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EX-32.2 - EXHIBIT 32.2 - LUCID INCex32_2.htm
 

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 MARCH 31, 2014

 

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.)

   

50 Methodist Hill Drive, Suite 1000

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    ¨    Accelerated filer    ¨    Non-accelerated filer (Do not check if a smaller reporting company)   ¨    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  ¨    No  x

 

As of April 15, 2014, 8,507,374 shares of Registrant’s common stock were outstanding.

 
 

LUCID, INC.

 

Quarterly Report on Form 10-Q

For the Period Ended March 31, 2014

 

Table of Contents

 

     
   

Page No. 

Part I FINANCIAL INFORMATION  
Item 1. Financial Statements 3
  Unaudited Condensed Balance Sheets as of March 31, 2014 and December 31, 2013 3
  Unaudited Condensed Statements of Operations for the Three Months Ended March 31, 2014 and 2013 4
  Unaudited Condensed Statements of Cash Flows for the Three Months Ended March 31, 2014 and 2013 5
  Notes to Unaudited Condensed Financial Statements 6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures about Market Risk 17
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 18
Signatures 19
2
 
PART IFINANCIAL INFORMATION

 

Item 1.Financial Statements

 

LUCID, INC.
UNAUDITED CONDENSED BALANCE SHEETS
AS OF MARCH 31, 2014 AND DECEMBER 31, 2013

 

   March 31,   December 31, 
   2014   2013 
ASSETS          
CURRENT ASSETS:          
Cash and cash equivalents  $229,537   $786,509 
Accounts receivable   390,859    499,667 
Inventories - net   1,005,604    708,862 
Prepaid expenses and other current assets   325,380    291,135 
Total current assets   1,951,380    2,286,173 
           
PROPERTY AND EQUIPMENT – NET   237,366    100,783 
           
DEFERRED FINANCING COSTS  – NET   4,718    4,906 
           
OTHER ASSETS   19,491    15,893 
           
TOTAL ASSETS  $2,212,955   $2,407,755 
           
LIABILITIES AND STOCKHOLDERS’ DEFICIT          
CURRENT LIABILITIES:          
Current portion of long-term debt  $23,500   $23,500 
Current portion of notes payable – related party   5,000,000    5,000,000 
Convertible promissory note – related party   100,000     
Accounts payable   1,262,314    536,460 
Accrued expenses and other current liabilities   2,119,149    1,720,867 
Current portion of deferred revenue   270,622    130,119 
Total current liabilities   8,775,585    7,410,946 
           
WARRANT LIABILITY   1,240    1,717 
           
NOTES PAYABLE – RELATED PARTIES - NET   6,767,162    6,757,848 
           
OTHER LONG-TERM LIABILITIES   851,336    730,515 
TOTAL LIABILITIES   16,395,323    14,901,026 
           
COMMITMENTS AND CONTINGENCIES          
           
STOCKHOLDERS’ DEFICIT:          
Preferred Stock — par value $.05 per share; 10,000,000 authorized; none issued or outstanding        
Common Stock — par value $.01 per share; 60,000,000 authorized; 8,507,374 issued and outstanding on March 31, 2014 and December 31, 2013   85,074    85,074 
Additional paid-in capital   39,507,309    39,372,962 
Accumulated deficit   (53,774,751)   (51,951,307)
TOTAL STOCKHOLDERS’ DEFICIT   (14,182,368)   (12,493,271)
           
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT  $2,212,955   $2,407,755 

 

See accompanying notes to unaudited condensed financial statements

3
 

LUCID, INC.
UNAUDITED CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013

 

   Three Months Ended
March 31,
 
   2014   2013 
         
REVENUES  $858,138   $1,058,610 
           
OPERATING EXPENSES:          
Cost of revenue   715,779    748,397 
General and administrative   776,807    450,188 
Sales and marketing   557,899    338,789 
Engineering, research and development   393,099    454,825 
Total operating expenses   2,443,584    1,992,199 
           
LOSS FROM OPERATIONS   (1,585,446)   (933,589)
           
OTHER (EXPENSES) INCOME:          
Interest expense   (217,403)   (137,812)
Loss on abandonment of long-lived assets   (16,080)    
Fair value adjustment of warrants   477    24,006 
Other   (4,992)   (5,400)
           
NET LOSS  $(1,823,444)  $(1,052,795)
           
BASIC AND DILUTED NET LOSS PER COMMON SHARE  $(0.22)  $(0.13)
           
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING   8,384,708    8,384,708 

 

See accompanying notes to unaudited condensed financial statements

4
 

LUCID, INC.

UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013

 

   Three Months Ended
March 31,
 
   2014   2013 
         
CASH FLOWS FROM OPERATING ACTIVITIES:          
Net loss  $(1,823,444)  $(1,052,795)
Adjustments to reconcile net loss to net cash used in operating activities:          
Depreciation and amortization   19,288    8,748 
Stock-based compensation   132,550    66,959 
Fair value adjustment of warrants   (477)   (24,006)
Warrants issued for services   1,797     
Loss on abandonment of long-lived assets   16,080     
Accretion of debt discount   9,315    16,716 
Change in:          
Accounts receivable   108,808    223,841 
Inventories   (296,741)   172,704 
Prepaid expenses and other current assets   (34,245)   (116,238)
Other assets   (3,600)    
Accounts payable   725,854    71,299 
Accrued expenses and other current liabilities   398,282    363,907 
Other liabilities   261,322    (295,804)
Net cash used in operating activities   (485,211)   (564,669)
           
CASH FLOWS FROM INVESTING ACTIVITIES – Purchases of property and equipment   (171,761)   (15,650)
           
CASH FLOWS FROM FINANCING ACTIVITIES:          
Repayments of debt       (12,750)
Borrowings on debt – related party   100,000     
Net cash provided by (used in) financing activities   100,000    (12,750)
           
NET DECREASE IN CASH   (556,972)   (593,069)
           
CASH – Beginning of period   786,509    926,447 
           
CASH – End of  period  $229,537   $333,378 

 

See accompanying notes to unaudited condensed financial statements.

5
 

LUCID, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013

 

1. DESCRIPTION OF THE BUSINESS AND BASIS OF PRESENTATION

 

Lucid, Inc., operating as Caliber Imaging & Diagnostics, or Caliber I.D., (the “Company” or “Lucid”), is a medical device company that develops, manufactures, markets and sells point-of-care cellular imaging systems. The Company’s patented and FDA-cleared VivaScope® technology provides physicians with real-time images of the epidermis and superficial dermis of the skin, as well as other epithelial tissues at a cellular level that can be interpreted by the physician at the bedside and/or transferred securely to a pathologist on VivaNet®, the Company’s HIPAA-compliant private telepathology network for remote diagnosis. With sensitivity and specificity that can rival the current “gold standard”, clinical histopathology, but without all of the associated costs of a traditional biopsy, the Company’s platform imaging technology has the potential to significantly improve patient outcomes while simultaneously reducing costs. 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 financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. 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 three months ended March 31, 2014 are not necessarily indicative of the results for any subsequent period or for the entire fiscal year ending December 31, 2014.

 

2. LIQUIDITY AND CAPITAL RESOURCES

 

As of March 31, 2014, the Company had cash and cash equivalents of $0.2 million and a working capital deficit of $6.8 million. During the three months ended March 31, 2014, cash used in operating activities totaled $0.5 million. As a result of its limited cash resources and working capital deficit, the Company is delinquent in paying a number of its creditors. Unless the Company obtains additional financing in the coming months, it will need to substantially curtail operations and may be unable to continue its business.

 

The Company anticipates that it will continue to generate losses for at least the next year as it develops and expands its products and offerings and seek to commercialize its products and expand its corporate infrastructure. The Company will continue to require significant amounts of additional capital to fund its operations, and such capital may not be available when it needs it on terms that it finds favorable, if at all. The Company is currrently seeking to raise these funds, though it may seek additional debt financings, credit facilities, 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 the Company may need to downsize or halt its operations. Prevailing market conditions may not allow for such a fundraising or new investors may not be prepared to purchase the Company’s securities at prices that are greater than the current market price.

 

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

 

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, 2013.

 

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 months ended March 31, 2014 and 2013, the Company did not grant any warrants not indexed to the Company’s own stock.

6
 

The following table presents the change in Level 3 liabilities at:

 

   Three Months Ended March 31, 
   2014   2013 
Balance at beginning of period  $1,717   $61,808 
Fair value adjustment   (477)   (24,006)
Balance at end of period  $1,240   $37,802 

 

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 $0.60 and $1.25 at March 31, 2014 and 2013, 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 March 31, 2014. 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

The components of inventories are as follows at:

 

   March 31, 2014   December 31, 2013 
Raw materials  $795,468       $426,996 
Finished goods   224,339    288,068 
Offsite demo equipment   125,669    125,669 
Less inventory reserve   (139,872)   (131,871)
   $1,005,604   $708,862 

 

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 includes amounts necessary to adjust the Company’s inventory and offsite demo equipment to net realizable value.

 

5. PREPAID EXPENSES AND OTHER CURRENT ASSETS

The components of prepaid expenses and other current assets are as follows at:

   March 31, 2014   December 31, 2013 
Prepaid inventory  $162,710       $168,768 
Other current assets   88,342    88,342 
Prepaid insurance   44,625    18,271 
Prepaid expenses   29,703    15,754 
   $325,380   $291,135 
7
 

6. PROPERTY AND EQUIPMENT

Property and equipment consists of the following at:

 

   March 31, 2014   December 31, 2013 
Machinery and equipment  $402,889       $402,889 
Computer hardware and software   102,882    100,245 
Leasehold improvements   92,119    46,891 
Furniture and fixtures   78,025    29,484 
Leased Equipment   50,722     
Vehicle   18,680    18,680 
Office equipment   3,869    3,869 
    749,186    602,058 
Less accumulated depreciation and amortization   (511,820)   (501,275)
   $237,366   $100,783 

 

Depreciation expense totaled approximately $19,000 for the three months ended March 31, 2014.

 

7. ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

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

 

   March 31, 2014   December 31, 2013 
Compensation and benefits  $760,987       $679,556 
Customer deposits   566,800    105,816 
Product warranty liability   384,126    384,126 
Interest – related party   328,158    240,958 
Professional fees   16,500    9,500 
Rent   496    41,705 
Other accrued expenses   62,082    259,206 
   $2,119,149   $1,720,867 

 

At March 31, 2014, $0.6 million was included in “Compensation and benefits” in the table above for accrued severance. 

 

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

 

Accrued rent represents rent escalation accounting in accordance with Accounting Standards Codification (“ASC”) 840-20 Operating Leases and decreased during the three months ended March 31, 2014 as the Company terminated its old lease and began a new lease.

 

8. NOTE PAYABLE—RELATED PARTIES

 

In July 2012, the Company borrowed $7.0 million from Northeast LCD Capital, an affiliate of the Company pursuant to a Loan and Security Agreement (the “2012 Term Loan”). On October 7, 2013, the Company entered into a letter agreement modifying the 2012 Term Loan by (i) extending the maturity date by three years to July 5, 2020, (ii) providing that interest will be payable only on maturity, and (iii) providing that the events of default will only be nonpayment at maturity or the Company’s insolvency (the “Modification”). The 2012 Term Loan refinanced a previous loan, may be prepaid at any time subject to certain notice requirements, bears interest at a rate of 7% per annum and is secured by all of the Company’s assets. The Company had recorded accrued interest of $0.9 million and $0.7 million at March 31, 2014 and December 31, 2013, respectively, in connection with the 2012 Term Loan. As a result of the Modification, accrued interest on the 2012 Term Loan was classified as long-term at December 31, 2013 and is included in Other Long-Term Liabilities on the Company’s financial statements. 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 the loan. Debt discount was $(0.2) million at March 31, 2014 and December 31, 2013 and is included in Notes Payable – Related Party – Net.

8
 

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 March 31, 2014 the Company was in compliance with all covenants. The 2012 Term Loan, as modified by the Modification, contains events of default consisting of nonpayment at maturity and the Company’s insolvency. 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 pursuant to 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 $0.3 million and $0.2 million at March 31, 2014 and December 31, 2013, respectively, in connection with the 2013 Term Loan. The 2013 Term Loan includes cross default provisions with the existing 2012 Term Loan. On October 7, 2013, the Company entered into a letter agreement with the holder of the 2013 Term Loan pursuant to which the holder agreed that upon closing of an offering by the Company in which it raises at least $6 million, all outstanding amounts of principal and interest under the 2013 Term Loan will convert into the Company’s common stock on the same terms as such shares sold to other investors in the offering. In exchange for this recapitalization, upon closing, the Company will issue to the holder warrants to purchase 150,000 shares of the Company’s common stock at an exercise price equal to the higher of $1.00 per share or the price paid by the other investors in this offering.

 

In March 2014, the Board of Directors authorized the Company to issue up to approximately $0.9 million in convertible debt and common stock to provide funding to the Company pending completion of a private placement of equity securities (the “Bridge Loan Program”). All convertible debt issued pursuant to the Bridge Loan Program will be payable on demand after November 20, 2014 and will bear interest at a rate of 7% per annum payable upon maturity. Upon closing of a financing in which the Company raises at least $6 million (the “Qualified Financing”), the principal and accrued interest on the convertible debt shall be automatically converted into identical equity securities as those issued in the Qualified Financing on the same terms as in the Qualified Financing. In March 2014, the Company borrowed $0.1 million from a Director of the Company pursuant to the Bridge Loan Program. In April 2014, the Company borrowed under the Bridge Loan Program an additional $0.2 million from other Directors of the Company and $0.2 million from an investment fund in which one of the Company’s Directors is a general partner.

 

Interest expense on Notes Payable – Related Party totaled $0.2 million and $0.1 million for the three months ended March 31, 2014 and 2013, respectively. Debt discount amortization was immaterial and was charged to interest expense for the three months ended March 31, 2014 and 2013.

 

9. DEBT

 

As of March 31, 2014, the Company had a promissory note outstanding totaling approximately $24,000, which does not accrue interest and was classified as a current liability on the accompanying condensed balance sheets, as the note was not repaid at its maturity date and is currently in default.

 

10. STOCKHOLDERS’ DEFICIT

Warrants - At March 31, 2014, there were warrants to purchase up to 2,790,180 shares of the Company’s common stock outstanding at a weighted average exercise price of $4.34.

 

In March 2014, the Company terminated its engagement with its financial advisor, H.C. Wainwright. As a result of this termination, H.C. Wainwright forfeited and returned to the Company the unvested two-thirds of the warrant to purchase 2,125,000 shares of the Company’s common stock.

 

In March 2014, the Company engaged Lafferty to provide general investment banking services. In connection with the placement of any securities, the Company has agreed to issue Lafferty common stock warrants equal to 10% of the number of shares of common stock underlying the securities issued in the financing. Such 10% will only be on the actual common stock issued and shall not apply to any derivative securities. The warrants shall have an exercise price equal to 120% of the price of the securities issued to the investors, except that if the price of the securities issued to investors reaches $0.80 then the exercise price will then become 110% of the price of the securities issued to investors. Additionally, the Company will issue 100,000 shares of its common stock to Lafferty in the event that Lafferty places a minimum of $3 million in escrow by June 1, 2014.

9
 

Stock options - At March 31, 2014, there were outstanding options to purchase 3,425,000 shares of the Company’s common stock at a weighted average exercise price of $1.40. In February 2014, the Board of Directors granted to its employees and a director of the Company a total of 165,000 stock options under the Company’s 2012 Stock Option and Incentive Plan, reducing the total number of shares available for issuance upon the grant or exercise of awards to 846,721.

 

11. 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 March 31, 
   2014   2013 
Net loss  $(1,823,444)  $(1,052,795)
           
Denominator:          
Weighted average common shares outstanding   8,384,708    8,384,708 
Basic and diluted net loss per common share  $(0.22)  $(0.13)

       

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

   Three Months Ended March 31, 
   2014   2013 
Options to purchase common stock   3,425,000    685,000 
Warrants   2,790,180    1,981,661 
Restricted stock   122,667    122,667 

   

12. 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
March 31,
 
   2014   2013 
   Product Sales   %   Product Sales   % 
   (in millions)       (in millions)     
North America  $0.1    15%  $0.4    39%
Europe   0.5    55%   0.4    37%
Asia   0.3    30%   0.3    24%
                     
 Total  $0.9    100%  $1.1    100%
                     

13. 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, other than described below.

 

In April 2014, the Company borrowed under the Bridge Loan Program an additional $0.2 million from Directors of the Company and $0.2 million from an investment fund in which one of the Company’s Directors is a general partner. The additional borrowing was under the same terms and conditions as the Bridge Loan Program described in Note 8 – Note Payable – Related Parties.

10
 

SPECIAL NOTE REGARDING 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, or Caliber I.D.

 

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, 2013, as updated in Part II, Item 1A in this Quarterly Report on Form 10-Q.

 

Overview

 

We are a medical device company that develops, manufactures, markets and sells point-of-care cellular imaging systems. Our patented and FDA-cleared VivaScope® technology provides physicians with real-time images of the epidermis and superficial dermis of the skin, as well as other epithelial tissues at a cellular level that can be interpreted by the physician at the bedside and/or transferred securely to a pathologist on VivaNet®, our HIPAA-compliant private telepathology network for remote diagnosis. With sensitivity and specificity that can rival the current “gold standard”, clinical histopathology, but without all of the associated costs of a traditional biopsy, our platform imaging technology has the potential to significantly improve patient outcomes while simultaneously reducing costs.

 

Our core products are FDA 510(k) cleared for clinical use and have regulatory approvals in most major markets. Our technology is already in use by physicians and researchers at major academic hospitals, and by pharmaceutical and cosmetic companies across the globe. Our devices allow these researchers to quickly and efficiently study the efficacy of new products, test ingredients, validate claims and determine safety. The technology is protected by 78 issued or pending patents worldwide.

 

To date, our proprietary platform imaging technology has been the subject of more than 350 independently sponsored studies or publications spanning numerous clinical and research fields. Extensive research has been conducted in dermatologic disorders including melanoma and nonmelanoma skin cancers, dermatoses, inflammatory and pigmentation disorders. Additionally, the technology has been used to noninvasively study burns, wound healing, neuropathy and oral tissues. Ex-vivo research has been conducted in head and neck, breast biopsy and surgical specimens. Our in-vivo products are ideal for applications in which a traditional biopsy is counterproductive, such as validating the diagnosis of benign lesions (thus, reducing unnecessary biopsies), monitoring noninvasive therapies and determining product efficacy. In the future, the technology may be used to perform real-time pathology in the operating room on tissues removed from the body and to identify tissues in the body during surgery.

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We are an “emerging growth company,” 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. Some investors may find our common stock less attractive as a result of our utilization of these exemptions, which may result in a less active trading market for our common stock and a more volatile stock price.

 

In addition, 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” until 2016, 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.

 

We were organized as a New York corporation on November 27, 1991 under the name Lucid Technologies, Inc. We subsequently amended our Certificate of Incorporation to change our name to Lucid, Inc. We are operating as Caliber Imaging & Diagnostics, or Caliber I.D. Our principal executive offices are located at 50 Methodist Hill Drive, Suite 1000, Rochester, New York 14623. Our telephone number is (585) 239-9800. Our web site is www.caliberid.com.

 

Product Portfolio

Our product portfolio consists of a variety of in-vivo and ex-vivo imaging systems, as well as a telepathology system, covering a wide variety of applications. 

 

Our VivaScope in-vivo devices, the VivaScope® 3000 (handheld device) and the VivaScope® 1500, use confocal cellular imaging to create a layer-by-layer scan of living tissue, with a >0.2mm imaging depth. This provides physicians with a microscopic view of living cells in the skin, with 3-5 micron cellular resolution comparable to histology. Our in-vivo imagers are FDA 510(k) cleared with an intended use 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.”

 

(GRAPHIC) 

 

Our VivaScope ex-vivo device, the VivaScope® 2500, uses confocal imaging to produce electro-optically enlarged images of unstained and unsectioned excised surgical tissue without the laborious tissue preparation procedures required to prepare the microscope slides used in traditional pathologic examination of tissue. As a Class I medical device, the VivaScope 2500 is exempt from 510(k) clearance.

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Our VivaNet telepathology server transfers images from the point of capture at a physician’s office or operating room to another physician, pathologist or other diagnostic reader for near real-time diagnosis and reporting. This HIPAA-compliant, cloud-based system stores images and diagnostic reports as a part of a patient’s permanent, electronic, medical record, increasing efficiency and potentially reducing costs for medical institutions as compared to current histology record retention processes. Our VivaLAN product is a telepathology system which retains all patient data within the customer’s facility. As Class I medical devices, our VivaNet and VivaLAN systems are exempt from 510(k) clearance.

 

We have devoted substantially all of our resources to the development of our technologies, 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 $1.8 million and $1.1 million for the three months ended March 31, 2014 and 2013, respectively. As of March 31, 2014, we had total stockholders’ deficit of approximately $14.2 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 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.

 

As of March 31, 2014, we had cash and cash equivalents of $0.2 million and a working capital deficit of $6.8 million. During the three months ended March 31, 2014, our cash used in operating activities totaled $0.5 million. As a result of our limited cash resources and working capital deficit, we are delinquent in paying a number of our creditors. Unless we obtain additional financing in the coming months, we will need to substantially curtail operations and may be unable to continue our business.

 

Our revenues are derived from 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. Certain direct sales contracts require installation at the customer’s location prior to acceptance. As such, revenue recognition on these contracts is typically 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. 

 

Results of Operations

 

Three Month Period Ended March 31, 2014 and 2013

 

We reported a net loss of $1.8 million or $(0.22) per share for the three month period ended March 31, 2014 as compared to a net loss of $1.1 million or $(0.13) per share for the three month period ended March 31, 2013. The increase in net loss for the three months ended March 31, 2014 resulted from increases in operating and other expenses during the period.

 

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

 

Revenues.    For the three months ended March 31, 2014 and 2013, we recorded sales of our products of $0.9 million and $1.1 million, respectively. The decrease resulted from lower revenue in North America, partially offset by increased revenue in Europe. Percentages of total sales by geographic region are as follows:

 

   Three months Ended
March 31,
 
   2014   2013 
   Product Sales   %   Product Sales   % 
   (in millions)       (in millions)     
North America  $0.1    15%  $0.4    39%
Europe   0.5    55%   0.4    37%
Asia   0.3    30%   0.3    24%
                     
 Total  $0.9    100%  $1.1    100%

  

Cost of revenue.    Cost of revenue remained relatively consistent at $0.7 million for the three months ended March 31, 2014 and 2013. As a percentage of product sales, cost of revenue was 83% and 71% for the three months ended March 31, 2014 and 2013, respectively. The increase in cost of revenue as a percentage of sales reflects the discounts extended to customers. For the three months ended March 31, 2014 and 2013, cost of revenue included non-cash stock-based compensation expenses of approximately $6,000 and $3,000, respectively.

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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 March 31, 2014, general and administrative expenses totaled $0.8 million, an increase of $0.3 million from the same period last year. The increase was primarily due severance expenses incurred of $0.1 million, a $0.1 million increase in stock-based compensation costs, and a $0.1 million increase in insurance costs. For the three months ended March 31, 2014 and 2013, general and administrative expenses included non-cash stock-based compensation expenses of $0.1 million and approximately $15,000, respectively.

 

Sales and marketing expenses.    Sales and marketing expenses consist primarily of salaries and benefits and general marketing expenses. For the three months ended March 31, 2014 and 2013, sales and marketing expenses totaled $0.6 million and $0.3 million, respectively. The increase primarily resulted from an increase of $0.1 million in wages due to increased headcount. For the three months ended March 31, 2014 and 2013, sales and marketing expenses included non-cash stock-based compensation expenses of approximately $7,000 and $14,000, respectively.

 

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 March 31, 2014, engineering, research and development expenses totaled $0.4 million, a decrease of $0.1 million from the same period in the prior year resulting from patent related costs. For the three months ended March 31, 2014 and 2013, engineering, research and development expenses included non-cash stock-based compensation expenses of approximately $15,000 and $35,000, respectively.

 

Interest expense.    Interest expense increased $0.1 million from $0.1 million for the three months ended March 31, 2013 to $0.2 million for the three months ended March 31, 2014. The increase in interest expense was a result of the placement of our 2013 Term Loan in May 2013 in the amount of $5 million.

 

Loss on abandonment of long-lived assets. We recorded a loss on abandonment of long-lived assets of approximately $16,000 during the three months ended March 31, 2014 related to leasehold improvements at our former headquarters.

 

Fair value adjustment of warrants expense.    For the three months ended March 31, 2014 and 2013, we recognized non-cash gains of approximately $1,000 and $24,000, respectively, to record changes in the fair value of certain of our outstanding warrants not indexed to our own stock.

 

Liquidity and Capital Resources

 

As of March 31, 2014, we had $2.0 million in current assets and $8.8 million in current liabilities, resulting in a working capital deficit of $6.8 million. As of December 31, 2013, we had $2.3 million in current assets and $7.4 million in current liabilities, respectively, resulting in a working capital deficit of $5.1 million. 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. During the three months ended March 31, 2014, our cash used in operating activities totaled $0.5 million. As a result of our limited cash resources and working capital deficit, we are delinquent in paying a number of our creditors. Unless we obtain additional financing in the coming months, we will need to substantially curtail operations and may be unable to continue our business.

 

In March 2014, the Company terminated its engagement with its financial advisor, H.C. Wainwright & Co., LLP (“H.C. Wainwright”). As a result of this termination, H.C. Wainwright forfeited and returned to the Company the unvested two-thirds of the warrant to purchase 2,125,000 shares of the Company’s common stock.

 

In March 2014, the Company engaged R.F. Lafferty & Co., Inc. (“Lafferty”) to provide general investment banking services. In addition to paying a $2,000 monthly retainer for the 6-month term of the engagement, which is creditable against a cash fee at the time of a funding, the Company has agreed to pay Lafferty a transaction fee of 8% of the gross proceeds from the placement of any securities and a fee for unallocated expenses of 1.5% of the gross proceeds. In connection with the placement of any securities, the Company has agreed to issue Lafferty common stock warrants equal to 10% of the number of shares of common stock underlying the securities issued in the financing. Such 10% will only be on the actual common stock issued and shall not apply to any derivative securities. The warrants shall have an exercise price equal to 120% of the price of the securities issued to the investors, except that if the price of the securities issued to investors reaches $0.80 then the exercise price will then become 110% of the price of the securities issued to investors. Additionally, the Company will issue 100,000 shares of its common stock to Lafferty in the event that Lafferty places a minimum of $3 million in escrow by June 1, 2014. Lafferty will receive no fees on monies invested by its directors, employees, stockholders or friends.

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We anticipate that we will continue to generate losses for at least the next year as we develop and expand our products and offerings and seek to commercialize our products and expand our corporate infrastructure. We will continue to require significant amounts of additional capital to fund our operations, and such capital may not be available when we need it on terms that we find favorable, if at all. We are seeking to raise these funds as described above, though we may seek additional debt financings, credit facilities, 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 current market price.

 

In October 2013, we entered into a letter agreement with the holder of the Loan and Security Agreement (the “2012 Term Loan”) and 2013 Term Loan. With respect to the 2013 Term Loan, the parties agreed that upon closing of the offering described above in which we raise at least $6 million, all outstanding amounts of principal and interest under the 2013 Term Loan will convert into our common stock on the same terms as such shares sold to other investors in the offering. With respect to the 2012 Term Loan, the holder agreed to (i) extend the maturity date by three years to July 5, 2020, (ii) provide that interest will be payable only on maturity, and (iii) provide that the events of default will only be nonpayment at maturity or our insolvency. Upon conversion of the 2013 Term Loan as set forth above, we agreed to issue to the holder a fully-vested warrant to purchase 150,000 shares of our common stock at an exercise price equal to the higher of $1.00 per share or the price at which shares are sold in the offering.

 

In March 2014, our Board of Directors authorized us to issue up to approximately $0.9 million in convertible debt and common stock to provide funding to us pending completion of a private placement of equity securities (the “Bridge Loan Program”). All convertible debt issued pursuant to the Bridge Loan Program will be payable on demand after November 20, 2014 and will bear interest at a rate of 7% per annum payable upon maturity. Upon closing of a financing in which we raise at least $6 million (the “Qualified Financing”), the principal and accrued interest on the convertible debt shall be automatically converted into identical equity securities as those issued in the Qualified Financing on the same terms as in the Qualified Financing. In March 2014, we borrowed $0.1 million from a Director of ours pursuant to the Bridge Loan Program. In April 2014, we borrowed under the Bridge Loan Program an additional $0.2 million from other Directors of ours and $0.2 million from an investment fund in which one of our Directors is a general partner.

 

There can be no assurance that we will be successful in our plans described above or in attracting alternative debt or equity financing. These conditions have raised substantial doubt about our 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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As of the date of this report we are delinquent in paying a number of creditors and our liquid assets (cash, cash equivalents and accounts receivable) are not sufficient to meet our obligations many of which are past due. These conditions have raised substantial doubt about the Company’s ability to continue as a going concern.

 

Summary of Cash Flows

         
   For the three months ended
March 31,
 
   2014   2013 
Operating activities  $(485,211)  $(564,669)
Investing activities   (171,761)   (15,650)
Financing activities   100,000    (12,750)
Net decrease in cash and cash equivalents  $(556,972)  $(593,069)

 

Net cash used in operating activities.    Cash used in operating activities was $0.5 million and $0.6 million for the three months ended March 31, 2014 and 2013, respectively.

 

Net cash used in investing activities.    Cash used in investing activities was $0.2 million and approximately $16,000 for the three months ended March 31, 2014 and 2013, 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 $0.1 million for the three months ended March 31, 2014 and cash used in financing activities was approximately $13,000 for the three months ended March 31, 2013. During the three months ended March 31, 2014, we borrowed $0.1 million from a director of ours under a Bridge Loan.

 

Term Loans. As of March 31, 2014 and December 31, 2013, term loans outstanding totaled $12.0 million.

 

Promissory Notes.    As of March 31, 2014 and December 31, 2013, promissory notes outstanding totaled approximately $24,000, respectively, and is classified as a current liability on the accompanying condensed balance sheets, as the note was not repaid at its maturity date and is currently in default. 

 

Convertible Promissory Note.   As of March 31, 2014, Bridge Loans outstanding totaled $0.1 million.

 

Trade Payables and Receivables.    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 our orders. As of the date of this report, we are overdue in paying a number of vendors and such condition may adversely impact the Company’s business and its ability to continue to operate as a business.

 

As of March 31, 2014, we had accounts receivable of approximately $0.4 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” in the accompanying condensed balance sheets.

 

Warrants. At March 31, 2014, we had warrants to purchase up to 2,790,180 shares of our common stock outstanding at a weighted average exercise price of $4.34.

 

Stock Options. At March 31, 2014, we had 3,425,000 stock options outstanding at a weighted average exercise price of $1.40 with 846,721 shares available for issuance upon the grant or issuance of awards.

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Off-Balance Sheet Arrangements

 

We had no off-balance sheet arrangements as of March 31, 2014 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 March 31, 2014, 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, 2013, 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.

 

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 March 31, 2014. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of March 31, 2014 were not 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 control 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 March 31, 2014, 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 March 31, 2014, 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 II OTHER 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, 2013 (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

 

On May 6, 2014, the Company entered into a Separation Agreement with Richard J. Pulsifer (the “Separation Agreement”). Per the terms of the Separation Agreement, starting in May 2014, Mr. Pulsifer will receive a cash payment of $100,000 in installments payable over a period of six months, subject to acceleration and payment of an amount equal to the greater of the Company’s monthly contribution to Mr. Pulsifer’s health insurance or $859.07 towards Mr. Pulsifer’s COBRA Health Insurance for a period of up to eighteen months. In April 2014, Mr. Pulsifer forfeited 270,000 unvested stock options. The foregoing description of the terms of the Separation Agreement is qualified in its entirety by reference to the full text of the Separation Agreement, which is attached to this Quarterly Report on Form 10-Q as Exhibit 10.2 and is incorporated herein by reference.

 

Item 6.Exhibits

 

10.1 Employment Agreement by and between the Company and Richard C. Christopher, dated March 18, 2014 (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 20, 2014 (File No. 001-35379))
   
*†10.2 Separation Agreement by and between the Company and Richard J. Pulsifer, dated May 6, 2014
   
*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 March 31, 2014, 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.
Management contract or compensatory plan or arrangement.
18
 

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 C. Christopher
     Name: Richard C. Christopher
     Title: Chief Financial Officer
     
Date: May 9, 2014    
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Exhibit Index

   
10.1 Employment Agreement by and between the Company and Richard C. Christopher, dated March 18, 2014 (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on March 20, 2014 (File No. 001-35379))
   
*†10.2 Separation Agreement by and between the Company and Richard J. Pulsifer, dated May 6, 2014
   
*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 March 31, 2014, 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.
Management contract or compensatory plan or arrangement.
20