Lucid Diagnostics(LUCD) - 2024 Q1 - Quarterly Report

Part I - Financial Information This section provides Lucid Diagnostics Inc.'s unaudited condensed consolidated financial statements and management's discussion and analysis for the three months ended March 31, 2024 Item 1. Financial Statements This section presents Lucid Diagnostics Inc.'s unaudited condensed consolidated financial statements for Q1 2024 and 2023, including balance sheets, statements of operations, equity changes, cash flows, and detailed notes Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific points in time | Metric (in thousands) | March 31, 2024 | December 31, 2023 | | :-------------------- | :------------- | :---------------- | | Total Assets | $32,048 | $27,270 | | Total Liabilities | $20,154 | $29,581 | | Total Stockholders' Equity (Deficit) | $11,894 | $(2,311) | - Total assets increased by $4,778 thousand, driven by a rise in cash from $18,896 thousand to $24,769 thousand[9] - Total liabilities decreased significantly by $9,427 thousand, primarily due to a reduction in 'Due To: PAVmed Inc.' and the Senior Secured Convertible Note[9] - Stockholders' Equity shifted from a deficit of $(2,311) thousand to a positive $11,894 thousand[9] Condensed Consolidated Statements of Operations This section outlines the company's financial performance over a period, detailing revenues, expenses, and net loss | Metric (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Revenue | $1,001 | $446 | | Total Operating Expenses | $11,793 | $14,763 | | Operating Loss | $(10,792) | $(14,317) | | Net Loss attributable to Lucid Diagnostics Inc. | $(10,612) | $(16,247) | | Net Loss per share (basic and diluted) | $(0.40) | $(0.40) | - Revenue increased by 124.4% year-over-year[11] - Total operating expenses decreased by 20.1% due to lower general and administrative expenses and research and development[11] - The net loss attributable to Lucid Diagnostics Inc. improved by 34.6% from $(16,247) thousand to $(10,612) thousand, despite a deemed dividend on preferred stock in 2024[11] Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) This section details the changes in the company's equity over time, including preferred stock, common stock, and accumulated deficit | Metric (in thousands) | Balance as of Dec 31, 2023 | Balance as of Mar 31, 2024 | | :-------------------- | :------------------------- | :------------------------- | | Preferred Stock Amount | $18,625 | $44,285 | | Common Stock Amount | $42 | $47 | | Additional Paid-In Capital | $129,763 | $136,411 | | Accumulated Deficit | $(150,741) | $(168,849) | | Total Stockholders' Equity (Deficit) | $(2,311) | $11,894 | - The company's total stockholders' equity significantly improved from a deficit of $(2,311) thousand at December 31, 2023, to a positive $11,894 thousand at March 31, 2024[13] - This was primarily driven by the issuance of Series B Preferred Stock ($44,285 thousand) and settlement of 'Due To: PAVmed Inc.' in common stock ($4,675 thousand), partially offset by a net loss and a deemed dividend on preferred stock exchange[13] Condensed Consolidated Statements of Cash Flows This section summarizes the cash inflows and outflows from operating, investing, and financing activities for the period | Metric (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Net Cash Flows Used in Operating Activities | $(12,612) | $(7,120) | | Net Cash Flows Used in Investing Activities | $(37) | $(17) | | Net Cash Flows Provided by Financing Activities | $18,522 | $24,185 | | Net Increase (Decrease) in Cash | $5,873 | $17,048 | | Cash, End of Period | $24,769 | $39,522 | - Cash used in operating activities increased significantly from $(7,120) thousand in Q1 2023 to $(12,612) thousand in Q1 2024[15] - Cash provided by financing activities decreased from $24,185 thousand to $18,522 thousand, primarily due to lower proceeds from the issue of preferred stock and convertible notes compared to the prior year[15] - Despite increased operating cash burn, the company ended Q1 2024 with $24,769 thousand in cash, an increase of $5,873 thousand for the quarter[15] Notes to Unaudited Condensed Consolidated Financial Statements This section provides detailed explanations of significant accounting policies, financial instruments, and other relevant disclosures supporting the financial statements Note 1 — The Company This note describes Lucid Diagnostics Inc.'s business, its focus on early detection of esophageal precancer, and its flagship products - Lucid Diagnostics Inc. is a commercial-stage medical diagnostics technology company focused on early detection of esophageal precancer and cancer (EAC) in GERD patients[16] - Its flagship product, EsoGuard Esophageal DNA Test, performed with the EsoCheck Esophageal Cell Collection Device, is presented as the first and only commercially available diagnostic test for widespread early detection of esophageal precancer[17] - EsoCheck is an FDA 510(k) and CE Mark cleared noninvasive swallowable balloon capsule catheter device utilizing proprietary Collect+Protect™ technology for targeted cell sampling[19] Note 2 — Liquidity and Going Concern This note addresses the company's financial viability, highlighting its current liquidity position and ability to continue operations - The Company generated $1.0 million in revenue for Q1 2024 but does not expect positive cash flows from operating activities in the near future[23] - Lucid incurred a net loss of approximately $18.1 million and used $12.6 million in operating cash flows for Q1 2024[24] - As of March 31, 2024, working capital was approximately $7.6 million, including $24.8 million in cash[24] - These factors raise substantial doubt about the Company's ability to continue as a going concern within one year, contingent on generating substantial revenue from third-party reimbursement and raising additional capital[25] Note 3 — Summary of Significant Accounting Policies This note outlines the key accounting principles and methods used in preparing the financial statements, including revenue recognition and fair value measurements - The financial statements are prepared in accordance with U.S. GAAP and SEC rules, consolidating the Company and its wholly-owned subsidiaries, with all intercompany transactions eliminated[27] - Revenue is primarily generated from EsoGuard Esophageal DNA tests, recognized upon release of patient test results to healthcare providers, with consideration being variable or fixed depending on payer contracts[32][33] - The March 2023 Senior Secured Convertible Note is accounted for under the fair value option (FVO) election, with changes in fair value recognized in the statement of operations[40][42] Note 4 — Revenue from Contracts with Customers This note details the company's revenue recognition policies and the sources of its revenue from customer contracts | Metric (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Revenue | $1,001 | $446 | | Cost of Revenue | $1,656 | $1,338 | - Revenue recognized from EsoGuard test results increased by 124.4% year-over-year[48][50] - Cost of revenue increased by 23.8% primarily due to laboratory operations and EsoCheck device supplies[48][50] Note 5 — Related Party Transactions This note discloses transactions between the company and its related parties, including fees and settlements with PAVmed Inc | Metric (in thousands) | Balance - Dec 31, 2023 | Balance - Mar 31, 2024 | | :-------------------- | :--------------------- | :--------------------- | | Total Due To: PAVmed Inc. | $9,339 | $1,871 | - The MSA Fee with PAVmed Inc. increased to $833 thousand per month effective January 1, 2024, from $750 thousand per month in Q1 2023[52] - On January 26, 2024, PAVmed elected to receive payment of $4,675 thousand in fees and reimbursements through the issuance of 3,331,771 shares of Lucid Diagnostics common stock[53] Note 6 — Prepaid Expenses, Deposits, and Other Current Assets This note provides details on the company's prepaid expenses, deposits, and other short-term assets | Metric (in thousands) | March 31, 2024 | December 31, 2023 | | :-------------------- | :------------- | :---------------- | | Total prepaid expenses, deposits and other current assets | $2,355 | $2,854 | - Prepaid expenses, deposits, and other current assets decreased by $499 thousand from December 31, 2023, to March 31, 2024, primarily due to reductions in prepaid insurance and deposits[55] Note 7 — Leases This note describes the company's lease arrangements, including right-of-use assets and lease liabilities | Metric (in thousands) | March 31, 2024 | December 31, 2023 | | :-------------------- | :------------- | :---------------- | | Operating lease right-of-use assets | $1,039 | $1,307 | | Total lease payments | $1,088 | N/A | | Present value of lease liabilities | $1,038 | $1,305 | - The company's operating lease right-of-use assets and lease liabilities decreased from December 31, 2023, to March 31, 2024[56][58] - Future lease payments total $1,088 thousand, with the majority due in the remainder of 2024[56][58] Note 8 — Intangible Assets, net This note provides information on the company's intangible assets, including their amortization and net carrying value | Metric (in thousands) | March 31, 2024 | December 31, 2023 | | :-------------------- | :------------- | :---------------- | | Total Intangible assets | $5,305 | $5,305 | | Less Accumulated Amortization | $(4,253) | $(3,881) | | Intangible Assets, net | $1,052 | $1,424 | - Net intangible assets decreased by $372 thousand due to amortization expense[59] - Amortization expense for Q1 2024 was $372 thousand, down from $505 thousand in Q1 2023, as some assets became fully amortized[59][144] Note 9 — Financial Instruments Fair Value Measurements This note explains the valuation methodologies and assumptions used for financial instruments measured at fair value | Metric (in thousands) | March 31, 2024 | December 31, 2023 | | :-------------------- | :------------- | :---------------- | | March 2023 Senior Convertible Note (Fair Value) | $13,140 | $13,950 | - The March 2023 Senior Convertible Note is classified as a Level 3 financial instrument and its fair value is determined using a Monte Carlo simulation with both observable and unobservable inputs[61][62] | Valuation Assumption | March 31, 2024 | December 31, 2023 | | :------------------- | :------------- | :---------------- | | Required rate of return | 9.80% | 10.00% | | Conversion Price | $5.00 | $5.00 | | Value of common stock | $0.81 | $1.41 | | Expected term (years) | 0.97 | 1.22 | | Volatility | 55.00% | 60.00% | | Risk free rate | 4.93% | 4.56% | Note 10 — Debt This note details the company's debt obligations, including convertible notes, their terms, and related transactions | Metric (in thousands) | March 31, 2024 | December 31, 2023 | | :-------------------- | :------------- | :---------------- | | March 2023 Senior Convertible Note (Face Value Principal) | $10,936 | $11,019 | | March 2023 Senior Convertible Note (Fair Value) | $13,140 | $13,950 | - The March 2023 Senior Convertible Note has a face value principal of $11.1 million, a 7.875% annual interest rate, a $5.00 conversion price, and matures on March 21, 2025[66] - In Q1 2024, approximately $83 thousand of principal and $436 thousand of interest were settled by issuing 543,298 common shares, resulting in a $167 thousand debt extinguishment loss[75] - The company is subject to financial covenants, including maintaining a minimum of $5.0 million in available cash and a market capitalization of at least $30 million, with which it was in compliance as of March 31, 2024[73] Note 11 — Stock-Based Compensation This note describes the company's stock-based compensation plans, including expense recognition and outstanding awards | Metric (in thousands) | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :-------------------- | :-------------------------------- | :-------------------------------- | | Total stock-based compensation expense | $933 | $3,208 | - Total stock-based compensation expense decreased significantly from $3,208 thousand in Q1 2023 to $933 thousand in Q1 2024, primarily due to a large decrease in general and administrative stock-based compensation[83] - As of March 31, 2024, 8,332,713 stock options were outstanding with a weighted average exercise price of $1.74, and 2,297,440 unvested restricted stock awards were outstanding[79][81] Note 12 — Stockholders' Equity This note provides details on the company's equity structure, including preferred and common stock issuances, and deemed dividends - On March 13, 2024, the Company issued 44,285 shares of Series B Convertible Preferred Stock for $18.1 million and exchanged all outstanding Series A and Series A-1 Preferred Stock for Series B Preferred Stock[86][101] - The Series B Preferred Stock has a stated value of $1,000 per share, an initial conversion price of $1.2444, and includes dividend rights and a one-time liquidation preference[87][89][90] - A deemed dividend of $7,495 thousand was recognized and charged to accumulated deficit on March 13, 2024, due to the Series B Preferred Stock issuance and exchange[102] - Subsequent to March 31, 2024, on May 6, 2024, the Company issued 11,634 shares of Series B-1 Convertible Preferred Stock for $11.6 million, with similar terms to Series B but a conversion price of $0.7228[94][95] Note 13 — Net Loss Per Share This note presents the calculation of basic and diluted net loss per share, including factors affecting dilutive securities | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :----- | :-------------------------------- | :-------------------------------- | | Net loss attributable to Lucid Diagnostics Inc. common stockholders | $(18,108) | $(16,247) | | Weighted average common shares outstanding, basic and diluted | 45,014,410 | 40,970,504 | | Net loss per share - basic and diluted | $(0.40) | $(0.40) | - Net loss per share remained at $(0.40) for both periods, despite a higher net loss attributable to common stockholders in Q1 2024 due to a $7,496 thousand deemed dividend on preferred stock[108] - Common stock equivalents, including stock options, unvested restricted stock awards, and preferred stock, were excluded from diluted EPS calculation as their inclusion would be anti-dilutive due to the company's net loss position[109] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's analysis of Lucid Diagnostics Inc.'s financial condition and operational results for Q1 2024, covering business overview, recent developments, detailed financial performance, liquidity, and critical accounting estimates Overview This section introduces Lucid Diagnostics Inc.'s business, its flagship product EsoGuard, and its role in early detection of esophageal precancer - Lucid Diagnostics is a commercial-stage medical diagnostics company focused on early detection of esophageal precancer and cancer (EAC) in at-risk patients[117] - The flagship product, EsoGuard Esophageal DNA Test, performed with the EsoCheck Esophageal Cell Collection Device, is positioned as the first and only widespread diagnostic tool for early detection of esophageal precancer, including Barrett's Esophagus (BE)[118] - EsoGuard demonstrated high analytical sensitivity (97%), specificity (95%), and accuracy (98%), with clinical validation showing 84% sensitivity and 86% specificity for BE detection[119] Recent Developments This section highlights key business and financing events that have occurred recently, impacting the company's operations and capital structure Business This section details recent operational and regulatory updates, including changes to the MSA with PAVmed and FDA's LDT rule impact - The management services agreement (MSA) with PAVmed was amended to increase the monthly fee to $0.83 million, effective January 1, 2024[122] - PAVmed elected to receive approximately $4.7 million in fees and reimbursements through the issuance of 3,331,771 shares of Lucid's common stock on January 26, 2024[123] - The FDA's final rule on LDTs will not immediately impact Lucid's regulatory strategy, as EsoGuard was marketed prior to May 6, 2024, and is NYS CLEP-approved, thus remaining under continued enforcement discretion[124] Financing This section outlines recent capital-raising activities, including preferred stock offerings and their impact on the company's financial position - On March 13, 2024, the company completed a Series B Preferred Stock offering and exchange, raising $18.16 million and converting all Series A and A-1 Preferred Stock into Series B Preferred Stock[126][127] - Subsequent to March 31, 2024, on May 6, 2024, the company issued Series B-1 Convertible Preferred Stock, raising an additional $11.6 million, concluding its Board-approved $30 million preferred stock offering[128][129] Results of Operations This section provides a comparative analysis of the company's financial performance for the three months ended March 31, 2024, versus 2023 The three months ended March 31, 2024 as compared to three months ended March 31, 2023 This section offers a detailed comparative analysis of key financial metrics and their changes between the two periods Revenue This section analyzes the company's revenue performance, highlighting growth drivers and key contributing factors | Metric (in millions) | Q1 2024 | Q1 2023 | | :------------------- | :------ | :------ | | Revenue | $1.0 | $0.4 | - Revenue increased by $0.6 million, or 150%, primarily due to increased EsoGuard Esophageal DNA Test performance in the company's CLIA laboratory[141] Cost of revenue This section examines the changes in the costs directly associated with generating revenue, including supplies and compensation | Metric (in millions) | Q1 2024 | Q1 2023 | | :------------------- | :------ | :------ | | Cost of revenue | $1.7 | $1.3 | - Cost of revenue increased by $0.4 million, or 30.8%, mainly due to higher EsoCheck and EsoGuard supplies costs and increased compensation-related costs, including stock-based compensation[142] Sales and marketing expenses This section details the trends and drivers behind the company's sales and marketing expenditures | Metric (in millions) | Q1 2024 | Q1 2023 | | :------------------- | :------ | :------ | | Sales and marketing expenses | $4.2 | $4.1 | - Sales and marketing expenses increased by $0.1 million, or 2.4%, primarily due to higher compensation-related costs from changes in headcount, bonus structure, and travel expenses[142] General and administrative expenses This section analyzes the changes in general and administrative costs, including stock-based compensation and professional fees | Metric (in millions) | Q1 2024 | Q1 2023 | | :------------------- | :------ | :------ | | General and administrative expenses | $4.1 | $6.9 | - General and administrative expenses decreased by $2.8 million, or 40.6%, mainly due to a $2.4 million decrease in stock-based compensation and a $0.9 million decrease in third-party professional fees, partially offset by a $0.3 million increase from the amended MSA with PAVmed[143][146] Research and development expenses This section reviews the company's research and development expenditures, focusing on changes in clinical trial and consulting costs | Metric (in millions) | Q1 2024 | Q1 2023 | | :------------------- | :------ | :------ | | Research and development expenses | $1.5 | $1.9 | - Research and development expenses decreased by $0.4 million, or 21.1%, primarily due to a reduction in development costs, particularly in clinical trial activities and outside professional and consulting fees related to EsoCure[143] Amortization of Acquired Intangible Assets This section discusses the amortization expense related to acquired intangible assets and factors influencing its change | Metric (in millions) | Q1 2024 | Q1 2023 | | :------------------- | :------ | :------ | | Amortization of acquired intangible assets | $0.4 | $0.5 | - Amortization expense decreased by $0.1 million, or 20%, as certain acquired intangible assets were fully amortized in February 2024[144] Other Income and Expense This section covers non-operating income and expenses, including fair value adjustments of financial instruments - The change in fair value of the March 2023 Senior Convertible Note resulted in $0.3 million of income in Q1 2024, compared to an initial $0.8 million non-cash expense recognized on the issue date in Q1 2023[145] Loss on Issue and Offering Costs - Senior Secured Convertible Note This section details the costs and losses incurred in connection with the issuance of the Senior Secured Convertible Note - In Q1 2023, the company recognized $1.2 million in lender fees and offering costs related to the March 2023 Senior Convertible Note; no such costs were incurred in Q1 2024[147] Loss on Debt Extinguishment This section explains the loss recognized from the settlement of debt obligations through the issuance of common stock - A debt extinguishment loss of approximately $0.2 million was recognized in Q1 2024 due to the settlement of principal and interest repayments of the March 2023 Senior Convertible Note through the issuance of common stock[148] Deemed Dividend on Series A and Series A-1 Convertible Preferred Stock Exchange Offer This section describes the deemed dividend recognized due to the exchange of preferred stock and its impact on accumulated deficit | Metric (in millions) | March 13, 2024 | | :------------------- | :------------- | | Deemed Dividend Charged to Accumulated Deficit | $7.5 | - A $7.5 million deemed dividend was recognized and charged to accumulated deficit on March 13, 2024, as a result of the Series B Convertible Preferred Stock issuance and the exchange of Series A and A-1 Preferred Stock[149] Liquidity and Capital Resources This section assesses the company's ability to meet its short-term and long-term financial obligations, including cash position and future funding needs - The company's current operations focus on commercializing EsoGuard through various sales channels and developing expanded clinical evidence for insurance reimbursement[150] - Lucid experienced a net loss of approximately $10.6 million and used $12.6 million in operating cash flows in Q1 2024, ending the quarter with $24.8 million in cash[152] - The company expects continued losses and negative cash flow, necessitating future debt and/or equity financing to fund operations and address existing convertible debt obligations, raising substantial doubt about its ability to continue as a going concern[152][153] - The company has raised approximately $29.8 million from Series B and Series B-1 Preferred Stock offerings, concluding its Board-approved $30 million preferred stock offering[129][154][156] Critical Accounting Estimates This section discusses the significant judgments and assumptions used in preparing the financial statements that could materially affect reported results - The company's financial statements rely on estimates and assumptions, particularly for fair value of debt obligations, stock-based equity awards, intangible assets, incremental borrowing rates, and income taxes[31] - Management's assessment of the company's going concern ability also involves estimating future cash flows[31] - There have been no material changes to critical accounting policies and estimates in Q1 2024[166] Item 4. Controls and Procedures This section details the evaluation of the company's disclosure controls and procedures and reports on any changes to internal controls over financial reporting during the quarter Evaluation of Disclosure Controls and Procedures This section reports on management's assessment of the effectiveness of the company's disclosure controls and procedures - Management, including the principal executive and financial officers, concluded that disclosure controls and procedures were effective as of March 31, 2024, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely[167] Changes to Internal Controls Over Financial Reporting This section discloses any material changes to the company's internal controls over financial reporting during the quarter - There were no changes in internal control over financial reporting during the fiscal quarter ended March 31, 2024, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[168] Part II - Other Information This section provides additional disclosures not covered in the financial statements, including legal proceedings, equity sales, and other relevant information Item 1. Legal Proceedings This section addresses potential legal actions and claims the company may face in the ordinary course of business, particularly during commercialization - 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, or cash flows[170] - Legal proceedings are subject to inherent uncertainties, and an unfavorable outcome could result in monetary damages or excessive verdicts, potentially having a material adverse impact[170] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports on any unregistered sales of equity securities and the use of proceeds during the reporting period - On March 22, 2024, the company approved the issuance of a three-year option to acquire 100,000 common shares at an exercise price of $1.50 per share to an investor relations firm, exempt from registration requirements under Section 4(a)(2) of the Securities Act[171] - No other unregistered securities were sold, and no securities were repurchased during the three months ended March 31, 2024, beyond what was previously disclosed[172] Item 5. Other Information This section provides other information not covered elsewhere in the report - During the fiscal quarter ended March 31, 2024, none of the company's directors or officers adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement"[173] Item 6. Exhibits This section lists all exhibits filed as part of this Quarterly Report on Form 10-Q - The exhibit index includes various documents such as Certificates of Designation for Series B and B-1 Preferred Stock, Exchange Agreements, Registration Rights Agreements, and certifications required by the Sarbanes-Oxley Act[181]