Lucid Diagnostics Inc. (LUCD)

Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and
analysis of our consolidated financial condition and results of operations should be read together with our consolidated financial statements
and related notes appearing elsewhere in this Annual Report on Form 10-K (the “Financial Statements”). Some of the information
contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect
to our plans and strategy for our business and related financing, includes forward-looking statements involving risks and uncertainties
and should be read together with the “Forward-Looking Statements” and “Risk Factors” sections of this Annual
Report on Form 10-K for a discussion of important factors which could cause actual results to differ materially from the results described
in or implied by the forward-looking statements contained in the following discussion and analysis.

Unless the context otherwise
requires, (i) “we”, “us”, and “our”, and the “Company”, “Lucid” and “Lucid
Diagnostics” refer to Lucid Diagnostics Inc. and its subsidiaries LucidDx Labs Inc. (“LucidDx Labs”) and CapNostics,
LLC (“CapNostics”), (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.

50

Overview

We are a commercial-stage, cancer
prevention medical diagnostics technology company focused on the millions of patients who are at risk of developing esophageal precancer
and cancer, specifically highly lethal esophageal adenocarcinoma (“EAC”).

We believe that our flagship
product, the EsoGuard Esophageal DNA Test, performed on samples collected with the EsoCheck Esophageal Cell Collection Device, constitutes
the first and only commercially available diagnostic test capable of serving as a widespread tool for the early detection of esophageal
precancer, including Barrett’s Esophagus (“BE”), in at-risk patients. Early detection of esophageal precancer allows
patients to undergo appropriate monitoring and treatment, as indicated by clinical practice guidelines, in an effort to prevent progression
to esophageal cancer.

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). The assay has been evaluated in multiple studies,
demonstrating sensitivity of ~90% for detecting disease along the full esophageal precancer to cancer spectrum, with a negative predictive
value (NPV) of ~99%. Sensitivity and NPV remain very high even for detecting early precancer, which is unprecedented for a molecular
diagnostic test.

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+Protect™ technology makes EsoCheck the only noninvasive esophageal cell collection
device capable of such anatomically targeted and protected sampling.

EsoGuard and EsoCheck are based
on patented technology licensed by Lucid from Case Western Reserve University (“CWRU”). EsoGuard and EsoCheck have been developed
to provide an accurate, non-invasive, patient-friendly test for the early detection of EAC and BE, including dysplastic BE and related
precursors to EAC in patients with gastroesophageal reflux disease (“GERD”), commonly known as chronic heartburn, acid reflux,
or just reflux.

Recent Developments

Business

Medicare Coverage

In November 2024, we submitted
to MolDx our complete clinical evidence package in support of a request for reconsideration of the non-coverage language in the LCD to
secure Medicare coverage for EsoGuard. The EsoGuard clinical evidence package included six new peer-reviewed publications: three clinical
validation studies (two in the intended use population, one case control), two clinical utility studies, and one analytical validation
study. The current LCD provides clear coverage criteria consistent with the American College of Gastroenterology (ACG) guidelines for
esophageal precancer testing. The package was submitted as part of a request for reconsideration of the non-coverage language in the
LCD to secure Medicare coverage for EsoGuard.

NCCN Clinical Practice Guidelines Update

In
March 2025, we announced that a recent update to the National Comprehensive Cancer Network® (NCCN) Clinical Practice Guidelines in
Oncology (NCCN Guidelines®) focused on Esophageal and Esophagogastric Junction Cancers (Version 1.2025) has added a new section on
BE screening. The NCCN Guidelines® now reference professional society guidelines on BE screening, including the most recent ACG clinical
guideline discussed above, which recommends non-endoscopic biomarker testing, such as EsoGuard performed on samples collected with EsoCheck,
as an acceptable alternative to invasive upper endoscopy to detect esophageal precancer.

Clinical Study Publications

On
March 18, 2025, the Company announced that its ENVET-BE clinical utility study has been accepted for publication in Gastroenterology
& Hepatology—the fifth peer-reviewed publication of clinical utility data for Lucid’s EsoGuard® Esophageal DNA Test, and
the second to present findings from a real-world screening population. The manuscript, entitled “Enhancing the Diagnostic Yield
of EGD for Diagnosis of Barrett’s Esophagus Through Methylated DNA Biomarker Triage,” demonstrates that confirmatory upper endoscopy
(EGD) performed in EsoGuard-positive patients had a substantially higher diagnostic yield for detecting esophageal precancer (Barrett’s
Esophagus or BE) than the expected yield of screening EGD alone in at-risk patients. The ENVET-BE study reviewed real-world data from
a cohort of 199 EsoGuard-positive patients who completed confirmatory EGD. The overall positive diagnostic yield for BE was 2.4-fold
higher than the expected yield of screening EGD alone, based on disease prevalence within an at-risk population. The yield was nearly
three-fold higher in patients meeting American College of Gastroenterology (ACG) screening criteria.

On November 7, 2024, the Company
announced that its manuscript for its multi-center ESOGUARD BE-1 study has been accepted for publication in The American Journal of Gastroenterology,
the official journal of the American College of Gastroenterology (ACG). This is the fourth publication presenting clinical validation
data for the Company’s EsoGuard® Esophageal DNA Test, and the second to demonstrate its performance in an intended-use screening
population. Consistent with previous studies, EsoGuard showed high sensitivity and negative predictive value in detecting esophageal precancer
(Barrett’s Esophagus or BE). The prospective, multi-center study presented data from a cohort of patients who met ACG guideline criteria
for esophageal precancer screening and underwent non-endoscopic EsoGuard testing followed by traditional upper endoscopy. EsoGuard sensitivity
and negative predictive value for detecting BE were approximately 88% and 99%, respectively. Specificity and positive predictive value
were approximately 81% and 30%, respectively. No serious adverse events were reported.

51

Recent Developments - continued

Business - continued

Highmark Reimbursement Approval

On March 13, 2025, the Company announced
that Highmark Blue Cross Blue Shield, an independent licensee of the Blue Cross and Blue Shield Association, has issued a positive coverage
policy for non-invasive screening of esophageal precancer and cancer in New York state. The new policy will cover EsoGuard in patients
who meet established criteria for esophageal precancer testing consistent with professional society guidelines.

CWRU NIH Grant Related to EsoGuard and EsoCheck

On February 27, 2025, the Company
announced that principal investigators from Case Western Reserve University (CWRU) and University Hospitals (UH), were awarded an $8 million
National Institutes of Health (NIH) R01 grant to conduct a five-year clinical study designed to evaluate esophageal precancer detection
using EsoCheck and EsoGuard among at-risk individuals without symptoms of chronic gastroesophageal reflux disease (GERD). The study, “A
Clinical Trial of Cancer Prevention by Biomarker Based Detections of Barrett’s Esophagus and Its Progression,” aims to evaluate
the effectiveness of EsoCheck and EsoGuard in detecting esophageal precancer (Barrett’s Esophagus or BE) to prevent esophageal cancer
(EAC) within a non-GERD at-risk population. To accomplish this aim, 800 patients without GERD symptoms who meet the American Gastroenterological
Association’s (AGA) risk criteria for screening will be recruited across five participating research centers: University Hospitals, University
of Colorado, Johns Hopkins University, University of North Carolina, and Cleveland Clinic.

IP Matters

On October 15, 2024, the Company
announced that it received a Notice of Allowance from the United States Patent and Trademark Office (USPTO) for a patent application covering
its proprietary method of using methylation of the cyclin-A1 (CCNA1) gene to help detect esophageal precancer and cancer, a key component
of its EsoGuard® Esophageal DNA Test.

EsoGuard utilizes next-generation
sequencing (NGS) to assess DNA methylation at 31 sites on two genes, vimentin (VIM) and cyclin-A1 (CCNA1). Such methylation has been shown
to be strongly associated with conditions along the spectrum from early esophageal precancer (non-dysplastic Barrett’s Esophagus or BE),
to late precancer (dysplastic BE), to cancer (esophageal adenocarcinoma). Although VIM methylation had been previously associated with
gastrointestinal neoplasias, the association of CCNA1 methylation with esophageal neoplasia is novel and appears to be more specific.

Appointment of Dennis Matheis to Board of Directors

On May 6, 2024, the board of directors
of the Company appointed Dennis Matheis as a Class C director of the Company (and he was subsequently re-elected to the board, together
with the incumbent Class C directors of the Company, at the Company’s annual shareholders meeting held on July 23, 2024).

Lucid IP Matters

On October 15, 2024, the Company
announced that it received a Notice of Allowance from the United States Patent and Trademark Office (USPTO) for a patent application
covering its proprietary method of using methylation of the cyclin-A1 (CCNA1) gene to help detect esophageal precancer and cancer, a
key component of its EsoGuard® Esophageal DNA Test.

EsoGuard utilizes next-generation
sequencing (NGS) to assess DNA methylation at 31 sites on two genes, vimentin (VIM) and cyclin-A1 (CCNA1). Such methylation has been
shown to be strongly associated with conditions along the spectrum from early esophageal precancer (non-dysplastic Barrett’s Esophagus
or BE), to late precancer (dysplastic BE), to cancer (esophageal adenocarcinoma). Although VIM methylation had been previously associated
with gastrointestinal neoplasias, the association of CCNA1 methylation with esophageal neoplasia is novel and appears to be more specific.

Intercompany Agreements with PAVmed

On August 6, 2024, PAVmed and the
Company entered into a ninth amendment to the management services agreement between PAVmed and Lucid (“MSA”) to increase the
monthly fee thereunder from $0.83 million per month to $1.05 million per month, effective as of July 1, 2024. In addition, under the terms
of PAVmed’s convertible debt, PAVmed is required to elect that these payments be made in cash.

Appointment of Dennis Matheis to Board of
Directors

On May 6, 2024, the board of directors
of the Company appointed Dennis Matheis as a Class C director of the Company (and Mr. Matheis was subsequently re-elected to the board,
together with the incumbent Class C directors of the Company, at the Company’s annual shareholders meeting held on July 23, 2024).

52

Recent Developments - continued

Financing

Registered Direct Offering

On March 5, 2025, the Company closed
on the sale of 13,939,331 shares of its common stock at a price of $1.10 per share (the “Offering”).

The net proceeds of the Offering,
after deducting the estimated placement agent’s fees and other expenses of the Offering, was approximately $14.5 million. The Company
intends to use the net proceeds from the Offering for working capital and other general corporate purposes.

Suspension of ATM Facility

In November 2022, the Company
entered into a Controlled Equity Offering℠ Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co.
(“Cantor”). Pursuant to the Sales Agreement, from time to time, the Company may offer and sell shares of its common stock
to or through Cantor, acting as sales agent or principal. Sales of the Company’s common stock by Cantor, if any, under the Sales
Agreement may be made by any method permitted by law and deemed to be an “at the market offering” as defined in Rule 415(a)(4)
promulgated under the Securities Act (the “ATM Offering”). The Company filed a prospectus supplement dated December 6, 2022
(the “ATM Prospectus Supplement”), for the offer and sale of shares of its common stock having an aggregate offering price
of up to $6,500,000 in the ATM Offering.

Effective as of March 4, 2025, the Company terminated
the ATM Prospectus Supplement. The Company will not make any sales of common stock in the ATM Offering unless and until a new prospectus
or prospectus supplement is filed.

Other than the termination of the Prospectus Supplement,
the Sales Agreement remains in full force and effect.

Debt Refinancing

On November 22, 2024, the Company
closed on the sale of $21.975 million in principal amount of 12.0% Senior Secured Convertible Notes due 2029 (collectively, the “2024
Convertible Notes”), in a private placement, to certain accredited investors (the “2024 Note Investors”). The sale
of the 2024 Convertible Notes was completed pursuant to the terms of that certain Securities Purchase Agreement, dated as of November
12, 2024 (the “2024 SPA”), between the Company and the 2024 Note Investors. The Company realized gross proceeds of $21.975
million and, after giving effect to the repayment in full of the March 2023 Senior Convertible Note, net proceeds of $18.3 million from
the sale of the 2024 Convertible Notes.

The Company used a portion of
the proceeds from the sale of the 2024 Convertible Notes to redeem the March 2023 Senior Convertible Note, by paying the contractual
redemption price of approximately $3.6 million.

53

Results
of Operations

Overview

Revenue

The Company recognized revenue
resulting from the delivery of patient EsoGuard test results when the Company considered the collection of such consideration to be probable
to the extent that it is unconstrained.

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 the 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.

Sales and marketing expenses

Sales and marketing expenses
consist primarily of salaries and related costs for employees engaged in sales, sales support and marketing activities, as well as the
portion of the MSA Fee (as defined in Note 5, Related Party Transactions, to our accompanying audited consolidated financial
statements) allocated to sales and marketing expenses, which are principally costs related to PAVmed employees who are performing services
for the Company. We anticipate our sales and marketing expenses will increase in the future, to the extent we expand our commercial sales
and marketing operations as resources permit and insurance reimbursement coverage for our EsoGuard test expands.

General and administrative expenses

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

We anticipate our general and
administrative expenses will increase in the future to the extent our business operations grow. Furthermore, we anticipate continued
expenses related to being a public company, including fees and expenses for audit, legal, regulatory, tax-related services, insurance
premiums and investor relations costs associated with maintaining compliance as a public company.

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:

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 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.

Other Income and Expense, net

Other income and expense, net,
consists principally of changes in fair value of our convertible note and losses on extinguishment of debt upon repayment of such convertible
note.

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.

54

Results of Operations - continued

The year ended December 31, 2024 as
compared to year ended December 31, 2023

Revenue

In the year ended December 31,
2024, revenue was $4.3 million as compared to $2.4 million for the corresponding period in the prior year. The $1.9 million increase
principally relates to the revenue for our EsoGuard Esophageal DNA Test performed in our CLIA laboratory for the period and the consideration
received for the performance of the EsoGuard Esophageal DNA Test.

Cost of revenue

In the year ended December 31,
2024, the cost of revenue was approximately $7.1 million as compared to $6.0 million for the corresponding period in the prior year.
The $1.1 million increase was principally related to:

Sales and marketing expenses

In the year ended December 31,
2024, sales and marketing costs were approximately $16.5 million as compared to $16.4 million for the corresponding period in the prior
year. The net increase of $0.1 million was principally related to:

General and administrative expenses

In the year ended December 31,
2024, general and administrative costs were approximately $20.2 million as compared to $19.3 million for the corresponding period in
the prior year. The net increase of $0.9 million was principally related to:

Research and development expenses

In the year ended December 31,
2024, research and development costs were approximately $6.0 million, compared to $7.3 million for the corresponding period in the prior
year. The net decrease of $1.3 million was principally related to:

55

Results of Operations - continued

The year ended December 31, 2024 as compared
to year ended December 31, 2023 - continued

Amortization of Acquired Intangible Assets

The amortization of acquired
intangible assets was approximately $0.7 million in the year ended December 31, 2024, as compared to $2.0 million for the corresponding
period in the prior year. The decrease of $1.3 million in the current period was due to certain acquired intangible assets being fully
amortized in February 2024.

Other Income and Expense

Change in fair value of convertible debt

In the year ended
December 31, 2024, the change in the fair value of our convertible note was approximately $5.4 million of income, related to
the 2024 Convertible Notes and the March 2023 Senior Convertible Note (as defined in Note 12, Debt, to our accompanying
consolidated financial statements). The 2024 Convertible Notes and March 2023 Senior Convertible Note were 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 remeasurement as a non-cash expense on the issue date.

Loss on Issue and Offering Costs - Senior Secured
Convertible Note

In the year ended December 31,
2023, in connection with the issue of the March 2023 Senior Convertible Note, we recognized a total of approximately $1.2 million of
lender fee and offering costs paid by us. The Company did not incur lender fees and offering costs in the year ended December 31,
2024.

Loss on Debt Extinguishment

In the year ended December 31,
2024, a debt extinguishment loss in the aggregate of approximately $5.2 million was recognized in connection with our March 2023 Senior
Convertible Note as discussed below.

See Note 12, Debt, to
our accompanying consolidated financial statements, for additional information with respect to the March 2023 Senior Convertible Note.

Deemed Dividend on Series A and Series A-1 Convertible
Preferred Stock Exchange Offer

The fair value of the consideration
given in the form of the issue of 31,790 shares of Series B Convertible Preferred Stock, with such fair value recognized as the carrying
value of such issued shares of Series B Convertible Preferred Stock, as compared to the carrying value of the extinguished Series A and
Series A-1 Convertible Preferred Stock (carrying value of $24.3 million), resulting in an excess of fair value of $7.5 million recognized
as a deemed dividend charged to accumulated deficit in the consolidated balance sheet on March 13, 2024, with such deemed dividend included
as a component of net loss attributable to common stockholders, summarized as follows:

56

Liquidity and Capital
Resources

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

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.

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 products and services, to ongoing research and development activities, and to conducting clinical
trials. We experienced a net loss of approximately $45.5 million and used approximately $44.1 million of cash in operations during the
year ended December 31, 2024. Financing activities provided $48.2 million of cash during the year ended December 31, 2024.
We ended the year with cash on-hand of $22.4 million as of December 31, 2024. We expect to continue to experience recurring losses
and negative cash flow from operations, and will continue to fund our operations with debt and/or equity financing transactions, which
in accordance with management’s plans may include conversions of our existing debt to equity and refinancing our existing debt
obligations to extend the maturity date. The Company’s ability to continue operations 12 months beyond the issuance of the financial
statements will depend upon generating substantial revenue that is conditioned on obtaining positive third-party reimbursement coverage
for its EsoGuard Esophageal DNA Test from both government and private health insurance providers, increasing revenue through contracting
directly with self-insured employers, and upon raising additional capital through various potential sources including equity and/or debt
financings or refinancing existing debt obligations. These factors raise substantial doubt about the Company’s ability to continue as a going concern within one
year after the date the accompanying consolidated financial statements are issued .

Preferred Stock Offerings

On March 13, 2024, we entered into
subscription agreements (each, a “Series B Subscription Agreement”) and exchange agreements (each, a “Series B 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 Series B 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 Series B 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 holders of the Series B 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. The Series B Preferred Stock is a voting security. The aggregate gross proceeds of these transactions were $18.16
million (inclusive of $5.67 million of aggregate gross proceeds from the sale of the Series A-1 Preferred Stock that was immediately exchanged
for Series B Preferred Stock in the transactions).

As a result of 100% of the then-outstanding
shares of Series A Preferred Stock and Series A-1 Preferred Stock being exchanged for shares of Series B Preferred Stock in the Series
B Offering and Exchange, no shares of Series A Preferred Stock or Series A-1 Preferred Stock remain outstanding.

On May 6, 2024, the Company issued
approximately 11,634 shares of newly designated Series B-1 Convertible Preferred Stock (the “Series B-1 Preferred Stock”).
The terms of the Series B-1 Preferred Stock are substantially identical to the terms of the Series B Preferred Stock, except that the
Series B-1 Preferred Stock has a conversion price of $0.7228. The aggregate gross proceeds from the sale of shares in such offering were
$11.6 million.

57

Liquidity and Capital Resources - continued

Private Placement - Securities Purchase Agreement

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

During the year ended December 31,
2024, approximately $8.4 million of principal repayments along with approximately $0.9 million of interest expense thereon, were settled
through the issuance of 13,866,867 shares of common stock of the Company, with such shares having a fair value of approximately $13.5
million (with such fair value measured as the respective conversion date quoted closing price of the common stock of the Company).

As discussed below, the March
2023 Senior Convertible Note was redeemed in full in November 2024.

November 2024 Senior Convertible Note Refinancing

On November 22, 2024, the Company
closed on the sale of $21.975 million in principal amount of 12.0% Senior Secured Convertible Notes due 2029 (collectively, the “2024
Convertible Notes”), in a private placement, to certain accredited investors (the “2024 Note Investors”). The sale
of the 2024 Convertible Notes was completed pursuant to the terms of that certain Securities Purchase Agreement, dated as of November
12, 2024 (the “2024 SPA”), between the Company and the 2024 Note Investors. The Company realized gross proceeds of $21.975
million and, after giving effect to the repayment in full of the March 2023 Senior Convertible Note, net proceeds of $18.3 million from
the sale of the 2024 Convertible Notes.

The Company used a portion of
the proceeds from the sale of the 2024 Convertible Notes to redeem the March 2023 Senior Convertible Note, by paying the contractual
redemption price of approximately $3.7 million.

58

Liquidity and Capital Resources - continued

Registered Direct Offering

On March 5, 2025, the
Company closed on the sale of 13,939,331 shares of its common stock at a price of $1.10 per share (the “Offering”). The
net proceeds of the Offering, after deducting the estimated placement agent’s fees and other expenses of $0.8 million, of the
Offering, was approximately $14.5 million. The Company intends to use the net proceeds from the Offering for working capital and
other general corporate purposes.

Committed Equity Facility and ATM Facility

In March 2022, we entered into
a committed equity facility with 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. Cumulatively, a total of 680,263 shares of common stock of
the Company have been issued through our committed equity facility for net proceeds of approximately $1.8 million, after a 4% discount,
as of December 31, 2024. This facility terminates on August 1, 2025, which is the first of the month following the 36-month anniversary
of the effective date of the registration statement for the same.

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. Cumulatively, a total of 230,068 shares of the Company have
been issued through our at-the-market equity facility for net proceeds of approximately $0.3 million, after payment of 3% commissions,
as of December 31, 2024. Effective as of March 4, 2025, the Company terminated the prospectus supplement for the “at-the-market
offering”. The Company will not make any sales of common stock in such offering unless and until a new prospectus or prospectus
supplement is filed.

Intercompany Agreements with PAVmed

From our inception in May 2018
through our initial public offering in October 2021, our operations were funded by PAVmed providing working capital cash advances and
by PAVmed paying certain operating expenses on our behalf. Additionally, our daily operations have been and continue to be conducted
in part by personnel employed by PAVmed, for which we incur an 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 personnel to the Company, with any such change in
the MSA Fee being subject to approval of the Company and PAVmed boards of directors. In March 2024, PAVmed and the Company were authorized
by their respective boards of directors to enter, and they did enter, into a eighth amendment to the MSA. Under this amendment, the monthly
fee due from the Company to PAVmed was increased from $750 to $833, effective January 1, 2024. In August 2024, PAVmed and the Company
were authorized by their respective boards of directors to enter, and they did enter, into a ninth amendment to the MSA. Under this amendment,
the monthly fee due from the Company to PAVmed was increased from $833 to $1,050, effective July 1, 2024. Pursuant to the MSA, as amended,
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 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). Under the terms of PAVmed’s convertible debt, PAVmed is required
to elect that the MSA payments be made in cash.

As of December 31, 2024,
we had a Due To: PAVmed Inc. payment obligation liability of approximately $0.0 million, which liability reflects that we had no accrued
obligations under a payroll and benefit expense reimbursement agreement (the “PBERA”) and the MSA, or with respect to any other operating
expenses paid by PAVmed on our behalf. See our accompanying consolidated financial statements Note 5, Related Party Transactions.
In accordance with the MSA and the PBERA, on January 26, 2024, PAVmed elected to receive payment of approximately $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.

59

Critical Accounting Estimates

The discussion and analysis of
our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance
with generally accepted accounting principles in the United States of America, or U.S. GAAP. The preparation of these consolidated financial
statements requires us to make estimates and assumptions affecting the reported amounts of assets, liabilities, and equity, along with
the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of
expenses during the corresponding periods. In accordance with U.S. GAAP, we base our estimates on historical experience and on various
other assumptions we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions
or conditions. While our significant accounting policies are described in more detail in our consolidated financial notes, we believe
the following accounting estimates to be critical to the judgments and estimates used in the preparation of our consolidated financial
statements.

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 a Securities Purchase Agreement
dated November 12, 2024, the Company issued Senior Secured Convertible Notes dated November 22, 2024, referred to herein as the “2024
Convertible Notes”, which are 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).

The estimated fair values reported
utilized the Company’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 and the volatility of similar entities within the medical device industry.
Changes in these assumptions can materially affect the estimated fair values.

See Note 11, Financial Instruments
Fair Value Measurements, with respect to the FVO election; and Note 12, Debt, for a discussion of the March 2023 Senior Convertible
Note.

60

Recent Accounting Standards Updates Adopted

In November 2023, the FASB issued
ASU No. 2023-07, Segment Reporting (Topic 280)—Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which
require public companies disclose significant segment expenses and other segment items on an annual and interim basis and to provide
in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently required annually.
The guidance is effective for public entities for fiscal years beginning after December 15, 2023, and interim periods within fiscal years
beginning after December 15, 2024. Early adoption is permitted. The guidance was adopted by the Company on January 1, 2024. The adoption
of the ASU did not have a significant impact on the Company’s consolidated financial statements.

Recent Accounting Standards Updates Not Yet Adopted

In November 2024, the FASB issued
ASU No. 2024-03, Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40):
Disaggregation of Income Statement Expenses. This update enhances financial statement disclosures by requiring public business entities
to disclose specified information about certain costs and expenses including the amounts of (a) purchases of inventory, (b) employee compensation,
(c) depreciation, and (d) intangible asset amortization included in each relevant expense caption. The update also requires disclosure
of certain amounts that are already required to be disclosed under current GAAP, disclosure of a qualitative description of the amounts
remaining in relevant expense captions that are not separately disaggregated quantitatively, and disclosure of the total amount of selling
expenses and, in annual reporting periods, an entity’s definition of selling expenses. The amendments in this update may be applied
either prospectively or retrospectively and are effective for annual reporting periods beginning after December 15, 2026, and interim
reporting periods beginning after December 15, 2027. Early adoption is permitted. The Company is currently evaluating the potential impact
of this guidance on its consolidated financial statements.

In December 2023, the FASB issued
ASU No. 2023-09, Income Taxes (Topic 740)—Improvements to Income Tax Disclosures (“ASU 2023-09”), which is intended to
enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 provide for enhanced income
tax information primarily through changes to the rate reconciliation and income taxes paid information. ASU 2023-09 is effective for
the Company prospectively to all annual periods beginning after December 15, 2024. Early adoption is permitted. The Company does not expect the standard to have a significant impact on its consolidated financial statements.

In October 2023, the FASB issued
ASU No. 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification
Initiative. This update modifies the disclosure or presentation requirements of a variety of topics in the Accounting Standards Codification
to conform with certain SEC amendments in Release No. 33-10532, Disclosure Update and Simplification. The amendments in this update should
be applied prospectively, and the effective date for each amendment will be the date on which the SEC’s removal of that related
disclosure from Regulation S-X or S-K becomes effective. However, if the SEC has not removed the related disclosure from its regulations
by June 30, 2027, the amendments will be removed from the Codification and not become effective. Early adoption is prohibited. We are
currently evaluating the potential impact of this guidance on its consolidated financial statements and disclosures.

Off-Balance sheet arrangements

We do not have any off-balance
sheet arrangements.

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

The
following discussion and analysis of our consolidated financial condition and results of operations should be read together with our
consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K (the “Financial Statements”).
Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including
information with respect to our plans and strategy for our business and related financing, includes forward-looking statements involving
risks and uncertainties and should be read together with the “Forward-Looking Statements” and “Risk Factors”
sections of this Annual Report on Form 10-K for a discussion of important factors which could cause actual results to differ materially
from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Unless
the context otherwise requires, (i) “we”, “us”, and “our”, and the “Company”, “Lucid”
and “Lucid Diagnostics” refer to Lucid Diagnostics Inc. and its subsidiaries LucidDx Labs Inc. (“LucidDx Labs”)
and CapNostics, LLC (“CapNostics”), (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.

Overview

We
are a commercial-stage medical diagnostics technology company focused on the millions of patients who are at risk of developing esophageal
precancer and cancer, specifically highly lethal EAC.

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 tool for
the early detection of esophageal precancer, including Barrett’s Esophagus (“BE”), in at-risk patients. Early detection
of esophageal precancer allows patients to undergo appropriate monitoring and treatment, as indicated by clinical practice guidelines,
in an effort to prevent progression to esophageal cancer.

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+Protect™ technology makes EsoCheck the only noninvasive esophageal
cell collection device capable of such anatomically targeted and protected sampling.

EsoGuard
and EsoCheck are based on patented technology licensed by Lucid from Case Western Reserve University (“CWRU”). EsoGuard and
EsoCheck have been developed to provide an accurate, non-invasive, patient-friendly test for the early detection of EAC and BE, including
dysplastic BE and related precursors to EAC in patients with GERD, commonly known
as chronic heart burn, acid reflux, or just reflux.

42

Recent
Developments

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.

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 is a voting security. The aggregate gross proceeds of these transactions was $18.16 million (inclusive of $5.67
million of aggregate gross proceeds from the sale of the Series A-1 Preferred Stock that was immediately exchanged for Series B
Preferred Stock in the transactions).

As a result of 100% of the then-outstanding
shares of Series A Preferred Stock and Series A-1 Preferred Stock being exchanged for shares of Series B Preferred Stock in the Series
B Offering and Exchange, no shares of Series A Preferred Stock or Series A-1 Preferred Stock remain outstanding.

On October 17, 2023, we sold 5,000 shares of Series A-1 Preferred Stock, solely to accredited investors (all of which
were included in the 10,670 shares of Series A-1 Preferred exchanged for Series B Preferred Stock in the Series B Offering and Exchange).
The aggregate gross proceeds to Lucid of this offering was $5.0 million.

43

Results
of Operations

Overview

Revenue

The
Company recognized revenue resulting from the delivery of patient EsoGuard test results 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 APA-RDx, of certain assets necessary to operate our own CLIA certified laboratory. For a fuller description of the APA-RDx,
see Note 6, Asset Purchase Agreement and Management Services Agreement, to our accompanying consolidated financial statements.

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.

For
the previously terminated EsoGuard Commercialization Agreement in February 2022, the cost of revenue recognized is inclusive of: a royalty
fee incurred under our license agreement with CWRU; the cost of EsoCheck devices and EsoGuard mailers (cell sample shipping costs); 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, sales support and marketing activities,
as well as the portion of the MSA Fee (as defined in Note 5, Related Party Transactions, to our accompanying consolidated financial
statements) allocated to sales and marketing expenses, which are principally costs related to PAVmed employees who are performing services
for the Company. We anticipate our sales and marketing expenses will increase in the future, to the extent we expand our commercial sales
and marketing operations as resources permit and insurance reimbursement coverage for our EsoGuard test expands.

General
and administrative expenses

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

We
anticipate our general and administrative expenses will increase in the future to the extent our business operations grow. Furthermore,
we anticipate continued expenses related to being a public company, including fees and expenses for audit, legal, regulatory, tax-related
services, insurance premiums and investor relations costs associated with maintaining compliance as a public company.

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:

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 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.

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.

44

Results
of Operations - continued

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

Revenue

In
the year ended December 31, 2023, revenue was $2.4 million as compared to $0.4 million in the prior year. The $2.0 million increase principally
relates to the revenue for our EsoGuard Esophageal DNA Test performed in our own CLIA laboratory. During the year ended December 31,
2022, there was revenue from the EsoGuard Commercialization Agreement with RDx, recognized in first two months of the prior year period,
which was terminated on February 25, 2022 when Lucid Diagnostics transitioned to its own laboratory operations.

Cost
of revenue

In
the year ended December 31, 2023, cost of revenue was approximately $6.0 million as compared to $3.6 million in the prior year. The $2.4
million increase was principally related to:

Sales
and marketing expenses

In
the year ended December 31, 2023, sales and marketing costs were approximately $16.4 million as compared to $16.1 million in the prior
year. The net increase of $0.3 million was principally related to:

General
and administrative expenses

In
the year ended December 31, 2023, general and administrative costs were approximately $19.3 million as compared to $24.0 million in the
prior year. The net decrease of $4.7 million was principally related to:

Research
and development expenses

In
the year ended December 31, 2023, research and development costs were approximately $7.3 million, compared to $11.3 million in the prior
year. The net decrease of $4.0 million was principally related to:

Amortization
of Acquired Intangible Assets

The
amortization of acquired intangible assets increased to $2.0 million in the year ended December 31, 2023, as compared to $1.6 million
in the prior year. The increase of $0.4 million in the current period was due to the timing of the acquired intangible assets in 2022.

Other
Income and Expense

Change
in fair value of convertible debt

In
the year ended December 31, 2023, the change in the fair value of our convertible note was approximately $3.0 million of expense,
related to the March 2023 Senior Convertible Note. The March 2023 Senior Convertible Note was initially measured at its issue date
estimated fair value and subsequently remeasured at estimated fair value as of each reporting period date. The Company initially
recognized a $0.8 million fair value non-cash expense on the issue date.

45

Results
of Operations - continued

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

Loss
on Issue and Offering Costs - Senior Secured Convertible Note

In
the year ended December 31, 2023, in connection with the issue of the March 2023 Senior Convertible Note, we recognized a total of
approximately $1.2 million of lender fee and offering costs paid by us.

See
Note 13, Debt, to our accompanying consolidated financial statements, for additional information with respect to the March 2023
Senior Convertible Note.

Liquidity
and Capital Resources

Our
current operational activities are principally focused on the commercialization of EsoGuard. We are pursuing commercialization across
multiple sales channels, including: the communication to and education of medical practitioners and clinicians regarding EsoGuard; the
establishment of Lucid Test Centers for the collection of cell samples using 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 also intends
to pursue development of other products and services.

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.

We are subject to all of the risks and uncertainties typically faced by
medical device and diagnostic companies that devote substantially all of their efforts to the commercialization of their initial product
and services and ongoing research and development activities and conducting clinical trials. We experienced a net loss of approximately
$52.7 million and used approximately $32.8 million of cash in operations during the year ended December 31, 2023. Financing activities
provided $29.5 million of cash during the year ended December 31, 2023. We ended the year with cash on-hand of $18.9 million as of
December 31, 2023. We expect to continue to experience recurring losses and negative cash flow from operations, and will continue
to fund our operations with debt and/or equity financing transactions, including current obligations on our existing convertible debt
which in accordance with management’s plans may include conversions to equity and refinancing our existing debt obligations to extend
the maturity date. The Company’s ability to continue operations beyond March 2025 will depend upon generating substantial
revenue that is conditioned on obtaining positive third-party reimbursement coverage for its EsoGuard Esophageal DNA Test from both government
and private health insurance providers, increasing revenue through contracting directly with self-insured employers, and on its ability
to raise additional capital through various potential sources including equity and/or debt financings or refinancing existing debt obligations.
These factors raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date
the accompanying consolidated financial statements are issued.

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 is a voting security. The aggregate gross proceeds of these transactions was $18.16 million (inclusive of $5.67
million of aggregate gross proceeds from the sale of the Series A-1 Preferred Stock that was immediately exchanged for Series B
Preferred Stock in the transactions).

As a result of 100% of the then-outstanding
shares of Series A Preferred Stock and Series A-1 Preferred Stock being exchanged for shares of Series B Preferred Stock in the Series
B Offering and Exchange, no shares of Series A Preferred Stock or Series A-1 Preferred Stock remain outstanding.

On October 17, 2023, we sold 5,000 shares of Series A-1 Preferred Stock,
solely to accredited investors (all of which were included in the 10,670 shares of Series A-1 Preferred exchanged for Series B Preferred
Stock in the Series B Offering and Exchange). The aggregate gross proceeds to Lucid of this offering was $5.0 million.

46

Liquidity
and Capital Resources - continued

Private
Placement - Securities Purchase Agreement

Effective
as of March 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 Senior Convertible Note with a face value principal of $11.1 million. We issued the
March 2023 Senior Convertible Note on March 21, 2023 pursuant to the SPA. The March 2023 Senior Convertible Note proceeds were
$9.925 million after deducting a $1.186 million lender fee and offering costs.

The March 2023 Senior Convertible 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 Senior Convertible 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 Senior Convertible Note amortizes over 18 months commencing six months after its issuance. The amortization
payments and accrued interest on the March 2023 Senior Convertible 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.

Under
the March 2023 Senior Convertible 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 Senior Convertible 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 December 31, 2023, the
Company was in compliance, and as of the date hereof, the Company is in compliance, with the Financial Tests.

During
the year ended December 31, 2023, approximately $0.1 million of principal repayments along with less than $0.1 million 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 $0.2 million (with such fair value measured as the respective conversion date quoted closing price of the common stock
of the Company).

Committed
Equity Facility and ATM Facility

In
March 2022, we entered into a committed equity facility with 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. Cumulatively, a total of 680,263
shares of common stock of the Company were issued for net proceeds of approximately $1.8 million, after a 4% discount, as of December
31, 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 year ended December
31, 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.

Intercompany
Agreements with PAVmed

From
our inception in May 2018 through our IPO in October 2021, our operations were funded by PAVmed providing working capital cash
advances and by PAVmed paying certain operating expenses on our behalf. Additionally, our daily operations have been and continue to
be conducted in part by personnel employed by PAVmed, for which we incur an 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 personnel to the Company,
with any such change in the MSA Fee being subject to approval of the Company and PAVmed boards of directors. In this regard, in
January 2024, the respective companies’ boards of directors approved a eighth amendment to the MSA to increase the MSA Fee to
$0.83 million per month, effective 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).

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 December 31, 2023, we had a Due To: PAVmed Inc. payment obligation liability of approximately $9.3 million, which liability is primarily
comprised of our obligations under the PBERA and the MSA, as well other operating expenses paid by PAVmed on our behalf. See our accompanying
consolidated financial statements Note 5, Related Party Transactions. In accordance with the MSA and the PBERA, on January 26,
2024, PAVmed elected to receive payment of approximately $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.

47

Critical
Accounting Policies and Estimates

The
discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which
have been prepared in accordance with generally accepted accounting principles in the United States of America, or U.S. GAAP. The preparation
of these consolidated financial statements requires us to make estimates and assumptions affecting the reported amounts of assets, liabilities,
and equity, along with the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the
reported amounts of expenses during the corresponding periods. In accordance with U.S. GAAP, we base our estimates on historical experience
and on various other assumptions we believe are reasonable under the circumstances. Actual results may differ from these estimates under
different assumptions or conditions. While our significant accounting policies are described in more detail in our consolidated financial
notes, we believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our consolidated
financial statements.

Revenue
Recognition

Revenues
are recognized when the satisfaction of the performance obligation occurs, in an amount that reflects the consideration we expect to
collect in exchange for those services. Our 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 we determine are within the scope of ASC 606, Revenue from Contracts with Customers, we
perform the following five steps: (1) identify the contract(s) with a customer, (2) identify the performance obligations in the contract,
(3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract and (5) recognize
revenue when (or as) the entity satisfies a performance obligation.

The
key aspects we consider include the following:

Contracts—Our
customer is primarily the patient, but we do not enter into a formal reimbursement contract with a patient. We establish 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 us and payers. However, when a patient is considered self-pay, we require payment from the
patient prior to the commencement of our performance obligations. Our consideration can be deemed variable or fixed depending on the
structure of specific payer contracts, and we consider 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. Our 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. We elected 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 we 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, we estimate the amount of consideration to which it will be entitled
in exchange for the promised goods or services. We limit the amount of variable consideration included in the transaction price to the
unconstrained portion of such consideration. In other words, we recognize revenue up to the amount of variable consideration that is
not subject to a significant reversal until additional information is obtained or the uncertainty associated with the additional payments
or refunds is subsequently resolved.

When
we do 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, we recognize revenue up to the amount of variable consideration not subject to a significant reversal until additional information
is obtained or the uncertainty associated with additional payments or refunds, if any, is subsequently resolved. Differences between
original estimates and subsequent revisions, including final settlements, represent changes in estimated expected variable consideration,
with the change in estimate recognized in the period of such revised estimate. With respect to a contracted service arrangement, the
fixed consideration revenue is recognized on an as-billed basis upon delivery of the laboratory test report with realization of such
fixed consideration deemed probable based upon actual historical experience.

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

Practical
Expedients—We do not adjust the transaction price for the effects of a significant financing component, as at contract inception,
we expect the collection cycle to be one year or less.

48

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).

The
estimated fair values reported utilized the Company’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 and the
volatility of similar entities within the medical device industry. Changes in these assumptions can materially affect the estimated fair
values.

See
Note 12, Financial Instruments Fair Value Measurements, with respect to the FVO election; and Note 13, Debt, for a discussion
of the March 2023 Senior Convertible Note.

Stock-Based
Compensation

Stock-based
awards are made to members of the board of directors of the Company, the Company’s employees and non-employees, under each of the
Lucid Diagnostics Inc. 2018 Equity Plan and the PAVmed Inc. 2014 Equity Plan.

The
grant-date estimated fair value of the stock-based award is recognized on a straight-line basis over the requisite service period, which
is generally the vesting period of the respective stock-based award, with such straight-line recognition adjusted, as applicable, so
the cumulative expense recognized is at-least equal-to-or-greater-than the estimated fair value of the vested portion of the respective
stock-based award as of the reporting date.

The
Company uses the Black-Scholes valuation model to estimate the fair value of stock options granted under both the PAVmed Inc. 2014 Equity
Plan and the Lucid Diagnostics Inc. 2018 Equity Plan, which requires the Company to make certain weighted-average valuation estimates
and assumptions for stock-based awards, principally as follows:

The
price per share of Lucid Diagnostics Inc. common stock used in the computation of estimated fair value of stock options and restricted
stock awards granted under the Lucid Diagnostics Inc. 2018 Equity Plan is its quoted closing price per share.

The
price per share of PAVmed Inc. common stock used in the computation of estimated fair value of stock options and restricted stock awards
granted under the PAVmed Inc. 2014 Equity Plan is its quoted closing price per share.

49

Recent Accounting Standards Updates Adopted

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

Recent
Accounting Standards Updates Not Yet Adopted

In
December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740)—Improvements to Income Tax Disclosures (“ASU 2023-09”),
which is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in ASU 2023-09 provide
for enhanced income tax information primarily through changes to the rate reconciliation and income taxes paid information. ASU 2023-09
is effective for the Company prospectively to all annual periods beginning after December 15, 2024. Early adoption is permitted. We are
currently evaluating the impact this update will have on our consolidated financial statements and disclosures.

In
November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280)—Improvements to Reportable Segment Disclosures (“ASU
2023-07”), which require public companies disclose significant segment expenses and other segment items on an annual and interim
basis and to provide in interim periods all disclosures about a reportable segment’s profit or loss and assets that are currently
required annually. The guidance is effective for public entities for fiscal years beginning after December 15, 2023, and interim periods
within fiscal years beginning after December 15, 2024. Early adoption is permitted. The guidance is applied retrospectively to all periods
presented in the financial statements, unless it is impracticable. We are currently evaluating the impact this update will have on our
consolidated financial statements and disclosures.

In October 2023, the FASB issued ASU No. 2023-06, Disclosure Improvements: Codification Amendments in Response to
the SEC’s Disclosure Update and Simplification Initiative. This update modifies the disclosure or presentation requirements of a
variety of topics in the Accounting Standards Codification to conform with certain SEC amendments in Release No. 33-10532, Disclosure
Update and Simplification. The amendments in this update should be applied prospectively, and the effective date for each amendment will
be the date on which the SEC’s removal of that related disclosure from Regulation S-X or S-K becomes effective. However, if the
SEC has not removed the related disclosure from its regulations by June 30, 2027, the amendments will be removed from the Codification
and not become effective. Early adoption is prohibited. We are currently evaluating the potential impact of this guidance on its consolidated
financial statements.

Off-Balance
sheet arrangements

We
do not have any off-balance sheet arrangements.

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

The
following discussion and analysis of our consolidated financial condition and results of operations should be read together with our
consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. Some of the information contained
in this discussion and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our
plans and strategy for our business and related financing, includes forward-looking statements involving risks and uncertainties and
should be read together with the “Forward-Looking Statements” and “Risk Factors” sections of this Annual Report
on Form 10-K for a discussion of important factors which could cause actual results to differ materially from the results described in
or implied by the forward-looking statements contained in the following discussion and analysis. Unless the context otherwise requires,
references herein to “we”, “us”, and “our”, and to the “Company” or “Lucid”
are to Lucid Diagnostics Inc. and its subsidiaries LucidDx Labs Inc. (“LucidDx Labs”) and CapNostics, LLC (“CapNostics”).

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 screening
tool to prevent esophageal adenocarcinoma (“EAC”) deaths, through early detection of esophageal precancer in at-risk gastroesophageal
reflux disease (“GERD,” also commonly known as chronic heartburn, acid reflux or simply reflux) patients.

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 in Science Translational Medicine and showed greater than 90% sensitivity and specificity at detecting esophageal
precancer and all conditions along the BE-EAC spectrum, including on samples collected with EsoCheck (Moinova, et al. Sci Transl Med.
2018 Jan 17;10(424): eaao5848). EsoGuard is commercially available in the U.S. as a Laboratory Developed Test (LDT) performed at our
CLIA-certified laboratory. Cell samples, including those collected with EsoCheck, as discussed below, are sent to our laboratory, for
testing and analyses using our proprietary EsoGuard NGS DNA assay.

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. It consists of a vitamin pill-sized rigid plastic capsule tethered to a thin silicone catheter from
which a soft silicone balloon with textured ridges emerges to gently swab surface esophageal cells. When vacuum suction is applied, the
balloon and sampled cells are pulled into the capsule, protecting them from contamination and dilution by cells outside of the targeted
region during device withdrawal. We believe this proprietary Collect+Protect™ technology makes EsoCheck the only noninvasive esophageal
cell collection device capable of such anatomically targeted and protected sampling.

EsoGuard
and EsoCheck are based on patented technology licensed by Lucid from Case Western Reserve University (“CWRU”). EsoGuard and
EsoCheck have been developed to provide an accurate, non-invasive, patient-friendly screening test for the early detection of adenocarcinoma
of the esophagus (“EAC”) and Barrett’s Esophagus (“BE”), including dysplastic BE and related pre-cursors
to EAC in patients with chronic gastroesophageal reflux (“GERD”).

Recent
Developments

Business

Status
of Clinical Trials

We
are currently seeking to accelerate our collection of clinical utility data through a range of trials that can be efficiently executed.
These efforts include a planned investigator-initiated, retrospective analysis of prospectively collected data on the approximately 400
San Antonio fire fighters who underwent testing as part of a community-sponsored cancer awareness event (in
respect of which we expect to publish results in the first half of 2023); an ongoing investigator-initiated, retrospective, single-center,
study with 500 patients (in respect of which we expect to publish results mid-2023), a virtual-patient randomized controlled trial with
intended recruitment of 100-200 physician participants (in respect of which we expect to publish
results this year); a Lucid-sponsored multi-center, prospective, observational study with 500 patients; and a Lucid-sponsored
registry at existing Lucid Test Centers, whereby all patients undergoing EsoCheck testing will be given the opportunity to provide informed
consent and contribute data about their risk factors, EsoGuard results, and subsequent diagnostic and/or therapeutic journey. Both Lucid-sponsored
observational/registry studies expect to have preliminary results and/or interim analysis before the end of 2023.

As
previously disclosed, consequently, we have decided to delay for the time being the two previously commenced clinical trials, the “EsoGuard
screening study” (“BE-1”) and the “EsoGuard case-control study” (“BE-2”), as we are devoting
our clinical resources to the studies cited above, which we expect will more efficiently generate the clinical data we are currently
prioritzing to drive EsoGuard commercialization.

44

LucidDx
Labs Laboratory Operations Update

On
February 14, 2023, we and our subsidiary, LucidDx Labs Inc., entered into an agreement (the “MSA Termination Agreement”)
with RDx, pursuant to which the parties mutually agreed to terminate the MSA-RDx without cause. The termination was effective as February
10, 2023. Until the termination of the MSA-RDx, RDx had continued to provide certain testing and related services for the Laboratory
in accordance with the terms of the MSA-RDx. Recently, however, we accelerated the development of internal resources necessary to operate
the Laboratory entirely on its own. Accordingly, we believe that termination of the MSA-RDx will improve the efficiency of the performance
of the EsoGuard assay.

Among
other things, the MSA Termination Agreement reduces the remaining amounts of the earnout payments and management fees due under the APA-RDx
and the MSA-RDx to $725,000 (from the $3,450,000 that would otherwise have been payable under the APA and MSA if the MSA had remained
in effect through the balance of its stated term), resulting in a net savings to us of $2,725,000. The payment was satisfied through
the issuance of 553,436 shares of Lucid Diagnostics’ common stock on February 25, 2023. we were not required to make any cash payments
in connection with the termination.

#CheckYourFoodTube
Events

In
January 2023, we successfully completed our first #CheckYourFoodTube Precancer Testing Event, in partnership with Rachelle Hamblin, M.D.,
M.P.H., and the San Antonio Fire Department (SAFD), to detect esophageal precancer in at-risk members of the department. The SAFD testing
event was held over two weekends in January, which has been designated as Firefighter Cancer Awareness Month by the International Association
of Fire Fighters (IAFF). A total of 391 members, nearly one-quarter of the department, who were deemed by Dr. Hamblin to be at-risk for
esophageal precancer, underwent a brief, on-site, noninvasive cell collection procedure, performed by our clinical personnel using EsoCheck.
Firefighters with suspected esophageal precancer based on a positive EsoGuard result were identified, including some less than forty
years of age, and will undergo appropriate monitoring and treatment, as indicated by clinical practice guidelines, to prevent progression
to esophageal cancer. These events, which we look to expand across the country, are an extension of our expanding satellite Lucid Test
Center (sLTC) program, which brings our precancer testing directly to patients—at their physician’s office and now at large
testing day events. We demonstrated that our nurse practitioners can each perform up to fifty EsoCheck procedures in a day, and our laboratory
team handled over two hundred incoming samples in a day, while maintaining turnaround times at target. These successes provide an excellent
foundation for future testing events as we continue to drive EsoGuard commercialization using all the tools at our disposal.

Payroll
and Benefit Expense Reimbursement Agreement

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

Financing

Series A Preferred Stock Offering

On March 7, 2023, we
entered into subscription agreements for the sale of 13,625 shares of Series A preferred stock (the “Series A Preferred
Stock”). Each share of the Series A Preferred Stock has a stated value of $1,000 and a conversion price of $1.394. The
terms of the Series A Preferred Stock also include a one times preference on liquidation and a right to receive dividends equal to
20% of the number of shares into which such Series A Preferred Stock is convertible, payable on the one-year and two-year
anniversary of the issuance date. The Series A Preferred Stock is a non-voting security, other than with respect to limited matters
related to changes in terms of the Series A Preferred Stock. The aggregate gross proceeds from the sale of shares in such offering
were $13.625 million.

45

Private Placement - Securities Purchase Agreement

Effective as of March 13, 2023,
we entered into a Securities Purchase Agreement (“SPA”) with an accredited institutional investor (“Investor”,
“Lender”, and /or “Holder”), pursuant to which we agreed to sell, and the Investor agreed to purchase a Senior
Secured Convertible Note with a face value principal of $11.1 million (the “March 2023 Senior Convertible Note”). The
issuance of the March 2023 Senior Convertible Note is subject to customary closing conditions.

The March 2023 Senior Secured Convertible Note would have a 7.875% annual
stated interest rate, a contractual conversion price of $5.00 per share of the Company’s common stock (subject to standard adjustments
in the event of any stock split, stock dividend, stock combination, recapitalization or other similar transaction), and a contractual
maturity date of the two-year anniversary of the date of issuance. The March 2023 Senior Convertible Note would be convertible into or
otherwise paid in shares of the Company’s common stock.

Under the March 2023
Senior Convertible Note, the Company would be subject to certain customary affirmative and negative covenants regarding the
incurrence of indebtedness, the existence of liens, the repayment of indebtedness and the making of investments, the payment of cash
in respect of dividends, distributions or redemptions, the transfer of assets, the maturity of other indebtedness, and transactions
with affiliates, among other customary matters. Under the March 2023 Senior Convertible Note, the Company would also be subject to
financial covenants requiring that (i) the amount of our available cash equal or exceed $5.0 million at all times, (ii) the ratio of
(a) the outstanding principal amount of the notes issued under the SPA, accrued and unpaid interest thereon and accrued and unpaid
late charges to (b) the Company’s average market capitalization over the prior ten trading days, not exceed 30%, and (iii)
that the Company’s market capitalization shall at no time be less than an amount to be agreed upon.

Committed Equity Facility and ATM Facility

In March 2022, we entered into a
committed equity facility with an affiliate of Cantor Fitzgerald (“Cantor”). Under the terms of the facility, Cantor has committed
to purchase up to $50 million of our common stock from time to time upon our request. While there are distinct differences, the facility
is structured similarly to a traditional at-the-market equity facility, insofar as it allows us to raise primary capital on a periodic
basis at prices based on the existing market price. Through December 31, 2022, 680,263 shares of our common stock were issued under this
facility for total proceeds of $1.8 million.

In November 2022, Lucid Diagnostics also entered into an “at-the-market
offering” for up to $6.5 million of its common stock that may be offered and sold under a Controlled Equity Offering Agreement between
Lucid Diagnostics and Cantor Fitzgerald & Co. In the year ended December 31, 2022, there were no Lucid Diagnostics shares sold through
their at-the-market equity facility. Subsequent to December 31, 2022, through March 9, 2023, Lucid Diagnostics sold 230,068 shares through
its at-the-market equity facility for approximately $0.3 million.

46

Results
of Operations

Overview

Revenue

The
Company recognized revenue resulting from the delivery of patient EsoGuard test results when the Company considered the collection of
such consideration to be probable to the extent that it is unconstrained. Additionally, revenue was recognized with respect to the EsoGuard
Commercialization Agreement, dated August 1, 2021, between the Company and RDx, a CLIA certified commercial laboratory service provider.
On February 25, 2022, the EsoGuard Commercialization Agreement was terminated upon the execution of an Asset Purchase Agreement between
the Company’s wholly-owned subsidiary of LucidDx Labs Inc. and RDx.

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
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 (as defined and discussed herein below) allocated to cost of revenue,
which is principally employee related costs of PAVmed employees engaged in the administration to patients of the EsoCheck cell sample
collection procedure (principally at the Lucid Test Centers); the EsoCheck devices and EsoGuard mailers (cell sample shipping costs)
distributed to medical practitioners locations and the Lucid Test Centers; and Lucid Test Centers operating expenses, including rent
expense and supplies.

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 allocated to sales and marketing expenses, which are principally employee related costs of PAVmed employees
who are performing services for the Company. We anticipate our sales and marketing expenses will increase in the future, as we anticipate
an increase in payroll and related expenses related to our commercial sales and marketing operations as we execute on our business strategy.

General
and administrative expenses

General
and administrative expenses consist primarily of professional fees, accounting and legal services, consultants and expenses associated
with obtaining and maintaining patents within our intellectual property portfolio, along with the portion of the MSA Fee allocated to
general and administrative expenses.

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

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:

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.

47

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 per share amounts.

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

Revenue

In
the year ended December 31, 2022, revenue was $0.4 million as compared to $0.5 million in the prior year. The $0.1 million decrease principally
relates to the termination of the EsoGuard Commercialization Agreement with RDx, as the Company transitioned to its own laboratory operations
effective February 25, 2022. The decrease was partially offset by revenue for our EsoGuard Esophageal DNA Test performed in our own CLIA
laboratory for the year ended December 31, 2022.

Cost
of revenue

In
the year ended December 31, 2022, cost of revenue was approximately $3.6 million as compared to $0.6 million in the prior year. The $3.0
million increase principally related to:

Sales
and marketing expenses

In
the year ended December 31, 2022, sales and marketing costs were approximately $16.1 million, compared to $5.3 million in the prior year.
The net increase of $10.8 million was principally related to:

General
and administrative expenses

In
the year ended December 31, 2022, general and administrative costs were approximately $23.7 million, compared to $12.8 million in the
prior year. The net increase of $10.9 million was principally related to:

48

Results
of Operations - continued

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

Research
and development expenses

In
the year ended December 31, 2022, research and development costs were approximately $11.5 million, compared to $9.3 million in the prior
year. The net increase of $2.2 million was principally related to:

See
our accompanying consolidated financial statements for each of: Note 5, Related Party Transactions, for a discussion of the consulting
fee expense and stock based compensation expense recognized with respect to the Physician Inventors consulting agreements and stock options
and restricted stock awards and for a discussion of the MSA between Lucid Diagnostics and PAVmed; and Note 14, Stock-Based Compensation,
for information regarding each of the Lucid Diagnostics 2018 Equity Plan and the PAVmed Inc. 2014 Equity Plan.

Amortization
of Acquired Intangible Assets

In
the year ended December 31, 2022, the amortization of acquired intangible assets was approximately $1.6 million as compared to no intangible
asset amortization in the prior year. The increase was principally related to the purchase of laboratory licenses and certifications
and laboratory information management software in Q1 2022 and the amortization of a defensive asset.

49

Liquidity
and Capital Resources

Our
current operational activities are principally focused on the commercialization of EsoGuard. We are expanding 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. Additionally, we are developing
expanded clinical evidence to support insurance reimbursement adoption by government and private insurers. Further, as resources permit,
the Company also intends to pursue development of other products and services, including EsoCure, an Esophageal Ablation Device.

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

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 5, 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 expect to continue to experience recurring losses from operations and will continue to fund our operations
with debt and equity financing transactions. Notwithstanding, however, with our cash on-hand as of the date hereof and committed equity
sources of financing, the Company expects to be able to fund its operations and meet its financial obligations as they become due for
the one year period from the date of the issue of the Company’s consolidated financial statements, as included herein in this Form
10-K.

Series A Preferred Stock Offering

On March 7, 2023, we
entered into subscription agreements for the sale of 13,625 shares of Series A preferred stock (the “Series A Preferred
Stock”). Each share of the Series A Preferred Stock has a stated value of $1,000 and a conversion price of $1.394. The
terms of the Series A Preferred Stock also include a one times preference on liquidation and a right to receive dividends equal to
20% of the number of shares into which such Series A Preferred Stock is convertible, payable on the one-year and two-year
anniversary of the issuance date. The Series A Preferred Stock is a non-voting security, other than with respect to limited matters
related to changes in terms of the Series A Preferred Stock. The aggregate gross proceeds from the sale of shares in such offering
were $13.625 million.

Private Placement - Securities Purchase Agreement

Effective as of March 13, 2023,
we entered into a Securities Purchase Agreement (“SPA”) with an accredited institutional investor (“Investor”,
“Lender”, and /or “Holder”), pursuant to which we agreed to sell, and the Investor agreed to purchase a Senior
Secured Convertible Note with a face value principal of $11.1 million (the “March 2023 Senior Convertible Note”). The
issuance of the March 2023 Senior Convertible Note is subject to customary closing conditions.

The March 2023 Senior Secured
Convertible Note would have a 7.875% annual stated interest rate, a contractual conversion price of $5.00 per share of the Company’s
common stock (subject to standard adjustments in the event of any stock split, stock dividend, stock combination, recapitalization or
other similar transaction), and a contractual maturity date of the two-year anniversary of the date of issuance. The March 2023 Senior
Convertible Note would be convertible into or otherwise paid in shares of the Company’s common stock.

Under the March 2023 Senior Convertible Note, the Company
would be subject to certain customary affirmative and negative covenants regarding the incurrence of indebtedness, the existence
of liens, the repayment of indebtedness and the making of investments, the payment of cash in respect of dividends, distributions or redemptions,
the transfer of assets, the maturity of other indebtedness, and transactions with affiliates, among other customary matters. Under the March 2023 Senior Convertible Note, the Company
would also be subject to financial covenants requiring that (i) the amount of our available cash equal or exceed $5.0 million
at all times, (ii) the ratio of (a) the outstanding principal amount of the notes issued under the SPA, accrued and unpaid interest thereon
and accrued and unpaid late charges to (b) the Company’s average market capitalization over the prior ten trading days, not exceed
30%, and (iii) that the Company’s market capitalization shall at no time be less than an amount to be agreed upon.

Committed Equity Facility and ATM Facility

In March 2022, we entered into
a committed equity facility with Cantor. Under the terms of the committed equity facility, Cantor has committed to purchase up to $50
million of our common stock from time to time at our request. While there are distinct differences, the committed equity facility is structured
similarly to a traditional at-the-market equity facility, insofar as it allows us to raise primary equity capital on a periodic basis
at prices based on the existing market price. As of December 31, 2022, under the committed equity facility, a total of 680,263 shares
of common stock of the Company were issued for proceeds of approximately $1.8 million.

In November 2022, Lucid Diagnostics also entered into an “at-the-market
offering” for up to $6.5 million of its common stock that may be offered and sold under a Controlled Equity Offering Agreement between
Lucid Diagnostics and Cantor Fitzgerald & Co. In the year ended December 31, 2022, there were no shares sold through their at-the-market
equity facility. Subsequent to December 31, 2022, through March 9, 2023, Lucid Diagnostics sold 230,068 shares through its at-the-market
equity facility for approximately $0.3 million.

50

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 of certain operating expenses on our behalf. Additionally, our daily operations have been and continue to be
principally managed by personnel employed by PAVmed, for which we incur a MSA Fee expense. The MSA Fee is charged on a monthly basis
and is subject-to periodic adjustment corresponding with changes in the services provided by PAVmed Inc. personnel to the Company, with
any such change in the MSA Fee being subject to approval of the Lucid Diagnostics Inc. and PAVmed Inc. boards of directors. In this regard,
in August 2022, the boards of directors of Lucid Diagnostics Inc. and PAVmed Inc. approved a sixth amendment to the MSA to increase the
MSA Fee to $550 per month from $390 per month, with such increase effective on a prospective basis commencing July 1, 2022. 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 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
accordance with the MSA, on November 30, 2022 PAVmed has elected to receive payment of $1.65 million in aggregated monthly fees under
the MSA through the issuance of 750,818 shares of Lucid Diagnostics Inc. Common Stock.

On
November 30, 2022, the Company and PAVmed entered into a payroll and benefit expense reimbursement agreement (the “PBERA”).
Historically, PAVmed has paid for certain payroll and benefit-related expenses in respect of the Company’s personnel on behalf
of the Company, and the Company has reimbursed PAVmed for the same. Pursuant to the PBERA, PAVmed will continue to pay such expenses,
and the Company will continue to reimburse PAVmed for the same. The PBERA now provides that the expenses will be reimbursed on a quarterly
basis or at such other frequency as the parties may determine, in cash or, subject to approval by the board of directors of each of PAVmed
and the Company, in shares of the Company’s common stock, with such shares valued at the volume weighted average price of such
stock during the final ten trading days preceding the later of the two dates on which such stock issuance is approved by the board of
directors of each of PAVmed and the Company (subject to a floor price of $0.40 per share), or in a combination of cash and shares. However,
in no event shall the Company issue any shares of its common stock to PAVmed in satisfaction of all or any portion of the expenses if
the issuance of such shares of its common stock would exceed the maximum number of shares of common stock that the Issuer may issue under
the rules or regulations of The Nasdaq Stock Market LLC (“Nasdaq”), unless the Company obtains the approval of its stockholders
as required by the applicable rules of the Nasdaq for issuances of shares of its common stock in excess of such amount. In accordance
with the PBERA, on November 30, 2022, PAVmed elected for the Company to reimburse PAVmed for $2.7 million in accrued and unreimbursed
payroll and benefit-related expenses paid by PAVmed on behalf of the Company through the third quarter of 2022 through the issuance of
1,479,326 shares of the Company’s common stock.

As
previously disclosed, on October 5, 2021, PAVmed Subsidiary Corp., a wholly owned subsidiary of PAVmed (“PAVmed Sub”), acquired
100% of the outstanding membership interest of CapNostics, LLC from a third party, for a purchase price of approximately $2.1 million.
Also as previously disclosed, effective as of April 1, 2022, pursuant to an assignment agreement (as amended and supplemented to date,
the “CapNostics Assignment Agreement”) between PAVmed Sub and the Company, PAVmed Sub assigned the interests to the Company
and, in consideration for the interests, the Company agreed to pay to PAVmed Sub an amount in cash equal to the purchase price paid by
PAVmed Sub to the third party. On November 30, 2022, pursuant to a supplement to the CapNostics Assignment Agreement, the Company, PAVmed
Sub and PAVmed agreed that the Company would pay the price for the interests through the issuance to PAVmed of 1,145,086 shares of the
Company’s common stock.

As
of December 31, 2022, we had a Due To: PAVmed Inc. payment obligation liability of an aggregate of approximately $5.0 million payable
for the reimbursement of employee related costs and certain operating expenses paid by PAVmed on our behalf. See our accompanying consolidated
financial statements Note 6, Due To PAVmed Inc.

51

Critical
Accounting Policies and Significant Judgments and Estimates

The
discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which
have been prepared in accordance with generally accepted accounting principles in the United States of America, or U.S. GAAP. The preparation
of these consolidated financial statements requires us to make estimates and assumptions affecting the reported amounts of assets, liabilities,
and equity, along with the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the
reported amounts of expenses during the corresponding periods. In accordance with U.S. GAAP, we base our estimates on historical experience
and on various other assumptions we believe are reasonable under the circumstances. Actual results may differ from these estimates under
different assumptions or conditions. While our significant accounting policies are described in more detail in our consolidated financial
notes, we believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our consolidated
financial statements.

Research
and Development Expenses

Research
and development expenses are recognized as incurred and include the salary and stock-based compensation of employees engaged in product
research and development activities, and the costs related to the Company’s various contract research service providers, suppliers,
engineering studies, supplies, and outsourced testing and consulting fees, as well as depreciation expense and rental costs for equipment
used in research and development activities, and fees incurred for access to certain facilities of contract research service providers.

Stock-Based
Compensation

Stock-based
awards are made to members of the board of directors of the Company, the Company’s employees and non-employees, under each of the
Lucid Diagnostics Inc. 2018 Equity Plan and the PAVmed Inc. 2014 Equity Plan.

The
grant-date estimated fair value of the stock-based award is recognized on a straight-line basis over the requisite service period, which
is generally the vesting period of the respective stock-based award, with such straight-line recognition adjusted, as applicable, so
the cumulative expense recognized is at-least equal-to-or-greater-than the estimated fair value of the vested portion of the respective
stock-based award as of the reporting date.

The
Company uses the Black-Scholes valuation model to estimate the fair value of stock options granted under both the PAVmed Inc. 2014 Equity
Plan and the Lucid Diagnostics Inc. 2018 Equity Plan, which requires the Company to make certain weighted-average valuation estimates
and assumptions for stock-based awards, principally as follows:

The
price per share of Lucid Diagnostics Inc. common stock used in the computation of estimated fair value of stock options and restricted
stock awards granted under the Lucid Diagnostics Inc. 2018 Equity Plan is as follows: (i) for the period October 14, 2021 to December
31, 2022 it is its quoted closing price per share; and (ii) for the period January 1, 2021 to October 14, 2021, it was estimated using
a probability-weighted average expected return methodology (“PWERM”), which involves the determination of equity value under
various exit scenarios and an estimation of the return to the common stockholders under each scenario.

The
price per share of PAVmed Inc. common stock used in the computation of estimated fair value of stock options and restricted stock awards
granted under the PAVmed Inc. 2014 Equity Plan is its quoted closing price per share.

Recent
Accounting Standards Updates Adopted

In
August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging
– Contracts in Entity’s Own Equity (Subtopic 815 – 40), (“ASU 2020-06”). ASU 2020-06 simplifies the accounting
for certain financial instruments with characteristics of liabilities and equity, by eliminating the beneficial conversion and cash conversion
accounting models previously contained in ASC 470-20 that required separate accounting for embedded conversion features. ASU 2020-06
also simplified the assessment of a financial instrument settlement to determine whether a contract is an entity’s own equity qualifies
for equity classification by removing certain conditions from ASC 815-4-25. The ASU 2020-06 amendments are effective for fiscal years
beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal
years beginning after December 15, 2020, including interim periods within those fiscal years. The Company’s adoption of the ASU
2020-06 guidance as of January 1, 2021 did not have an effect on the Company’s consolidated financial statements.

52

In
December 2019, the FASB issued ASU No. 2019-12, “Income Taxes: Simplifying the Accounting for Income Taxes”, (“ASU
2019-12”). The guidance of ASU 2019-12 removes certain exceptions for recognizing deferred taxes for investments, performing intra-period
allocation, and calculating income taxes in interim periods, and adds revised guidance to reduce complexity in certain areas, including
recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. Adoption of the guidance of ASU
2019-12 is required for annual and interim financial statements beginning after December 15, 2020. The Company’s adoption of the
ASU 2019-12 guidance as of January 1, 2021 did not have an effect on the Company’s consolidated financial statements.

Effective
December 31, 2021, the Company adopted FASB ASC Topic 842, Leases, (“ASC 842”). ASC 842 established a right-of-use (“ROU”)
model requiring a lessee to recognize a ROU asset and a lease liability for all leases with terms greater-than 12 months. Leases are
classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement.
The Company’s adoption of ASC 842 did not have an effect on the Company’s consolidated financial statements. See Note 10,
Leases.

Off-Balance
sheet arrangements

We
do not have any off-balance sheet arrangements.

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

The following discussion
and analysis of our consolidated financial condition and results of operations should be read together with our consolidated financial
statements and related notes appearing elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion
and analysis or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy
for our business and related financing, includes forward-looking statements involving risks and uncertainties and should be read together
with the “Forward-Looking Statements” and “Risk Factors” sections of this Annual Report on Form 10-K for a discussion
of important factors which could cause actual results to differ materially from the results described in or implied by the forward-looking
statements contained in the following discussion and analysis. Unless the context otherwise requires, references herein to “we”,
“us”, and “our”, and to the “Company” or “Lucid” are to Lucid Diagnostics Inc. and its
subsidiaries.

Overview

Operations
Overview

We
are a commercial-stage medical diagnostics technology company focused on the millions of patients with long-standing GERD who are at
risk of developing esophageal precancer and cancer, specifically highly lethal EAC, which is expected to lead to approximately 16,000
U.S. deaths in 2021.

We
believe that our lead products, the EsoGuard Esophageal DNA Test performed on samples collected with the EsoCheck Esophageal Cell Collection
Device, constitute the first and only commercially available diagnostic test capable of serving as a widespread screening tool to prevent
EAC deaths, through early detection of esophageal precancer in at-risk GERD patients.

EsoGuard
is commercialized in the U.S. as a laboratory developed test (“LDT”) previously performed previously at our
unrelated third-party commercial clinical laboratory service partner ResearchDx Inc. (with a d/b/a “Pacific Dx”)
(“RDx”), at their Clinical Laboratory Improvement Amendments (“CLIA”) certified commercial clinical laboratory,
located in Irvine, CA. Starting March 2022, the EsoGuard LDT is performed at our CLIA-certified commercial clinical laboratory,
located in Lake Forest, CA. Additionally, RDx also 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. We are in the process of transferring EsoCheck manufacturing to Coastline International
Inc., a high-volume manufacturer headquartered in San Diego, CA with plants in Mexico. Both EsoGuard and EsoCheck recently completed
the CE Mark certification process. EsoGuard, used with EsoCheck, was granted FDA Breakthrough Device designation and is the subject of
two large, actively enrolling, international multicenter PMA clinical trials.

The
EsoGuard PLA code 0114U secured final Medicare payment determination of $1,938.01, effective January 1, 2021. The CLIA
certified laboratory where the EsoGuard assay is performed has begun to submit claims and receive out-of-network private insurance
payments. We are awaiting Medicare local coverage determination. We are also aggressively pursuing EsoGuard U.S. private payor
payment and coverage as well as payment in Europe.

Our
initial EsoGuard commercialization efforts have focused on gastroenterology (“GI”) physicians. EsoGuard testing has accelerated
as pandemic-related healthcare facility limitations have eased. We have utilized a hybrid sales model of full-time sales management supervising
senior independent sales representatives and supported by full-time clinical specialists. We are significantly expanding our full-time
commercial team and currently employ a national director of sales, seven regional business managers, three clinical specialists and a
sales operations manager. We are contracted with approximately fifty independent sales representatives and are actively recruiting full-time
territory managers in each region to specifically call on either GI or primary care physicians.

We are working to expand
EsoGuard commercialization across multiple channels by targeting primary care physicians and consumers in addition to GI physicians.
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, starting with three test centers launched in the Phoenix metropolitan area and have recently announced we have expanded
our test centers into Utah, Nevada, and Colorado. We also are establishing 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.

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

Impact
of SARS-CoV-2 - COVID-19 Pandemic

Previously,
in December 2019, there was an outbreak of a novel strain of a coronavirus occurred, with such coronavirus designated by the United Nations
(UN) World Health Organization (“WHO”) as the “Severe Acute Respiratory Syndrome Coronavirus 2” - or “SARS-CoV-2”.
The SARS-CoV-2 spread on a global basis to other countries, including the United States of America (“USA” “U.S.”
or “United States”). On March 11, 2020, the WHO declared a pandemic resulting from SARS-CoV-2, with such pandemic commonly
referred to by its resulting illness of “COVID-19” (“coronavirus disease-2019”), and is referred to herein as
the “COVID-19 pandemic”. The COVID-19 pandemic is ongoing, and we continue to monitor the ongoing impact of the COVID-19
pandemic on the United States national economy, the global economy, and our business.

The
COVID-19 pandemic may have an adverse impact on our operations, supply chains, and distribution systems and /or those of our contractors,
and increase our expenses, including as a result of impacts associated with preventive and precautionary measures being taken, restrictions
on travel, quarantine polices, and social distancing. Such adverse impact may include, for example, the inability of our employees and
/or those of our contractors to perform their work or curtail their services provided to us.

We
expect the significance of the COVID-19 pandemic, including the extent of its effect on our consolidated financial condition and consolidated
operational results and cash flows, to be dictated by the success of United States and global efforts to mitigate the spread of and /or
to contain the SARS-CoV-2 and the impact of such efforts.

In
addition, the spread of the SARS-CoV-2 has disrupted the United States’ healthcare and healthcare regulatory systems which could
divert healthcare resources away from, or materially delay United States Food and Drug Administration (“FDA”) approval with
respect to our products.

Furthermore,
our clinical trials have been and may be further affected by the COVID-19 pandemic, as site initiation and patient enrollment may be
delayed, for example, due to prioritization of hospital resources toward the virus and /or illness response, as well as travel restrictions
imposed by governments, and the inability to access clinical test sites for initiation and monitoring.

The
COVID-19 pandemic may have an adverse impact on the economies and financial markets of many countries, including the USA, resulting in
an economic downturn that could adversely affect demand for our products and services and /or our product candidates.

Although
we are continuing to monitor and assess the effects of the COVID-19 pandemic on our business, the ultimate impact of the COVID-19 pandemic
(or a similar health epidemic) is highly uncertain and subject to change, and therefore, its impact on our consolidated financial condition,
consolidated results of operations, and /or consolidated cash flows, the adverse impact could be material.

Results
of Operations

Overview

Revenue

Revenue
was recognized with respect to the EsoGuard Commercialization Agreement, dated August 1, 2021, between the Company’s majority-owned
subsidiary, Lucid Diagnostics Inc., and ResearchDX Inc. (“RDx”), CLIA certified commercial laboratory service provider.

Cost
of revenue

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 (as defined and discussed herein below) allocated to cost of revenue,
which is principally employee related costs of PAVmed employees engaged in the administration to patients of the EsoCheck cell sample
collection procedure (principally at the LUCID Test Centers); the EsoCheck devices and EsoGuard mailers (cell sample shipping costs)
distributed to medical practitioners locations and the LUCID Test Centers; and LUCID Test Centers operating expenses, including rent
expense and supplies.

Sales
and marketing expenses

Sales
and marketing expenses consist primarily of the portion of the MSA Fee allocated to sales and marketing expenses, which are principally
employee related costs of PAVmed employees, as well as advertising and promotion expenses. 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 our commercial sales
and marketing operations as we execute on our business strategy.

General
and administrative expenses

General
and administrative expenses consist primarily of professional fees, accounting and legal services, consultants and expenses associated
with obtaining and maintaining patents within our intellectual property portfolio, along with the portion of the MSA Fee allocated to
general and administrative expenses.

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

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:

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 are focused principally on obtaining FDA approvals and developing product improvements
or extending the utility of the lead products in our pipeline, including EsoCheck and EsoGuard.

Interest
Expense

Interest
expense recognized is with respect to a Senior Unsecured Promissory Note, dated June 1, 2021, with a face value principal of $22.4 million,
an annual interest rate of 7.875%, and a contractual maturity date of May 18, 2028, issued by us to PAVmed. The Senior Unsecured Promissory
Note replaced the $22.4 million aggregate outstanding and payable balance of the Due To: PAVmed Inc., as of June 1, 2021. The Senior
Unsecured Promissory Note provided for the partial or full repayment of the face value principal and accrued but unpaid interest thereon
by the issue of shares of our common stock, at the election of PAVmed Inc., at a conversion price of $1.42 per share of Lucid Diagnostics
Inc. common stock.

On
October 13, 2021, we issued 15,803,200 shares of our common stock to PAVmed upon the election by PAVmed to convert the $22.4 million
face value principal under the terms of a Senior Unsecured Promissory Note, dated June 1, 2021.

See
our accompanying consolidated financial statements Note 6, Due To PAVmed Inc., for a discussion of the Senior Unsecured Promissory
Note dated June 1, 2021 issued by us to PAVmed.

Authorized
Shares Increase and Stock-Split - October 6, 2021

Effective
October 6, 2021, our board of directors: increased the authorized shares of common stock to 100.0 million shares; and declared a 1.411-to-1.0
common stock-split. The number of shares of our common stock and the stock options and restricted stock awards granted under the Lucid
Diagnostics Inc. 2018 Equity Plan, and the corresponding stock option exercise price per share; the fair value per share of the stock
options and restricted stock awards; and the Senior Unsecured Promissory Note conversion price per share, for all periods presented,
as applicable, have been adjusted for such common stock split.

Management
Services Agreement (MSA)

We
are a majority-owned subsidiary of PAVmed, which has a majority equity ownership interest and has financial control of Lucid Diagnostics.

Our
daily operations are managed by personnel employed by PAVmed, for which we incur the MSA Fee, according to the provisions of the
MSA with PAVmed. The MSA Fee is charged on a quarterly basis and is subject-to periodic adjustment corresponding with changes in the
number of PAVmed. employees providing services to us, with the change in the MSA Fee approved by each of the Lucid Diagnostics and PAVmed’s
board of directors. The MSA does not have a termination date, but may be terminated by the Lucid Diagnostics board of directors.

The
classification of the MSA Fee between cost-of-revenue, sales and marketing expense, general and administrative expense, and research
and development expense is based on the PAVmed quarterly classification of employee salary expense. In this regard, PAVmed 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.

See
our accompanying unaudited condensed financial statements Note 5, Related Party Transactions - PAVmed Inc. - Management Services
Agreement, for a discussion of the MSA between Lucid Diagnostics and PAVmed.

Presentation
of Dollar Amounts

All
dollar amounts in this Management’s Discussion and Analysis of Financial Condition and Results of Operations are presented in whole
dollars, if not otherwise indicated as being presented as dollars in millions, except for the number of shares and per share amounts.

Year
ended December 31, 2021 versus December 31, 2020

Revenue

In
the year ended December 31, 2021, revenue was $0.5 million as compared to no revenue in the corresponding period in the prior year. The
$0.5 million increase principally relates to our EsoGuard Commercialization Agreement, dated August 1, 2021, which resulted in revenue
recognition of $0.1 million per month beginning August 2021.

Cost
of revenue

In
the year ended December 31, 2021, cost of revenue was approximately $0.6 million, compared to no cost of revenue in the corresponding
period in the prior year. The $0.6 million increase principally relates to costs associated with our commercialization agreement that
started in August 2021.

Sales
and marketing expenses

In
the year ended December 31, 2021, sales and marketing costs were approximately $5.3 million, compared to $1.3 million for the corresponding
period in the prior year. The net increase of $4.0 million was principally related to:

General
and administrative expenses

In
the year ended December 31, 2021, general and administrative costs were approximately $12.8 million, compared to $1.5 million for the
corresponding period in the prior year. The net increase of $11.2 million was principally related to:

Research
and development expenses

In
the year ended December 31, 2021, research and development costs were approximately $9.3 million, compared to $5.4 million for the corresponding
period in the prior year. The net increase of $3.9 million was principally related to:

See
our consolidated financial statements as of and for the years ended December 31, 2021 and 2020 for each of: Note 5, Related Party
Transactions - PAVmed Inc., for a discussion of the consulting fee expense and stock based compensation expense recognized with respect
to the Physician Inventors consulting agreements and stock options and restricted awards; and the MSA between Lucid Diagnostics and PAVmed;
and Note 12, Stock-Based Compensation, for information regarding each of the Lucid Diagnostics 2018 Equity Plan and the
PAVmed Inc. 2014 Equity Plan.

Liquidity
and Capital Resources

Due
To: PAVmed Inc. & Senior Unsecured Promissory Note Issued to PAVmed Inc.

Since
inception, prior to our IPO discussed below, our operations have been funded by PAVmed providing working capital cash advances
and the payment by PAVmed of certain operating expenses on-our-behalf. Additionally, our daily operations are managed by personnel employed
by PAVmed, for which we incur a MSA Fee expense according to the provisions of the MSA discussed above.

As
of December 31, 2021, we had a Due To: PAVmed Inc. payment obligation liability of an aggregate of approximately $1.6 million
payable to reimburse for employee related costs and payments PAVmed Inc. made on behalf of Lucid Diagnostics.

See
our accompanying consolidated financial statements Note 6, Due To PAVmed Inc.

On
October 18, 2021, we completed an initial public offering (“IPO”) of our common stock under an effective registration statement
on Form S-1 (SEC File No. 333-259721), wherein a total of 5.0 million shares of our common stock were issued, with such total shares
inclusive of 571,428 shares issued to PAVmed, at an IPO price of $14.00 per share, resulting gross proceeds of $70.0 million, before
underwriting fees of $4.9 million, and approximately $0.7 million of offering costs incurred by us.

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 expect to continue to experience recurring losses from operations and we will continue to fund our operations
with debt and/or equity financing transactions. Notwithstanding, however, with the cash on-hand as of the date hereof, of which is inclusive
of the cash proceeds resulting from the as a result of our IPO, we expect to be able to fund its future operations for one year from
the date of the issue of our consolidated financial statements, as included herein in this Annual Report on Form 10-K
for the year ended December 31, 2021.

Lucid
Diagnostics Inc. Committed Equity Facility – Subsequent to December 31, 2021

Subsequent
to December 31, 2021, in March 2022, we entered into a committed equity facility with an affiliate of Cantor. Under the terms of the
facility, Cantor has committed to purchase up to $50 million in our shares of our common stock from time to time at our request. 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.

Upon
the initial satisfaction of the conditions to Cantor’s obligation to purchase shares under the facility, including that a registration
statement registering the resale by Cantor of the Shares under the Securities Act is declared effective by the SEC and a final prospectus
relating thereto is filed with the SEC, we will have the right, but not the obligation, from time to time at our sole discretion until
the first day of the month next following the expiration of the 36-month period after the effective date of the registration statement,
to direct Cantor to purchase shares in accordance with the terms of the facility, by delivering written notice to Cantor prior to the
commencement of trading on any trading day, subject to certain maximum amounts. The purchase price of the shares will be 96% of the volume
weighted average price of the shares of common stock during the trading date on which we have timely delivered written notice to Cantor
directing it to purchase shares under the facility.

We
will not sell, and Cantor will not purchase, any shares pursuant to the facility, if the aggregate number of shares of common stock issued
pursuant to the facility would exceed 7,482,763 shares of common stock, unless we obtain approval of our stockholders for the sale of
shares in excess of such amount. In addition, we will not sell, and Cantor will not purchase, any shares pursuant to the facility, which,
when aggregated with all other shares of common stock then beneficially owned by Cantor and its affiliates, would result in the beneficial
ownership by Cantor and its affiliates of more than 4.99% of our outstanding voting power or shares of common stock.

In
connection with the execution of the agreement for the facility, we agreed to pay Cantor $1.0 million as consideration for its irrevocable commitment
to purchase the shares upon the terms and subject to the satisfaction of the conditions set forth in such agreement. In addition, pursuant
to the agreement, e agreed to reimburse Cantor for certain of its expenses. We also entered into a registration rights agreement with
Cantor. We have the right to terminate the agreement at any time after initial satisfaction of the conditions to Cantor’s obligation
to purchase shares under the facility, at no cost or penalty, upon three trading days’ prior written notice.

Critical
Accounting Policies and Significant Judgments and Estimates

The
discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which
have been prepared in accordance with generally accepted accounting principles in the United States of America, or U.S. GAAP. The preparation
of these consolidated financial statements requires us to make estimates and assumptions affecting the reported amounts of assets, liabilities,
and equity, along with the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the
reported amounts of expenses during the corresponding periods. In accordance with U.S. GAAP, we base our estimates on historical experience
and on various other assumptions we believe are reasonable under the circumstances. Actual results may differ from these estimates under
different assumptions or conditions. While our significant accounting policies are described in more detail in our consolidated financial
notes, we believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our consolidated
financial statements.

Revenue
Recognition

The
Company recognizes revenue under the provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification
(“ASC”) Topic 606, Revenue from Contracts with Customers, (“ASC 606”). At its inception, an arrangement
is accounted for under the provisions of ASC 606 as a contract with a customer when there is: a legally enforceable contract between
the parties; the rights of the parties are identified; the arrangement has commercial substance; and collectability of the contract consideration
is deemed probable. To determine revenue recognition for arrangements determined to be within the scope of ASC 606, the Company performs
the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii)
determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize
revenue when (or as) the entity satisfies a performance obligation.

Research
and Development Expenses

Research
and development expenses are recognized as incurred and include the salary and stock-based compensation of employees engaged in product
research and development activities, and the costs related to the Company’s various contract research service providers, suppliers,
engineering studies, supplies, and outsourced testing and consulting fees, as well as depreciation expense and rental costs for equipment
used in research and development activities, and fees incurred for access to certain facilities of contract research service providers.

Stock-Based
Compensation

Stock-based
awards are made to members of the board of directors of the Company, the Company’s employees and non-employees, under each of the
Lucid Diagnostics Inc. 2018 Equity Plan and the PAVmed Inc. 2014 Equity Plan.

The
grant-date estimated fair value of the stock-based
award is recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the respective
stock-based award, with such straight-line recognition adjusted, as applicable, so the cumulative expense recognized is at-least equal-to-or-greater-than
the estimated fair value of the vested portion of the respective stock-based award as of the reporting date.

The
Company uses the Black-Scholes valuation model to estimate the fair value of stock options granted under both the PAVmed Inc. 2014 Equity
Plan and the Lucid Diagnostics Inc. 2018 Equity Plan, which requires the Company to make certain weighted-average valuation estimates
and assumptions for stock-based awards, principally as follows:

The
price per share of PAVmed Inc. common stock used in the computation of estimated fair value of stock options and restricted stock
awards granted under the PAVmed Inc. 2014 Equity Plan is its quoted closing price per share.

The
price per share of Lucid Diagnostics Inc. common stock used in the computation of estimated fair value of stock options and restricted
stock awards granted under the Lucid Diagnostics Inc. 2018 Equity Plan is as follows: (i) for the period October 14, 2021 to December
31, 2021 it is its quoted closing price per share; and (ii) for the period January 1, 2021 to October 14, 2021, it was estimated using
a probability-weighted average expected return methodology (“PWERM”), which involves the determination of equity value under
various exit scenarios and an estimation of the return to the common stockholders under each scenario; and (iii) as of December 31, 2020,
it was estimated using a discounted cash flow analysis applied to a multi-year forecast of its future cash flows.

Leases

The
Company adopted FASB ASC Topic 842, Leases, (“ASC 842”) effective December 31, 2021, with such adoption not having
an effect on the Company’s consolidated financial statements. 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.

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 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.

Income
Taxes

The
Company accounts for income taxes using the asset and liability method, as required by FASB ASC Topic 740, Income Taxes, (ASC 740). Current
tax liabilities or receivables are recognized for estimated income tax payable and/or refundable for the current year. Deferred tax assets
and deferred tax liabilities are recognized for estimated future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax basis, along with net operating loss and tax credit carryforwards.
Deferred tax assets and deferred tax liabilities are measured using enacted tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or settled. Changes in deferred tax assets and deferred tax liabilities
are recorded in the provision for income taxes.

Under
ASC 740, a “more-likely-than-not” criterion is applied when assessing the estimated realization of deferred tax assets through
their utilization to reduce future taxable income, or with respect to a deferred tax asset for tax credit carryforward, to reduce future
tax expense. A valuation allowance is established, when necessary, to reduce deferred tax assets, net of deferred tax liabilities, when
the assessment indicates it is more-likely-than-not, the full or partial amount of the net deferred tax asset will not be realized. As
a result of the evaluation of the positive and negative evidence bearing upon the estimated realizability of net deferred tax assets,
and based on a history of operating losses, it is more-likely-than-not the deferred tax assets will not be realized, and therefore a
valuation allowance reserve equal to the full amount of the deferred tax assets, net of deferred tax liabilities, has been recognized
as a charge to income tax expense as of December 31, 2021 and December 31, 2020.

The
Company recognizes the benefit of an uncertain tax position it has taken or expects to take on its income tax return if such a position
is more-likely-than-not to be sustained upon examination by the taxing authorities, with the tax benefit recognized being the largest
amount having a greater than 50% likelihood of being realized upon ultimate settlement. As of December 31, 2021, the Company does not
have any unrecognized tax benefits resulting from uncertain tax positions.

The
Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision. There were no
amounts accrued for penalties or interest as of December 31, 2021 and December 31, 2020 or recognized during the year ended December
31, 2021 and December 31, 2020. The Company is not aware of any issues under review to potentially result in significant payments, accruals,
or material deviations from its position.

On
October 14, 2021, Lucid Diagnostics Inc. completed its initial public offering (“IPO”) of its common stock. While PAVmed
Inc. holds a majority-interest equity ownership and has a controlling financial interest, its ownership interest was reduced from 81.8477%
before the IPO to 79.9796% after the IPO. Accordingly, Lucid Diagnostics Inc. is included in the PAVmed Inc and Subsidiaries
consolidated income tax returns through October 13, 2021, and effective October 14, 2021, Lucid Diagnostics Inc. will file
its income tax returns on a stand-alone legal entity basis. The Lucid Diagnostics Inc. stand-alone legal entity estimated income
tax provision was computed on an assumed separate income tax return for the periods presented through October 13, 2021, wherein,
the estimated income tax provision of Lucid Diagnostics Inc. is computed as if its income tax returns were filed by Lucid Diagnostics
Inc. on a stand-alone legal entity basis. Notwithstanding the absence of a formal tax sharing agreement between PAVmed Inc. and Lucid
Diagnostics Inc., the Lucid Diagnostics Inc. stand-alone legal entity current tax expense and /or tax refund, if any, would be settled
with PAVmed Inc. (as opposed with the respective tax authority) through October 13, 2021. The deferred tax asset and /or deferred
tax liability; a valuation allowance on the deferred tax asset, net; and /or an uncertain tax position, if any; each as discussed above,
is determined based on Lucid Diagnostics Inc. stand-alone legal entity assumed filing of separate income tax returns.

Recent
Accounting Standards Updates Adopted

In
August 2020, the FASB issued ASU 2020-06, Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging
– Contracts in Entity’s Own Equity (Subtopic 815 – 40), (“ASU 2020-06”). ASU 2020-06 simplifies the accounting
for certain financial instruments with characteristics of liabilities and equity, by eliminating the beneficial conversion and cash conversion
accounting models previously contained in ASC 470-20 that required separate accounting for embedded conversion features. ASU 2020-06
also simplified the assessment of a financial instrument settlement to determine whether a contract is an entity’s own equity qualifies
for equity classification by removing certain conditions from ASC 815-4-25. The ASU 2020-06 amendments are effective for fiscal years
beginning after December 15, 2023, and interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal
years beginning after December 15, 2020, including interim periods within those fiscal years. The Company’s adoption of the ASU
2020-06 guidance as of January 1, 2021 did not have an effect on the Company’s consolidated financial statements.

In
December 2019, the FASB issued ASU No. 2019-12, “Income Taxes: Simplifying the Accounting for Income Taxes”, (“ASU
2019-12”). The guidance of ASU 2019-12 removes certain exceptions for recognizing deferred taxes for investments, performing intra-period
allocation, and calculating income taxes in interim periods, and adds revised guidance to reduce complexity in certain areas, including
recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group. Adoption of the guidance of ASU
2019-12 is required for annual and interim financial statements beginning after December 15, 2020. The Company’s adoption of the
ASU 2019-12 guidance as of January 1, 2021 did not have an effect on the Company’s consolidated financial statements.

JOBS
Act EGC Accounting Election

The
Company is an “emerging growth company” or “EGC”, as defined in the Jumpstart Our Business Startups Act of 2012
(the “JOBS Act”). Under the JOBS Act, an EGC can delay adopting new or revised accounting standards issued after the enactment
of the JOBS Act until such time as those standards apply to private companies. The Company has irrevocably elected to avail itself of
this exemption from new or revised accounting standards, and, therefore, will not be subject to the same new or revised accounting standards
as public companies who are not an EGC.