Lucid Diagnostics Inc. — Q2 2023 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2023. Unless noted, financial figures below are in millions of dollars. Lucid is a majority-owned PAVmed subsidiary developing and commercializing EsoGuard, a laboratory DNA test, and EsoCheck, a cell-collection device, for detecting esophageal precancer in at-risk patients.
Financial performance and liquidity
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $0.159 | $0 | $0.605 | $0.189 |
| Cost of revenue | $1.549 | $0 | $2.887 | $0.369 |
| Gross loss | $1.390 | $0 | $2.282 | $0.180 |
| Operating loss | $11.584 | $14.628 | $25.900 | $26.899 |
| Net loss | $11.381 | $14.624 | $27.628 | $26.894 |
| Net loss per share | $0.27 | $0.41 | $0.67 | $0.76 |
At June 30, cash was $32.570 million; current assets were $35.749 million and current liabilities $26.683 million. Total liabilities were $27.415 million and stockholders’ equity $15.071 million. No operating profit or positive gross margin was reported.
For the first six months, operating cash use was $14.057 million, investing cash use was $0.032 million, and financing provided $24.185 million; cash increased $10.096 million to $32.570 million. The comparable 2022 operating and investing cash uses were $19.081 million and $2.584 million.
Debt included a senior secured convertible note with $11.111 million face principal and $11.610 million fair value, due March 21, 2025, bearing 7.875% interest. Lucid also owed PAVmed $10.697 million, principally for management fees, payroll and other expenses.
Changes versus the prior comparable period
- Q2 revenue of $0.159 million came from EsoGuard testing in Lucid’s own laboratory; the prior-year quarter had no revenue. First-half revenue rose to $0.605 million from $0.189 million, but cost of revenue rose substantially as in-house laboratory and device operations expanded.
- Q2 operating loss narrowed by $3.044 million, and net loss narrowed by $3.243 million. Lower general and administrative and research and development expenses were partly offset by higher cost of revenue and sales and marketing spending.
- First-half operating loss improved by $0.999 million, while net loss increased by $0.734 million, including note-related fair-value and issuance costs.
- Cash increased from $22.474 million at December 31, 2022, following preferred-stock and convertible-note financing. The note added secured debt and related covenants.
Outlook, risks and notable items
- Management expects recurring operating losses and negative operating cash flow and plans to continue funding operations with debt and equity. It stated that cash on hand and committed equity sources are expected to fund operations and obligations for one year from issuance of the financial statements; this outlook depends on financing availability and execution.
- No quantified revenue or earnings guidance was provided. Management plans to expand EsoGuard commercialization through clinician outreach, Lucid Test Centers, mobile testing events, fire-department testing events and direct contracting. It also intends to build clinical evidence to support insurer reimbursement.
- Management described planned or ongoing clinical evidence efforts, including analyses and studies, with preliminary results or submissions expected before the end of 2023. These are plans, not reported results.
- The note requires Lucid to maintain at least $5 million of available cash, meet a debt-to-market-capitalization test beginning September 30, 2023, and maintain market capitalization of at least $30 million. The note is secured by company and subsidiary assets and guaranteed by subsidiaries. Management reported compliance with the financial tests as of June 30 and the filing date.
- Series A preferred shares raised $13.625 million gross. They carry liquidation priority, potential conversion beginning after six months, automatic conversion on the second anniversary, and share dividends equal to 20% of conversion shares at each of the first and second anniversaries, subject to stated terms. These terms create potential dilution.
- The MSA fee payable to PAVmed increased to $0.750 million per month, effective January 1, 2023; first-half MSA expense was $4.500 million. Related-party balances and arrangements merit attention.
- Management identified commercialization, market acceptance, reimbursement, regulatory, financing, clinical, intellectual-property, operational and PAVmed-relationship risks. It reported no pending legal proceedings known to be reasonably likely to have a material impact. Disclosure controls were assessed as effective.
Important facts for investors to verify
- Whether EsoGuard test volumes, payer coverage, collections and reimbursement improve enough to materially increase revenue and gross margin.
- Cash burn and financing runway, including the availability and terms of committed equity sources and any further financing.
- Compliance with note covenants and the impact of required installment payments, potential cash settlement, collateral and conversion terms.
- Potential dilution from preferred-stock conversion and dividends, stock awards, equity facilities and other share issuances. Common shares outstanding were 41.854 million at June 30 and 43.726 million as of August 10, 2023, with the latter figure inclusive of unvested restricted stock awards.
- Progress and results of clinical studies, commercial initiatives and insurer reimbursement efforts, and the ongoing costs of operating Lucid’s laboratory and test-center channels.