LUCD US Equity☆

UNITED

STATES

SECURITIES

AND EXCHANGE COMMISSION

Washington,

DC 20549

FORM

10-K

(Mark

One)

For

the fiscal year ended December 31, 2023

OR

For

the transition period from _____ to _____

Commission

File Number: 001-40901

LUCID

DIAGNOSTICS INC.

(Exact

Name of Registrant as Specified in Its Charter)

(State or Other Jurisdiction of (IRS Employer

Incorporation or Organization) Identification No.)

360 Madison Avenue

(Address of Principal Executive Offices) (Zip Code)

(917)813-1828

(Registrant’s

Telephone Number, Including Area Code)

Securities

registered 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

Securities

registered under Section 12(g) of the Exchange Act:

None.

Indicate

by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No

☒

Indicate

by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ☐

No ☒

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 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 has filed a report on and attestation to its management’s assessment of the effectiveness

of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered

public accounting firm that prepared or issued its audit report. ☐

If

securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant

included in the filing reflect the correction of an error to previously issued financial statements. ☐

Indicate

by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation

received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

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 June 30, 2023, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market

value of the registrant’s voting stock held by non-affiliates was approximately $14.4 million, based on 10,331,863 shares of common

stock held by non-affiliates and a last reported sales price per share of the registrant’s common stock of $1.39 on such date.

As

of March 21, 2024 there were 48,244,798 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).

DOCUMENTS

INCORPORATED BY REFERENCE

Portions

of the registrant’s definitive proxy statement for its 2024 annual meeting of stockholders are incorporated by reference into Part

III of this Form 10-K where indicated. Such definitive proxy statement will be filed with the U.S. Securities and Exchange Commission

within 120 days after the year ended December 31, 2023.

TABLE

OF CONTENTS

PART I

Item 1. Business 1

Item 1A. Risk Factors 14

Item 1B. Unresolved Staff Comments 40

Item 1C. Cybersecurity 40

Item 2. Property 40

Item 3. Legal Proceedings 40

Item 4. Mine Safety Disclosures 40

PART II

Item 6. [Reserved] 41

Item 7A. Quantitative and Qualitative Disclosure About Market Risk 50

Item 8. Financial Statements and Supplementary Data 50

Item 9A. Controls and Procedures 51

Item 9B. Other Information 51

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 51

PART III

Item 10. Directors, Executive Officers, and Corporate Governance 52

Item 11. Executive Compensation 52

Item 14. Principal Accountant Fees and Services 52

PART IV

Item 15. Exhibits and Financial Statement Schedules 53

i

FORWARD-LOOKING

STATEMENTS

This

Annual Report on Form 10-K (this “Form 10-K”), including the discussion and analysis of our consolidated financial

condition and results of operations set forth under Item 7 of this Form 10-K, contains forward-looking statements that involve substantial risks and uncertainties. All

statements, other than statements of historical facts, contained in this Form 10-K, 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 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;

● the ability of our products to achieve market acceptance;

● 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 and other health-related emergencies;

● risks related to our relationship with PAVmed; and

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 results, plans and/or objectives disclosed

in our forward-looking statements, and the intended or expected developments and/or other events disclosed in our forward-looking statements

may not actually occur, and accordingly you should not place undue reliance on our forward-looking statements. You should read this Annual

Report on Form 10-K and the documents we have filed as exhibits to this 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.

ii

Part

I

Item

1. Business

Background

and Overview

Lucid

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

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

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

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

its subsidiaries.

We

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

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

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

EsoGuard

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

It quantifies methylation at 31 sites on two genes, Vimentin (VIM) and Cyclin A1 (CCNA1). Analytical validation tests of EsoGuard demonstrated

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

intra-assay precision. Two independent clinical validation case control studies funded by the National Institute of Health utilized were

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

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

(95% CI 81-91%). Positive predictive value (PPV) and negative predictive value (NPV) were calculated

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

42% and NPV of around 98%.

EsoCheck

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

in a less than five-minute office procedure. It consists of a vitamin pill-sized rigid plastic capsule tethered to a thin silicone catheter

from which a soft silicone balloon with textured ridges emerges to gently swab surface esophageal cells. When vacuum suction is applied,

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

region during device withdrawal. We believe this proprietary Collect+ProtectTM technology makes EsoCheck the only noninvasive esophageal

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

EsoGuard

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

EsoCheck have been developed to provide accurate, non-invasive, patient-friendly testing for the early detection of EAC and Barrett’s

Esophagus (“BE”), including dysplastic BE and related pre-cursors to EAC in patients with chronic GERD.

Market

Opportunity

In

2023, approximately 20,000 U.S. GERD patients are projected to be diagnosed with EAC and approximately 16,000 will die from it. Over

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

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

all cases, EAC silently progresses until it manifests itself with new symptoms of advanced disease. EAC is nearly always invasive at

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

As

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

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

in at-risk patients without symptoms of GERD. Based on this revision, we believe the cohort recommended for screening consists of an

estimated 30 million U.S. individuals with at least 3 established risk factors for BE. Accordingly, we believe EsoGuard’s total

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

U.S. patients recommended for screening by clinical practice guidelines. (In December 2019, we secured “gapfill” determination

for EsoGuard’s PLA code 0114U through the CMS CLFS process. This allowed us to engage directly with Medicare contractor Palmetto

GBA and its MolDx Program on CMS payment and coverage. As discussed below under the heading “Reimbursement and Market Access”,

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

Unfortunately,

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

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

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

Since

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

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

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

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

We

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

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

and cancer in patients with 3 or more risk factors.

Clinical

Guidelines for At-Risk Population

The

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

including the American College of Gastroenterology (“ACG”) BE Guidelines. In its Recommendation 5, the ACG suggests a single screening

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

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

An

ACG clinical guideline entitled “Diagnosis and Management of Barrett’s Esophagus: An Updated ACG Guideline,”

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

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

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

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

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

esophageal cell collection devices, as well as methylated DNA biomarkers such as EsoGuard. The summary of evidence for this recommendation

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

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

EsoCheck.

In

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

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

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

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

tools that are easy to administer, patient friendly, and cost-effective for the detection of BE. The clinical practice update by the

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

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

Commercialization

Our

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

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

treatment with endoscopic esophageal ablation.

To

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

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

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

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

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

In

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

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

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

Also,

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

during Firefighter Cancer Awareness Month as designated by the International Association of Fire Fighters (IAFF). A total of 391 members

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

by our clinical personnel using EsoCheck. Since then, additional testing events have been hosted with the SAFD, and similar events

have been held with fire departments throughout the country. These events are ongoing and are an extension of Lucid’s satellite

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

day events.

In

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

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

cancer screening diagnostic companies that have deployed similar strategies. In August 2023, we contracted with the

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

San Antonio locations.

We

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

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

Reimbursement

and Market Access

As

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

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

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

A

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

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

Medicaid Services (“CMS”) website by MAC Palmetto GBA. (A substantially identical LCD was published by Noridian

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

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

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

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

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

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

year.

In

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

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

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

majority of our revenue to date.

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

testing over the past several years. We believe that EsoGuard falls within the definition of a biomarker test and thus we are reviewing

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

Clinical

Utility and Clinical Trials

Demonstrating

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

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

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

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

identify or exclude patients who would benefit from additional management and/or treatment. Clinical utility studies are also important

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

We

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

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

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

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

evaluates EsoGuard performance in the intended-use population. Publication of real-world experience of EsoCheck as a nonendoscopic cell

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

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

and underwent confirmatory endoscopic evaluation. These four manuscripts will be submitted for peer review in the first half of 2024.

Additionally,

the Lucid-sponsored multi-center, prospective, observational CLinical Utility of EsoGuard study (CLUE) with

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

data snapshot of the Lucid-sponsored PREVENT and PREVENT-Firefighter (FF) registries with a combined

enrollment of >1,000 subjects are expected to be published in a similar timeframe. Combined interim results from the PREVENT and PREVENT-FF

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

& Digestive Systems (ISSN: 2640-7477). Both studies capture information on the diagnostic and/or therapeutic journey of subjects

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

the Lucid evidence portfolio.

Similarly,

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

Finally,

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

2023 and is expected to continue through 2024. This data will further supplement what has previously been produced by the two NCI-funded

studies (Moinova, et al. Sci Transl Med. 2018; BETRNet).

Manufacturing

EsoCheck

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

and Sage Product Development. Our current line at Coastline can produce up to 25,000 units per year. With Coastline’s improvement

and expansion, there is capacity to scale exponentially. Our EsoGuard Specimen Kits are currently manufactured for us by our partner

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

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

License

Agreement

Under

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

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

changes in the esophagus and on sample preservation. We are required to pay CWRU royalties on net sales of licensed products as

follows: 5% of net sales of less than $100 million per year; and 8% of net sales greater than $100 million per year. We are also

required to pay CWRU minimum annual royalty payments as follows: $50,000 per year, beginning January 1 following the first

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

a year; $300,000 per year, if net sales of a licensed product exceed $50 million in a year; and $600,000 per year, if net sales of a

licensed product exceed $100 million in a year. Minimum yearly royalty amounts are subject to increase based on the percentage

change in the CPI-W Consumer Price Index and are credited against the royalties otherwise due. The license agreement was subject to

four regulatory and commercialization milestones, of which one remains unachieved and unpaid. The remaining milestone is the FDA PMA

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

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

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

U.S. government agency, whichever comes later.

Regulatory

In

June 2019, we received FDA 510(k) clearance to market EsoCheck in the U.S. as a device indicated for use in the collection and retrieval

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

populations in the U.S. In December 2019, our CLIA-certified then-laboratory partner, completed documentation of EsoGuard analytical

validity allowing us to commercialize it as a LDT.

In

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

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

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

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

more favorable pre/post market data collection balance. The Centers for Medicare and Medicaid Services and the United States Congress

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

In

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

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

be marketed in CE Mark European countries.

In

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

IVDs manufactured by a laboratory would generally fall under the same enforcement approach as other IVDs. If finalized, FDA believes

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

of safety and effectiveness. As such, FDA has structured the proposed phaseout policy to contain five key stages:

It

is currently anticipated that FDA will finalize the proposed policy by April 2024. Once the final policy is released, we will implement

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

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

per the timeframe defined in the final policy. We are confident that the proposed policy will not have a commercial impact as the Company

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

QS requirements, if and when required by the FDA.

Our

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

using EsoGuard on samples collected with EsoCheck. This use of EsoGuard together with EsoCheck as a testing system must be cleared or

approved by the FDA as an IVD device.

Laboratory

Operations

On

February 25, 2022, our new, wholly owned subsidiary, LucidDx Labs Inc. (“LucidDx Labs”), acquired from ResearchDX Inc.

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

CAP-accredited clinical laboratory located in Lake Forest, CA. Since March 2022, we have conducted EsoGuard testing at our own

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

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

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

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

assay.

In

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

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

of multiplexed triplicate consensus versus singleplex techniques, consistent with CLIA standards. Clinical validation analysis demonstrated

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

costs in extensive validation studies.

Competition

The

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

than 30 million at-risk individuals over the age of 50. Given the large market for pre-cancer testing, we likely will face numerous competitors,

some of which possess significantly greater financial and other resources and development capabilities than us. Our EsoGuard test faces

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

early detection products. Our EsoCheck device faces competition from other manufactures with devices designed to collect cell samples

from targeted regions of the esophagus. For example, EndoSign, commercialized by Cyted, and much like Cytosponge and our own EsophaCap

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

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

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

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

We

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

technologies and licenses complementary to our products or advantageous to our business. We are aware of several companies that compete

or are developing technologies in our current and future products areas. In order to compete effectively, our products will have to achieve

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

EsoCure

The EsoCure Esophageal Ablation

Device is a novel technology that allows 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 connection with our efforts to

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

Lucid was granted the rights to commercialize EsoCure for the treating dysplastic BE. Under the intercompany license, Lucid will pay PAVmed

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

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

circumferential ablation of the esophageal mucosal lining. An acute and survival animal study of EsoCure Esophageal Ablation Device has

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

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

a future FDA 510(k) submission.

Our

Relationship with PAVmed

We

are a majority-owned subsidiary of PAVmed, and PAVmed has a controlling financial interest. We continue to depend on PAVmed to provide

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

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

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

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

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

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

securities are converted into shares of our common stock. For as long as PAVmed continues to control more than 50% of our voting securities,

PAVmed will be able to direct the election of all the members of our board of directors. Similarly, PAVmed will have the power to determine

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

to take other actions that might be favorable to PAVmed, without prior notice to other stockholders. Even if PAVmed’s ownership

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

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

We

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

agreement (the “PBERA”). Under the MSA, PAVmed provides management, technical and administrative services to us, including

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

as well as services related to corporate financial, accounting and legal matters. The terms of this agreement are intended to be consistent

with the terms that we could have negotiated with unaffiliated third parties; however, they may actually be more or less favorable. Under

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

on our behalf, and we reimburse PAVmed for the same. PAVmed may elect that our obligations under each of the MSA and the PBERA are settled

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

subject also to approval by our board). The MSA does not have a termination date, but may be terminated by our board of directors

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

Recent

Events

Business

Intercompany

Agreements with PAVmed

In

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

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

In

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

million to $0.83 million, effective as of January 1, 2024. The eighth amendment to the MSA was executed on March 22, 2024. Pursuant to

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

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

trading days of the applicable month (subject to a floor price of $0.70 per share). However, in no event will PAVmed be entitled to receive

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

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

Financing

Preferred

Stock Offerings

On

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

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

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

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

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

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

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

Preferred Stock (collectively, the “Series B Offering and Exchange”). Prior to the execution of the Series B

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

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

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

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

has a stated value of $1,000 and a conversion price of $1.2444. The terms of the Series B Preferred Stock also include a one times

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

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

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

described elsewhere in this Form 10-K). The aggregate gross proceeds of these transactions was $18.16 million (inclusive of $5.67

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

Preferred Stock in the transactions).

All the shares of Series A Preferred

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

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

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

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

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

Intellectual

Property

Our

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

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

as available through registration in the United States and internationally. Patent protection and other proprietary rights are thus essential

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

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

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

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

to provide protection beyond such date in each instance). For EsoGuard, families are pending that, when granted, will offer additional

protections until at least 2037.

Technology Year

The

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

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

our proprietary technologies relating to our business, including inventions and improvements to inventions. Under the CWRU License Agreement,

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

attainable. We seek patent protection, as appropriate, on:

● the product itself including all embodiments with future commercial potential;

● the methods of using the product; and

● the methods of manufacturing the product.

In

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

countries where there is a value in doing so. Foreign filings can be cumbersome and expensive, and we will pursue such filings when we

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

of the technology.

The

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

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

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

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

delays by the U.S. Patent and Trademark Office (“USPTO”) in granting a patent, or patent term extension, which restores time

lost due to regulatory delays.

We

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

the United States and internationally. Prior to acquiring or licensing a technology from a third party, we will evaluate the existing

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

competing rights of others.

We

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

maintain our competitive position. We protect our proprietary rights through a variety of methods, including confidentiality agreements

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

have access to proprietary information. We will generally require employees to assign patents and other intellectual property to us as

a condition of employment with us. All of our consulting agreements assign to us all new and improved intellectual property that arise

during the term of the agreement.

Lucid

also has proprietary rights to a range of trademarks, including, among others, Lucid DiagnosticsTM, LUCIDTM, EsoCheck®,

EsoGuard®, Collect + Protect®, and EsoCheck Cell Collection Device®. (Solely as a matter of convenience, trademarks and trade

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

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

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

Health

Insurance Coverage and Reimbursement

Our

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

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

our products are used.

In

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

certain clinical evidentiary requirements. In addition to uncertainties surrounding coverage policies, there are periodic changes to

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

determine reimbursement amounts. This includes annual updates to payments to physicians, hospitals and ambulatory surgery centers for

procedures during which our products are used. An example of payment updates is the Medicare program’s updates to hospital and

physician payments, which are done on an annual basis using a prescribed statutory formula. In the past, when the application of the

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

See

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

Government

Regulation

Key

U.S. Regulation

FDA

Regulation

For

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

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

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

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

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

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

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

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

and examination of specimens taken from the human body”.

Our

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

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

FDA

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

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