResearchDx Inc.

On February 14, 2023, through LucidDx Labs Inc, the Company entered into an agreement (the “MSA Termination Agreement”) with RDx, pursuant to ~~pay a total~~which the parties mutually agreed to terminate the MSA-RDx without cause. The termination was effective as February 10, 2023. Until the termination of $~~3,000~~the management service agreement with RDx, RDx had continued to ~~be paid as twelve (12) equal installment payments commencing May 25, 2022~~provide certain testing and ~~then on each three month anniversary thereof, inclusive of a final installment payment on February 25, 2025, with such installment payments recognized as current period expense as incurred. In~~related services for the ~~three and nine months ended September 30, 2022, as provided for~~Laboratory in ~~the APA-RDx, installment payments were settled~~accordance with the ~~issuances~~terms of ~~82,618~~ ~~and~~ ~~199,989~~ ~~shares of common stock of Lucid Diagnostics Inc., with such shares having fair values of $188~~ ~~and $427, respectively, (with~~ the fair value measured as the quoted closing price on the dates the shares were issued), which was recognized as a current period expense included in general and administrative expenses in the accompanying unaudited condensed consolidated statement of operations.MSA-RDx.

The ~~APA-RDx provides for each of an acceleration and a cancellation~~MSA Termination Agreement reduces the remaining amounts of the ~~remaining unpaid installment~~earnout payments ~~summarized as follows:~~

	●	The payment of the remaining unpaid installment payments will be accelerated as immediately due and payable as of the date the “MSA-RDx” (as such agreement is discussed below) is either terminated by LucidDx Labs Inc. without cause or if it is terminated by mutual agreement between the Company and RDx.

	●	The payment of the remaining unpaid installment payments will be cancelled if the MSA-RDx is terminated by LucidDx Labs Inc. for cause, defined as the occurrence of any one of: (i) a material breach by RDx which is not cured within thirty days of LucidDx Labs Inc. written notice; (ii) RDx becomes insolvent and /or bankrupt; or (ii) RDx fails to comply with applicable statutes, is barred from participating in federal health care programs, or by action of changes in law or regulation, or by action of judicial interpretation of law, or by judicial civil proceedings decisions.

~~Management Services Agreement - Research Dx Inc~~

~~LucidDx Labs Inc.~~ and ~~RDx entered into a separate~~ management ~~services agreement (“MSA-RDx”), dated~~fees due under the APA-RDx and ~~effective February 25, 2022, with such agreement having a term~~the MSA-RDx to $713. The payment was satisfied through the issuance of ~~three years~~553,436 ~~commencing on the agreement’s effective date, and an initial fee of $150~~ ~~per quarter. The MSA-RDx provides for the cancellation~~shares of the ~~remaining unpaid installment~~Company’s common stock in February 2023. The Company was not required to make any cash payments ~~upon termination of~~in connection with the ~~MSA-RDx for any reason or no reason by either party thereto.~~termination.

Note 7 — Prepaid Expenses, Deposits, and Other Current Assets

Prepaid expenses and other current assets consisted of the following as of:

Schedule of Prepaid Expenses and Other Current Assets

September 30, 2022 December 31, 2021
Advanced payments to service providers and suppliers $ 363 $ 260
Prepaid insurance 26 1,578
Deposits 2,389 1,116
EsoCheck cell collection supplies 55 434
EsoGuard mailer supplies 49 59
Total prepaid expenses, deposits and other current assets $ 2,882 $ 3,447

	September 30, 2023		December 31, 2022
Advanced payments to service providers and suppliers	$	273	$	371
Prepaid insurance		44		52
Deposits		2,725		1,331
EsoCheck cell collection supplies		190		59
EsoGuard mailer supplies		—		52
Total prepaid expenses, deposits and other current assets	$	3,232	$	1,865

Note 8 — Leases

During the nine months ended September 30, ~~2022,~~2023, the Company entered into additional lease agreements that have commenced and are classified as operating leases and short-term leases ~~including~~ for ~~each of: a commercial clinical laboratory and~~ additional Lucid Test Centers.

The Company’s future lease payments as of September 30, ~~2022,~~2023, which are presented as operating lease liabilities, current portion and operating lease liabilities, less current portion on the Company’s unaudited condensed consolidated balance sheets are as follows:

Schedule Of Future Lease Payments Of Operating Lease Liabilities


2023 (remainder of year)	$	313
2024		1,161
2025		127
2026		63
2027		24
Total lease payments	$	1,688
Less: imputed interest		(96	)
Present value of lease liabilities	$	1,592

2022 (remainder of year) $ 246
2023 980
2024 928
2025 24
Total lease payments $ 2,178
Less: imputed interest (175 )
Present value of lease liabilities $ 2,003

Note 8 — Leases - continued

Supplemental disclosure of cash flow information related to the Company’s cash and non-cash activities with its leases are as follows:

Schedule Of Cash Flow Supplemental Information

	Nine Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2023			2022
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	689		$	—		$	894		$	689
Non-cash investing and financing activities
Right-of-use assets obtained in exchange for new operating lease liabilities	$	2,567		$	—		$	380		$	2,567
Weighted-average remaining lease term - operating leases (in years)		2.24			—			1.58			2.24
Weighted-average discount rate - operating leases		7.875	%		—	%		7.875	%		7.875	%

As of September 30, 2023 and December 31, 2022, the Company’s right-of-use assets from operating leases ~~are~~were $~~2,002~~1,594 and $2,008, respectively, which are ~~reporting~~reported in operating lease right-of-use assets ~~- operating leases~~ in the unaudited condensed consolidated balance sheets. As of September 30, 2023 and December 31, 2022, the Company ~~has~~had outstanding operating lease obligations of $~~2,003~~1,592 and $1,999, respectively, of which $~~860~~1,128 isand $962, respectively, are reported in operating lease liabilities, current portion and $~~1,143~~464 ~~is reporting~~and $1,037, respectively, are reported in operating lease liabilities less current portion in the Company’s unaudited condensed consolidated balance sheets. ~~The Company did not have operating leases as of December 31, 2021.~~ The Company calculates its incremental borrowing rates for specific lease terms, used to discount future lease payments, as a function of the financing terms the Company would likely receive on the open market.

Note 9 —Intangible Assets, net

Intangible assets, less accumulated amortization, consisted of the following as of:

Schedule of Intangible Assets ~~Accumulated Amortization~~

	Estimated Useful Life	September 30, 2022			Estimated Useful Life	September 30, 2023			December 31, 2022
Defensive technology	60 months	$	2,105		60 months	$	2,105		$	2,105
Laboratory licenses and certifications and laboratory information management software	24 months		3,200		24 months		3,200		$	3,200
Total Intangible assets			5,305				5,305			5,305
Less Accumulated Amortization			(1,355	)			(3,376	)		(1,860	)
Intangible Assets, net		$	3,950			$	1,929		$	3,445

The defensive technology intangible asset of $2.1 million (and approximately $0.2 million of accumulated amortization) was recognized by the Company as of the April 1, 2022 effective date of the ~~intercompany~~ transfer of CapNostics, LLC (“CapNostics”) to the Company from PAVmed Subsidiary Corp (a wholly-owned subsidiary of ~~PAVmed Inc.)~~PAVmed). The transfer was accounted for as entities under common control. The defensive technology intangible asset was recognized by PAVmed Subsidiary Corp upon its acquisition of CapNostics, ~~LLC,~~ an unrelated third-party, for total purchase consideration paid on the October 5, 2021 acquisition date of approximately $2.1 million in cash. The CapNostics ~~LLC~~ transaction was accounted for as an asset acquisition, resulting in the recognition of the defensive technology intangible asset. The defensive technology intangible asset is being amortized on a straight-line basis over an expected useful life60 months commencing on the acquisition date. ~~See Note 5,~~ ~~Due To PAVmed Inc.~~~~, with respect to the transfer of the corresponding $2.1~~ ~~million payment obligation Due To: PAVmed Inc.~~

As noted in Note 6, Asset Purchase Agreement and Management Services Agreement, the asset purchase agreement between the Company and ResearchDx Inc. (“APA-RDx”), is being accounted for as an asset acquisition. The intangible assets recognized under the APA-RDx are the laboratory licenses and certifications (inclusive of a CLIA certification, CAP accreditation, and clinical laboratory licenses for five (5) U.S. States ~~transfer~~transferred to the Company from RDx), and a laboratory information management software perpetual-use royalty-free license granted under the APA-RDx, with such intangible asset having a useful life of twenty-four months commencing on the APA-RDx February 25, 2022 transaction date.

Amortization expense of the intangible assets discussed above was $505 and $0505 for the three month periods ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and $~~1,144~~1,516 and $01,144 for the nine month periods ended September 30, ~~2022~~2023 and ~~2021,~~2022, respectively, and is included in ~~general and administrative expenses~~amortization of acquired intangible assets in the accompanying unaudited condensed consolidated statements of operations. As of September 30, ~~2022,~~2023, the estimated future amortization expense associated with the Company’s finite-lived intangible assets for each of the five succeeding fiscal years is as follows:

Schedule of Future Amortization Expense


2023 (remainder of year)	$	505
2024		688
2025		421
2026		315
Total	$	1,929

2022 (remainder of year) $ 504
2023 2,021
2024 688
2025 421
2026 316
Total $ 3,950

Note 10 — Financial Instruments Fair Value Measurements

Recurring Fair Value Measurements

The fair value hierarchy table for the reporting date noted is as follows:

Schedule of Financial Liabilities Measured at Fair Value on Recurring Basis

	Fair Value Measurement on a Recurring Basis at Reporting Date Using¹
	Level-1 Inputs		Level-2 Inputs		Level-3 Inputs		Total
September 30, 2023
March 2023 Senior Convertible Note	$	—	$	—	$	14,490	$	14,490
Totals	$	—	$	—	$	14,490	$	14,490

There were no transfers between the respective Levels during the period ended September 30, 2023.

As discussed in Note 11, Debt, the Company issued a Senior Secured Convertible Note dated March 21, 2023 with a $11.1 million face value principal (“March 2023 Senior Convertible Note”). The convertible note is accounted for under the ASC 825-10-15-4 fair value option (“FVO”) election, wherein, the financial instrument is initially measured at its issue date estimated fair value and subsequently remeasured at estimated fair value on a recurring basis at each reporting period date.

The estimated fair value of the financial instruments classified within the Level 3 category was determined using both observable inputs and unobservable inputs. Unrealized gains and losses associated with liabilities within the Level 3 category include changes in fair value attributable to both observable (e.g., changes in market interest rates) and unobservable (e.g., changes in unobservable long- dated volatilities) inputs.

The estimated fair value of the March 2023 Senior Convertible Note as of each of March 21, 2023 and September 30, 2023 were computed using a Monte Carlo simulation of the present value of its cash flows using a synthetic credit rating analysis and a required rate-of-return, using the following assumptions:

Schedule of Fair Value Assumption Used

	March 2023 Senior Convertible Note: March 21, 2023			March 2023 Senior Convertible Note: September 30, 2023
Fair Value	$	11,900		$	14,490
Face value principal payable	$	11,111		$	11,019
Required rate of return		11.00	%		11.10	%
Conversion Price	$	5.00		$	5.00
Value of common stock	$	1.54		$	1.17
Expected term (years)		2.00			1.47
Volatility		75.00	%		65.00	%
Risk free rate		4.09	%		5.13	%
Dividend yield		—	%		—	%

The estimated fair values reported utilized the Company’s common stock price along with certain Level 3 inputs (as discussed in the table above), in the development of Monte Carlo simulation models, discounted cash flow analyses, and /or Black-Scholes valuation models. The estimated fair values are subjective and are affected by changes in inputs to the valuation models and analyses, including the Company’s common stock price, the Company’s dividend yield, the risk-free rates based on U.S. Treasury security yields, and certain other Level-3 inputs including, assumptions regarding the estimated volatility in the value of the Company’s common stock price. Changes in these assumptions can materially affect the estimated fair values.

Note 11 — Debt

The fair value and face value principal outstanding of the March 2023 Senior Convertible Note as of the dates indicated are as follows:

Summary of Outstanding Debt

	Contractual Maturity Date	Stated Interest Rate			Conversion Price per Share		Face Value Principal Outstanding		Fair Value
March 2023 Senior Convertible Note	March 21, 2025		7.875	%	$	5.00	$	11,019	$	14,490
Balance as of September 30, 2023							$	11,019	$	14,490

The changes in the fair value of debt during the three and nine months ended September 30, 2023 is as follows:

Schedule of Changes in Fair Value of Debt

	March 2023 Senior Convertible Note			Other Income (expense)
Fair Value - June 30, 2023	$	11,610		$	—
Face value principal – issue date
Fair value adjustment – issue date
Installment repayments – common stock		(92	)		—
Non-installment payments – common stock		(49	)		—
Change in fair value		3,021			(3,021	)
Fair Value at September 30, 2023	$	14,490			-
Other Income (Expense) - Change in fair value – three months ended September 30, 2023				$	(3,021	)

	March 2023 Senior Convertible Note			Other Income (expense)
Fair Value - December 31, 2022	$	—		$	—
Fair Value - Beginning balance	$	—		$	—
Face value principal – issue date		11,111		$	—
Fair value adjustment – issue date		789			(789	)
Installment repayments – common stock		(92	)		—
Non-installment payments – common stock		(49	)		—
Change in fair value		2,731			(2,731	)
Fair Value at September 30, 2023	$	14,490			-
Fair Value - Ending balance	$	14,490			-
Other Income (Expense) - Change in fair value – nine months ended September 30, 2023				$	(3,520	)

March 2023 Senior Secured Convertible Note

Lucid Diagnostics entered into a Securities Purchase Agreement (“SPA”) dated March 13, 2023, with an accredited institutional investor (“Investor”, “Lender”, and /or “Holder”), wherein Lucid agreed to sell, and the Investor agreed to purchase, an aggregate of $11.1 million face value principal of debt.

Under the SPA, Lucid issued in a registered direct offering under its effective shelf registration statement a Senior Secured Convertible Note dated March 21, 2023, referred to herein as the “March 2023 Senior Convertible Note”, with such note having a $11.1 million face value principal, a 7.875% annual stated interest rate, a contractual conversion price of $5.00 per share of the Company’s common stock (subject to standard adjustments in the event of any stock split, stock dividend, stock combination, recapitalization or other similar transaction), and a contractual maturity date of March 21, 2025. The March 2023 Senior Convertible Note may be converted into shares of common stock of the Company at the Holder’s election.

The March 2023 Senior Convertible Note proceeds were $9.925 million after deducting a $1.186 million lender fee and offering costs. The lender fee and offering costs were recognized as of the March 21, 2023 issue date as a current period expense in other income (expense) in the Company’s unaudited condensed consolidated statement of operations.

During the period from March 21, 2023 to September 20, 2023, Lucid is required to pay interest expense only (on the $11.1 million face value principal), at 7.875% per annum, computed on a 360 day year. The Company paid in cash interest expense of $148 and $391 for the three and nine months ended September 30, 2023, respectively.

Note 1011 — Debt - continued

Commencing September 21, 2023, and then on each of the successive first and tenth trading day of each month thereafter through to and including March 14, 2025 (each referred to as an “Installment Date”); and on the March 21, 2025 maturity date, the Company will be required to make a principal repayment of $292 together with accrued interest thereon, with such 38 payments referred to herein as the “Installment Amount”, settled in shares of common stock of the Company, subject to customary equity conditions, including minimum share price and volume thresholds, or at the election of the Company, in cash, in whole or in part.

In addition to the Installment Amount repayments, the Holder may elect to accelerate the conversion of future Installment Amount repayments, and interest thereon, subject to certain restrictions, as defined, utilizing the then current conversion price of the most recent Installment Date conversion price.

The payment of all amounts due and payable under this senior convertible note is guaranteed by all of Lucid Diagnostics’ subsidiaries; and the obligations under this senior convertible note are secured by all of the assets of Lucid Diagnostics and its subsidiaries.

Lucid is subject to certain customary affirmative and negative covenants regarding the rank of the note, along with the incurrence of further indebtedness, the existence of liens, the repayment of indebtedness and the making of investments, the payment of cash in respect of dividends, distributions or redemptions, the transfer of assets, the maturity of other indebtedness, and transactions with affiliates, among other customary matters.

Lucid is subject to financial covenants requiring: (i) a minimum of $5.0 million of available cash at all times; (ii) the ratio of (a) the outstanding principal amount of the total senior convertible notes outstanding, accrued and unpaid interest thereon and accrued and unpaid late charges to (b) the Company’s average market capitalization over the prior ten trading days, as of the last day of any fiscal quarter commencing with September 30, 2023, to not exceed 30%; and (iii) the Company’s market capitalization to at no time be less than $30 million. As of September 30, 2023, the Company was in compliance, and as of the date hereof, the Company is in compliance, with the Financial Tests.

In the nine months ended September 30, 2023, approximately $92 of principal repayments along with approximately $48 of interest expense thereon, were settled through the issuance of 115,388 shares of common stock of the Company, with such shares having a fair value of approximately $166 (with such fair value measured as the respective conversion date quoted closing price of the common stock of the Company). The conversions resulted in a debt extinguishment loss of $26 in the three and nine months ended September 30, 2023.

Note 12 — Stock-Based Compensation

Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan

The Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan (“Lucid Diagnostics ~~Inc.~~ 2018 Equity Plan”) is separate and apart from the PAVmed ~~Inc.~~ 2014 Equity Plan discussed below. The Lucid Diagnostics ~~Inc.~~ 2018 Equity Plan is designed to enable Lucid Diagnostics ~~Inc.~~ to offer employees, officers, directors, and consultants, ~~as defined,~~ an opportunity to acquire shares of common stock of Lucid ~~Diagnostics Inc.~~Diagnostics. The types of awards that may be granted under the Lucid Diagnostics ~~Inc.~~ 2018 Equity Plan include stock options, stock appreciation rights, restricted stock, and other stock-based awards subject to limitations under applicable law. All awards are subject to approval by the Lucid Diagnostics ~~Inc. board of directors.~~compensation committee.

A total of ~~9,144,000~~11,644,000 shares of common stock of Lucid Diagnostics ~~Inc.~~ are reserved for issuance under the Lucid Diagnostics ~~Inc.~~ 2018 Equity Plan, with ~~3,754,051~~3,929,301 shares available for grant as of September 30, ~~2022.~~2023. The share reservation is not diminished by a total of 423,300 stock options and 50,000 restricted stock awards granted outside the Lucid Diagnostics ~~Inc.~~ 2018 Equity Plan, as of September 30, ~~2022.~~2023.

1416

Note 1012 — Stock-Based Compensation - continued

Lucid Diagnostics ~~Inc.~~ Stock Options

Lucid Diagnostics ~~Inc.~~ stock options granted under the Lucid Diagnostics ~~Inc.~~ 2018 Equity Plan and stock options granted outside such plan are summarized as follows:

Schedule of Stock Options Issued and Outstanding Activities

	Number of Stock Options			Weighted Average Exercise Price		Remaining Contractual Term (Years)		Intrinsic Value⁽²⁾		Number of Stock Options			Weighted Average Exercise Price		Remaining Contractual Term (Years)		Intrinsic Value⁽²⁾
Outstanding stock options at December 31, 2021		1,419,242		$	0.73		7.0	$	6,665
Outstanding stock options at December 31, 2022											2,565,377		$	3.14		8.3	$	428
Granted⁽¹⁾		2,320,000		$	3.71						2,982,500		$	1.32
Exercised		(964,717	)	$	0.72						—		$	—
Forfeited		(141,436	)	$	4.33						(590,662	)	$	2.70
Outstanding stock options at September 30, 2022⁽³⁾		2,633,089		$	3.17		8.6	$	499
Vested and exercisable stock options at September 30, 2022		960,364		$	2.33		7.2	$	499
Outstanding stock options at September 30, 2023⁽³⁾											4,957,215		$	2.10		8.6	$	347
Vested and exercisable stock options at September 30, 2023											1,439,442		$	2.77		7.0	$	347

⁽¹⁾	Stock options granted under the Lucid Diagnostics ~~Inc.~~ 2018 Equity Plan and those granted outside such plan generally vest one-third in one year then ratably over ~~twelve~~the next eight quarters, ~~with the vesting commencing with the grant date quarter-end,~~ and have a ten-year contractual term from date-of-grant.
⁽²⁾	The intrinsic value is computed as the difference between the quoted price of the Lucid Diagnostics ~~Inc.~~ common stock on each of September 30, ~~2022~~2023 and December 31, ~~2021~~2022 and the exercise price of the underlying Lucid Diagnostics ~~Inc.~~ stock options, to the extent such quoted price is greater than the exercise price.
⁽³⁾	The outstanding stock options presented in the table above, are inclusive of 423,300 stock options granted outside the Lucid Diagnostics ~~Inc.~~ 2018 Equity Plan, as of September 30, ~~2022~~2023 and December 31, ~~2021.~~2022.

See Note 4, Related Party Transactions, for a summary of the stock-based compensation expense recognized with respect to the stock options granted under the Lucid Diagnostics ~~Inc.~~ 2018 Equity Plan to the Physician Inventors.

Subsequent to September 30, 2023, on November 6, 2023, the company granted to employees 500,000 stock options under the Lucid Diagnostics Inc 2018 Equity Plan with a weighted average exercise price of $1.29 for which will generally vest one-third after one year then ratably over the next eight quarters.

Lucid Diagnostics ~~Inc.~~ Restricted Stock Awards

Lucid Diagnostics ~~Inc.~~ restricted stock awards granted under the Lucid Diagnostics ~~Inc.~~ 2018 Equity Plan and restricted stock awards granted outside such plan are summarized as follows:

Schedule of Restricted Stock Award Activity

	Number of Restricted Stock Awards			Weighted Average Grant Date Fair Value		Number of Restricted Stock Awards			Weighted Average Grant Date Fair Value
Unvested restricted stock awards as of December 31, 2021		1,940,740		$	12.76
Unvested restricted stock awards as of December 31, 2022⁽¹⁾							2,091,420		$	11.44
Granted		320,000			4.53		—			—
Vested		(169,320	)		13.48		(303,980	)		11.95
Forfeited		—			—		—			—
Unvested restricted stock awards as of September 30, 2022⁽¹⁾		2,091,420		$	11.44
Unvested restricted stock awards as of September 30, 2023							1,787,440		$	11.36

⁽¹⁾

The unvested restricted stock awards presented in the table above, are inclusive of 50,000 restricted stock awards granted outside the Lucid Diagnostics ~~Inc.~~ 2018 Equity Plan as of December 31, 2022. These 50,000 restricted stock awards were fully vested during the period ended September 30, ~~2022 and December 31, 2021.~~2023.

~~On January 7, 2022,~~

Subsequent to September 30, 2023, on November 6, 2023, ~~320,000~~550,000 restricted stock awards were granted under the Lucid Diagnostics Inc 2018 Equity Plan, with such restricted stock awards ~~having a single~~vesting one third each year for the next three years with the final vesting date on ~~January 7, 2025,~~November 6, 2026, and an aggregate grant date fair value of approximately $~~1.4~~0.7 million, measured as the grant date closing price of Lucid Diagnostics Inc. common stock, with such aggregate estimated fair value recognized as stock-based compensation expense ratably on a straight-line basis over the vesting period, which is commensurate with the service period. The restricted stock awards are subject to forfeiture if the requisite service period is not completed.

PAVmed Inc. 2014 Equity Plan

The PAVmed Inc. 2014 Long-Term Incentive Equity Plan (the “PAVmed ~~Inc.~~ 2014 Equity Plan”), is separate and apart from the Lucid Diagnostics ~~Inc.~~ 2018 Equity Plan (as such equity plan is discussed above).

1517

Note 1012 — Stock-Based Compensation - continued

Stock-Based Compensation Expense

The stock-based compensation expense recognized by the Company for both the Lucid Diagnostics ~~Inc.~~ 2018 Equity Plan and the PAVmed ~~Inc.~~ 2014 Equity Plan, for the periods indicated, was as follows:

Schedule of Stock-Based Compensation Expense

2022 2021 2022 2021

Three Months Ended
September 30,

Nine Months Ended
September 30,

2022 2021 2022 2021
Lucid Diagnostics Inc 2018 Equity Plan – cost of revenue $ 9 $ — $ 9 $ —
Lucid Diagnostics Inc 2018 Equity Plan – sales and marketing expenses 253 — 733 —
Lucid Diagnostics Inc 2018 Equity Plan - general and administrative expenses 2,990 2,695 9,504 5,988
Lucid Diagnostics Inc 2018 Equity Plan - research and development expenses 28 21 125 57
PAVmed Inc 2014 Equity Plan - sales and marketing expenses 161 — 497 —
PAVmed Inc 2014 Equity Plan - general and administrative expenses 78 — 224 —
PAVmed Inc 2014 Equity Plan - research and development expenses 52 56 159 111
Total stock-based compensation expense $ 3,571 $ 2,772 $ 11,251 $ 6,156

	2023		2022		2023		2022
	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Lucid Diagnostics 2018 Equity Plan – cost of revenue	$	16	$	9	$	44	$	9
Lucid Diagnostics 2018 Equity Plan – sales and marketing		228		253		697		733
Lucid Diagnostics 2018 Equity Plan - general and administrative		721		2,990		4,069		9,504
Lucid Diagnostics 2018 Equity Plan - research and development		67		28		204		125
PAVmed 2014 Equity Plan - cost of revenue		10		—		26		—
PAVmed 2014 Equity Plan - sales and marketing		106		161		359		497
PAVmed 2014 Equity Plan - general and administrative		7		78		170		224
PAVmed 2014 Equity Plan - research and development		97		52		290		159
Total stock-based compensation expense	$	1,252	$	3,571	$	5,859	$	11,251

The stock-based compensation expense, as presented above, is inclusive of: stock options and restricted stock awards granted under the Lucid Diagnostics ~~Inc.~~ 2018 Equity Plan to employees of PAVmed, ~~Inc.,~~ the Physician Inventors, , and members of the board of directors of Lucid Diagnostics, ~~Inc.,~~ as well as the stock options granted under the PAVmed ~~Inc.~~ 2014 Equity Plan to the Physician Inventors.

As of September 30, ~~2022,~~2023, unrecognized stock-based compensation expense and weighted average remaining requisite service period with respect to stock options and restricted stock awards issued under each of the Lucid Diagnostics ~~Inc.~~ 2018 Equity Plan and the PAVmed ~~Inc.~~ 2014 Equity Plan, as discussed above, is as follows:

Schedule of Unrecognized Compensation Expense and Weighted Average Remaining Service Period

	Unrecognized Expense		Weighted Average Remaining Service Period (Years)		Unrecognized Expense		Weighted Average Remaining Service Period (Years)
Lucid Diagnostics Inc. 2018 Equity Plan
Lucid Diagnostics 2018 Equity Plan
Stock Options	$	3,791		2.4	$	3,620		2.1
Restricted Stock Awards	$	7,165		0.8	$	633		1.0
PAVmed Inc. 2014 Equity Plan
PAVmed 2014 Equity Plan
Stock Options	$	1,618		1.7	$	608		1.9
Restricted Stock Awards	$	187		1.2

Stock-based compensation expense recognized with respect to stock options granted under the Lucid Diagnostics ~~Inc.~~ 2018 Equity Plan was based on a weighted average estimated fair value of such stock options of $0.88 per share and $1.61 per share during the ~~period~~periods ended September 30, ~~2022. The stock-based compensation was~~2023 and 2022, respectively, calculated using the following weighted average Black-Scholes valuation model assumptions:

Schedule of Stock-based Compensation Valuation Assumptions

	~~Nine Months Ended~~ ~~September 30,~~
	~~2022~~
~~Expected term of stock options (in years)~~		~~5.8~~
~~Expected stock price volatility~~		72	%
~~Risk free interest rate~~		~~3.2~~	%
~~Expected dividend yield~~		—	%

~~Note 10 — Stock-Based Compensation~~ ~~- continued~~

	2023			2022
	Nine Months Ended September 30,
	2023			2022
Expected term of stock options (in years)		5.6			5.8
Expected stock price volatility		75	%		72	%
Risk free interest rate		3.7	%		3.2	%
Expected dividend yield		—	%		—	%

Lucid Diagnostics Inc Employee Stock Purchase Plan (“Lucid ESPP”)

~~The~~A total of 231,987 shares of common stock of Lucid Diagnostics ~~Inc Employee Stock Purchase Plan (“~~were purchased for proceeds of approximately $276 on March 31, 2023 under the Lucid ~~Diagnostics Inc ESPP”), initial six-month stock purchase period was April 1, 2022 to September 30, 2022.~~ESPP. A total of276,213 and 84,030 shares of common stock of Lucid Diagnostics ~~Inc~~ were purchased for proceeds of approximately $275 and $109 on September 30, 2023 and 2022, respectively, under the Lucid ~~Diagnostics Inc.~~ ESPP. The Lucid ~~Diagnostics Inc.~~ ESPP has a total reservation of ~~500,000~~1,000,000 shares of common stock of which ~~415,970~~407,770 shares are available-for-issue as of September 30, ~~2022.~~2023. In January 2023, the number of shares available-for-issue was increased by 500,000 in accordance with the evergreen provisions of the plan.

Note 1113 —Stockholders’ Equity

Series A Preferred Stock Offering

On March 7, 2023, the Company issued 13,625 shares of newly designated Series A Convertible Preferred Stock, par value $0.001 per share (the “Series A Preferred Stock”), to accredited investors at a purchase price of $1,000 per share, for aggregate gross proceeds to the Company of $13.625 million. In connection with the issuance the Company filed a Certificate of Designation of Preferences, Rights and Limitations of the Series A Preferred Stock with the Secretary of State of the State of Delaware (the “Certificate of Designation”). The key terms of the Series A Preferred Stock are as follows:

Each share of Series A Preferred Stock is convertible at the option of the holder, subject to certain beneficial ownership limitations into such number of shares of the Company’s common stock, equal to the number of Series A Preferred Shares to be converted, multiplied by the stated value of $1,000 (the “Stated Value”), divided by the conversion price in effect at the time of the conversion. The initial conversion price is $1.394, subject to adjustment in the event of stock splits, stock dividends, and similar transactions. The Series A Preferred Stock is convertible into shares of our common stock at any time at the option of the holder from and after the six-month anniversary of its issuance, and automatically converts into shares of our common stock on March 7, 2025, the second anniversary of its issuance.

The Series A Preferred Stock will be senior to the Common Stock and any other class of the Company’s capital stock that is not by its terms senior to or pari passu with the Series A Preferred Stock.

The holders of Series A Preferred Stock will be entitled to dividends payable as follows: (i) a number of shares of Common Stock equal to 20% of the number of shares of Common Stock issuable upon conversion of the Series A Preferred Stock then held by such Holder on March 7, 2024, and (ii) a number of shares of Common Stock equal to 20% of the number of shares of Common Stock issuable upon conversion of the Series A Preferred Stock then held by such Holder on March 7, 2025. A holder that converts its Series A Preferred Stock prior to March 7, 2024 or March 7, 2025, as the case may be, will not receive the dividend that accrues on such date with respect to such converted Series A Preferred Stock. The holders of the Series A Preferred Stock also will be entitled to dividends equal, on an as-if-converted to shares of Common Stock basis, to and in the same form as dividends actually paid on shares of the Common Stock when, as, and if such dividends are paid on shares of the Common Stock.

In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company (or any Deemed Liquidation Event as defined in the Certificate of Designation), the holders of shares of Series A Preferred Stock then outstanding will be entitled to be paid out of the assets of the Company available for distribution to its stockholders, before any payment shall be made to the holders of Common Stock by reason of their ownership thereof, an amount per share equal to the greater of (i) the Stated Value, plus any dividends accrued but unpaid thereon, or (ii) such amount per share as would have been payable had all shares of Series A Preferred Stock been converted into Common Stock immediately prior to such event.

The Series A Preferred Stock is a non-voting security, other than with respect to limited matters related to changes in terms of the Series A Preferred Stock.

The Company will not effect any conversion of the Series A Preferred Stock, and a holder will not have the right to receive dividends or convert any portion of the Series A Preferred Stock, to the extent that, after giving effect to the receipt of dividends or the conversion, the holder (together with such holder’s affiliates, and any persons acting as a group together with such holder or any of the holder’s affiliates) would beneficially own in excess of 4.99% of the Company’s outstanding common stock (or, upon election of the holder, 9.99% of the Company’s outstanding common stock).

The Company and the investors in the offering also executed a registration rights agreement (the “Series A Registration Rights Agreement”), pursuant to which the Company agreed to file a registration statement covering the resale of the shares of Common Stock issuable pursuant to the Series A Preferred Stock.

Series A-1 Preferred Stock Offering

Subsequent to September 30, 2023, on October 17, 2023, the Company issued 5,000 shares of newly designated Lucid Series A-1 Convertible Preferred Stock (the “Series A-1 Preferred Stock”). The terms of the Series A-1 Preferred Stock are substantially identical to the terms of the Series A Preferred Stock, except that the Series A-1 Preferred Stock has a conversion price of $1.2592. The aggregate gross proceeds from the sale of shares in such offering were $5.0 million.

The Company and the investors in the offering also executed a registration rights agreement (the “Series A-1 Registration Rights Agreement”), pursuant to which the Company agreed to file a registration statement covering the resale of the shares of Common Stock issuable pursuant to the Series A-1 Preferred Stock.

Lucid Diagnostics ~~Inc.~~ Common Stock

In June 2023, the Company received shareholder approval to issue up to 200 million shares of its common stock, an increase of 100 million shares.

As of September 30, ~~2022~~2023 and December 31, ~~2021~~2022 there were ~~37,016,225~~42,329,864 and ~~34,917,907~~40,518,792 shares of common stock issued and outstanding, respectively. As of September 30, ~~2022,~~2023, PAVmed ~~Inc.~~ holds ~~27,927,190~~31,302,420 shares, representing a majority-interest equity ownership and PAVmed ~~Inc.~~ has a controlling financial interest in ~~Lucid Diagnostics Inc.~~the Company.

Note 13 — Stockholders’ Equity - continued

Committed Equity Facility ~~- March 28, 2022~~and ATM Facility

On March 28, 2022, ~~Lucid Diagnostics, Inc.~~the Company entered into a committed equity facility with an affiliate of Cantor Fitzgerald (“Cantor”). Under the terms of the committed equity facility, Cantor has committed to purchase up to $50 million of ~~Lucid Diagnostics Inc.~~the Company’s common stock from time to time at the request of the Company. While there are distinct differences, the facility is structured similarly to a traditional at-the-market equity facility, insofar as it allows the Company to raise primary equity capital on a periodic basis at prices based on the existing market price. ~~As of September 30, 2022, under the committed equity facility,~~Cumulatively a total of 680,263 shares of Lucid Diagnostics’ common stock ~~of the Company~~ were issued for net proceeds of approximately $~~1,807~~1.8. million, after a 4% discount, as of September 30, 2023.

In ~~connection with~~November 2022, the ~~execution~~Company entered into an “at-the-market offering” (“ATM”) for up to $6.5 million of its common stock that may be offered and sold under a Controlled Equity Offering Agreement between the ~~agreement for~~Company and Cantor Fitzgerald & Co. In the ~~committed~~nine months ended September 30, 2023, the Company sold 230,068 shares through the at-the-market equity facility ~~the Company paid Cantor~~for net proceeds of approximately $~~1.0~~0.3 million, ~~as consideration for its irrevocable commitment to purchase the~~after payments of 3% commissions. No shares upon the terms and subject to the satisfaction of the conditions set forth in such agreement. In addition, pursuant to the agreement, we agreed to reimburse Cantor for certain of its expenses. The Company also entered into a registration rights agreement with Cantor. The Company has the right to terminate the agreement at any time after initial satisfaction of the conditions to Cantor’s obligation to purchase shareswere sold under the at-the-market equity facility ~~at no cost or penalty, upon~~during the three ~~trading days’ prior written notice.~~months ended September 30, 2023.

Note 1214 — Net Loss Per Share

The ~~“Net~~Net loss per share basic and ~~diluted”~~diluted for the respective periods indicated - is as follows:

Schedule of ~~Basic and Fully Diluted~~ Net Loss Per Share Basic and Diluted

	2022			2021			2022			2021			2023			2022			2023			2022
	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021			2023			2022			2023			2022
Numerator
Net loss	$	(14,349	)	$	(6,957	)	$	(41,243	)	$	(16,772	)	$	(14,208	)	$	(14,349	)	$	(41,836	)	$	(41,243	)

Denominator
Weighted average common shares outstanding, basic and diluted		36,405,945			14,114,707			35,767,857			14,114,707			41,862,805			36,405,945			41,558,979			35,767,857

Net loss per share
Net loss per share - basic and diluted	$	(0.39	)	$	(0.49	)	$	(1.15	)	$	(1.19	)	$	(0.34	)	$	(0.39	)	$	(1.01	)	$	(1.15	)

Basic weighted-average number of shares of common stock outstanding for the periods ended September 30, ~~2022~~2023 and ~~2021~~2022 include the shares of the Company issued and outstanding during such periods, each on a weighted average basis. The basic weighted average number of shares common stock outstanding excludes common stock equivalent incremental shares, while diluted weighted average number of shares outstanding includes such incremental shares. However, as the Company was in a loss position for all periods presented, basic and diluted weighted average shares outstanding are the same, as the inclusion of the incremental shares would be anti-dilutive. The common stock equivalents excluded from the computation of diluted weighted average shares outstanding are as follows:

Schedule of ~~Anti-dilutive Securities~~Common Stock Equivalents Excluded from Computation of Diluted Earnings Per Share

	2023		2022
	September 30,
	2023		2022

Stock options		4,957,215		2,633,089
Unvested restricted stock awards		1,787,440		2,091,420
Preferred stock		13,683,647		—
Total		20,428,302		4,724,509

September 30,
2022 2021

Stock options 2,633,089 1,399,242
Unvested restricted stock awards 2,091,420 1,806,080
Total 4,724,509 3,205,322

1720

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our unaudited condensed consolidated financial condition and results of operations should be read together with our Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 (the “Form 10-K”), as filed with the Securities and Exchange Commission (the “SEC”). ~~We are a majority-owned consolidated subsidiary of PAVmed Inc. (“PAVmed”).~~

Unless the context otherwise requires, ~~references herein to~~(i) “we”, “us”, and “our”, and to the “Company” or, “Lucid” and “Lucid Diagnostics” ~~are~~refer to Lucid Diagnostics ~~Inc~~Inc. and its subsidiaries LucidDx Labs Inc. (“LucidDx Labs”) and CapNostics, LLC (“CapNostics”)., (ii) “FDA” refers to the Food and Drug Administration, (iii) “510(k)” refers to a premarket notification, submitted to the FDA by a manufacturer pursuant to § 510(k) of the Food, Drug and Cosmetic Act and 21 CFR § 807 subpart E, (iv) “CLIA” refers to the Clinical Laboratory Improvement Amendments of 1988 and associated regulations set forth in 42 CFR § 493, (v) “CE Mark” refers to a “Conformité Européenne” Mark, a mark indicating that a product such as a medical device conforms to the essential requirements of the relevant European directive, and (vi) “LDT” refers to a diagnostic test, defined by the FDA as “an IVD that is intended for clinical use and designed, manufactured and used within a single laboratory,” which is generally subject only to self-certification of analytical validity under the CMS CLIA program.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Form 10-Q”), including the following discussion and analysis of our ~~(unaudited)~~unaudited condensed consolidated financial condition and results of operations, contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Form 10-Q, including statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. The words “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Forward-looking statements are not guarantees of future performance and the Company’s actual results may differ significantly from ~~the results discussed~~those expressed or implied in the forward-looking statements. Factors that might cause such differences include, but are not limited to, those discussed in Item 1A of Part I of the Form 10-K under the heading “Risk Factors.”

Important factors that may affect our actual results include:

	●	our limited operating history;
	●	our financial performance, including our ability to generate revenue;
	●	our ability to obtain regulatory approval for the commercialization of our products;
	●	the risk that the FDA will cease to exercise enforcement discretion with respect to LDTs, like EsoGuard;
	●	the ability of our products to achieve market acceptance;
	●	our success in retaining or recruiting, or changes required in, our officers, key employees or directors;
	●	our potential ability to obtain additional financing when and if needed;
	●	our ability to protect our intellectual property;
	●	our ability to complete strategic acquisitions;
	●	our ability to manage growth and integrate acquired operations;
	●	the potential liquidity and trading of our securities;
	●	our regulatory and operational risks;
	●	cybersecurity risks;
	●	risks related to the COVID-19 ~~pandemic;~~pandemic and other health-related emergencies;
	●	risks related to our relationship with PAVmed; and
	●	our estimates regarding expenses, future revenue, capital requirements and needs for additional financing.

In addition, our forward-looking statements do not reflect the potential impact of any future financings, acquisitions, mergers, dispositions, joint ventures or investments we may make.

We may not actually achieve the plans, intentions, and/or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. You should read this Form 10-Q, ~~and the Form 10-K, and~~ the documents we have filed as exhibits to this Form 10-Q, and the Form 10-K completely and with the understanding our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

Overview

We are a commercial-stage ~~cancer prevention,~~ medical diagnostics technology company focused on the millions of patients ~~with long-standing gastroesophageal reflux disease (“GERD”)~~ who are at risk of developing esophageal precancer and cancer, specifically highly lethal esophageal adenocarcinoma (“EAC”)~~, which is expected to lead to approximately 16,000 U.S. deaths per year.~~.

We believe that our ~~lead products,~~flagship product, the EsoGuard Esophageal DNA Test, performed on samples collected with the EsoCheck Esophageal Cell Collection Device, ~~constitute~~constitutes the first and only commercially available diagnostic test capable of serving as a widespread ~~screening~~ tool ~~to prevent EAC deaths, through~~for the early detection of esophageal precancer, including Barrett’s Esophagus (“BE”), in at-risk ~~GERD~~ patients.

●	EsoGuard is a DNA test performed on surface esophageal cells collected with EsoCheck in a brief noninvasive office procedure which has been shown to be over 90% sensitive and specific at detecting Barrett’s Esophagus (“BE”), a precancerous condition Early detection of ~~the esophagus and all conditions along the BE-EAC spectrum. (Moinova, et al. Sci Transl Med. 2018 Jan 17;10(424): eaao5848).~~

●	EsoCheck is a swallowable balloon capsule catheter capable of sampling surface esophageal cells in a less-than -five-minute, noninvasive office procedure. We believe EsoCheck’s Collect+Protect™ technology makes it the only noninvasive esophageal cell collection device capable of anatomically targeted and protected sampling to prevent dilution and contamination during device withdrawal.

We are party to an amended and restated patent license agreement with CWRU, dated August 23, 2021 (the “Amended CWRU License Agreement”), which provides for the exclusive worldwide license of the intellectual property rights for the proprietary technologies underlying EsoCheck and EsoGuard.

EsoGuard is commercialized in the U.S. as a laboratory developed test (“LDT”). It was previously performed by our unrelated third-party commercial clinical laboratory service partner ResearchDx Inc. (“RDx”), at their Clinical Laboratory Improvement Amendments (“CLIA”) certified commercial clinical laboratory, located in Irvine, CA. Beginning in March 2022, EsoGuard has been performed at our own CLIA-certified commercial clinical laboratory, located in Lake Forest, CA. RDx also currently manufactures our EsoGuard specimen kits. EsoCheck is commercialized in the U.S. as a 510(k) cleared esophageal cell collection device currently manufactured for us by our contract manufacturing partner, Sage Product Development Inc., located in Foxborough, MA. As discussed below, we are in the process of transferring EsoCheck manufacturing to Coastline International Inc., a high-volume manufacturer headquartered in San Diego, CA. EsoCheck has completed the CE Mark certification process. EsoGuard, used with EsoCheck, was granted Food and Drug Administration (“FDA”) Breakthrough Device designation and requires the completion of an international multicenter pre-market approval (“PMA”) clinical trial to be able to submit EsoGuard to the FDA for approval as an in vitro diagnostic device (“IVD”).

EsoGuard secured a final Medicare payment determination of $1,938.01, effective January 1, 2021. We are awaiting a Medicare local coverage determination (“LCD”), as discussed in more detail below. We are also aggressively pursuing U.S. private payor payment and coverage, as well as payment in Europe.

We are working to expand EsoGuard commercialization across multiple channels by building a direct sales and marketing team targeting primary care physicians, specialists, institutions and consumers. To assure sufficient testing capacity and geographic coverage, as part of this expansion, we are building our own network of Lucid Test Centers, staffed by Lucid-employed clinical personnel, where patients can undergo the EsoCheck procedure and have the sample sent for EsoGuard testing. We have also established an EsoGuard Telemedicine Program, in partnership with UpScript, LLC, an independent third-party telemedicine provider, that can accommodate EsoGuard self-referrals from direct-to-consumer marketing.

~~Updated Clinical Guidelines and Guidance~~

~~In April 2022, the American College of Gastroenterology (“ACG”) updated its clinical guideline to support~~ esophageal precancer ~~(including BE) screening~~allows patients to undergo appropriate monitoring and treatment, as indicated by clinical practice guidelines, in an effort to prevent ~~highly lethal EAC utilizing EsoGuard on samples collected with EsoCheck. The clinical guideline reiterates the ACG’s long-standing recommendation for~~progression to esophageal precancer screening in at-risk patients with GERD, commonly known as chronic heartburn, acid reflux or simply reflux. In its Recommendation 5, the ACG suggests a single screening endoscopy in patients with chronic GERD symptoms and 3 or more additional risk factors for BE, including male sex, age greater than 50 years, White race, tobacco smoking, obesity, and family history of BE or EAC in a first-degree relative. Furthermore, and importantly for the first time, the clinical guideline also endorses nonendoscopic biomarker screening as an acceptable alternative to costly and invasive endoscopy by stating in its Recommendation 6 that the ACG suggests that a swallowable, nonendoscopic capsule device combined with a biomarker is an acceptable alternative to endoscopy for screening for BE. The clinical guideline specifically mentions EsoCheck, along with our EsophaCap device, as such swallowable, nonendoscopic esophageal cell collection devices. The clinical guideline also mentions methylated DNA markers (like those detected by the EsoGuard test) as such a biomarker. The summary of evidence for this recommendation includes a reference to the seminal NIH-funded multicenter, case-control study published in 2018 in Science Translational Medicine, which demonstrated that EsoGuard is highly accurate at detecting esophageal precancer and cancer, including on samples collected with EsoCheck.cancer.

1921

Overview - continued

~~In July 2022, the American Gastroenterology Association (“AGA”)~~EsoGuard is a bisulfite-converted 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). The assay was evaluated in a 408-patient multicenter case-control study published ~~updated clinical guidance that mirrors the same furnished by the ACG as described above~~, ~~endorsing the use of non-invasive screening tools like EsoCheck, which is cited~~ in ~~its guideline, as an acceptable alternative to endoscopy to directly address the need for noninvasive screening tools that are easy to administer, patient friendly,~~Science Translational Medicine and ~~cost-effective for the detection of BE. The clinical practice update by the AGA also significantly expands the target population for~~showed greater than 90% sensitivity and specificity at detecting esophageal precancer ~~screening,~~and all conditions along the BE-EAC spectrum, including ~~for~~on samples collected with EsoCheck (Moinova, et al. Sci Transl Med. 2018 Jan 17;10(424): eaao5848). EsoGuard ~~and EsoCheck, by recommending, for~~is commercially available in the first time, screening in at-risk patients without symptoms of reflux. 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. As a result, chronic symptomatic GERD is no longer a mandatory prerequisite and asymptomatic patients with three of the other six risk factors (e.g., male sex, age greater than 50 years, White race, tobacco smoking, obesity, and family history of BE) are now considered at-risk patients recommended for screening.

~~Local Coverage Determination~~

In April 2022, a proposed LCD DL39256, entitled “Molecular Testing for Detection of Upper Gastrointestinal Metaplasia, Dysplasia, and Neoplasia” was published on the Center for Medicare and Medicaid Services (“CMS”) website by the Medicare Administrative Contractor (“MAC”) Palmetto GBA. The proposed LCD is a further step in our efforts to secure Medicare coverage and payment for EsoGuard.

~~The proposed LCD, which the CMS website explicitly characterizes~~U.S. as a ~~“work in progress”~~LDT performed at our CLIA-certified laboratory. Cell samples, including those collected with EsoCheck, as discussed below, are sent to our laboratory, for ~~“public review,” outlines criteria that MAC Palmetto GBA’s Molecular Diagnostic Services Program (“MolDX”) expects upper gastrointestinal precancer~~testing and cancer molecular diagnostic tests to meet. These criteria include active GERD with at least two risk factors, as well as evidence of analytic validity, clinical validity, and clinical utility. Although it found that no currently existing test has fulfilled all these criteria, it indicated that it will “monitor the evidence and will provide coverage based on the pertinent literature and society recommendations.” Notably, the proposed LCD pre-dated, and therefore does not include consideration of, the most recent ACG clinical guideline update endorsing swallowable, nonendoscopic capsule devices combined with a biomarker, such as EsoCheck andanalyses using EsoGuard. The publication of the proposed LCD included a written comment period that extended through May 14, 2022. MolDX held an open meeting on May 10, 2022, during which stakeholders and other interested parties had the opportunity to address the proposed LCD.

~~We have used~~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 ~~written comment process~~balloon and ~~the open meeting to bring to MolDX essential information that was not incorporated~~sampled cells are pulled into the ~~proposed LCD. These include:~~capsule, protecting them from contamination and dilution by cells outside of the ~~updated ACG clinical guideline;~~targeted region during device withdrawal. We believe this proprietary Collect+Protect™ technology makes EsoCheck the ~~fact that EsoGuard’s published performance is at or above accepted performance criteria for detection~~only noninvasive esophageal cell collection device capable of ~~lower gastrointestinal cancers in approved~~such anatomically targeted and currently effective Medicare coverage determinations; and data from ongoing clinical utility studies Lucid and clinical investigators are performing. A final LCD will not be issued until the MAC has had the opportunity to assess and consider the comments and input from the written comment period and the open meeting.protected sampling.

Following the MAC Palmetto GBA release of a proposed LCD, the MAC Noridian Healthcare Solutions published a proposed LCD entitled Molecular Testing for Detection of Upper Gastrointestinal Metaplasia, Dysplasia, and Neoplasia DL39262. The proposed LCD mirrors the MAC Palmetto GBA proposed LCD. We have used the MAC Noridian Healthcare Solutions open meeting held on May 26, 2022, and the written comment period that ended on June 11, 2022 to bring the same essential information that we provided to the MAC Palmetto GBA to maintain consistency in our approach and advocate appropriately.

~~Status of Clinical Trials~~

In 2021, we began conducting two concurrent clinical trials, the “EsoGuard screening study” (“BE-1”) and the “EsoGuard case-control study” (“BE-2”), to expand the clinical evidence for the technologies and to support FDA pre-market approval (“PMA”) of the use of EsoGuard and EsoCheck asare based on patented technology licensed by Lucid from Case Western Reserve University (“CWRU”). EsoGuard and EsoCheck have been developed to provide an in-vitro diagnostic medical device (“IVD”). However, in light of the MAC Palmetto GBA’s recently published proposed LCD DL39256, the recently updated AGA guidance, and the ACG update to its clinical guideline that supports screening to prevent highly lethal EAC utilizing a biomarkeraccurate, non-invasive, patient-friendly test like EsoGuard on samples collected with a swallowable, nonendoscopic capsule device like EsoCheck, we have determined to prioritize our clinical trial efforts and resources towards supporting studies that will help secure insurance reimbursement adoption for EsoGuard by government and private insurers. Consequently, we have decided to delay for the ~~time being the BE-1 trial while continuing~~early detection of EAC and BE, including dysplastic BE and related precursors to ~~enroll GERD~~EAC in patients with ~~a previous diagnosis of nondysplastic BE, low grade dysplasia, high grade dysplasia,~~chronic gastroesophageal reflux disease (“GERD”), commonly known as chronic heart burn, acid reflux, or ~~EAC in the BE-2 case-control study through Q2 2023.~~just reflux.

~~EsoCure Esophageal Ablation Device~~

In connection with our efforts to expand our presence in the diagnostic market, we are also developing a third product, the EsoCure Esophageal Ablation Device, with the intent to allow a clinician to treat dysplastic BE before it can progress to EAC, a highly lethal esophageal cancer, and to do so without the need for complex and expensive capital equipment. As described in Note 5, ~~Due To PAVmed Inc.~~, we entered into a license agreement with our parent company, PAVmed, pursuant to which we were granted the rights to commercialize EsoCure. A successful pre-clinical feasibility animal study of EsoCure has been completed, demonstrating excellent, controlled circumferential ablation of the esophageal mucosal lining. An acute and survival animal study of EsoCure has also been completed, demonstrating successful direct thermal balloon catheter ablation of esophageal lining through the working channel of a standard endoscope. We plan to conduct additional development work and animal testing of EsoCure to support a future FDA 510(k) submission.

Recent Developments

Business

Status of Clinical Trials and Publications

Lucid continues to accelerate its collection and publication of clinical utility data through a range of trials. These efforts include an investigator-initiated, retrospective analysis of prospectively collected data on San Antonio firefighters who underwent testing as part of a community-sponsored cancer awareness event described below; a virtual-patient randomized controlled trial with intended recruitment of at least 100 physician participants; a Lucid-sponsored multi-center, prospective, observational study with 500 patients; and two Lucid-sponsored registries, in which Lucid collects real-world clinical utility and clinical validity data on EsoGuard Esophageal DNA testing for the detection of esophageal precancer in two distinct populations.

With regard to the two registries, the Prospective REView of Esophageal Precancer DetectioN in AT-Risk Patients (PREVENT) Registry collects data on EsoGuard testing in the commercial increased-risk population, while the PREVENT-Fire Fighters (PREVENT-FF) Registry focuses exclusively on increased-risk firefighters. Complete data for the San Antonio firefighter study has been accepted for peer review publication in Journal of Gastrointestinal & Digestive System (ISSN: 2161-069X). Combined early interim results from the PREVENT and PREVENT-FF registries focusing on provider decision impact has also been accepted for peer review publication in Journal of Gastroenterology & Digestive Systems (ISSN: 2640-7477).

Interim results for the Lucid-sponsored observational study have been posted in preprint on medRxiv and are undergoing journal peer review. Enrollment for the Lucid-sponsored observational study is expected to be completed by the end of the year. Similarly, results for the Lucid-sponsored virtual-patient study are expected to be ready for analysis before the end of 2023.

#CheckYourFoodTube Events

In January 2023, Lucid completed its first #CheckYourFoodTube Precancer Testing Event, with the San Antonio Fire Department (the “SAFD”) during Firefighter Cancer Awareness Month as designated by the International Association of Fire Fighters (IAFF). A total of 391 members who were deemed to be at-risk for esophageal precancer, underwent a brief, on-site, noninvasive cell collection procedure, performed by our clinical personnel using EsoCheck. Firefighters with suspected esophageal precancer based on a positive EsoGuard result were identified, including some less than 40 years of age, and will undergo appropriate monitoring and treatment, as indicated by clinical practice guidelines, to prevent progression to esophageal cancer.

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 Lucid Test Center (“sLTC”) program, which brings Lucid precancer testing directly to patients—at their physician’s office and now at testing day events.

Launch of Direct Contracting Strategic Initiative

In 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, the company announced it had 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.

~~Reimbursement – Private Payer~~

As part of the transition to our own CLIA-certified commercial clinical laboratory, we contracted with a revenue cycle management (“RCM”) service provider to submit third-party reimbursement claims on our behalf. The RCM service provider has joint oversight of payer claims, appeals processes, patient billing, online payment collection, and claims tracking. On August 1, 2022, our new RCM company began submitting claims to third-party payers. At the point when submission by the RCM began, more than 2,000 claims had accumulated since the commencement of our laboratory operations on February 25, 2022. These claims and other claims that were subsequently generated are now being processed, including 1,088 tests in the three months ended September 30, 2022.

~~Refer to Note 3 of our Condensed Consolidated Financial Statements for more information on Revenue from Contracts with Customers.~~Business - continued

~~EsoCheck Cell Collection Device Update~~New Revenue Cycle Management Provider

In ~~October 2022,~~May 2023, Lucid began to transition claims submission responsibility to a new revenue cycle management provider that offered more robust capabilities for, among other things, claims processing and appeals. The provider upgrade has been completed and claim submissions resumed in June 2023. Since completing the ~~FDA announced they completed their review~~transition, the upgrade has continued to demonstrate an improvement in speed of collections, turnaround time to claim submission, percentage of claims paid, and actionable data for appeals.

Personnel Update

Effective on November 6, 2023, Lucid’s board of directors appointed Shaun M. O’Neil as the President of Lucid. Mr. O’Neil, who is 41 years old, also continues to serve as the Chief Operating Officer of PAVmed and as the Chief Operating Officer of Lucid. For additional biographical information about Mr. O’Neil, please refer to Lucid’s definitive proxy statement on Schedule 14A filed on May 1, 2023, which information is incorporated herein by reference. Other than in connection with his service as an officer of PAVmed and Lucid, Mr. O’Neil has not engaged in any transactions with Lucid that are required to be reported pursuant to Item 404(a) of Regulation S-K.

Financing

Series A Preferred Stock Offering

On March 7, 2023, we sold 13,625 shares of Series A convertible preferred stock, par value $0.001 per share (the “Series A Preferred Stock”), solely to accredited investors. Each share of the ~~EsoCheck 510(k) (#K222366) premarket notification~~Series A Preferred Stock has a stated value of ~~intent to market~~$1,000 and a conversion price of $1.394. The Series A Preferred Stock is convertible into shares of our common stock at any time at the ~~device and granted the use~~option of the ~~EsoCheck Cell Collection Device for~~holder from and after the ~~collection and retrieval~~six-month anniversary of ~~surface cells~~its issuance (or, if later, the effective date of a registration statement covering the resale of the ~~esophagus~~underlying shares), and automatically converts into shares of our common stock on the second anniversary of its issuance. The terms of the Series A Preferred Stock also include a preference on liquidation and a right to receive dividends equal to 20% of the number of shares into which such Series A Preferred Stock is convertible, payable on each of the one-year and two-year anniversary of the issuance date. The Series A Preferred Stock is a non-voting security, other than with respect to limited matters related to changes in terms of the ~~general population~~Series A Preferred Stock. The aggregate gross proceeds from the sale of adults and adolescents, 12 years of age and older. This action by the FDA now expands the targeted US patient population to include adolescents not previously covered by the Company’s initial EsoCheck 510(k) clearance.shares in such offering were $13.625 million.

~~EsoCheck Manufacturing Update~~Series A-1 Preferred Stock Offering

On October ~~4, 2022,~~17, 2023, we ~~completed our first full day~~sold 5,000 shares of ~~manufacturing~~Series A-1 convertible preferred stock, par value $0.001 per share (the “Series A-1 Preferred Stock”), solely to accredited investors. The terms of ~~EsoCheck at Coastline International Inc.,~~the Series A-1 Preferred Stock are substantially identical to the terms of the Series A Preferred Stock, except that the Series A-1 Preferred Stock has a ~~high-volume medical device manufacturer. By mid-2023, we expect to transition~~conversion price of $1.2592. The aggregate gross proceeds from ~~our current manufacturer, Sage Product Development Inc., to Coastline International Inc., as~~ the ~~manufacturing process is further optimized.~~sale of shares in such offering were $5.0 million.

~~Financing~~Private Placement - Securities Purchase Agreement

Effective as of March 13, 2023, we entered into a Securities Purchase Agreement (“SPA”) with an accredited institutional investor, pursuant to which we agreed to sell, and the investor agreed to purchase, a Senior Secured Convertible Note with a face value principal of $11.1 million (the “March 2023 Note”). We issued the March 2023 Note on March 21, 2023 pursuant to the SPA. The proceeds from the sale of the March 2023 Note were $9.925 million after deducting a $1.186 million lender fee and offering costs.

The March 2023 Note has a 7.875% annual stated interest rate, a contractual conversion price of $5.00 per share of the Company’s common stock (subject to standard adjustments in the event of any stock split, stock dividend, stock combination, recapitalization or other similar transaction), and a contractual maturity date of the two-year anniversary of the date of issuance. The principal of the March 2023 Note and accrued interest thereon is convertible at the option of the holder into the Company’s common stock at the contractual conversion price. In addition, the principal of the March 2023 Note amortizes over 18 months commencing six months after its issuance. The amortization payments and accrued interest on the March 2023 Note are payable in shares of the Company’s common stock (subject to the satisfaction of certain customary equity conditions and except for interest payable prior to September 21, 2023), at prices based on the then current market price.

ATM Facility

In ~~March~~November 2022, weLucid Diagnostics entered into an “at-the-market offering” for up to $6.5 million of its common stock that may be offered and sold under a ~~committed equity facility with an affiliate of~~Controlled Equity Offering Agreement between Lucid Diagnostics and Cantor Fitzgerald & Co. (“Cantor”). ~~Under~~In the ~~terms of the facility, Cantor has committed to purchase up to $50 million of~~nine months ended September 30, 2023, we sold 230,068 shares through our ~~common stock from time to time upon our request. While there are distinct differences, the facility is structured similarly to a traditional~~ at-the-market equity facility ~~insofar as it allows us to raise primary capital on a periodic basis at prices based on~~for net proceeds of approximately $0.3 million, after payment of 3% commissions. No shares were sold through our at-the-market equity facility during the ~~existing market price. Through~~three months ended September 30, ~~2022, 680,263 shares of our common stock were issued under this facility for total proceeds of $1.8 million.~~2023.

2123

Results of Operations

Overview

Revenue

The Company recognized revenue resulting from the delivery of patient EsoGuard test results ~~for which cash collections have occurred or payment was reasonably assured.~~when the Company considered the collection of such consideration to be probable to the extent that it is unconstrained. Additionally, in the three months ended March 31, 2022, revenue was recognized with respect to the EsoGuard Commercialization Agreement, dated August 1, 2021, between the Company and RDx, a CLIA certified commercial laboratory service provider. On February 25, 2022, the EsoGuard Commercialization Agreement was terminated upon our acquisition, pursuant to the ~~execution~~APA-RDx, of an certain assets necessary to operate our own CLIA certified laboratory. For a fuller description of the APA-RDx, see Note 6, Asset Purchase Agreement ~~between the Company’s wholly-owned subsidiary of LucidDx Labs Inc.~~ and ~~RDx.~~Management Services Agreement, to our accompanying unaudited condensed consolidated financial statements.

Cost of revenue

Cost of revenues recognized from the delivery of patient EsoGuard test results includes costs related to EsoCheck device usage, shipment of test collection kits, royalties and the cost of services to process tests and provide results to physicians. We incur expenses for tests in the period in which the activities occur, therefore, gross margin as a percentage of revenue may vary from quarter to quarter due to costs being incurred in one period that relate to revenues recognized in a later period.

We expect that gross margin for our services will continue to fluctuate and be affected by EsoGuard test volume, our operating efficiencies, patient compliance rates, payer mix, the levels of reimbursement, and payment patterns of payers and patients.

~~The~~For the previously terminated EsoGuard Commercialization Agreement in February 2022, the cost of revenue recognized ~~with respect to the revenue recognized under the EsoGuard Commercialization Agreement~~ is inclusive of: a royalty fee incurred under the Amended CWRU License ~~Agreement; the MSA Fee~~Agreement (as defined ~~and discussed herein below) allocated~~in Note 4, Related Party Transactions, to our accompanying unaudited condensed consolidated financial statements); the cost of revenue, which is principally employee related costs of PAVmed employees engaged in the administration to patients of the EsoCheck cell sample collection procedure (principally at the Lucid Test Centers); the EsoCheck devices and EsoGuard mailers (cell sample shipping costs) ~~distributed to medical practitioners locations and the Lucid Test Centers;~~; and Lucid Test Centers operating expenses, including rent expense and supplies.

Sales and marketing expenses

Sales and marketing expenses consist primarily of salaries and related costs for employees engaged in sales and marketing activities, as well as the portion of the MSA Fee (as defined in Note 4, Related Party Transactions, to our accompanying unaudited condensed consolidated financial statements) allocated to sales and marketing expenses, which are principally ~~employee~~costs related ~~costs of~~to PAVmed ~~employees.~~employees who are performing services for the Company. We anticipate our sales and marketing expenses will increase in the future, ~~as we anticipate an increase in payroll and related expenses related~~ to the ~~roll-out of~~extent we expand our commercial sales and marketing operations as ~~we execute on~~resources permit and insurance reimbursement coverage for our ~~business strategy.~~EsoGuard test expands.

General and administrative expenses

General and administrative expenses consist primarily of professional fees for accounting, tax, audit and legal services ~~consultants and~~(including those fees incurred as a result of our being a public company), consulting fees, expenses associated with obtaining and maintaining patents within our intellectual property portfolio, and certain employee costs, along with the portion of the MSA Fee allocated to general and administrative expenses.

We anticipate our general and administrative expenses will increase in the future ~~related~~ to ~~continued expansion of~~the extent our ~~overall~~ business ~~operations. We also~~operations grow. Furthermore, we anticipate continued expenses related to being a public company, including ~~professional~~fees and expenses for audit, legal, regulatory, tax-related services, ~~fees for legal, accounting, tax, audit, employees involved in third-party payor reimbursement contract negotiations~~insurance premiums and ~~regulatory services~~investor relations costs associated with maintaining compliance as a public ~~company, along with insurance premiums, investor relations, and other corporate expenses.~~company.

Research and development expenses

Research and development expenses are recognized in the period they are incurred and consist principally of internal and external expenses incurred for the development of our technologies and conducting clinical trials, including:

●	~~consulting costs charged to us by various external contract research organizations we contract with to conduct clinical and preclinical studies and engineering design and development;~~
●	costs associated with regulatory filings;
	●	patent license fees;
	●	cost of laboratory supplies and acquiring, developing, and manufacturing preclinical prototypes; and
●	~~product design engineering studies;~~
●	~~fees associated with conducting clinical trials for our EsoGuard diagnostic assay; and~~
●	MSA Fee allocated to research and ~~development, as such MSA Fee are discussed below.~~development.

We plan to incur research and development expenses for the foreseeable future as we continue the development of our existing products as well as new innovations. Our research and development activities, including our clinical trials, are focused principally on ~~obtaining FDA approvals,~~ facilitating insurer reimbursement, encouraging physician adoption and developing product improvements or extending the utility of the lead products in our pipeline, including EsoCheck and EsoGuard.

~~Results of Operations~~ ~~- continued~~

~~Overview~~ ~~- continued~~

Presentation of Dollar Amounts

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

Results of Operations - continued

~~Three~~The three months ended September 30, ~~2022~~2023 as compared to three months ended September 30, ~~2021~~2022

Revenue

In the three months ended September 30, ~~2022,~~2023, revenue was ~~$0.1~~$0.8 million as compared to ~~$0.2~~$0.1 million infor the corresponding period in the prior year. The ~~$0.1~~$0.7 million ~~decrease~~increase principally relates to the ~~termination~~increase in volume of ~~the EsoGuard Commercialization Agreement with RDx, as the Company transitioned to its own laboratory operations effective February 25, 2022. The decrease was offset by revenue for~~ our EsoGuard Esophageal DNA ~~Test~~Tests performed in our own CLIA laboratory for the ~~three months ended September 30, 2022.~~period and the consideration received for the performance of the EsoGuard Esophageal DNA Tests.

Cost of revenue

In the three months ended September 30, ~~2022,~~2023, cost of revenue ~~was~~remained relatively level, at approximately $1.6 million, as compared to ~~$0.1 million for~~ the corresponding period in the prior year. The ~~$1.5 million increase principally related to:~~factors contributing to cost of revenue remaining relatively level were as follows:

	●	approximately $0.3 million decrease in laboratory facility and operations costs;
	●	approximately $0.2 million increase in compensation related ~~costs as a result of an increase in headcount;~~costs; and
	●	approximately ~~$0.4~~$0.1 million increase in EsoCheck and EsoGuard supplies ~~usage costs; and~~
●	~~approximately $0.9 million increase in laboratory operations~~ costs.

Sales and marketing expenses

In the three months ended September 30, ~~2022,~~2023, sales and marketing costs were approximately ~~$3.9~~$3.8 million as compared to ~~$0.9~~$3.9 million for the corresponding period in the prior year. The net ~~increase~~decrease of ~~$3.0~~$0.1 million was principally related to:

	●	approximately ~~$2.9~~$0.2 million decrease related to the amended MSA with PAVmed;
	●	approximately $0.4 million increase in compensation related costs, including stock-based compensation of approximately $0.4 million with respect to restricted stock awards (“RSA”) grants under the Lucid Diagnostics Inc. 2018 Equity Plan to Lucid Diagnostics and PAVmed employees and non-employees, and an increase in stock options granted corresponding with the increase in headcount;compensation; and
	●	approximately ~~$0.1~~$0.3 million ~~increase~~decrease in third party marketing, corporate information technology and consulting ~~and outside professional services fees.~~expenses.

General and administrative expenses

In the three months ended September 30, ~~2022,~~2023, general and administrative costs were approximately ~~$5.7~~$4.3 million as compared to ~~$3.5~~$5.7 million for the corresponding period in the prior year. The net ~~increase~~decrease of ~~$2.2~~$1.4 million was principally related to:

	●	approximately $2.3 million decrease in stock-based compensation from RSA and stock option grants to Lucid employees and non-employees;
	●	approximately $0.7 million increase in compensation related costs, including stock-based compensation of approximately $0.2 million with respect to RSA grants under the Lucid Diagnostics Inc. 2018 Equity Plan to Lucid Diagnostics and PAVmed employees and non-employees, and an increase in stock options granted corresponding with the increase in headcount;
●	~~approximately $0.5 million increase in consulting services~~ related to ~~patents, regulatory compliance, legal processes for contract review, transition of public relations and investor relations firms, and public company expenses;~~
●	~~approximately $0.6 million increase in~~ the amended MSA ~~fee allocation from~~with PAVmed ~~related~~due to the growth and expansion of our business and the services incurred through PAVmed; and
	●	approximately ~~$0.4~~$0.2 million increase ~~in general business expenses.~~related to compensation related costs.

~~Results of Operations~~ ~~- continued~~

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

Research and development expenses

In the three months ended September 30, ~~2022,~~2023, research and development costs were approximately ~~$2.7~~$1.6 million, compared to ~~$2.2~~$2.7 million for the corresponding period in the prior year. The net ~~increase~~decrease of ~~$0.5~~$1.1 million was principally related to:

	●	approximately ~~$0.3~~$1.4 million ~~increase~~decrease in development costs, particularly in clinical trial activities and outside professional and consulting fees with respect to ~~EsoCheck, EsoCure and EsoGuard;~~EsoCure; and
	●	approximately ~~$0.2~~$0.3 million increase in ~~the MSA fee allocation from PAVmed~~compensation related ~~to the growth and expansion of our business and the services incurred through PAVmed.~~costs, including stock-based compensation.

Amortization of Acquired Intangible Assets

The amortization of acquired intangible assets remained relatively level, at approximately $0.5 million, in the three months ended September 30, 2023, as compared to the corresponding period in the prior year.

Other Income and Expense

Change in fair value of convertible debt

In the three months ended September 30, 2023, the change in the fair value of our convertible note was approximately $3.0 million of income, related to the March 2023 Note. The March 2023 Note was initially measured at its issue-date estimated fair value and subsequently remeasured at estimated fair value as of each reporting period date. The Company initially recognized a $0.8 million fair value non-cash expense on the issue date.

See Note 11, Debt, to our accompanying unaudited condensed consolidated financial statements, for ~~each of: Note 4~~~~, Related Party Transactions,~~ ~~for a discussion of the consulting fee expense and stock based compensation expense recognized~~additional information with respect to the ~~Physician Inventors consulting agreements and stock options and restricted stock awards and for a discussion of the MSA between Lucid Diagnostics and PAVmed; and Note 10~~~~, Stock-Based Compensation~~~~, for information regarding each of the Lucid Diagnostics 2018 Equity Plan and the PAVmed Inc. 2014 Equity Plan.~~March 2023 Note.

Results of Operations - continued

~~Nine~~

The nine months ended September 30, ~~2022~~2023 as compared to nine months ended September 30, ~~2021~~2022

Revenue

In the nine months ended September 30, ~~2022,~~2023, revenue was ~~$0.3~~$1.4 million as compared to ~~$0.2~~$0.3 million infor the corresponding period in the prior year. The ~~$0.1~~$1.1 million increase principally relates to the revenue ~~for laboratory services rendered~~ for our EsoGuard Esophageal DNA Test performed in our own CLIA ~~laboratory. The increase was partially offset by the termination of~~laboratory, as compared to revenue from the EsoGuard Commercialization Agreement with RDx, asrecognized in first two months of the ~~Company~~prior year period, which was terminated on February 25, 2022 when Lucid Diagnostics transitioned to its own laboratory ~~operations effective February 25, 2022.~~operations.

Cost of revenue

In the nine months ended September 30, ~~2022,~~2023, cost of revenue was approximately ~~$2.0~~$4.5 million as compared to ~~$0.1~~$2.0 million for the corresponding period in the prior year. The ~~$1.9~~$2.5 million increase was principally related to:

	●	approximately ~~$0.4 million increase in compensation related costs as a result of an increase in headcount;~~
●	~~approximately $0.6~~$1.1 million increase in EsoCheck and EsoGuard supplies ~~usage~~costs;
	●	approximately $0.7 million increase in laboratory facility and operations costs; and
	●	approximately ~~$0.9~~$0.7 million increase in ~~laboratory operations~~compensation related costs.

Sales and marketing expenses

In the nine months ended September 30, ~~2022,~~2023, sales and marketing costs were approximately ~~$11.1~~$12.0 million as compared to ~~$2.6~~$11.1 million for the corresponding period in the prior year. The net increase of ~~$8.5~~$0.9 million was principally related to:

	●	approximately ~~$7.7~~$2.1 million increase in compensation related costs ~~including stock-based compensation~~principally as a result of ~~approximately $1.2 million with respect to restricted stock awards (“RSA”) grants under the Lucid Diagnostics Inc. 2018 Equity Plan to Lucid Diagnostics and PAVmed employees and non-employees, and~~ an increase in ~~stock options granted corresponding with the increase in headcount;~~
●	~~approximately $1.0 million increase in consulting and outside professional services fees and for EsoCheck and EsoGuard;~~headcount, including stock-based compensation; and
	●	approximately ~~$0.2~~$1.2 million decrease in ~~the MSA fee allocation from PAVmed related to the growth and expansion of our business and the services incurred through PAVmed.~~third party marketing expenses.

General and administrative expenses

In the nine months ended September 30, ~~2022,~~2023, general and administrative costs were approximately ~~$18.2~~$15.0 million as compared to ~~$7.8~~$18.5 million for the corresponding period in the prior year. The net ~~increase~~decrease of ~~$10.4~~$3.5 million was principally related to:

	●	approximately ~~$2.7~~$5.5 million ~~increase~~decrease in ~~compensation related costs, including~~ stock-based compensation of approximately $1.8 million with respect to RSA grants under the Lucid Diagnostics Inc. 2018 Equity Plan to Lucid Diagnostics and PAVmed employees and non-employees, and an increase in stock options granted corresponding with the increase in headcount;compensation;
	●	approximately ~~$4.8~~$2.6 million increase ~~in consulting services~~ related to ~~patents, regulatory compliance, legal processes for contract review, transition of public relations and investor relations firms, and public company expenses;~~
●	~~approximately $1.3 million increase in~~ the amended MSA ~~fee allocation from~~with PAVmed ~~related~~due to the growth and expansion of our business and the services incurred through PAVmed; and
	●	approximately ~~$1.6~~$0.6 million ~~increase general business expenses.~~decrease related to outside professional services and facility related costs.

~~Results of Operations~~ ~~- continued~~

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

Research and development expenses

In the nine months ended September 30, ~~2022,~~2023, research and development costs were approximately ~~$9.0~~$5.3 million, compared to ~~$5.8~~$8.8 million for the corresponding period in the prior year. The net ~~increase~~decrease of ~~$3.2~~$3.5 million was principally related to:

	●	approximately ~~$2.5~~$4.8 million ~~increase~~decrease in development costs, particularly in clinical trial activities and outside professional and consulting fees with respect to ~~EsoCheck, EsoCure and EsoGuard;~~EsoCure;
	●	approximately ~~$0.2~~$0.6 million increase ~~in compensation related costs and~~ related to ~~expanded clinical and engineering staff; and~~
●	~~approximately $0.5 million increase in~~ the amended MSA ~~fee allocation from~~with PAVmed ~~related~~due to the growth and expansion of our business and the services incurred through ~~PAVmed.~~PAVmed; and
	●	approximately $0.7 million increase in compensation related costs, including stock-based compensation.

Amortization of Acquired Intangible Assets

The amortization of acquired intangible assets increased to $1.5 million in the nine months ended September 30, 2023, as compared to $1.1 million in the corresponding period in the prior year. The increase of $0.4 million in the current period was due to the timing of the acquired intangible assets in 2022.

Other Income and Expense

Change in fair value of convertible debt

In the nine months ended September 30, 2023, the change in the fair value of our convertible note was approximately $3.5 million of expense, related to the March 2023 Note. The March 2023 Note was initially measured at its issue date estimated fair value and subsequently remeasured at estimated fair value as of each reporting period date. The Company initially recognized a $0.8 million fair value non-cash expense on the issue date.

Loss on Issue and Offering Costs - Senior Secured Convertible Note

In the nine months ended September 30, 2023, in connection with the issue of the March 2023 Note, we recognized a total of approximately $1.2 million of lender fee and offering costs paid by us.

Results of Operations - continued

The nine months ended September 30, 2023 as compared to nine months ended September 30, 2022 - continued

Liquidity and Capital Resources

Our current operational activities are principally focused on the commercialization of EsoGuard. We are ~~expanding~~pursuing commercialization across multiple sales channels, including: the communication to and education of medical practitioners and clinicians regarding EsoGuard; ~~and~~ the establishment of Lucid Diagnostics Test Centers for the collection of cell samples using ~~EsoCheck.~~EsoCheck; the launch of the mobile testing unit; ongoing #CheckYourFoodTube testing days; and our direct contracting strategic initiative. Additionally, we are developing expanded clinical evidence to support insurance reimbursement adoption by government and private insurers. Further, as resources permit, the Company is also ~~pursuing~~intends to pursue development of other products and services, including EsoCure, an Esophageal Ablation Device.

Our ability to generate revenue depends upon our ability to successfully advance the commercialization of EsoGuard, including significantly expanding insurance reimbursement coverage, while also completing the clinical studies, product and service development, and necessary regulatory approval thereof. There are no assurances, however, we will be able to obtain an adequate level of financial resources required for the long-term commercialization and development of our products and services.

Prior to our initial public offering (“IPO”) of our common stock in October 2021, our operations were funded by PAVmed, inclusive of providing working capital cash advances and the payment of certain operating expenses on our behalf. Additionally, certain of our operations continue to be managed by PAVmed personnel, for which we incur expense according to the provisions of a MSA between us and PAVmed. See Note 4~~, Related Party Transactions,~~ ~~for a discussion of the MSA.~~

We are subject to all of the risks and uncertainties typically faced by medical device and diagnostic companies that devote substantially all of their efforts to the commercialization of their initial product and services and ongoing research and development activities and conducting clinical trials. We experienced a net loss of approximately $41.8 million and used approximately $22.8 million of cash in operations for the nine months ended September 30, 2023. Financing activities provided $24.5 million of cash during the nine months ended September 30, 2023. We ended the quarter with cash on-hand of $24.1 million as of September 30, 2023. We expect to continue to experience recurring losses and negative cash flow from operations and will continue to fund our operations with debt and equity financing ~~transactions.~~transactions including current obligations on our existing convertible debt which in accordance with management’s plans may include conversions to equity and refinancing our existing debt obligations to extend the maturity date. Notwithstanding, however, with our cash on-hand as of the date hereof and the committed equity sources of financing, described below, and conversion and refinancing of existing convertible notes, the Company expects to be able to fund its operations and meet its financial obligations as they become due for the one year period from the date of the issue of the Company’s unaudited condensed consolidated financial statements, as included herein in this Form 10-Q.

Series A Preferred Stock Offering

~~Committed Equity Facility -~~On March ~~28, 2022~~7, 2023, we sold 13,625 shares of Series A Preferred Stock, solely to accredited investors. Each share of the Series A Preferred Stock has a stated value of $1,000 and a conversion price of $1.394. The Series A Preferred Stock is convertible into shares of our common stock at any time at the option of the holder from and after the six-month anniversary of its issuance (or, if later, the effective date of a registration statement covering the resale of the underlying shares), and automatically converts into shares of our common stock on the second anniversary of its issuance. The terms of the Series A Preferred Stock also include a preference on liquidation and a right to receive dividends equal to 20% of the number of shares into which such Series A Preferred Stock is convertible, payable on each of the one-year and two-year anniversary of the issuance date. The Series A Preferred Stock is a non-voting security, other than with respect to limited matters related to changes in terms of the Series A Preferred Stock. The aggregate gross proceeds from the sale of shares in such offering were $13.625 million.

Series A-1 Preferred Stock Offering

On October 17, 2023, we sold 5,000 shares of Series A-1 Preferred Stock, solely to accredited investors. The terms of the Series A-1 Preferred Stock are substantially identical to the terms of the Series A Preferred Stock, except that the Series A-1 Preferred Stock has a conversion price of $1.2592. The aggregate gross proceeds from the sale of shares in such offering were $5.0 million.

Private Placement - Securities Purchase Agreement

Effective as of March ~~28,~~13, 2023, we entered into the SPA with an accredited institutional investor, pursuant to which we agreed to sell, and the investor agreed to purchase the March 2023 Note with a face value principal of $11.1 million. We issued the March 2023 Note on March 21, 2023 pursuant to the SPA. The March 2023 Note proceeds were $9.925 million after deducting a $1.186 million lender fee and offering costs.

Liquidity and Capital Resources - continued

Under the March 2023 Note, the Company is subject to certain customary affirmative and negative covenants regarding the incurrence of indebtedness, the existence of liens, the repayment of indebtedness and the making of investments, the payment of cash in respect of dividends, distributions or redemptions, the transfer of assets, the maturity of other indebtedness, and transactions with affiliates, among other customary matters. Under the March 2023 Note, the Company is also subject to financial covenants requiring that (i) the amount of the Company’s available cash shall equal or exceed $5.0 million at all times, (ii) the ratio of (a) the outstanding principal amount of the notes issued under the SPA, accrued and unpaid interest thereon and accrued and unpaid late charges, as of the last day of any fiscal quarter commencing with September 30, 2023 to (b) the Company’s average market capitalization over the prior ten trading days, shall not exceed 30%, and (iii) the Company’s market capitalization shall at no time be less than $30 million (the “Financial Tests”). As of September 30, 2023, the Company was in compliance, and as of the date hereof, the Company is in compliance, with the Financial Tests.

In the nine months ended September 30, 2023, approximately $92 of principal repayments along with approximately $48 of interest expense thereon, were settled through the issuance of 115,388 shares of common stock of the Company, with such shares having a fair value of approximately $166 (with such fair value measured as the respective conversion date quoted closing price of the common stock of the Company). In the three months ended September 30, 2023, 115,388 shares of common stock of the Company were issued in satisfaction of a portion of this debt.

Committed Equity Facility and ATM Facility

In March 2022, we entered into a committed equity facility with ~~Cantor.~~a Cantor affiliate. Under the terms of the committed equity facility, the Cantor affiliate has committed to purchase up to $50 million of our common stock from time to time at our request. While there are distinct differences, the committed equity facility is structured similarly to a traditional at-the-market equity facility, insofar as it allows us to raise primary equity capital on a periodic basis at prices based on the existing market price. ~~As of September 30, 2022, under the committed equity facility,~~Cumulatively, a total of 680,263 shares of common stock of the Company were issued for net proceeds of approximately $1.8 ~~million.~~million, after a 4% discount, as of September 30, 2023. No shares were sold through this facility during the three months ended September 30, 2023.

In November 2022, Lucid Diagnostics also entered into an “at-the-market offering” for up to $6.5 million of its common stock that may be offered and sold under a Controlled Equity Offering Agreement between Lucid Diagnostics and Cantor. In the nine months ended September 30, 2023, we sold 230,068 shares through our at-the-market equity facility for net proceeds of approximately $0.3 million, after payment of 3% commissions. No shares were sold through our at-the-market equity facility during the three months ended September 30, 2023.

Due To: PAVmed Inc.

Since our inception in May 2018 through our IPO in October 2021, our operations were funded by PAVmed providing working capital cash advances and ~~the payment~~ by PAVmed ofpaying certain operating expenses on our behalf. Additionally, our daily operations have been and continue to be ~~principally managed~~conducted in part by personnel employed by PAVmed, for which we incur aan MSA Fee expense. The MSA Fee is charged on a monthly basis and is subject-to periodic adjustment corresponding with changes in the services provided by PAVmed ~~Inc.~~ personnel to the Company, with any such change in the MSA Fee being subject to approval of the ~~Lucid Diagnostics Inc.~~Company and PAVmed ~~Inc.~~ boards of directors. In this regard, in ~~August 2022,~~May 2023, the respective companies’ boards of directors ~~of Lucid Diagnostics Inc. and PAVmed Inc.~~ approved a ~~sixth~~seventh amendment to the MSA to increase the MSA Fee to ~~$550~~$750 per month, ~~from $390 per month, with such increase~~ effective ~~on a prospective basis commencing July~~January 1, ~~2022.~~2023. Pursuant to the ~~sixth~~MSA, as amended by the seventh amendment, the parties agreed PAVmed ~~Inc.~~ may elect to receive payment of the monthly MSA Fee in cash or in shares of our common stock, with such shares valued at the volume weighted average price (“VWAP”) during the final ten trading days of the applicable month (subject to a floor price of $0.70 per share). However, in no event will PAVmed ~~Inc.~~ be entitled to receive under the MSA, as amended, more than 7,709,836 shares of our common stock (representing 19.99% of our outstanding shares of common stock as of immediately prior to the execution of the sixth amendment). The shares that may be issued under the MSA, as amended, are being offered and sold in transactions exempt from registration under the Securities Act of 1933, as amended, in reliance on the exemption afforded under Section 4(a)(2) thereof.

In addition, on November 30, 2022, we entered into a payroll and benefit expense reimbursement agreement (the “PBERA”)with PAVmed. Historically, PAVmed has paid for certain payroll and benefit-related expenses in respect of our personnel on our behalf, and we have reimbursed PAVmed for the same. Pursuant to the PBERA, PAVmed will continue to pay such expenses, and we will continue to reimburse PAVmed for the same. The PBERA provides that the expenses will be reimbursed on a quarterly basis or at such other frequency as the parties may determine, in cash or, subject to approval by PAVmed’s and our boards of directors, in shares of our common stock, with such shares valued at the volume weighted average price of such stock during the final ten trading days preceding the later of the two dates on which such stock issuance is approved by PAVmed’s and our boards of directors (subject to a floor price of $0.40 per share), or in a combination of cash and shares. However, in no event will we issue any shares of our common stock to PAVmed in satisfaction of all or any portion of the expenses if the issuance of such shares of our common stock would exceed the maximum number of shares of common stock that we may issue under the rules or regulations of Nasdaq, unless we obtain the approval of our stockholders as required by the applicable rules of the Nasdaq for issuances of shares of our common stock in excess of such amount.

As of September 30, ~~2022,~~2023, we had a Due To: PAVmed Inc. payment obligation liability of ~~an aggregate~~approximately $10.3 million, which liability is primarily comprised of ~~approximately $6.6 million payable for~~our obligations under the ~~transfer of CapNostics, LLC,~~PBERA and ~~for reimbursement of employee related costs and certain~~the MSA, as well other operating expenses paid by PAVmed on our behalf. See our accompanying unaudited condensed consolidated financial statements Note 5, Due To PAVmed Inc.

Critical Accounting Policies and Significant Judgments and Estimates

The discussion and analysis of our ~~(unaudited)~~ financial condition and ~~consolidated~~ results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions ~~affecting~~that affect the ~~reported~~ amounts ~~of assets, liabilities, and equity, along with the disclosure of contingent assets and liabilities at the date of the~~reporting in our unaudited condensed consolidated financial statements and ~~the reported amounts of expenses during the corresponding periods.~~accompanying notes. On an ongoing basis, we evaluate our estimates and judgements. In accordance with U.S. GAAP, we base our estimates on historical experience and on various other ~~assumptions we believe~~factors that are ~~reasonable~~believed to be appropriate under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. Our critical accounting policies are as disclosed in the Company’s ~~annual report~~Annual Report on Form 10-K for the year ended December 31, ~~2021~~2022 as filed with the SEC on ~~April 6, 2022,~~March 14, 2023, except as otherwise noted in “Fair Value Option (“FVO”) Election” subsection of Note 2, Summary of Significant Accounting Policies ~~and Recent Accounting Standards Updates~~, ofto our unaudited condensed consolidated financial statements included herein in this Form ~~10-Q.~~10-Q with respect to the March 2023 Note. We determined upon the issuance of our March 2023 Note to elect the fair value option. At issuance, the carrying value of the March 2023 Note was recorded at estimated fair value. The estimated fair values reported utilized Lucid’s common stock price along with certain Level 3 inputs, in the development of Monte Carlo simulation models, discounted cash flow analyses, and /or Black-Scholes valuation models. The estimated fair values are subjective and are affected by changes in inputs to the valuation models and analyses, including the Company’s common stock price, the Company’s dividend yield, the risk-free rates based on U.S. Treasury security yields, and certain other Level-3 inputs including, assumptions regarding the estimated volatility in the value of the Company’s common stock price. We remeasure the March 2023 Note to its estimated fair value at each reporting period using valuation techniques similar to those applied at issuance. The change in the fair value is recognized as other income (expense) in the statement of operations. A significant change in the volatility could have a material impact to the carrying value of the March 2023 Note as well as the amount of change recognized during the period.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of September 30, ~~2022.~~2023. Based on such evaluation, our principal executive officer and principal financial officer concluded our disclosure controls and procedures (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) were effective as of such date to provide reasonable assurance the information required to be disclosed by us in the reports we file or submit under the Exchange Act is ~~(i)~~ recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and ~~forms~~forms. Disclosure controls and ~~(ii)~~procedures include, without limitation, controls and procedures designed to ensure information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Changes to Internal Controls Over Financial Reporting

There has been no change in internal ~~controls~~control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during our fiscal quarter ended September 30, ~~2022~~2023 that has materially affected, or is reasonably likely to materially affect, our ~~internals~~internal control over financial reporting.

Part II - Other Information

Item 1. Legal Proceedings

In the ordinary course of our business, particularly as it begins commercialization of its products, the Company may be subject to certain other legal actions and claims, including product liability, consumer, commercial, tax and governmental matters, which may arise from time to time. ~~Except as otherwise noted herein, the~~The Company ~~does~~is not ~~believe it is currently a party to~~aware of any ~~other~~such pending legal ~~proceedings.~~or other proceedings that are reasonably likely to have a material impact on the Company. Notwithstanding, legal proceedings are ~~subject-to~~subject to inherent uncertainties, and an unfavorable outcome could include monetary damages, and excessive verdicts can result from litigation, and as such, could result in a material adverse impact on the Company’s business, financial position, results of operations, and /or cash flows. Additionally, although the Company has specific insurance for certain potential risks, the Company may in the future incur judgments or enter into settlements of claims which may have a material adverse impact on the Company’s business, financial position, results of operations, and /or cash flows.

Item 2. Unregistered Sales of Equity Securities and Use of ~~Proceeds~~Proceeds.

~~See the disclosure~~Except as previously disclosed in ~~“Liquidity and Capital Resources - Committed Equity Facility - March 28, 2022” under Item 2 above and in the Current Report~~our current reports on Form 8-K filed ~~by us with~~prior to the ~~SEC on April 1, 2022, each~~date of ~~which is incorporated herein by reference, for a description of the committed equity facility with Cantor and the shares issuable to Cantor thereunder.~~

~~In addition, effective as of August 25, 2022,~~this Form 10-Q, we ~~issued 82,618 shares~~did not sell any unregistered securities or repurchase any of our ~~common stock to an entity designated by RDx, in satisfaction of a $250,000 installment payment due under~~securities during the asset purchase agreement dated February 25, 2022, between LucidDx Labs (our wholly-owned subsidiary) and RDx, and unrelated third-party. See the Current Report on Form 8-K filed by us with the SEC on March 3, 2022, which is incorporated herein by reference, for a fuller description of the asset purchase agreement with RDx and the installment payments thereunder.three months ended September 30, 2023.

On October 14, 2021, we completed our initial public offering (“IPO”) of our common stock under an effective registration statement on Form S-1 (SEC File No. 333-259721). As of September 30, ~~2022,~~2023, of the net proceeds of $64.4 million, approximately ~~$39.3~~$64.4 million has been used, in a manner consistent with the use of proceeds set forth in the prospectus for our IPO, as follows: approximately ~~$5.3~~$7.5 million of net repayments ~~due to PAVmed;~~of Due To: PAVmed Inc.; approximately ~~$4.7~~$5.0 million for the purchase of our laboratory equipment, software, and its operating expenses; and ~~$29.3~~$51.9 million of working capital expenditures. None of the proceeds have been paid to any of our directors, officers, 10% stockholders, or affiliates, other than as described above.

Item 5. Other Information

~~None.~~The information set forth in Item 2 under “Recent Developments—Business—Personnel Update” is incorporated by reference in this Item 5.

Item 6. Exhibits

The exhibits filed as part of this Quarterly Report on Form 10-Q are set forth in the “Exhibit Index” below.

2630

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Lucid Diagnostics Inc.

November ~~14, 2022~~13, 2023	By:	/s/ Dennis M McGrath
		Dennis M McGrath
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

2731

EXHIBIT INDEX

		~~Incorporation by Reference~~
~~Exhibit No.~~	~~Description~~		~~Form~~	~~Exhibit No.~~	~~Date~~
~~2.1‡~~	~~Asset Purchase Agreement, dated as of February 25, 2022, by and among LucidDx Labs Inc., Lucid Diagnostics Inc. and ResearchDx, Inc. ‡~~		~~8-K~~	~~2.1~~	~~3/3/2022~~
~~10.1~~	~~Amended and Restated 2018 Long-Term Incentive Equity Plan.~~		~~DEF 14A~~	~~Annex A~~	~~5/2/2022~~
~~10.2~~	~~Employee Stock Purchase Plan~~		~~DEF 14A~~	~~Annex B~~	~~5/2/2022~~
~~31.1~~	~~Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~		*
~~31.2~~	~~Certification of Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.~~		*
~~32.1~~	~~Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002~~		*
~~32.2~~	~~Certification of Principal Financial and Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.~~		*

~~101.INS~~	~~Inline XBRL Instance Document~~		*
~~101.CAL~~	~~Inline XBRL Taxonomy Extension Schema~~		*
~~101.DEF~~	~~Inline XBRL Taxonomy Extension Calculation Linkbase~~		*
~~101.LAB~~	~~Inline XBRL Taxonomy Extension Label Linkbase~~		*
~~101.PRE~~	~~Inline XBRL Taxonomy Extension Presentation Linkbase~~		*
~~104~~	~~Cover Page Interactive Data File (embedded within the Inline XBRL document)~~		*

Incorporation by Reference
Exhibit No. Description Form Exhibit No. Date
3.1 Form of Certificate of Designation of Preferences, Rights and Limitations of Series A-1 Preferred Stock. 8-K 3.1 10/18/2023
10.1 Form of Registration Rights Agreement. 8-K 10.1 10/18/2023
31.1 Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
31.2 Certification of Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. *
32.1 Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 *
32.2 Certification of Principal Financial and Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. *

101.INS Inline XBRL Instance Document *
101.CAL Inline XBRL Taxonomy Extension Schema *
101.DEF Inline XBRL Taxonomy Extension Calculation Linkbase *
101.LAB Inline XBRL Taxonomy Extension Label Linkbase *
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase *
104 Cover Page Interactive Data File (embedded within the Inline XBRL document) *

* Filed herewith.
‡ Certain exhibits and schedules have been omitted pursuant to Item 601(b)(10) of Regulation S-K. The registrant hereby undertakes to furnish supplementally a copy of any omitted exhibit or schedule upon request by the Securities and Exchange Commission.

2832

	Common Stock				Additional Paid-In			Accumulated
	Shares		Amount		Capital			Deficit			Total
Balance as of December 31, 2021		34,917,907	$	35	$	96,608		$	(41,904	)	$	54,739
Exercise - stock options - Lucid Diagnostics Inc. 2018 Equity Plan		964,716		1		693			—			694
Stock-based compensation - Lucid Diagnostics Inc.		—		—		10,371			—			10,371
Stock-based compensation - PAVmed Inc.		—		—		880			—			880
Vest - restricted stock awards		169,320		—		—			—			—
CapNostics, LLC transfer		—		—		(211	)		—			(211	)
APA-RDx - Installment Payment		199,989		—		427			—			427
Issuance - Committed Equity Facility, net of deferred financing charges		680,263		1		1,766			—			1,767
Purchase - Employee Stock Purchase Plan		84,030		—		109			—			109
Net loss		—		—		—			(41,243	)		(41,243	)
Balance as of September 30, 2022		37,016,225	$	37	$	110,643		$	(83,147	)	$	27,533

	CapNostics, LLC Transfer		PAVmed Inc. OBO Payments			Employee-Related Costs			MSA Fees			Total
Balance - December 31, 2021	$	—	$	620		$	1,037		$	—		$	1,657
MSA fees		—		—			—			3,990			3,990
On Behalf Of (OBO) activities		—		1,114			—			—			1,114
ERC - Payroll & Benefits		—		—			7,178			—			7,178
CapNostics, LLC transfer		2,105		—			—			—			2,105
Cash payments to PAVmed Inc.		—		(1,598	)		(5,496	)		(2,340	)		(9,434	)
Balance - September 30, 2022	$	2,105	$	136		$	2,719		$	1,650		$	6,610


2022 (remainder of year)	$	246
2023		980
2024		928
2025		24
Total lease payments	$	2,178
Less: imputed interest		(175	)
Present value of lease liabilities	$	2,003


2022 (remainder of year)	$	504
2023		2,021
2024		688
2025		421
2026		316
Total	$	3,950

		Incorporation by Reference
Exhibit No.	Description	Form	Exhibit No.	Date
3.1	Form of Certificate of Designation of Preferences, Rights and Limitations of Series A-1 Preferred Stock.	8-K	3.1	10/18/2023
10.1	Form of Registration Rights Agreement.	8-K	10.1	10/18/2023
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	*
31.2	Certification of Principal Financial and Accounting Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	*
32.1	Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	*
32.2	Certification of Principal Financial and Accounting Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	*

101.INS	Inline XBRL Instance Document	*
101.CAL	Inline XBRL Taxonomy Extension Schema	*
101.DEF	Inline XBRL Taxonomy Extension Calculation Linkbase	*
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase	*
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase	*
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)	*