| Summary of Significant Accounting Policies | Note
2 — Summary of Significant Accounting Policies Significant
Accounting Policies Basis
of Presentation The
accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the
United States of America (“U.S. GAAP”), and applicable rules and regulations of the United States Securities and Exchange
Commission (“SEC”), and include the accounts of the Company and its wholly-owned subsidiaries, LucidDx Labs Inc and CapNostics
LLC. All intercompany transactions and balances have been eliminated in consolidation. Lucid Diagnostics Inc. (“the Company”)
is a majority-owned consolidated subsidiary of PAVmed Inc., which has a majority equity ownership interest and has financial control
of Lucid Diagnostics Inc. The Company manages its operations as a single operating segment for the purposes of assessing performance
and making operating decisions. All
amounts in the accompanying consolidated financial statements and these notes thereto are presented in thousands of dollars, if not otherwise
noted as being presented in millions of dollars, except for shares and per share amounts. Use
of Estimates In
preparing the consolidated financial statements in conformity with U.S. GAAP, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of contingent losses, as of the date of the consolidated
financial statements, as well as the reported amounts of revenue and expenses during the reporting period. Significant estimates in these
consolidated financial statements include those related to the estimated fair value of stock-based equity awards and intangible assets.
Other significant estimates include the estimated incremental borrowing rate, the provision or benefit for income taxes and the corresponding
valuation allowance on deferred tax assets. Additionally, management’s assessment of the Company’s ability to continue as
a going concern involves the estimation of the amount and timing of future cash inflows and outflows. On an ongoing basis, the Company
evaluates its estimates and assumptions. The Company bases its estimates on historical experience and on various other assumptions believed
to be reasonable. Due to inherent uncertainty involved in making estimates, actual results reported in future periods may be affected
by changes in these estimates. Financial
Condition The
provisions of Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 205-40,
Presentation of Financial Statements - Going Concern (“ASC 205-40”) requires management to assess an entity’s ability
to continue as a going concern within one year of the date of the financial statements are issued. In each reporting period (including
interim periods), an entity is required to assess conditions known and reasonably knowable as of the financial statement issuance date
to determine whether it is probable an entity will not meet its financial obligations within one year from the financial statement issuance
date. Substantial doubt about an entity’s ability to continue as a going concern exists when
conditions and events, considered in the aggregate, indicate it is probable the entity will be unable to meet its financial obligations
as they become due within one year after the date the financial statements are issued. Prior
to its initial public offering (“IPO”) of its common stock, the operations of the Company were funded by PAVmed Inc., inclusive
of providing working capital cash advances and the payment of certain operating expenses on-behalf-of the Company. Additionally, certain
operations of Lucid Diagnostics Inc. continue to be managed by personnel of PAVmed Inc., for which Lucid Diagnostics Inc. incurs expense
according to the provisions of a Management Services Agreement between Lucid Diagnostics Inc. and PAVmed Inc. See Note 5, Related
Party Transactions Due To PAVmed Inc. The
Company is subject to all of the risks and uncertainties typically faced by medical device and diagnostic companies that devote substantially
all of their efforts to the commercialization of their initial product and services and ongoing research and development activities and
conducting clinical trials. The Company expects to continue to experience recurring losses from operations and will continue to fund
its operations with debt and equity financing transactions. Notwithstanding, however, with the 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 Annual Report on Form 10-K for the period ended December 31, 2022. See Note 18, Subsequent Events Note 2 — Summary of Significant Accounting
Policies Cash The
Company maintains its cash at a major financial institution with high credit quality. At times, the balance of its cash deposits may
exceed federally insured limits. The Company has not experienced losses on deposits with commercial banks and financial institutions
which exceed federally insured limits. Offering
Costs Offering
costs consist of certain legal, accounting, and other advisory fees incurred related to the Company’s efforts to raise debt and
equity capital. Offering costs in connection with equity financing are recognized as either an offset against the financing proceeds
to extent the underlying security is equity classified or a current period expense to extent the underlying security is liability classified
or for which the fair value option is elected. Offering costs, lender fees, and warrants issued in connection with debt financing, to
the extent the fair value option is not elected, are recognized as debt discount, which reduces the reported carrying value of the debt,
with the debt discount amortized as interest expense, generally over the contractual term of the debt agreement, to result in a constant
rate of interest. Offering costs associated with in-process capital financing are accounted for as deferred offering costs. Revenue
Recognition Revenues
are recognized when the satisfaction of the performance obligation occurs, in an amount that reflects the consideration the Company expects
to collect in exchange for those services. The Company’s revenue is primarily generated by its laboratory testing services utilizing
its EsoGuard Esophageal DNA tests. The services are completed upon release of a patient’s test result to the ordering healthcare
provider. Revenue recognized is inclusive of both variable consideration in connection with an individual patient’s third-party
insurance coverage policy and fixed consideration in connection with a contracted services arrangement with an unrelated third party
legal entity. To determine revenue recognition for the arrangements that the Company determines are within the scope of ASC 606, Revenue
from Contracts with Customers, the Company performs the following five steps: (1) identify the contract(s) with a customer, (2) identify
the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance
obligations in the contract and (5) recognize revenue when (or as) the entity satisfies a performance obligation. The
key aspects considered by the Company include the following: Contracts Performance
obligations Transaction
price If
the consideration derived from the contracts is deemed to be variable, the Company estimates the amount of consideration to which it
will be entitled in exchange for the promised goods or services. The Company limits the amount of variable consideration included in
the transaction price to the unconstrained portion of such consideration. In other words, the Company recognizes revenue up to the amount
of variable consideration that is not subject to a significant reversal until additional information is obtained or the uncertainty associated
with the additional payments or refunds is subsequently resolved. When
the Company does not have significant historical experience or that experience has limited predictive value, the constraint over estimates
of variable consideration may result in no revenue being recognized upon delivery of patient EsoGuard test results to the ordering healthcare
provider. As such, the Company recognizes revenue up to the amount of variable consideration not subject to a significant reversal until
additional information is obtained or the uncertainty associated with additional payments or refunds, if any, is subsequently resolved.
Differences between original estimates and subsequent revisions, including final settlements, represent changes in estimated expected
variable consideration, with the change in estimate recognized in the period of such revised estimate. With respect to a contracted service
arrangement, the fixed consideration revenue is recognized on an as-billed basis upon delivery of the laboratory test report with realization
of such fixed consideration deemed probable based upon actual historical experience. Allocate
transaction price Practical
Expedients Note 2 — Summary of Significant Accounting
Policies Fixed
Assets Fixed
assets are stated at cost and depreciated using the straight-line method over the assets’ estimated useful lives. Additions and
improvements are capitalized, including direct and indirect costs incurred to validate equipment and bring to working conditions. The
costs for maintenance and repairs are expensed as incurred. Leases The
Company adopted FASB ASC Topic 842, Leases A
lease ROU asset represents the Company’s right to use an underlying asset for the lease term, and the lease liability represents
its contractual obligation to make lease payments. The lease ROU asset is measured at the lease commencement date as the present value
of the future lease payments plus initial direct costs incurred. The Company recognizes lease expense of the amortization of the lease
ROU asset for an operating lease on a straight-line basis over the lease term; and for financing leases on a straight-line basis unless
another basis is more representative of the pattern of economic benefit. The operating ROU asset also includes any lease incentives received
for improvements to leased property, when the improvements are lessee-owned. For improvements to leased property that are lessor-owned,
the Company includes amounts the Company incurred for the improvements as ROU assets which are amortized on a straight-line basis over
the life of the lease. The
lease liability is measured at the lease commencement date with the discount rate generally based on the Company’s incremental
borrowing rate (to the extent the lease implicit rate is not known nor determinable), with interest expense recognized using the interest
method for financing leases. Certain
leases may include options to extend or terminate the agreement. The Company does not assume renewals in determination of the lease term
unless the renewals are deemed to be reasonably certain at lease commencement. As well, an option to terminate is considered unless it
is reasonably certain the Company will not exercise the option. The Company elected the practical expedient to not recognize a lease
ROU asset and lease payment liability for leases with a term of twelve months or less (“short-term leases”), resulting in
the aggregate lease payments being recognized on a straight line basis over the lease term. The Company’s leases with a commencement
date prior to January 1, 2022 were short-term leases and therefore did not require recording a ROU asset or lease liability at December
31, 2021. Additionally, the Company elected the practical expedient to not separate lease and non-lease components. Intangible
Assets Purchased
intangible assets are recorded at cost and depreciated using the straight-line method over the assets’ estimated useful life. See
Note 11, Intangible Assets, net Impairment
- Long Lived Assets The
Company reviews its long-lived assets, including intangible assets with finite lives, for recoverability whenever events or changes in
circumstances indicate the carrying amount of the assets may not be fully recoverable. The Company evaluates assets for potential impairment
by comparing estimated future undiscounted net cash flows to the carrying amount of the asset. If the carrying amount of the assets exceeds
the estimated future undiscounted cash flows, impairment is measured based on the difference between the carrying amount of the assets
and fair value which is generally an expected present value cash flow technique. The assessment and determination of the existence of
an impairment indicator comprises measurable operating performance criteria as well as qualitative factors deemed relevant and appropriate
to such evaluation. 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:
● With
respect to the PAVmed Inc. 2014 Equity Plan, the expected stock price volatility is based
on the historical stock price volatility of PAVmed Inc. common stock and the volatilities
of similar entities within the medical device industry over the period commensurate with
the expected term with respect to stock options granted to the board of directors and employees
in the years ended December 31, 2022 and 2021; Note 2 — Summary of Significant Accounting
Policies
● With
respect to stock options granted under the Lucid Diagnostics Inc. 2018 Equity Plan, the expected
stock price volatility was based on the historical stock price volatility of similar entities
within the medical device industry over the period commensurate with the expected term with
respect to stock options granted to employees in the years ended December 31, 2022 and 2021;
● The
risk-free interest rate is based on the interest rate payable on U.S. Treasury securities
in effect at the time of grant for a period commensurate with either the expected term or
the remaining contractual term, as applicable, of the stock option; and,
● The
expected dividend yield is based on annual dividends of $ 0.00 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. Financial
Instruments Fair Value Measurements FASB
ASC Topic 820, Fair Value Measurement, (ASC 820) defines fair value as the price which would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at a transaction measurement date. The ASC 820 three-tier
fair value hierarchy prioritizes the inputs used in the valuation methodologies, as follows:
Level
1 Valuations
based on quoted prices for identical assets and liabilities in active markets.
Level
2 Valuations
based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets or liabilities in
active markets, quoted prices for identical or similar assets and liabilities in markets which are not active, or other inputs observable
or can be corroborated by observable market data.
Level
3 Valuations
based on unobservable inputs reflecting the Company’s own assumptions, consistent with reasonably available assumptions made
by other market participants. These valuations require significant judgment. As
of December 31, 2022 and December 31, 2021, the carrying values of cash, and accounts payable, approximate their respective fair value
due to the short-term nature of these financial instruments. Research
and Development Expenses Research
and development expenses are recognized as incurred and include the salary and stock-based compensation of employees engaged in product
research and development activities, and the costs related to the Company’s various contract research service providers, suppliers,
engineering studies, supplies, and outsourced testing and consulting fees, as well as depreciation expense and rental costs for equipment
used in research and development activities, and fees incurred for access to certain facilities of contract research service providers. Patent
Costs and Purchased Patent License Rights Patent
related costs in connection with filing and prosecuting patent applications and patents filed by the Company are expensed as incurred
and are included in the line item captioned “general and administrative expenses” in the accompanying consolidated statements
of operations. Patent fee reimbursement expense incurred under the patent license agreement agreements are included in the line item
captioned “research and development expenses” in the accompanying consolidated statements of operations. The
Company has entered into agreements with third parties to acquire technologies for potential commercial development. Such agreements
generally require an initial payment by the Company when the contract is executed. The purchase of patent license rights for use in research
and development activities, including product development, are expensed as incurred and are classified as research and development expense.
Additionally, the Company may be obligated to make future royalty payments in the event the Company commercializes the technology and
achieves a certain sales volume. In accordance with Financial Accounting Standards Board (“FASB”) Accounting Standard Codification
(“ASC”) Topic 730, “Research and Development”, (“ASC 730”), expenditures for research and development,
including upfront licensing fees and milestone payments associated with products not yet been approved by the United States Food and
Drug Administration (“FDA”), are charged to research and development expense as incurred. Future contract milestone and /or
royalty payments will be recognized as expense when achievement of the milestone is determined to be probable and the amount of the corresponding
milestone can be objectively estimated. Note 2 — Summary of Significant Accounting
Policies 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, 2022 and 2021. 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, 2022, the Company does no The
Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision. There were no 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 to below
80% 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. Net
Loss Per Share The
net loss per share is computed by dividing each of the respective net loss by the number of “basic weighted average common shares
outstanding” and diluted weighted average shares outstanding” for the reporting period indicated. The basic weighted-average
shares common shares outstanding are computed on a weighted average based on the number of days the shares of common stock of the Company
are issued and outstanding during the respective reporting period indicated. The diluted weighted average common shares outstanding are
the sum of the basic weighted-average common shares outstanding plus the number of common stock equivalents’ incremental shares
on an if-converted basis, computed using the treasury stock method, computed on a weighted average based on the number of days the incremental
shares would potentially be issued and outstanding during the periods indicated, if dilutive. The Company’s common stock equivalents
include stock options and unvested restricted stock awards granted under the Lucid Diagnostics Inc. 2018 Long-Term Incentive Equity Plan. Notwithstanding,
as the Company has a net loss for each reporting period presented, only the basic weighted average common shares outstanding are used
to compute the basic and diluted net loss per share for each reporting period presented. JOBS
Act EGC Accounting Election The
Company is an “emerging growth company” or “EGC”, as defined in the Jumpstart Our Business Startups Act of 2012
(the “JOBS Act”). Under the JOBS Act, an EGC can delay adopting new or revised accounting standards issued after the enactment
of the JOBS Act until such time as those standards apply to private companies. The Company has irrevocably elected to avail itself of
this exemption from new or revised accounting standards, and, therefore, will not be subject to the same new or revised accounting standards
as public companies who are not an EGC. Note 2 — Summary of Significant Accounting
Policies Reclassifications Certain
prior-year amounts have been reclassified to conform to the current year presentation, which includes presenting costs of revenue within
operating expenses on the statements of operations, in the consolidated financial statements and accompanying notes to the consolidated
financial statements. The impact of the reclassifications made to prior year amounts is not material and did not affect net loss. 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. 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. |
