Lucid Diagnostics(LUCD) - 2023 Q2 - Quarterly Report

Filing Information This section details the filing information for Lucid Diagnostics Inc.'s Quarterly Report (Form 10-Q) for Q2 2023 - The document is a Quarterly Report (Form 10-Q) for Lucid Diagnostics Inc. for the period ended June 30, 2023[1][2] Registrant Filer Status | Filer Status | Designation | | :------------- | :---------- | | Large Accelerated filer | ☐ | | Accelerated filed | ☐ | | Non-accelerated filer | ☒ | | Smaller reporting company | ☒ | | Emerging growth company | ☒ | - As of August 10, 2023, there were 43,725,703 shares of the registrant's Common Stock outstanding[5] Part I - Financial Information Item 1. Financial Statements This section presents Lucid Diagnostics Inc.'s unaudited condensed consolidated financial statements and comprehensive notes for the period ended June 30, 2023 Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheet Highlights (in thousands) | Metric | June 30, 2023 | December 31, 2022 | Change | | :----------------------------------- | :-------------- | :---------------- | :----- | | Total Assets | $42,486 | $32,509 | +$9,977 | | Cash | $32,570 | $22,474 | +$10,096 | | Total Current Liabilities | $26,683 | $8,425 | +$18,258 | | Senior Secured Convertible Note - at fair value | $11,610 | — | +$11,610 | | Due To: PAVmed Inc. | $10,697 | $4,960 | +$5,737 | | Total Stockholders' Equity | $15,071 | $23,047 | -$7,976 | Condensed Consolidated Statements of Operations Condensed Consolidated Statements of Operations Highlights (in thousands) | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Revenue | $159 | $— | $605 | $189 | | Cost of revenue | $1,549 | $— | $2,887 | $369 | | Operating loss | $(11,584) | $(14,628) | $(25,900) | $(26,899) | | Net loss | $(11,381) | $(14,624) | $(27,628) | $(26,894) | | Net loss per share - basic and diluted | $(0.27) | $(0.41) | $(0.67) | $(0.76) | - The company's revenue significantly increased in Q2 2023 and H1 2023, while operating loss decreased for both periods compared to the prior year, but net loss increased for the six-month period[11] Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) Changes in Stockholders' Equity (Deficit) Highlights (in thousands) | Metric | 6 Months Ended June 30, 2023 | | :----------------------------------- | :--------------------------- | | Balance as of December 31, 2022 | $23,047 | | Issuance - Series A Preferred Stock | $13,625 | | Stock-based compensation - Lucid Diagnostics Inc. | $3,982 | | Stock-based compensation - PAVmed Inc. | $625 | | Net loss | $(27,628) | | Balance as of June 30, 2023 | $15,071 | - Total Stockholders' Equity decreased from $23,047k at December 31, 2022, to $15,071k at June 30, 2023, primarily due to the net loss, partially offset by the issuance of Series A Preferred Stock[14] Condensed Consolidated Statements of Cash Flows Condensed Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :----------------------------------- | :--------------------------- | :--------------------------- | | Net cash flows used in operating activities | $(14,057) | $(19,081) | | Net cash flows used in investing activities | $(32) | $(2,584) | | Net cash flows provided by financing activities | $24,185 | $688 | | Net increase (decrease) in cash | $10,096 | $(20,977) | | Cash, end of period | $32,570 | $32,679 | - Cash provided by financing activities significantly increased in H1 2023, leading to a net increase in cash, contrasting with a net decrease in the prior year[19] Notes to Unaudited Condensed Consolidated Financial Statements Note 1 — Summary Description of the Company - Lucid Diagnostics is a commercial-stage medical diagnostics technology company focused on early detection of esophageal precancer (EAC) in GERD patients[21][22] - Its flagship product, the EsoGuard Esophageal DNA Test, performed on samples collected with the EsoCheck Esophageal Cell Collection Device, is the first and only commercially available diagnostic test for early detection of esophageal precancer[22][23][24] - The company expects recurring losses but anticipates funding operations for one year from the report date with current cash and committed equity sources[26] Note 2 — Summary of Significant Accounting Policies - The financial statements are prepared in accordance with U.S. GAAP, are unaudited, and consolidate the Company and its wholly-owned subsidiaries, with PAVmed Inc. as the majority owner[29] - Revenue is primarily from EsoGuard Esophageal DNA tests, recognized upon release of patient test results to the ordering healthcare provider, considering variable and fixed consideration[34][35][39] - The company elected the 'fair value option' (FVO) for the March 2023 Senior Secured Convertible Note, measuring it at fair value at issuance and subsequently, with changes recognized in the statement of operations[46][48] - The adoption of ASU No. 2016-13 (Financial Instruments-Credit Losses) on January 1, 2023, did not have a material impact on the condensed consolidated financial statements[51] Note 3 — Revenue from Contracts with Customers Revenue and Cost of Revenue (in thousands) | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :---------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Revenue | $159 | $— | $605 | $189 | | Cost of Revenue | $1,549 | $— | $2,887 | $369 | - The increase in revenue in 2023 is primarily due to the delivery of patient EsoGuard test results from the Company's own CLIA laboratory, following the termination of the EsoGuard Commercialization Agreement with ResearchDx Inc. (RDx) in February 2022[53] - Cost of revenue in 2023 is principally related to laboratory operations and EsoCheck device supplies, reflecting the shift to in-house testing[54][55] Note 4 — Related Party Transactions Related Party Expenses (in thousands) | Expense Category | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | CWRU – Royalty Fees (Cost of Revenue) | $10 | $— | $34 | $9 | | Stock-based compensation – Physician Inventors (G&A) | $— | $272 | $180 | $544 | | Amended CWRU – License Agreement - reimbursement of patent legal fees (R&D) | $— | $209 | $389 | $209 | | Fees - Physician Inventors' consulting agreements (R&D) | $9 | $10 | $10 | $18 | | Stock-based compensation – Physician Inventors' stock options (R&D) | $52 | $52 | $105 | $99 | | Total Related Party Expenses | $71 | $543 | $718 | $882 | - The Management Services Agreement (MSA) Fee with PAVmed Inc. increased to $750k per month, effective January 1, 2023, from $390k per month in Q2 2022[58] MSA Fee Expense Classification (in thousands) | Expense Category | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :----------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Sales & Marketing | $109 | $183 | $218 | $383 | | General & Administrative | $1,554 | $640 | $3,108 | $1,284 | | Research & Development | $587 | $347 | $1,174 | $673 | | Total MSA Fee | $2,250 | $1,170 | $4,500 | $2,340 | Note 5 — Due To PAVmed Inc. Due To: PAVmed Inc. (in thousands) | Component | Balance - December 31, 2022 | 6 Months Ended June 30, 2023 Activity | Balance - June 30, 2023 | | :----------------------------------- | :-------------------------- | :------------------------------------ | :---------------------- | | MSA Fees | $1,650 | $4,500 | $6,150 | | Employee Related Costs (ERC) | $3,026 | $922 | $3,948 | | On Behalf Of (OBO) payments | $284 | $601 | $599 | | Cash payments to PAVmed Inc. | — | $(286) | — | | Total Due To: PAVmed Inc. | $4,960 | $5,737 | $10,697 | - The aggregate liability to PAVmed Inc. significantly increased by $5,737k to $10,697k as of June 30, 2023, primarily driven by accrued MSA fees and employee-related costs[60] Note 6 — Asset Purchase Agreement and Management Services Agreement - The Company acquired certain assets from ResearchDx Inc. (RDx) on February 25, 2022, to establish its own CLIA-certified laboratory, recognizing an intangible asset of approximately $3,200k[61][62] - The management services agreement with RDx was terminated on February 10, 2023, with remaining payment obligations of $713k settled by issuing 553,436 shares of the Company's common stock[63][64] Note 7 — Prepaid Expenses, Deposits, and Other Current Assets Prepaid Expenses, Deposits, and Other Current Assets (in thousands) | Asset Category | June 30, 2023 | December 31, 2022 | | :----------------------------------- | :-------------- | :---------------- | | Advanced payments to service providers and suppliers | $344 | $371 | | Prepaid insurance | $171 | $52 | | Deposits | $2,587 | $1,331 | | EsoCheck cell collection supplies | $39 | $59 | | EsoGuard mailer supplies | $3 | $52 | | Total prepaid expenses, deposits and other current assets | $3,144 | $1,865 | - Total prepaid expenses, deposits, and other current assets increased by $1,279k, primarily due to a significant increase in deposits[65] Note 8 — Leases - The Company entered into additional operating lease agreements for Lucid Test Centers during the six months ended June 30, 2023[66] Future Lease Payments and Lease Liabilities (in thousands) | Metric | Amount (June 30, 2023) | | :----------------------------------- | :--------------------- | | Total lease payments | $1,958 | | Present value of lease liabilities | $1,831 | | Operating lease right-of-use assets | $1,835 | | Weighted-average remaining lease term | 1.80 years | | Weighted-average discount rate | 7.875% | Note 9 — Intangible Assets, net Intangible Assets, net (in thousands) | Asset Category | June 30, 2023 | December 31, 2022 | | :----------------------------------- | :-------------- | :---------------- | | Defensive technology | $2,105 | $2,105 | | Laboratory licenses and certifications and LIMS software | $3,200 | $3,200 | | Total Intangible assets | $5,305 | $5,305 | | Less Accumulated Amortization | $(2,870) | $(1,860) | | Intangible Assets, net | $2,435 | $3,445 | Amortization Expense (in thousands) | Period | 2023 | 2022 | | :--------------------------- | :--- | :--- | | 3 Months Ended June 30 | $505 | $639 | | 6 Months Ended June 30 | $1,010 | $639 | - Net intangible assets decreased by $1,010k due to amortization of defensive technology (60-month useful life) and laboratory licenses/software (24-month useful life)[68][69][70] Note 10 — Financial Instruments Fair Value Measurements - The March 2023 Senior Convertible Note is classified as a Level 3 financial instrument and is measured at fair value using a Monte Carlo simulation[71][72][74] March 2023 Senior Convertible Note Fair Value and Assumptions | Metric | March 21, 2023 | June 30, 2023 | | :------------------- | :------------- | :------------ | | Fair Value | $11,900k | $11,610k | | Value of common stock | $1.54 | $1.39 | | Expected term (years) | 2.00 | 1.73 | | Volatility | 75.00% | 70.00% | | Risk free rate | 4.09% | 4.89% | - A $290k income was recognized in Q2 2023 due to a decrease in the fair value of the convertible note[74][76] Note 11 — Debt - The March 2023 Senior Secured Convertible Note has a $11.1 million face value principal, a 7.875% annual interest rate, a $5.00 conversion price, and matures on March 21, 2025[76][78] - Net proceeds from the note were $9.925 million after deducting $1.186 million in lender fees and offering costs[79] - The note includes financial covenants requiring a minimum of $5.0 million in available cash, a debt-to-market capitalization ratio not exceeding 30% (commencing Sept 30, 2023), and a market capitalization of at least $30 million; the Company was in compliance as of June 30, 2023[85][163] Note 12 — Stock-Based Compensation Total Stock-Based Compensation Expense (in thousands) | Period | 2023 | 2022 | | :--------------------------- | :--- | :--- | | 3 Months Ended June 30 | $1,399 | $3,844 | | 6 Months Ended June 30 | $4,607 | $7,679 | - Total stock-based compensation expense decreased significantly in both the three and six months ended June 30, 2023, compared to the prior year[94] Unrecognized Stock-Based Compensation Expense (in thousands) as of June 30, 2023 | Plan/Award Type | Unrecognized Expense | Weighted Average Remaining Service Period (Years) | | :----------------------------------- | :------------------- | :---------------------------------------------- | | Lucid Diagnostics 2018 Equity Plan - Stock Options | $4,129 | 2.3 | | Lucid Diagnostics 2018 Equity Plan - Restricted Stock Awards | $1,141 | 1.1 | | PAVmed 2014 Equity Plan - Stock Options | $861 | 2.0 | Note 13 — Stockholders' Equity - On March 7, 2023, the Company issued 13,625 shares of Series A Convertible Preferred Stock for aggregate gross proceeds of $13.625 million, with an initial conversion price of $1.394 per share[98] - Shareholders approved an increase in authorized common stock to 200 million shares in June 2023[105] - As of June 30, 2023, PAVmed holds 31,302,420 shares, representing a majority-interest equity ownership in the Company[105] - Under the Committed Equity Facility, 680,263 shares were issued for $1.8 million net proceeds cumulatively as of June 30, 2023; under the ATM Facility, 230,068 shares were sold for $0.3 million net proceeds in H1 2023[106][107] Note 14 — Net Loss Per Share Net Loss Per Share (Basic and Diluted) | Period | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :----------------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net loss per share - basic and diluted | $(0.27) | $(0.41) | $(0.67) | $(0.76) | - Basic and diluted net loss per share are identical because the Company was in a loss position, making the inclusion of common stock equivalents anti-dilutive[108] - Common stock equivalents excluded from diluted EPS increased significantly to 20,517,912 at June 30, 2023, primarily due to preferred stock[108] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Lucid Diagnostics Inc.'s financial condition, operational results, business developments, financing, and liquidity for the periods ended June 30, 2023 Overview - Lucid Diagnostics is a commercial-stage medical diagnostics company focused on the early detection of esophageal precancer (EAC) in patients with gastroesophageal reflux disease (GERD)[115] - The flagship product, EsoGuard Esophageal DNA Test, used with the EsoCheck Esophageal Cell Collection Device, is designed for non-invasive, early detection of esophageal precancer and Barrett's Esophagus (BE)[116][118][119][120] - EsoGuard demonstrated over 90% sensitivity and specificity in detecting esophageal precancer and conditions along the BE-EAC spectrum in a 408-patient study[118] Recent Developments Business Developments - Lucid is accelerating clinical utility data collection through planned retrospective analysis of San Antonio firefighter data (results H2 2023), a virtual-patient randomized controlled trial (results 2023), a multi-center observational study, and a patient registry[121] - The company completed its first CheckYourFoodTube Precancer Testing Event with the San Antonio Fire Department in January 2023, testing 391 at-risk members, and has expanded these events to other fire departments and launched a mobile testing unit in June 2023[122][123][124] - A Direct Contracting Strategic Initiative was launched in March 2023 to engage self-insured employers and unions, resulting in a contract with Ancira Automotive Group in August 2023[125] - Transitioned to a new revenue cycle management provider in May 2023, leading to improved speed of collections, claim submission, payment percentage, and data for appeals[126] Financing Developments - On March 7, 2023, Lucid completed a Series A Preferred Stock offering, raising $13.625 million in gross proceeds from the sale of 13,625 shares[128] - A private placement of a Senior Secured Convertible Note with a face value of $11.1 million was completed on March 13, 2023, yielding $9.925 million in net proceeds after fees[130][131] - In the six months ended June 30, 2023, the company sold 230,068 shares through its at-the-market (ATM) equity facility for net proceeds of approximately $0.3 million[133] Results of Operations Revenue Revenue (in millions) | Period | 2023 | 2022 | | :--------------------------- | :--- | :--- | | 3 Months Ended June 30 | $0.2 | $0.0 | | 6 Months Ended June 30 | $0.6 | $0.2 | - Revenue increased significantly due to the Company performing EsoGuard tests in its own CLIA laboratory after the termination of the EsoGuard Commercialization Agreement with RDx in February 2022[135][144][151] Cost of Revenue Cost of Revenue (in millions) | Period | 2023 | 2022 | | :--------------------------- | :--- | :--- | | 3 Months Ended June 30 | $1.5 | $0.0 | | 6 Months Ended June 30 | $2.9 | $0.4 | - The increase in cost of revenue is primarily due to increased laboratory facility and operations costs, EsoCheck and EsoGuard supplies costs, and compensation-related costs associated with the Company's own CLIA laboratory operations[145][152] Sales and Marketing Expenses Sales and Marketing Expenses (in millions) | Period | 2023 | 2022 | | :--------------------------- | :--- | :--- | | 3 Months Ended June 30 | $4.0 | $3.9 | | 6 Months Ended June 30 | $8.2 | $7.2 | - Sales and marketing expenses increased due to higher compensation-related costs from increased headcount, partially offset by a decrease in third-party marketing expenses[145][152] General and Administrative Expenses General and Administrative Expenses (in millions) | Period | 2023 | 2022 | | :--------------------------- | :--- | :--- | | 3 Months Ended June 30 | $3.8 | $6.7 | | 6 Months Ended June 30 | $10.3 | $12.6 | - General and administrative expenses decreased primarily due to lower stock-based compensation and reduced expenses from the termination of the MSA-RDx, despite an increase in the amended MSA with PAVmed[146][153] Research and Development Expenses Research and Development Expenses (in millions) | Period | 2023 | 2022 | | :--------------------------- | :--- | :--- | | 3 Months Ended June 30 | $1.8 | $3.4 | | 6 Months Ended June 30 | $4.1 | $6.3 | - Research and development expenses decreased mainly due to a reduction in development costs, particularly for clinical trial activities and EsoCure, partially offset by increased compensation and amended MSA fees[147][154] Amortization of Acquired Intangible Assets Amortization of Acquired Intangible Assets (in millions) | Period | 2023 | 2022 | | :--------------------------- | :--- | :--- | | 3 Months Ended June 30 | $0.5 | $0.6 | | 6 Months Ended June 30 | $1.0 | $0.6 | - Amortization expense for acquired intangible assets remained relatively stable in the three-month period and increased in the six-month period[11] Other Income and Expense - The change in fair value of the March 2023 Senior Convertible Note resulted in $0.3 million of income in Q2 2023 but a $0.5 million expense for the six months ended June 30, 2023, due to an initial $0.8 million non-cash expense on the issue date[148][155] - The Company recognized approximately $1.2 million in lender fees and offering costs related to the March 2023 Senior Convertible Note in the six months ended June 30, 2023[156] Liquidity and Capital Resources - Lucid's current operational activities are focused on commercializing EsoGuard through multiple sales channels and expanding clinical evidence to support insurance reimbursement[157] - The company experienced a net loss of $27.6 million and used $14.1 million in cash from operations for the six months ended June 30, 2023, but financing activities provided $24.2 million[159] - As of June 30, 2023, the company had $32.6 million in cash on hand and expects to fund operations and meet financial obligations for one year from the report date with existing cash and committed equity sources[159] - The company was in compliance with all financial covenants of the March 2023 Senior Secured Convertible Note as of June 30, 2023, including minimum cash and market capitalization requirements[163] - The liability 'Due To: PAVmed Inc.' was approximately $10.7 million as of June 30, 2023, primarily from MSA fees and payroll/benefit reimbursements[169] Item 4. Controls and Procedures Management evaluated the effectiveness of disclosure controls and procedures, confirming their efficacy with no material changes to internal controls during the quarter ended June 30, 2023 - Disclosure controls and procedures were evaluated and deemed effective as of June 30, 2023[172] - No material changes to internal controls over financial reporting occurred during the fiscal quarter ended June 30, 2023[173] Part II - Other Information Item 1. Legal Proceedings The company reports no material pending legal proceedings, while acknowledging inherent uncertainties and potential for future claims - The Company is not aware of any pending legal or other proceedings that are reasonably likely to have a material impact on its business, financial position, results of operations, and/or cash flows[175] - Legal proceedings are subject to inherent uncertainties, and an unfavorable outcome could result in a material adverse impact[175] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds No unregistered securities were sold in Q2 2023, and $57.5 million of IPO proceeds have been utilized for repayments, laboratory expenses, and working capital - No unregistered securities were sold or repurchased during the three months ended June 30, 2023[176] - Of the $64.4 million net proceeds from the October 2021 IPO, approximately $57.5 million has been used as of June 30, 2023[177] - Proceeds were used for approximately $5.3 million in net repayments to PAVmed Inc., $5.0 million for laboratory equipment/expenses, and $47.2 million for working capital expenditures[177] Item 5. Other Information This section confirms no additional information is reported - No other information is reported under this item[178] Item 6. Exhibits This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including key agreements and certifications - Exhibit 10.1: Seventh Amendment to Management Services Agreement, dated May 9, 2023, between PAVmed Inc. and Lucid Diagnostics Inc.[185] - Exhibits 31.1, 31.2, 32.1, 32.2: Certifications of Principal Executive Officer and Principal Financial and Accounting Officer pursuant to the Sarbanes-Oxley Act of 2002[185] - Exhibits 101.INS, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104: Inline XBRL documents[185] Signature - The report was signed by Dennis M McGrath, Chief Financial Officer (Principal Financial and Accounting Officer) of Lucid Diagnostics Inc., on August 14, 2023[184]