10-Q 1 lucid_2q13.htm FORM 10-Q
 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

 

(MARK ONE)

xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2013

OR

¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM                      TO                     .

 

COMMISSION FILE NUMBER 001-35379

 

LUCID, INC.

(Exact name of registrant as specified in its charter)

 

New York 16-1406957

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

   

95 Methodist Hill Drive, Suite 500

Rochester, NY

14623
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code (585) 239-9800

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  o

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer    o    Accelerated filer    o    Non-accelerated filer    o    Smaller reporting company    x

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  x

 

As of August 1, 2013, 8,507,374 shares of Registrant’s common stock were outstanding.

 
 

LUCID, INC.

 

Quarterly Report on Form 10-Q

For the Period Ended June 30, 2013

 

Table of Contents

 

      Page No.
Part I  FINANCIAL INFORMATION   
Item 1.  Financial Statements  3
   Unaudited Condensed Balance Sheets as of June 30, 2013 and December 31, 2012  3
   Unaudited Condensed Statements of Operations for the Three and Six Months Ended June 30, 2013 and 2012  4
   Unaudited Condensed Statements of Cash Flows for the Six Months Ended June 30, 2013 and 2012  5
Item 2.  Management’s Discussion and Analysis of Financial Condition and Results of Operations  10
Item 3.  Quantitative and Qualitative Disclosures about Market Risk  16
Item 4.  Controls and Procedures  17
Part II  OTHER INFORMATION 
Item 1.  Legal Proceedings  18
Item 1A.  Risk Factors  18
Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds  18
Item 3.  Defaults Upon Senior Securities  18
Item 4.  Mine Safety Disclosures  18
Item 5.  Other Information  18
Item 6.  Exhibits  19
Signatures  20
2
 
PART IFINANCIAL INFORMATION
Item 1.Financial Statements

 

LUCID, INC.

UNAUDITED CONDENSED BALANCE SHEETS

AS OF JUNE 30, 2013 AND DECEMBER 31, 2012

 

   June 30,   December 31, 
   2013   2012 
ASSETS          
CURRENT ASSETS:          
Cash and cash equivalents  $3,922,421   $926,447 
Accounts receivable   57,129    559,336 
Inventories – net   625,222    926,236 
Prepaid expenses and other current assets   143,158    49,155 
Total current assets   4,747,930    2,461,174 
           
PROPERTY AND EQUIPMENT – net   95,786    107,409 
           
DEFERRED FINANCING COSTS  – net   5,439    6,128 
           
OTHER ASSETS   15,892    15,991 
           
TOTAL ASSETS  $4,865,047   $2,590,702 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
CURRENT LIABILITIES:          
Current portion of long-term debt – net  $54,833   $379,311 
Accounts payable   553,271    955,514 
Accrued expenses and other current liabilities   2,304,339    1,515,334 
Current portion of deferred revenue   25,000    244,081 
Total current liabilities   2,937,443    3,094,240 
           
WARRANT LIABILITY   26,377    61,808 
           
NOTES PAYABLE – RELATED PARTIES – net   11,731,818    6,698,386 
           
OTHER LONG-TERM LIABILITIES   77,967    443,623 
TOTAL LIABILITIES   14,773,605    10,298,057 
           
COMMITMENTS AND CONTINGENCIES          
           
STOCKHOLDERS’ DEFICIT:          
Common stock — par value $.01 per share; 60,000,000 authorized; 8,507,374 issued and outstanding on June 30, 2013 and December 31, 2012.   85,074    85,074 
Additional paid-in capital   38,803,246    38,679,627 
Accumulated deficit   (48,796,878)   (46,472,056)
TOTAL STOCKHOLDERS’ DEFICIT   (9,908,558)   (7,707,355)
           
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT  $4,865,047   $2,590,702 

 

See accompanying notes to unaudited condensed financial statements.

3
 

LUCID, INC.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2013 AND 2012

   Three Months Ended
June 30,
   Six Months Ended
June 30,
 
   2013   2012   2013   2012 
                 
REVENUES  $515,814   $571,749   $1,574,424   $889,558 
                     
OPERATING EXPENSES:                    
 Cost of revenue   583,544    611,649    1,331,941    1,106,946 
 General and administrative   430,773    1,176,185    880,961    2,564,586 
 Sales and marketing   345,713    332,097    684,502    1,042,034 
 Engineering, research and development   340,023    1,103,691    794,848    1,880,589 
Total operating expenses   1,700,053    3,223,622    3,692,252    6,594,155 
                     
LOSS FROM OPERATIONS   (1,184,239)   (2,651,873)   (2,117,828)   (5,704,597)
                     
OTHER EXPENSES:                    
 Interest expense   (178,319)   (51,294)   (316,131)   (116,605)
 Gain (loss) on extinguishment of debt   80,706    (59,506)   80,706    (366,284)
 Fair value adjustment of warrants   11,425    424,871    35,431    472,129 
 Other   (1,600)   (736)   (7,000)   (3,825)
                     
NET LOSS  $(1,272,027)  $(2,338,538)  $(2,324,822)  $(5,719,182)
                     
BASIC AND DILUTED NET LOSS PER COMMON SHARE  $(0.15)  $(0.30)  $(0.28)  $(0.73)
                     
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING   8,384,708    7,821,058    8,384,708    7,806,241 

See accompanying notes to unaudited condensed financial statements.

4
 

LUCID, INC.
UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2013 AND 2012

 

   Six Months Ended
June 30,
 
   2013   2012 
         
CASH FLOWS FROM OPERATING ACTIVITIES:          
 Net loss  $(2,324,822)  $(5,719,182)
 Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization   17,469    23,141 
Stock-based compensation   123,719    1,023,488 
Fair value adjustment of warrants   (35,431)   (472,130)
(Gain) loss on extinguishment of debt   (80,706)   366,284 
Accretion of debt discount   33,433    105,927 
Change in:          
Accounts receivable   502,207    85,233 
Inventories   301,014    388,362 
Prepaid expenses and other current assets   (94,003)   (33,127)
Other assets   —     (3,163)
Accounts payable   (402,243)   192,633 
Accrued expenses and other current liabilities   789,005    117,204 
Other liabilities and deferred revenue   (584,737)   295,322 
Net cash used in operating activities   (1,755,095)   (3,630,008)
           
CASH FLOWS FROM INVESTING ACTIVITIES:          
Purchases of property and equipment   (5,158)   (75,775)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
 Borrowings on note payable – related parties   5,000,000    2,340,793 
 Repayments of debt   (243,773)   (3,346,279)
 Loan acquisition costs   —     (62,034)
 Issuance of common units   —     20,257 
 Issuance of common stock   —     2,640 
Net cash provided by (used in) financing activities   4,756,227    (1,044,623)
           
NET INCREASE (DECREASE) IN CASH   2,995,974    (4,750,406)
           
CASH – Beginning of period   926,447    4,896,141 
           
CASH – End of period  $3,922,421   $145,735 
           
SUPPLEMENTAL CASH FLOW DATA – Cash paid for interest  $—    $62,939 

See accompanying notes to unaudited condensed financial statements.

5
 

LUCID, INC.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2013 AND 2012

1.DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION

 

Lucid, Inc., operating as Caliber Imaging & Diagnostics, Inc., or Caliber I.D., (the “Company” or “Lucid”), is a medical device company that designs, manufactures and sells non-invasive cellular imaging devices that assist physicians in the early detection of disease. The Company sells its products in the United States and numerous foreign countries and is headquartered in Rochester, New York.

 

The Company’s unaudited condensed financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. The financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of such information. All such adjustments are of a normal recurring nature. Although the Company believes that the disclosures are adequate to make the information presented not misleading, certain information and footnote disclosures have been condensed or omitted pursuant to such rules and regulations. This unaudited interim financial information should be read in conjunction with the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2012. The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, sales, expenses, and related disclosures at the date of the financial statements and during the reporting period. Actual results could differ materially from these estimates. The year-end balance sheet data was derived and condensed from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America. The results of operations for the six months ended June 30, 2013 are not necessarily indicative of the results for any subsequent period or for the entire fiscal year ending December 31, 2013.

 

Certain immaterial reclassification adjustments have been made to the prior year financial statements to reclassify certain operating costs from General and administrative to Cost of revenue, Sales and marketing, and Engineering, research and development in the accompanying condensed statements of operations to conform to the current year presentation.

 

As a cost-saving measure, in January 2013, the Company dissolved its wholly-owned subsidiary Lucid International, Inc. The dissolution of Lucid International, Inc. did not have a significant impact on the Company’s financial position or results of operations. All information regarding the Unaudited Condensed Financial Statements prior to January 2013 were presented on a consolidated basis.

2.LIQUIDITY AND CAPITAL RESOURCES

 

The Company has incurred net losses of approximately $2.3 million and $5.7 million for the six months ended June 30, 2013 and 2012, respectively. In addition, the Company had a stockholders’ deficit balance of approximately $9.9 million at June 30, 2013 and $7.7 million at December 31, 2012. Furthermore, the Company’s current forecast for fiscal 2013 projects a significant net loss and projects a need to raise additional capital to fund operations beyond 2013. The Company continues to explore strategic alternatives to finance its business plan, including but not limited to, private equity or debt financings or other sources, such as strategic partnerships. The Company is also focusing on increasing sales of its products to generate cash flows to fund its operations.

 

In May 2013, the Company borrowed $5.0 million from an affiliate of the Company under a Subsequent Term Note. See Note 6 – Note Payable – Related Parties for additional information. Proceeds from this note will be used for working capital requirements and for repaying other long-term liabilities.

 

The Company will need to raise additional capital in the fourth quarter of 2013 and beyond, and such capital may not be available at that time or on favorable terms, if at all. The Company may seek to raise these funds through public or private equity offerings, debt financings, credit facilities, or partnering or other corporate collaborations and licensing arrangements. If adequate funds are not available or are not available on acceptable terms, the Company’s ability to fund its operations, take advantage of opportunities, develop products and technologies, and otherwise respond to competitive pressures could be significantly delayed or limited, and operations may need to be downsized or halted.

 

There can be no assurance that the Company will be successful in its plans described above or in attracting alternative debt or equity financing. These conditions have raised substantial doubt about the Company’s ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

6
 
3.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

There were no material changes to the summary of significant accounting policies disclosed in Note 3 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2012.

 

Fair Value Measurements — The Company considers warrants that are not indexed to the Company’s own stock to be classified as Level 3 in the fair value hierarchy. Level 3 valuations are based on inputs that are unobservable and significant to the overall fair value measurement. The degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. During the three and six months ended June 30, 2013 and 2012, the Company did not grant any warrants not indexed to the Company’s own stock. The following table presents the change in Level 3 liabilities:

 

   Three Months Ended June 30,   Six Months Ended June 30, 
   2013   2012   2013   2012 
Balance at beginning of period  $37,802   $ 640,322   $61,808   $ 687,580 
Fair value adjustment   (11,425)   (424,871)   (35,431)   (472,129)
Balance at end of period  $26,377   $ 215,451   $26,377   $ 215,451 

 

The fair value of these warrants was derived using the Black-Scholes pricing model.  The most significant input to the model is the Company’s stock price, which was $1.20 and $1.99 at June 30, 2013 and 2012, respectively.

 

The Company’s financial instruments consist principally of accounts receivable, accounts payable and debt. The Company classifies its outstanding debt as Level 2 in the fair value hierarchy and estimated that its carrying value approximated fair value as of June 30, 2013. This estimate is based on acceptable valuation methodologies which use market data of similarly sized and situated debt issuers.

Recently Issued Accounting Standards — In the normal course of business, the Company evaluates all new accounting standards issued by the Financial Accounting Standards Board, Securities and Exchange Commission, Emerging Issues Task Force, American Institute of Certified Public Accountants and other authoritative accounting bodies to determine the potential impact they may have on the Company’s financial statements. Based upon this review, management does not expect any of the recently issued accounting standards to have a material impact on the Company’s financial statements.

4.INVENTORIES - NET

 

The components of inventories are as follows at:

   June 30, 2013   December 31, 2012 
Raw materials  $506,174   $659,149 
Finished goods   217,030    334,026 
Offsite demo equipment   96,566    96,566 
Less inventory reserve   (194,548)   (163,505)
   $625,222   $926,236 

Offsite demo equipment represents the cost of products physically located at customer locations, during an orientation period for which the Company retains title. As such, no depreciation expense has been recorded on these units. The inventory reserve at June 30, 2013 includes amounts necessary to adjust the Company’s inventory and offsite demo equipment to net realizable value following the Company’s release of newly redesigned products in 2012.

7
 
5.ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

 

Accrued expenses and other current liabilities consisted of the following at:

 

   June 30,
2013
   December 31,
2012
 
Compensation and benefits  $885,931   $635,039 
Interest   548,020    265,719 
Product warranty liability   384,126    263,000 
Customer deposits   125,539    79,384 
Rent   42,565    39,674 
Professional fees   34,000    21,388 
Insurance   32,322    —   
Other   251,836    211,130 
   $2,304,339   $1,515,334 

 

In 2012, the Company and certain officers of the Company mutually agreed to terminate their employment relationships (See Note 8 - Reduction in Force).  At June 30, 2013, $0.7 million was included in “Compensation and benefits” in the table above for the current portion of these liabilities. 

 

Customer deposits represent advances paid to the Company by customers for the purchase of equipment.

6.NOTE PAYABLE—RELATED PARTIES

 

In July 2012, the Company borrowed $7.0 million from an affiliate of the Company pursuant to a Loan and Security Agreement (the “2012 Term Loan”). The 2012 Term Loan refinanced a previous loan and matures in July 2017. The Company may prepay the 2012 Term Loan at any time, subject to certain notice requirements. The 2012 Term Loan bears interest at a rate of 7% per annum, payable quarterly commencing in July 2014, and is secured by all of the Company’s assets. The Company had recorded accrued interest of $0.5 million and $0.3 million at June 30, 2013 and December 31, 2012, respectively, in connection with the 2012 Term Loan. In connection with the closing of the 2012 Term Loan, the Company issued 167,164 shares of the Company’s common stock to the affiliate. The Company allocated the debt proceeds between the debt and common stock based on the relative fair value of each financial instrument, resulting in a debt discount of $0.3 million which is being amortized to interest expense over the term of 2012 Term Loan.

 

The 2012 Term Loan contains customary affirmative and negative covenants, including covenants restricting the incurrence of debt, imposition of liens, the payment of dividends, and entering into affiliate transactions. At June 30, 2013 the Company was in compliance with all covenants. The 2012 Term Loan also contains customary events of default, including among others, nonpayment of principal or interest, material inaccuracy of representations and failure to comply with covenants. If an event of default occurs and is continuing under the 2012 Term Loan, the entire outstanding balance may become immediately due and payable.

 

In May 2013, the Company borrowed an additional $5.0 million from the same affiliate of the Company under a Subsequent Term Note (the “2013 Term Loan”). The 2013 Term Loan matures in November 2014 and may be prepaid at any time. The 2013 Term Loan bears interest at a rate of 7% per annum, payable upon maturity and is secured by all of the Company’s assets. The Company had recorded accrued interest of approximately $39,000 at June 30, 2013 in connection with the 2013 Term Loan. The 2013 Term Loan includes cross default provisions with the existing 2012 Term Loan.

7.DEBT

 

As of December 31, 2012, promissory notes outstanding totaled $0.4 million on two notes which do not accrue interest. In May 2013, the outstanding balance of one of the promissory notes was settled in full, resulting in a gain on extinguishment of debt of $0.1 million for the six months ended June 30, 2013.

 

As of June 30, 2013 the remaining promissory note totaled $0.1 million and was classified as a current liability as of June 30, 2013 on the accompanying condensed balance sheets.

8.REDUCTION IN FORCE

In 2012, the Company implemented restructuring plans resulting in force reductions to streamline the Company’s infrastructure and lower overall operating expenses.  In addition, in January, June, and September 2012, the Company and certain officers of the Company mutually agreed to terminate their employment relationships.  As a result of these reductions in force, the Company recognized expenses of approximately $0.6 million during the six months ended June 30, 2012. No such charges were incurred during the six months ended June 30, 2013. At June 30, 2013, approximately $0.8 million was accrued for these liabilities which were recognized in 2012, of which approximately $0.1 million was long-term in nature to be paid in installments through the first quarter of 2016 and was recorded as “Other Long-Term Liabilities” on the Company’s accompanying condensed balance sheets.

8
 
9.NET LOSS PER COMMON SHARE DATA

The following table sets forth the computation of basic and diluted net loss attributable to common stockholders per common share, as well as a reconciliation of the numerator and denominator used in the computation:

 

   Three Months Ended June 30,   Six Months Ended June 30, 
   2013   2012   2013   2012 
Net loss  $(1,272,027)  $ (2,338,538)  $(2,324,822)  $ (5,719,182)
                     
Denominator:                    
Weighted-average common shares outstanding   8,384,708    7,821,058    8,384,708    7,806,241 
Basic and diluted net loss per common share  $(0.15)  $ (0.30)  $(0.28)  $ (0.73)

 

The following equivalent shares were excluded from the calculation of diluted loss per share as their impact would have been anti-dilutive:

 

   Six months ended June 30, 
   2013   2012 
           
Options to purchase common stock   685,000    1,811,941 
Warrants   1,981,661    2,215,680 
Restricted stock   122,667    122,167 
10.SEGMENT INFORMATION

 

The Company operates in one reportable segment — as a medical device company that designs, manufactures and sells non-invasive cellular imaging devices that assist physicians in the early detection of disease. The Company’s chief operating decision maker reviews financial information for the Company as a whole for purposes of allocating resources and evaluating financial performance. Substantially all long-lived assets of the Company are in the United States. Sales for each significant geographical area are as follows:

 

   Three months Ended
June 30,
   Six months Ended
June 30,
 
   2013   2012   2013   2012 
   Product
Sales
   %   Product
Sales
   %   Product
Sales
   %   Product
Sales
   % 
   (in millions)       (in millions)       (in millions)       (in millions)     
North America  $0.1    27%  $0.1    14%  $0.5    28%  $0.2    26%
Europe   0.3    50%   0.1    23%   0.6    41%   0.3    37%
Asia   0.1    23%   0.2    36%   0.4    24%   0.2    20%
Latin America       0%   0.2    27%   0.1    7%   0.2    17%
Total  $0.5    100%  $0.6    100%  $1.6    100%  $0.9    100%
11.SUBSEQUENT EVENTS

 

The Company has evaluated subsequent events after the balance sheet date through the date of filing of the Company’s financial statements with the Securities and Exchange Commission for appropriate accounting and disclosure and concluded that there were no subsequent events requiring adjustment or disclosure in the Company’s financial statements.

9
 

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q and the information incorporated herein by reference contain forward-looking statements that involve a number of risks and uncertainties including information with respect to our plans and strategy for our business and related financing, thereof, contain forward-looking statements that involve risks, uncertainties and assumptions. All statements that express expectations, estimates, forecasts or projections are forward-looking statements. Words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “seeks”, “estimates”, “projects”, “forecasts”, “may”, “should”, and variations of such words and similar expressions are intended to identify such forward-looking statements. These statements include but are not limited to statements under the captions “Business”, “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” as well as other sections in this Quarterly Report on Form 10-Q. You should be aware that the occurrence of any of the events discussed under the heading “Item 1A. Risk Factors” of our Form 10-K and elsewhere in this report could substantially harm our business, results of operations and financial condition and that if any of these events occurs, the trading price of our securities could decline and you could lose all or a part of the value of your shares of our securities. The cautionary statements made in this report are intended to be applicable to all related forward-looking statements wherever they may appear in this Quarterly Report on Form 10-Q. We urge you not to place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we assume no obligation to update our forward-looking statements, even if new information becomes available in the future.

 

Unless the context otherwise indicates, references in this report to the terms “Lucid”, “the Company”, “we,” “our” and “us” refer to Lucid, Inc. operating as Caliber Imaging & Diagnostics, Inc., or Caliber I.D., and its subsidiary if pertaining to the period before January 29, 2013.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes. In addition to historical information, some of the information in this discussion and analysis contains forward-looking statements reflecting our current expectations and involves risk and uncertainties. For example, statements regarding our expectations as to our plans and strategy for our business, future financial performance, expense levels and liquidity sources are forward-looking statements. Our actual results and the timing of events could differ materially from those discussed in our forward-looking statements as a result of many factors, including those set forth under “Risk Factors” in Part I, Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2012, as updated in Part II, Item 1A in this Quarterly Report on Form 10-Q.

 

Overview

 

We are a medical device company that designs, manufactures and sells non-invasive cellular imaging devices enabling physicians to image and diagnose skin disease in real time without an invasive or surgical biopsy. Devices using our Rapid Cell ID technology allow physicians to detect and diagnose skin disease, including basal cell carcinoma, melanoma, and inflammatory and pigmentary disorders. Rapid Cell ID technology offers physicians the option to non-invasively diagnose, monitor and follow-up the non-invasive treatment of basal cell carcinoma, and includes the capacity to visualize the margins of the disease prior to surgery, improving patient outcomes. We have developed an integrated platform of tools, including the VivaScope® 1500, VivaScope® 2500 and VivaScope® 3000 Rapid Cell ID Imagers along with our telepathology service that can be used by doctors, surgeons, and research laboratories. Our tools are already in use by doctors and researchers in major academic hospitals as well as at pharmaceutical and large cosmetic companies.

 

Our telepathology server, when connected to a physician’s VivaScope imager, transfers images from a physician’s office or operating room to another physician, pathologist or other diagnostic reader for near real-time diagnosis and reporting. In addition, the telepathology server stores images and pathology reports as a part of a patient’s HIPAA compliant permanent, electronic, medical record increasing efficiency and reducing costs for medical institutions compared to current histology record retention processes.

 

We have devoted substantially all of our resources to the development of our Rapid Cell ID technology and telepathology service, which expenses have included research and development, conducting clinical investigations for our product candidates, protecting our intellectual property and the general and administrative support of these operations. While we have generated revenue through product sales, we have funded our operations largely through an initial public equity offering and multiple rounds of private debt and equity financings. We have never been profitable and we reported net losses of approximately $2.3 million and $5.7 million for the six months ended June 30, 2013 and 2012, respectively. As of June 30, 2013, we had an accumulated stockholders’ deficit of approximately $9.9 million. We expect to incur operating losses for the foreseeable future as we invest substantial resources to promote the commercialization, and attempt to achieve widespread adoption, of our products. We will need to raise additional capital in the fourth quarter of 2013 and beyond. Adequate additional funding may not be available to us on acceptable terms, or at all. We expect that research and development expenses and sales and marketing expenses will increase along with general and administrative costs, as we grow and operate as a public company. We will need to generate significant revenues to achieve profitability and we may never do so.

10
 

Our revenues primarily consist of the sale of our products and services, primarily VivaScopes, as well as an immaterial amount of revenue from maintenance and support services. We recognize product revenue when evidence of an agreement exists, title has passed (generally upon shipment) or services have been rendered. When product sales do not include installation or training, such as for all distributor sales and many direct sales, revenue is recognized upon shipment. Certain direct sales contracts require installation at the customer’s location prior to acceptance. As such, revenue recognition on these contracts is delayed until all aspects of delivery, including installation, are complete. In addition, should the contract include training, revenue recognition is delayed until training is complete.

 

Our Rapid Cell ID technology platform includes:

In-Vivo Confocal Imagers. The VivaScope 1500 and the VivaScope 3000 (handheld device) confocal systems are cleared with a FDA 510(k) to acquire, store, retrieve, display and transfer in-vivo images of tissue, including blood collagen and pigment, in exposed unstained epithelium and the supporting stroma for review by physicians to assist in forming a clinical judgment. We designed our VivaScope System to support the capture of: (i) clinical images of the patient; (ii) images of the patient’s lesions; and (iii) confocal images of the patient’s lesions that can be evaluated at the point of care or transmitted over our HIPAA compliant telepathology network to a pathologist.
Ex-Vivo Confocal Imagers. The VivaScope 2500 produces electro-optically enlarged images of unstained and unsectioned excised surgical tissue for medical purposes. The VivaScope 2500 is a Class I medical device and is exempt from FDA 510(k). We are developing the VivaScope 2500 confocal imager for the rapid imaging of tissue that has been surgically excised from the body. We expect these devices, which are intended to require little or no tissue preparation to render images similar to those obtained using traditional histology techniques, will streamline the practice of conventional laboratory pathology for excised tissue analysis.
Telepathology. Our telepathology server is a Digital Imaging and Communications in Medicine (DICOM) standard compliant medical grade image server. The DICOM standard, established and in use since 1993, is a global technology standard for all aspects of the communication of medical images and is used in virtually all hospitals world-wide, ensuring that every hospital and medical imaging center is a potential customer. Our telepathology server is registered with the FDA as a Class I medical image device, which categorizes it as a radiology diagnostic device, for the storage, transfer and retrieval of images between physicians and diagnostic readers, typically pathologists.

 

During the first quarter of 2012, we began a program to enhance the functionality of our existing In-Vivo Confocal Imagers (the “2012 Enhancement Program”) which was substantially completed by September 30, 2012. During the 2012 Enhancement Program we redesigned many optical and electrical components within our in-vivo confocal imagers to increase speed and functionality. Our redesigned products generate images of the highest level of optical quality with greater reliability and repeatability. We have also improved the user interface with a touch-screen monitor and an ergonomic redesign of the handheld device. During the 2012 Enhancement Program, sales of our existing products slowed, as our customers waited to place orders for the redesigned products.

 

Reimbursement

 

We have retained the services of a medical reimbursement firm, Scott Taylor & Associates, which has commenced discussions with the third party private payers in an effort to obtain positive coverage decisions and routine reimbursement.

 

A skin biopsy is typically performed by a dermatologist. We have designed our VivaScope and telepathology system to facilitate the detection of skin disease which we believe may over time make medical practices more productive by shifting physician procedures from surgical biopsies to excising lesions known to be cancerous as determined by confocal imaged optical biopsies.

The Company remains optimistic that it will ultimately receive third party private payer reimbursement, although the Company does not know what the timing of such reimbursement might be or if the reimbursement amount will be deemed adequate by the physicians and patients.

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Emerging Growth Company Status

 

We are an “emerging growth company”, or “EGC” as defined in the Jumpstart Our Business Startups Act, or the JOBS Act, and we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, exemptions from the requirements of holding a nonbinding advisory vote on executive compensation, from which we are currently exempt as a smaller reporting company, and stockholder approval of any golden parachute payments not previously approved in connection with a transaction resulting in a change of control. We expect to take advantage of these exemptions. If we do take advantage of any of these exemptions, we do not know if some investors will find our common stock less attractive as a result. The result may be a less active trading market for our common stock and the stock price may be more volatile.

 

While we have not yet done so, Section 107 of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.

 

We could remain an “emerging growth company” for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed $1 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three year period. Please see Part II, Item 1A Risk Factors.

 

Results of Operations

 

Three and Six Months Ended June 30, 2013 and 2012

 

We reported a net loss of $1.3 million or $(0.15) per share for the three month period ended June 30, 2013 as compared to a consolidated net loss of $2.3 million or $(0.30) per share for the three month period ended June 30, 2012. Decreased net losses for the three months ended June 30, 2013 resulted primarily from decreases in general and administrative costs as well as engineering, research and development expenses, partially offset by a decrease in income resulting from the fair value adjustment of warrants. We reported a net loss of $2.3 million or $(0.28) per share for the six month period ended June 30, 2013 as compared to a consolidated net loss of $5.7 million or $(0.73) per share for the six month period ended June 30, 2012. Decreased net losses for the six months ended June 30, 2013 resulted from increased sales and an overall decrease in operating expenses as compared to the six months ended June 30, 2012.

 

The following presents a more detailed discussion of our operating results:

 

Revenues.    For the three months ended June 30, 2013 and 2012, we recorded sales of our products of $0.5 million and $0.6 million, respectively. The decrease was primarily attributed to decreases in sales of $0.2 million in Latin America and $0.1 million in Asia, offset by an increase in sales of $0.2 million in Europe. For the six months ended June 30, 2013 and 2012, we recorded sales of our products of $1.6 million and $0.9 million, respectively. The increase was primarily attributed to increases in sales of $0.3 million in North America, $0.3 million in Europe and $0.2 million in Asia. During 2012, we began a significant enhancement program to increase the speed and functionality of our VivaScope confocal imagers which was substantially completed by September 30, 2012. We believe that sales of our existing products were negatively impacted for the first three quarters of 2012 primarily because we informed our key distributors at the end of 2011 about the 2012 Enhancement Program.

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Percentages of total sales by geographic region are as follows:

 

   Three months Ended
June 30,
   Six months Ended
June 30,
 
   2013   2012   2013   2012 
   Product
Sales
   %   Product
Sales
   %   Product
Sales
   %   Product
Sales
   % 
   (in millions)       (in millions)       (in millions)       (in millions)     
North America  $0.1    27%  $0.1    14%  $0.5    28%  $0.2    26%
Europe   0.3    50%   0.1    23%   0.6    41%   0.3    37%
Asia   0.1    23%   0.2    36%   0.4    24%   0.2    20%
Latin America       0%   0.2    27%   0.1    7%   0.2    17%
Total  $0.5    100%  $0.6    100%  $1.6    100%  $0.9    100%

 

Cost of revenue.    For each of the three months ended June 30, 2013 and 2012, we incurred cost of revenue of $0.6 million. As a percentage of product sales, cost of revenue was 113% and 107% for the three months ended June 31, 2013 and 2012, respectively. For the three months ended June 30, 2013, cost of revenue included a charge of $0.1 million to increase our warranty reserve related to specific products under warranty which were sold prior to our 2012 Enhancement Program. Based upon the increased functionality of our new enhancement products, we continue to expect that our new products will incur a lower rate of warranty charges. For the six months ended June 30, 2013 and 2012, we incurred cost of revenue of $1.3 million and $1.1 million, respectively. The increase in absolute dollars of cost of sales reflects a significant increase in sales compared to the six months ended June 30, 2012. As a percentage of product sales, cost of revenue was 85% and 124% for the six months ended June 31, 2013 and 2012, respectively.

 

General and administrative expenses.    General and administrative expenses consist primarily of salaries and benefits, professional fees, including those associated with being a public company, occupancy costs for our facilities, insurance costs and general corporate expenses. For the three months ended June 30, 2013, general and administrative expenses totaled $0.4 million, a decrease of $0.7 million from the same period last year. The decrease resulted primarily from a $0.4 million decrease in severance costs, a $0.2 million decrease in stock-based compensation costs and a $0.1 million decrease in legal and accounting fees. For the six months ended June 30, 2013, general and administrative expenses totaled $0.9 million, a decrease of $1.7 million from the same period last year. The decrease resulted primarily from a $0.6 million decrease in severance costs, a $0.5 million decrease in stock-based compensation costs and a $0.4 million decrease in legal and accounting fees.

 

Sales and marketing expenses.    Sales and marketing expenses consist primarily of salaries and benefits and general marketing expenses. For each of the three months ended June 30, 2013 and 2012, sales and marketing expenses totaled $0.3 million. For the six months ended June 30, 2013, sales and marketing expenses totaled $0.7 million, a decrease of $0.4 million from the same period in the prior year. The decrease primarily resulted from a decrease of $0.1 million in expenses related to physician education, reimbursement consulting and marketing support as well as a decrease in demo equipment expenses of $0.1 million.

 

Engineering, research and development expenses.    Engineering, research and development expenses consist primarily of salaries and benefits, consulting fees and material costs used in the development of new products and product improvements. For the three months ended June 30, 2013, engineering, research and development expenses totaled $0.3 million, a decrease of $0.8 million from the same period in the prior year. The decrease in engineering, research and development expenses primarily resulted from a $0.3 million decrease in stock-based compensation charges and other compensation expenses and a $0.3 million decrease in consulting fees related to the 2012 Enhancement Program. For the six months ended June 30, 2013, engineering, research and development expenses totaled $0.8 million, a decrease of $1.1 million from the same period in the prior year. The decrease in engineering, research and development expenses primarily resulted from a $0.4 million decrease in stock-based compensation charges, a $0.2 million decrease in severance costs and other compensation expenses and a $0.4 million decrease in consulting fees related to the 2012 Enhancement Program.

 

Interest expense.    Interest expense increased $0.1 million from $0.1 million for the three months ended June 30, 2012 to $0.2 million for the three months ended June 30, 2013. Interest expense increased $0.2 million from $0.1 million for the six months ended June 30, 2012 to $0.3 million for the six months ended June 30, 2013. The increases in interest expense were a result of the increase in the long term loan payable balance.

 

Gain (loss) on extinguishment of debt. The Company recorded a gain on extinguishment of debt of $0.1 million for the three months ended June 30, 2013 as compared to a loss on extinguishment of debt of $0.1 million during the same period in 2012. The decrease in loss resulted from a gain of $0.1 million on the extinguishment of a promissory note during the three months ended June 30, 2013. The Company recorded gain on extinguishment of debt of $0.1 million for the six months ended June 30, 2013 as compared to a loss on extinguishment of debt of $0.4 million during the same period of 2012. The decrease in the loss was a result of the conversion of debt in 2012 in connection with the IPO which resulted in a loss.

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Fair value adjustment of warrants expense.    For the three months ended June 30, 2013 and 2012, we recognized income of approximately $11,000 and $0.4 million, respectively, to record changes in the fair value of certain of our outstanding warrants not indexed to our own stock. We recognized income for the change in fair value for these warrants for the six months ended June 30, 2013 and 2012 of approximately $35,000 and $0.5 million, respectively.

 

Liquidity and Capital Resources

 

As of June 30, 2013, we had $4.7 million in current assets and $2.9 million in current liabilities, resulting in a working capital surplus of $1.8 million. As of December 31, 2012, we had $2.5 million in current assets and $3.1 million in current liabilities, respectively, resulting in a working capital deficit of $0.6 million. Our working capital increased during the six months ended June 30, 2013 primarily as a result of the capital raised in May 2013 when the Company borrowed $5.0 million from an affiliate of the Company under a Subsequent Term Note (the “2013 Term Loan”). The increase in working capital was partially offset by net operating losses during the period. Our current assets consist of cash and cash equivalents, accounts receivable, inventories, prepaid expenses and other current assets. Our current liabilities consist of the current portion of our long-term debt, accounts payable, accrued expenses, and deferred revenue.

 

We anticipate that we will continue to generate losses for at least the next year as we develop and expand our product offerings and seek to commercialize our products and expand our corporate infrastructure. We believe that our existing cash and cash equivalents will allow us to fund our operating plan through the fourth quarter of 2013.

 

We will require significant amounts of additional capital to fund our operations in the fourth quarter of 2013 and beyond, and such capital may not be available when we need it on terms that we find favorable, if at all. We may seek to raise these funds through public or private equity offerings, debt financings, credit facilities, or partnering or other corporate collaborations and licensing arrangements. If adequate funds are not available or are not available on acceptable terms, our ability to fund our operations, take advantage of opportunities, develop products and technologies, and otherwise respond to competitive pressures could be significantly delayed or limited, and we may need to downsize or halt our operations. Prevailing market conditions may not allow for such a fundraising or new investors may not be prepared to purchase our securities at prices that are greater than the purchase price of shares sold in our initial public offering.

 

There can be no assurance that the Company will be successful in its plans described above or in attracting alternative debt or equity financing. These conditions have raised substantial doubt about the Company’s ability to continue as a going concern.

 

Because of the numerous risks and uncertainties associated with research, development and commercialization of medical devices, we are unable to estimate the exact amounts of our working capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:

the cost of development and growth of our VivaScope business;
the cost of commercialization activities of our products, and of our future product candidates, including marketing, sales and distribution costs;
the number and characteristics of any future product candidates we pursue or acquire;
the scope, progress, results and costs of researching and developing our future product candidates, and conducting clinical trials;
the timing of, and the costs involved in, maintaining and obtaining regulatory approvals for our existing products and future product candidates;
the cost of manufacturing our existing VivaScope products and maintaining our telepathology server, as well as such costs associated with any future product candidates we successfully commercialize;
our ability to establish and maintain strategic partnerships, licensing or other arrangements and the financial terms of such agreements;
the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcome of such litigation; and
the timing, receipt and amount of sales of, or royalties on, our future products, if any.
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Summary of Cash Flows

         
   For the six months ended
June 30,
 
   2013   2012 
Operating activities  $(1,755,095)  $(3,630,008)
Investing activities   (5,158)   (75,775)
Financing activities   4,756,227    (1,044,623)
Net increase (decrease) in cash and cash equivalents  $2,995,974   $(4,750,406)

 

Net cash used in operating activities.    Cash used in operating activities was $1.8 million and $3.6 million for the six months ended June 30, 2013 and 2012, respectively. The decrease in cash used in operating activities resulted from the decrease in net loss of $3.4 million, partially offset by a decrease of $0.9 million in other liabilities relating to the change in severance liabilities over the period ended June 30, 2012 and a decrease of $0.6 million in accounts payable as a result of decreased balance of accounts payable at June 30, 2013.

 

Net cash used in investing activities.    Cash used in investing activities was approximately $5,000 and $0.1 million for the six months ended June 30, 2013 and 2012, respectively, and represents the purchases of fixed assets during these periods.

 

Net cash provided by (used in) financing activities.    Cash provided by financing activities was $4.8 million for the six months ended June 30, 2013 as a result of the $5.0 million borrowed by the Company under the 2013 Term Loan. Cash used in financing activities was $1.0 million for the six months ended June 30, 2012 primarily due to payments on the Company’s 2011 Credit Facility and a final cash payment of $0.6 million of principal to certain holders of the 2010/2011 Convertible Debt Offering that did not convert to equity at the close of our IPO.

 

Term Loans.    In July 2012, we borrowed $7.0 million from an affiliate pursuant to a Loan and Security Agreement (the “2012 Term Loan”), which refinanced a previous loan in the amount of $3.0 million. The 2012 Term Loan matures in July 2017 although we may prepay the note at any time, subject to certain notice requirements. The 2012 Term Loan bears interest at a rate of 7% per annum, payable quarterly commencing in July 2014 and is secured by all of the Company’s assets.

 

The 2012 Term Loan contains customary affirmative and negative covenants, including covenants restricting the incurrence of debt, imposition of liens, the payment of dividends, and entering into affiliate transactions. The 2012 Term Loan also contains customary events of default, including among others, nonpayment of principal or interest, material inaccuracy of representations and failure to comply with covenants. If an event of default occurs and is continuing under the 2012 Term Loan, the entire outstanding balance may become immediately due and payable.

 

In May 2013, the Company borrowed an additional $5.0 million from the same affiliate of the Company under the 2013 Term Loan. The 2013 Term Loan matures in November 2014 and may be prepaid at any time. The 2013 Term Loan bears interest at a rate of 7% per annum, payable upon maturity and is secured by all of the Company’s assets. The 2013 Term Loan includes cross default provisions with the existing 2012 Term Loan.

 

Promissory Notes.    As of June 30, 2013 and December 31, 2012, promissory notes outstanding totaled $0.1 million and $0.4 million, respectively, on two notes which do not accrue interest. In May 2013, the outstanding balance of one of the two notes was settled in full. The principal of the second note of $0.1 million was classified as a current liability as of June 30, 2013 on the accompanying condensed balance sheets.   

 

Trade Payables and Receivables.    As of June 30, 2013, we had approximately $0.2 million of accounts payable which were aged over 180 days. Management has reached agreements with certain of these vendors to pay overdue amounts over time. Generally, the terms for our trade payables are 30 days from the date of receipt. Certain vendors require partial or full prepayment, especially for parts unique to the Company’s orders.

 

As of June 30, 2013, we had accounts receivable of approximately $0.1 million. We generally request 50% prepayment from all customers, with the balance due 30 days after shipment, although in certain circumstances we require the full balance prior to shipment. Amounts collected prior to the recognition of revenue are recognized as customer deposits and are included in “accrued expenses and other current liabilities.”

15
 

Warrants.    At June 30, 2013, we had 1,981,661 warrants outstanding at a weighted average exercise price of $5.75. These warrants were issued primarily in connection with our convertible debt issuances prior to our initial public offering, as well as in the common units sold in our initial public offering.

 

Stock Options.    At June 30, 2013, we had 685,000 stock options outstanding at a weighted average exercise price of $3.15.

 

Off-Balance Sheet Arrangements

 

We had no off-balance sheet arrangements as of June 30, 2013 and as of the date of this report.

 

Recently Issued Accounting Standards

 

In the normal course of business, management evaluates all new accounting standards issued by the Financial Accounting Standards Board, SEC, Emerging Issues Task Force, American Institute of Certified Public Accountants and other authoritative accounting bodies to determine the potential impact they may have on our financial statements. Based upon this review, we do not expect any of the recently issued accounting standards to have a material impact on our financial statements.

 

Critical Accounting Policies and Estimates

 

During the quarter ended June 30, 2013, there were no significant changes in our critical accounting policies and estimates. Please refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2012, for a more complete discussion of our estimates and critical accounting policies.

Item 3.Quantitative and Qualitative Disclosures about Market Risk

 

We are not required to provide the information required by this Item because we are a smaller reporting company.

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Item 4.Controls and Procedures.

 

Evaluation of Disclosure Controls and Procedures

 

Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of June 30, 2013. Based on that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures as of June 30, 2013 were not fully effective for the items below in providing reasonable assurance that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding disclosures. A controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the control system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

 

The senior management team and other key personnel perform monitoring and other key control activities to ensure the accuracy of the Company’s filings; however, these procedures are not fully documented or tested in a manner that supports a conclusion that these procedures are designed and operating effectively. Management intends to remediate these material weaknesses as soon as practicable after the Company’s financial position improves.

 

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected on a timely basis. In its assessment of the effectiveness of internal control over our financial reporting as of June 30, 2013, our management determined that that there were control deficiencies that constituted the following material weaknesses:

The Company has limited documentation of significant accounting policies, internal controls, management’s estimates and judgments and assessment of recent accounting pronouncements.
The Company’s accounting department does not have sufficient personnel and resources, to test and implement effective procedures that support the accurate and timely reporting of our financial results.

 

Changes in Internal Control Over Financial Reporting

 

During the quarter ended June 30, 2013, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART IIOTHER INFORMATION
Item 1.Legal Proceedings

 

We are not currently subject to any material legal proceedings, nor, to our knowledge, is any material legal proceeding threatened against us. From time to time, we may be a party to certain legal proceedings, incidental to the normal course of our business. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.

Item 1A.Risk Factors

 

There were no material changes to the risk factors disclosed in Part I, Item 1A Risk Factors of our Annual Report on Form 10-K for the year ended December 31, 2012 (except to the extent additional factual information disclosed elsewhere in this Quarterly Report on Form 10-Q relates to such risk factors (including, without limitation, the matters discussed in Part I, Item 2 Management’s Discussion and Analysis of Financial Condition and Results of Operations)).

Item 2.Unregistered Sales of Equity Securities and Use of Proceeds

 

None.

Item 3.Defaults Upon Senior Securities

 

None.

Item 4. Mine Safety Disclosures

 

Not Applicable.

Item 5.Other Information

 

None.

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Item 6.Exhibits

 

10.1 Subsequent Term Note, by and between the Company and Northeast LCD Capital, LLC dated May 20, 2013 (Incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013 (File No. 001-35379))
   
10.2 Intercreditor and Participation Agreement, by and between the Company and Northeast LCD Capital, LLC dated May 20, 2013 (Incorporated by reference to Exhibit 10.2 of the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2013 (File No. 001-35379))
   
*31.1 Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
   
*31.2 Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
   
**32.1 Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
   
**32.2 Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
   
††101 The following material from Lucid Inc.’s Quarterly Report on Form 10-Q, for the quarter ended June 30, 2013, formatted in XBRL (Extensible Business Reporting Language): (i) the Unaudited Condensed Balance Sheets; (ii) the Unaudited Condensed Statements of Operations; (iii) the Unaudited Condensed Statements of Cash Flows; and (iv) the Notes to Unaudited Condensed Financial Statements.

 

 
*Filed herewith.
**Furnished herewith.
††XBRL information is furnished and not filed for purposes of Sections 11 and 12 of the Securities Act of 1933, as amended, and Section 18 of the Securities Exchange Act of 1934, as amended, and is not subject to liability under those sections, is not part of any registration statement or prospectus to which it relates and is not incorporated or deemed to be incorporated by reference into any registration statement, prospectus or other document.
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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  LUCID, INC.
     
  By: /s/ Richard J. Pulsifer         
    Name: Richard J. Pulsifer
    Title: Chief Financial Officer

 

Date: August 9, 2013

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