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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

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

For the quarterly period ended June 30, 2021

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: 001-39976

 

Lucira Health, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

27-2491037

( State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

1412 62nd Street

Emeryville, California 94608

 

(Address of principal executive offices)

 

Registrant’s telephone number, including area code: (510) 350-8071

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.001 per share

 

LHDX

 

Nasdaq Global Select Market

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  ☒    No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).     Yes  ☒    No  

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

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

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

As of August 10, 2021, the number of shares of registrant’s common stock, par value $0.001 per share, outstanding was 38,698,789.

 

 

 


 

 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

1

 

Condensed Balance Sheets

1

 

Condensed Statements of Operations

2

 

Condensed Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

3

 

Condensed Statements of Cash Flows

4

 

Notes to Unaudited Condensed Financial Statements

5

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

27

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

34

Item 4.

Controls and Procedures

34

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

36

Item 1A.

Risk Factors

36

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

87

Item 3.

Defaults Upon Senior Securities

88

Item 4.

Mine Safety Disclosures

88

Item 5.

Other Information

88

Item 6.

Exhibits

89

Signatures

90

 

 

Where You Can Find More Information

Investors and others should note that we announce material financial and other information using our investor relations website, press releases, SEC filings and public conference calls and webcasts. We also post supplemental materials on the Press Release section of our investor relations website at www. https://ir.lucirahealth.com/. Except as specifically noted herein, information on or accessible through our website is not, and will not be deemed to be, a part of this Quarterly Report on Form 10-Q or incorporated by reference into any other filings we may make with the U.S. Securities and Exchange Commission (the “SEC”).

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

i


 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which statements involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations or financial condition; business strategy and plans; and objectives of management for future operations, including our statements regarding the benefits and timing of the roll out of new technology, are forward-looking statements. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” or “would” or the negative of these words or other similar terms or expressions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

 

 

the extent and duration of the COVID-19 pandemic and our expectations regarding customer and user demand for our COVID-19 test kit;

 

 

our expected future growth;

 

 

our ability to obtain and maintain regulatory approval for our test kits, including our existing Emergency Use Authorizations, or EUAs, for our COVID-19 test kits;

 

 

the size and growth potential of the markets for our test kits, including the COVID-19 diagnostic testing market, and our ability to serve those markets;

 

 

our ability to accurately forecast demand for our test kits;

 

 

the rate and degree of physician and market acceptance of our test kits;

 

 

the expected future growth of our sales and marketing organization;

 

 

coverage and reimbursement for our test kits;

 

 

the performance of, and our reliance on, third parties in connection with the commercialization of our test kits, including Jabil Inc., or Jabil, and our single-source suppliers;

 

 

our ability to accurately forecast, and Jabil’s ability to manufacture, appropriate quantities of our COVID-19 test kit to meet commercial demand;

 

 

regulatory developments in the United States and foreign countries;

 

 

our research and development for our influenza test kit and any future test kits;

 

 

the development, regulatory approval, and commercialization of competing products;

 

 

our ability to retain and hire senior management and key personnel;

 

 

our expectations regarding the period during which we qualify as an emerging growth company under the JOBS Act;

 

 

our ability to develop and maintain our corporate infrastructure, including our internal controls;

 

 

our financial performance and capital requirements; and

 

 

our expectations regarding our ability to obtain and maintain intellectual property protection for our test kits, as well as our ability to operate our business without infringing the intellectual property rights of others.

 

ii


 

 

You should not rely on forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, and operating results. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties, and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. The results, events, and circumstances reflected in the forward-looking statements may not be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.

 

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based on information available to us as of the date of this Quarterly Report on Form 10-Q. While we believe that such information provides a reasonable basis for these statements, that information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.

 

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments.

 

You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed with the Securities and Exchange Commission as exhibits to this Quarterly Report on Form 10-Q with the understanding that our actual future results, levels of activity, performance, and events and circumstances may be materially different from what we expect.

 

“Lucira Health,” “Lucira,” the Lucira Health logo and our other registered or common law trade names, trademarks or service marks appearing in this Quarterly Report on Form 10-Q are our property. Trade names, trademarks and service marks of other companies appearing in this Quarterly Report on Form 10-Q are the property of their respective owners. We do not intend our use or display of other companies’ trade names, trademarks or service marks to imply a relationship with, or endorsement or sponsorship of us by, these other companies. Solely for convenience, the trademarks and tradenames referred to in this Quarterly Report on Form 10-Q appear without the ® and ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights, or the right of the applicable licensor to these trademarks and tradenames.

 

 

iii


 

 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

LUCIRA HEALTH, INC.

CONDENSED BALANCE SHEETS

(Unaudited)

(In thousands, except share and per share data)

 

 

 

June 30,

 

 

December 31,

 

 

 

2021

 

 

2020 (1)

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash

 

$

161,662

 

 

$

58,212

 

Accounts receivable, net

 

 

3,392

 

 

 

293

 

Inventory

 

 

36,182

 

 

 

4,865

 

Grant income receivable

 

 

92

 

 

 

183

 

Prepaid expenses

 

 

6,164

 

 

 

3,496

 

Other current assets

 

 

6,099

 

 

 

844

 

Restricted cash equivalents

 

 

2,338

 

 

 

2,338

 

Total current assets

 

 

215,929

 

 

 

70,231

 

Property and equipment, net

 

 

28,153

 

 

 

19,408

 

Operating lease right-of-use assets

 

 

576

 

 

 

748

 

Other assets

 

 

31

 

 

 

2,316

 

Total assets

 

$

244,689

 

 

$

92,703

 

Liabilities, Redeemable Convertible Preferred Stock, and Stockholders’ Equity (Deficit)

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

6,673

 

 

$

3,981

 

Accrued liabilities

 

 

18,672

 

 

 

4,445

 

Operating lease liabilities, current

 

 

374

 

 

 

431

 

Customer deposits

 

 

2,916

 

 

 

 

Total current liabilities

 

 

28,635

 

 

 

8,857

 

Convertible notes payable

 

 

 

 

 

24,694

 

Operating lease liabilities, net of current portion

 

 

254

 

 

 

380

 

Total liabilities

 

 

28,889

 

 

 

33,931

 

Commitments and contingencies (Note 5)

 

 

 

 

 

 

 

 

        Redeemable convertible preferred stock $0.001 par value; 0 and 103,355,827 shares

        authorized as of June 30, 2021 and December 31, 2020, respectively; 0 and 23,978,747

        shares issued and outstanding as of June 30, 2021 and December 31, 2020,

        respectively; aggregate liquidation preference of $0 as of June 30, 2021

 

 

 

 

 

121,080

 

Stockholders’ equity (deficit):

 

 

 

 

 

 

 

 

        Preferred stock $0.001 par value; 10,000,000 and 0 shares authorized as

        of June 30, 2021 and December 31, 2020, respectively; 0 shares issued

        and outstanding as of June 30, 2021 and December 31, 2020

 

 

 

 

 

 

  Common stock, $0.001 par value; 200,000,000 and 150,000,000 shares authorized as of

  June 30, 2021 and December 31, 2020, respectively; 38,684,546 and 2,712,694 shares

  issued and outstanding as of June 30, 2021 and December 31, 2020, respectively

 

 

39

 

 

 

3

 

Additional paid-in capital

 

 

308,991

 

 

 

1,403

 

Accumulated deficit

 

 

(93,230

)

 

 

(63,714

)

Total stockholders’ equity (deficit)

 

 

215,800

 

 

 

(62,308

)

Total liabilities, redeemable convertible preferred stock, and stockholders’ equity (deficit)

 

$

244,689

 

 

$

92,703

 

 

(1) The balance sheet as of December 31, 2020 is derived from the audited financial statements as of that date

 

The accompanying notes are an integral part of these condensed financial statements.

1


 

LUCIRA HEALTH, INC.

CONDENSED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except share and per share data)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net sales

 

$

12,439

 

 

$

 

 

$

16,955

 

 

$

 

Cost of products sold

 

 

12,505

 

 

 

 

 

 

17,873

 

 

 

 

Gross loss

 

 

(66

)

 

 

 

 

 

(918

)

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

10,117

 

 

 

4,574

 

 

 

16,399

 

 

 

7,315

 

Selling, general and administrative

 

 

6,100

 

 

 

931

 

 

 

12,200

 

 

 

1,559

 

Total operating expenses

 

 

16,217

 

 

 

5,505

 

 

 

28,599

 

 

 

8,874

 

Loss from operations

 

 

(16,283

)

 

 

(5,505

)

 

 

(29,517

)

 

 

(8,874

)

Other income (expense), net:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Grant income

 

 

79

 

 

 

335

 

 

 

281

 

 

 

1,977

 

Interest income (expense)

 

 

4

 

 

 

(10

)

 

 

1

 

 

 

(10

)

Remeasurement of derivative liabilities and convertible notes

 

 

 

 

 

(1,444

)

 

 

(281

)

 

 

(1,444

)

Total other income (expense), net

 

 

83

 

 

 

(1,119

)

 

 

1

 

 

 

523

 

Net loss

 

$

(16,200

)

 

$

(6,624

)

 

$

(29,516

)

 

$

(8,351

)

Net loss per share of common stock, basic and diluted

 

$

(0.42

)

 

$

(2.90

)

 

$

(0.96

)

 

$

(3.68

)

Weighted-average number of shares used in net loss per share of common stock, basic and diluted

 

 

38,483,766

 

 

 

2,282,024

 

 

 

30,688,349

 

 

 

2,270,130

 

 

The accompanying notes are an integral part of these condensed financial statements.

2


 

LUCIRA HEALTH, INC.

CONDENSED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK

AND STOCKHOLDERS’ EQUITY (DEFICIT)

(Unaudited)

(In thousands, except share data)

 

 

 

 

Redeemable

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

Convertible Preferred Stock

 

 

 

Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balance as of March 31, 2021

 

 

-

 

 

 

-

 

 

 

 

38,550,148

 

 

 

39

 

 

 

307,903

 

 

$

(77,030

)

 

$

230,912

 

Issuance of common stock upon exercise of stock options

 

 

-

 

 

 

-

 

 

 

 

134,398

 

 

 

-

 

 

 

143

 

 

 

-

 

 

 

143

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

945

 

 

 

-

 

 

 

945

 

Net loss

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(16,200

)

 

 

(16,200

)

Balance as of June 30, 2021

 

 

-

 

 

$

-

 

 

 

 

38,684,546

 

 

$

39

 

 

$

308,991

 

 

$

(93,230

)

 

$

215,800

 

 

 

 

 

Redeemable

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

Convertible Preferred Stock

 

 

 

Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Deficit

 

Balance as of March 31, 2020

 

 

10,466,169

 

 

$

48,426

 

 

 

 

2,257,740

 

 

$

2

 

 

$

757

 

 

$

(28,093

)

 

$

(27,334

)

Issuance of common stock upon exercise of stock options

 

 

-

 

 

 

-

 

 

 

 

187,164

 

 

 

-

 

 

 

153

 

 

 

-

 

 

 

153

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

59

 

 

 

-

 

 

 

59

 

Net loss

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(6,624

)

 

 

(6,624

)

Balance as of June 30, 2020

 

 

10,466,169

 

 

$

48,426

 

 

 

 

2,444,904

 

 

$

2

 

 

$

969

 

 

$

(34,717

)

 

$

(33,746

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

Convertible Preferred Stock

 

 

 

Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity (Deficit)

 

Balance as of December 31, 2020

 

 

23,978,747

 

 

$

121,080

 

 

 

 

2,712,694

 

 

 

3

 

 

 

1,403

 

 

$

(63,714

)

 

$

(62,308

)

Conversion of redeemable convertible preferred shares into

   common stock

 

 

(23,978,747

)

 

 

(121,080

)

 

 

 

23,978,747

 

 

 

24

 

 

 

121,056

 

 

 

-

 

 

 

121,080

 

Conversion of convertible notes into common stock

 

 

-

 

 

 

-

 

 

 

 

1,470,947

 

 

 

2

 

 

 

24,980

 

 

 

-

 

 

 

24,982

 

Issuance of common stock upon IPO, net of issuance costs

 

 

-

 

 

 

-

 

 

 

 

10,350,000

 

 

 

10

 

 

 

159,889

 

 

 

-

 

 

 

159,899

 

Issuance of common stock upon exercise of stock options

 

 

-

 

 

 

-

 

 

 

 

172,158

 

 

 

-

 

 

 

190

 

 

 

-

 

 

 

190

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

1,473

 

 

 

-

 

 

 

1,473

 

Net loss

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(29,516

)

 

 

(29,516

)

Balance as of June 30, 2021

 

 

-

 

 

$

-

 

 

 

 

38,684,546

 

 

$

39

 

 

$

308,991

 

 

$

(93,230

)

 

$

215,800

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Total

 

 

Convertible Preferred Stock

 

 

 

Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

Stockholders'

 

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Deficit

 

 

Balance as of December 31, 2019

 

 

6,712,085

 

 

$

30,960

 

 

 

 

2,257,740

 

 

$

2

 

 

$

699

 

 

$

(26,366

)

 

$

(25,665

)

 

Issuance of Series B redeemable convertible preferred stock, net of issuance costs

 

 

3,754,084

 

 

 

17,466

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

Issuance of common stock upon exercise of stock options

 

 

-

 

 

 

-

 

 

 

 

187,164

 

 

 

-

 

 

153

 

 

 

-

 

 

 

153

 

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

117

 

 

 

-

 

 

 

117

 

 

Net loss

 

 

-

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(8,351

)

 

 

(8,351

)

 

Balance as of June 30, 2020

 

 

10,466,169

 

 

$

48,426

 

 

 

 

2,444,904

 

 

$

2

 

 

$

969

 

 

$

(34,717

)

 

$

(33,746

)

 

 

 

The accompanying notes are an integral part of these condensed financial statements.

 

3


 

 

LUCIRA HEALTH, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(29,516

)

 

$

(8,351

)

Adjustments to reconcile net loss to net cash used in operating

   activities:

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

1,473

 

 

 

117

 

Allowance for doubtful accounts

 

 

259

 

 

 

 

 

Depreciation and amortization

 

 

882

 

 

 

118

 

Remeasurement of derivative liabilities and convertible notes

 

 

281

 

 

 

1,444

 

Noncash interest expense

 

 

3

 

 

 

6

 

Noncash lease expense

 

 

172

 

 

 

150

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Inventory

 

 

(31,317

)

 

 

 

Accounts receivable

 

 

(3,358

)

 

 

 

Grant income receivable

 

 

91

 

 

 

1,639

 

Prepaid expenses and other current assets

 

 

(8,767

)

 

 

(800

)

Other assets

 

 

3,129

 

 

 

 

Accounts payable

 

 

2,678

 

 

 

527

 

Customer deposits

 

 

2,916

 

 

 

 

Accrued liabilities

 

 

13,635

 

 

 

47

 

Operating lease liabilities

 

 

(183

)

 

 

(135

)

Net cash used in operating activities

 

 

(47,622

)

 

 

(5,238

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Acquisition of property and equipment

 

 

(8,977

)

 

 

(2,285

)

Net cash used in investing activities

 

 

(8,977

)

 

 

(2,285

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock on IPO, net of issuance costs

 

 

159,899

 

 

 

 

Proceeds from issuance of convertible notes payable net of issuance costs

 

 

 

 

 

5,612

 

Proceeds from issuance of redeemable convertible preferred stock, net

   of issuance costs

 

 

 

 

 

17,466

 

Proceeds from exercise of stock options

 

 

150

 

 

 

153

 

Net cash provided by financing activities

 

 

160,049

 

 

 

23,231

 

Net increase in cash and restricted cash equivalents

 

 

103,450

 

 

 

15,708

 

Cash and restricted cash equivalents, beginning of period

 

 

60,550

 

 

 

4,100

 

Cash and restricted cash equivalents, end of period

 

 

164,000

 

 

 

19,808

 

Reconciliation to amounts on the balance sheets:

 

 

 

 

 

 

 

 

Cash

 

$

161,662

 

 

$

19,808

 

Restricted cash equivalents

 

 

2,338

 

 

 

 

Total cash and restricted cash equivalents

 

$

164,000

 

 

$

19,808

 

Supplemental disclosures of noncash financing and investing activities:

 

 

 

 

 

 

 

 

Purchase of property and equipment included in accounts payable and accrued liabilities

 

$

650

 

 

$

 

Vesting of early exercise options

 

$

40

 

 

$

 

Conversion of redeemable convertible notes payable principal and interest for common stock on IPO

 

$

24,982

 

 

$

 

Conversion of convertible redeemable preferred shares into common stock on IPO

 

$

121,080

 

 

$

 

 

The accompanying notes are an integral part of these condensed financial statements.

 

4


 

 

LUCIRA HEALTH, INC.

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

(In thousands, except share and per share data)  

Note 1. Organization

Description of Business

Lucira Health, Inc. (the “Company”) was incorporated under the laws of the state of Delaware on February 20, 2013 under the name DiAssess Inc. The Company changed its name to Lucira Health, Inc. in January 2020. The Company is located in Emeryville, California.

The Company is a medical technology company focused on the development and commercialization of transformative and innovative infectious disease test kits. The Company has developed a testing platform that produces high-complexity-laboratory-accurate molecular testing in a single-use and user-friendly test kit that is powered by two AA batteries and fit in the palm of a hand. The Company’s initial focus is within respiratory diseases, and initially for COVID-19 and influenza Types A and B indications.

On November 17, 2020, the Company received an Emergency Use Authorization (“EUA”) from the Food and Drug Administration (“FDA”) for (1) prescription at-home use with self-collected nasal swab specimens in individuals aged 14 and older who are suspected of COVID-19 by their healthcare provider and (2) use at the point-of-care (“POC”), with self-collected nasal swab specimens in individuals aged 14 and older, and in individuals aged 13 and under when the specimen is collected by a healthcare provider at the POC. People who are suspected of COVID-19 are those who are either symptomatic or are thought to have been exposed to COVID-19.  On April 9, 2021, the Company received its first FDA EUA authorization for over-the-counter (“OTC”) non-prescription use among symptomatic and asymptomatic individuals aged 14 and older (with self-collection) and children aged two to 13 (with parent collection).  

Reverse Stock Split

On January 28, 2021, the Company’s board of directors (the “Board”) approved a 1-for-4.3103 reverse stock split (the “Reverse Stock Split”) of the Company’s common stock and each series of its redeemable convertible preferred stock to be consummated prior to the effectiveness of the Company’s initial public offering (“IPO”) on February 4, 2021. The par value and authorized shares of the common stock and redeemable convertible preferred stock were not adjusted as a result of the Reverse Stock Split. All issued and outstanding common stock, preferred stock, options to purchase common stock and per share amounts contained in the financial statements have been retroactively adjusted to give effect to the Reverse Stock Split for all periods presented. The Company filed an amended and restated certificate of incorporation with the Secretary of State of the State of Delaware on January 28, 2021 that automatically effectuated the Reverse Stock Split without any further action required.

Initial Public Offering

On February 9, 2021, the Company closed its IPO of 10,350,000 shares of its common stock, including 1,350,000 shares of common stock issued pursuant to the full exercise of the underwriters’ option to purchase additional shares in the IPO, at a price to the public of $17.00 per share. The net proceeds to the Company from the IPO were $159.9 million, after deducting underwriting discounts and commissions of $12.3 million and offering expenses of $3.7 million. In connection with the IPO, all shares of redeemable convertible preferred stock and outstanding convertible notes converted into 25,449,694 shares of common stock.

Liquidity and Going Concern

The Company has incurred recurring losses and negative cash flows from operating activities since inception. The Company anticipates that it will continue to incur net losses into the foreseeable future. As of June 30, 2021, the Company had cash of $161.7 million and had an accumulated deficit of $93.2 million. The Company believes that cash as of June 30, 2021 will be sufficient to fund its planned operations for a period of at least 12 months from the date of the issuance of the accompanying financial statements.

Management expects to incur additional losses in the future and in order to continue to fund its operations the Company may need to raise additional capital to fully implement its business plan. The Company may raise additional capital through the issuance of equity securities, debt financings or other sources in order to further implement its business plan. However, if such financing is not available when needed and at adequate levels, the Company will need to reevaluate its operating plan and may be required to delay the development of new test kits.

5


 

Other Risk and Uncertainties

While the Company generated $17.0 million of revenues from the sale of its test kits during the six months ended June 30, 2021, there still remains uncertainty of future revenue from sales of its test kits. The Company is devoting most of its efforts to the sales and marketing and research and development of its test kits. The Company is subject to a number of product risks, including the receipt of regulatory approvals for additional indications of the COVID-19 test kit and timing thereof, size of the market opportunity, demand from the public and members of the medical community for the COVID-19 test kit and rate of adoption of the COVID-19 test kit. The commercial success of the COVID-19 test kit was initially dependent upon physicians, and healthcare providers accepting and adopting our test kit. Since receiving the EUA authorization for OTC use, our commercial business has evolved to include partnerships with testing providers, distributors and businesses. The Company is also subject to risks related to compliance with government regulations, protection of proprietary technology, dependence on third-parties, product liability, and dependence on key individuals.

In connection with the COVID-19 pandemic, governments have implemented significant measures, including closures, quarantines, travel restrictions and other social distancing directives, intended to control the spread of the virus. Companies have also taken precautions, such as requiring employees to work remotely, imposing travel restrictions and temporarily closing businesses. The Company believes some of the precautionary measures and challenges resulting from the COVID-19 pandemic may continue as COVID-19 becomes endemic, but there is uncertainty and volatility in these and other trends despite the continued progress of vaccination efforts. To the extent that restrictions remain in place, additional prevention and mitigation measures are implemented in the future, or there is uncertainty about the effectiveness of these or any other measures to contain or treat COVID-19, there is likely to be an adverse impact on global economic conditions and consumer confidence and spending, which could materially and adversely affect the Company’s research and development, as well as operational activities. At this time, the Company is working to manage and mitigate potential disruptions to its research and future manufacturing and supply chain considerations. The Company has not experienced hindrance to its operations or material negative financial impacts as compared to prior periods. At this time, the extent to which the COVID-19 pandemic impacts the Company’s business will depend on future developments, which are highly uncertain and cannot be predicted.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The Company’s financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), and applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) for interim financial information and pursuant to the instructions of the SEC on Form 10-Q and Article 10 of Regulation S-X of the SEC. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the management’s opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation of the results of operations and cash flows for the periods presented have been included.

The accompanying balance sheet as of June 30, 2021, the statements of operations for the three and six months ended June 30, 2021 and June 30, 2020, the statements of redeemable convertible preferred stock and stockholders’ equity (deficit) for the three and six months ended June 30, 2021 and June 30, 2020, and the statements of cash flows for the six months ended June 30, 2021 and 2020 are unaudited. The unaudited interim financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of June 30, 2021 and the results of its operations and cash flows for the six months ended June 30, 2021 and June 30, 2020. The financial data and other information disclosed in these notes related to the three and six months ended June 30, 2021 and June 30, 2020 are unaudited. The results for the three and six months ended June 30, 2021 are not necessarily indicative of results to be expected for the year ending December 31, 2021, any other interim periods, or any future year or period. These financial statements and accompanying notes should be read in conjunction with the financial statements and notes thereto in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, as filed with the SEC on March 31, 2021.

Use of Estimates

Significant estimates and assumptions made in the accompanying financial statements include, but are not limited to recognition of grant income, the fair value of the Company’s common stock and redeemable convertible preferred stock, the fair value of derivative liabilities and convertible notes payable, stock-based compensation, incremental borrowing rate, revenue recognition, inventory valuation, sales returns, warranty reserves, allowance for doubtful accounts, accrued research and development costs, uncertain tax positions, the recoverability of its long-lived assets and the valuation of deferred tax assets. The Company evaluates its

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estimates and assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could materially differ from those estimates.

Concentration of Credit Risk and Significant Suppliers

Financial instruments that potentially subject the Company to credit risk consist principally of cash held by financial institutions, grant income receivables and account receivables. Substantially all of the Company’s cash is held at one financial institution that management believes is of high credit quality. Such deposits may, at times, exceed federally insured limits.

The Company’s grant income receivable balance at each respective balance sheet dates results from grant agreements with the U.S. government.

As of June 30, 2021, accounts receivable balance was $3.4 million. Two customers accounted for 12% and 10% of accounts receivable balance. As of December 31, 2020, accounts receivable balance was $0.3 million and was comprised by the Company’s only customer. The Company evaluates the collectability of its accounts receivable based on historical collection trends and provides for an allowance for doubtful accounts. Allowance for doubtful accounts was $0.4 million and $0 million as of June 30, 2021 and December 31, 2020, respectively. Two customers accounted for 14% and 10% of the Company’s revenue during the three and six months ended June 30, 2021.

The Company is dependent on key suppliers, who are single source, for certain laboratory materials and inventory items. An interruption in the supply of these materials could temporarily impact the Company’s ability to manufacture its commercial inventory and perform development, testing and clinical trials related to its products.

Fair Value Measurements

The carrying value of the Company’s cash, accounts receivable, grant income receivable, prepaid expenses, other current assets and accrued liabilities approximate fair value due to the short-term nature of these items.

Fair value is defined as the exchange price that would be received for an asset or an exit price paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

The fair value hierarchy defines a three-level valuation hierarchy for disclosure of fair value measurements as follows:

 

Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities;

 

Level 2—Inputs other than quoted prices included within Level 1 that are observable, unadjusted quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

 

Level 3—Unobservable inputs that are supported by little or no market activity for the related assets or liabilities.

The categorization of a financial instrument within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The Company’s derivative liabilities and convertible notes are measured at fair value on a recurring basis and are classified as Level 3 liabilities until conversion of the notes. The Company records subsequent adjustments to reflect the increase or decrease in estimated fair value at each reporting date on the statement of operations.

Cash, and Restricted Cash Equivalents

The Company considers highly liquid investments purchased with a remaining maturity date upon acquisition of three months or less to be cash equivalents and are stated at cost, which approximates fair value. As of June 30, 2021 and June 30, 2020, there were no cash equivalents.

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As of June 30, 2021, the Company held a restricted cash balance of $2.3 million which was used to secure a letter of credit in relation to the Company’s contract manufacturer to secure certain purchases made on the Company’s behalf. The cash was deposited in a money market account with maturities of three months or less and thus considered a restricted cash equivalent.

Inventories Produced in Preparation for Product Launches

The Company capitalizes inventories produced in preparation for product launches sufficient to support estimated initial market demand. Typically, capitalization of such inventory begins when positive results have been obtained for the clinical trials that the Company determines are necessary to support regulatory approval, uncertainties regarding ultimate regulatory approval have been significantly reduced and the Company has determined it is probable that these capitalized costs will provide future economic benefit in excess of capitalized costs. The factors considered by the Company in evaluating these uncertainties include the receipt and analysis of positive clinical test results for the underlying product, results from meetings with the relevant regulatory authorities prior to the filing of regulatory applications, and the submission of the regulatory application. The Company closely monitors the status of each respective product within the regulatory approval process, including all relevant communication with regulatory authorities. If the Company is aware of any specific material risks or contingencies other than the normal regulatory review and approval process or if there are any specific issues identified relating to safety, efficacy, manufacturing, marketing or labeling, the related inventory would generally not be capitalized.

For inventories that are capitalized in preparation of product launch, anticipated future sales, expected approval date and shelf lives are evaluated in assessing realizability. The shelf life of a product is determined as part of the regulatory approval process; however, in evaluating whether to capitalize pre-launch inventory production costs, the Company considers the product stability data of all of the pre-approval production to date to determine whether there is adequate expected shelf life for the capitalized pre-launch production costs. Prior to obtaining the EUA authorization for its COVID-19 test kit on November 17, 2020, the Company charged $2.3 million of preapproval inventory to research and development expense. After receipt of the EUA in November 2020, the Company accounted for all production item purchases as inventory in accordance with its inventories policy below. Preapproval inventories previously recorded as research and development expense that are subsequently sold will have a zero cost of product. Subsequent to receipt of the EUA in November 2020, the Company utilized a portion of the preapproval inventory resulting in a remaining unused amount of $1.3 million as of December 31, 2020. During the three months ended June 30, 2021, the Company utilized less than $0.1 million of the preapproval inventory write-offs for cost of sales. During the six months ended June 30, 2021, the Company utilized all of the preapproval inventory write-offs for cost of sales of $1.0 million and for selling, general and administrative and research and development activities of $0.3 million.

Inventories

The Company values its inventory at the lower of cost or net realizable value and determines the cost of inventory using standard costs which closely resembles the first-in, first-out method. Lower of cost or net realizable value is evaluated by considering obsolescence, excessive levels of inventory, deterioration and other factors.

In order to assess the ultimate realization of inventories, the Company is required to make judgments as to future demand requirements compared to current or committed inventory levels. The Company periodically reviews its inventories for shelf life, excess or obsolescence and writes-down obsolete or otherwise unmarketable inventory to its estimated net realizable value. If the actual net realizable value is less than that estimated by the Company, or if it is determined that inventory utilization will further diminish based on estimates of demand, additional inventory write-downs may be required. Amounts written-down due to unmarketable inventory are recorded in cost of revenue and a new lower-cost basis for the inventory is established. The Company did not record any write down adjustment during the six months ended June 30, 2021.

Warranty

The Company offers a standard product warranty that our products will perform as intended upon the date of original delivery for a reasonable period of time, which is the shorter of date usage or product shelf life. The Company has the obligation, at its option, to either refund, repair or replace a defective product. At the time revenue is recognized, an estimate of future warranty costs is recorded as a component of cost of products sold. The estimate of future warranty costs is based on historical as well as current product failure rates, service delivery costs incurred in correcting product failures, and warranty policies. The Company will regularly review these estimates to assess the appropriateness of our recorded warranty liabilities and adjust the amounts as necessary. As of June 30, 2021 and December 31, 2020, the accrued liability for warranty returns was not significant.

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Grant Income Receivable

Grant income receivable consists of billed and unbilled amounts earned from various government grants for costs incurred prior to the period end under reimbursement contracts. The amounts are billed to the respective government agencies. As collection is deemed probable, no allowance for doubtful accounts has been established. If amounts become uncollectible, they are recorded as operating expense in the Company’s statements of operations. Of the amounts presented on the balance sheets as grant income receivable, $0.1 million and $0.2 million were unbilled as of June 30, 2021 and December 31, 2020, respectively.

Property and Equipment, Net

Property and equipment are stated at cost, net of depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, generally between three and seven years. Leasehold improvements are amortized on a straight-line basis over the lesser of the estimated useful life of the asset or the remaining term of the related lease. Maintenance and repairs are charged to expense as incurred, and improvements and betterments are capitalized. When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the balance sheet and any resulting gain or loss is reflected in other income or expense in the statements of operations in the period realized.

Leases

The Company determines if an arrangement is a lease at inception and if so, determines whether the lease qualifies as operating or finance. Operating leases are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the balance sheets. The Company did not have any finance leases as of June 30, 2021 and December 31, 2020.

ROU assets represent the right to use an underlying asset for the lease term and lease liabilities represent the obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at lease commencement date based on the present value of lease payments over the lease term. When the Company’s leases do not provide an implicit rate, an incremental borrowing rate is used based on the information available at commencement dates in determining the present value of lease payments. The Company uses the implicit rate when readily determinable. The operating lease ROU assets also include any lease payments made and exclude lease incentives when paid by the Company or on the Company’s behalf. The Company’s lease terms may include options to extend or terminate the lease when it is reasonably certain that it will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term.

The Company has lease agreements with lease and non-lease components. The Company elected to not separate lease and non-lease components for all of its building leases. The Company also made an accounting policy election to recognize lease expense for leases with a term of 12 months or less on a straight-line basis over the lease term and not recognize ROU assets or lease liabilities for such leases.

Long-Lived Assets

The Company’s long-lived assets are comprised principally of its property and equipment, including leasehold improvements and ROU assets.

If the Company identifies a change in the circumstances related to its long-lived assets that indicates the carrying value of any such asset may not be recoverable, the Company will perform an impairment analysis. A long-lived asset is deemed to be impaired when the undiscounted cash flows expected to be generated by the asset (or asset group) are less than the asset’s carrying amount. Any required impairment loss would be measured as the amount by which the asset’s carrying value exceeds its fair value and would be recorded as a reduction in the carrying value of the related asset and a charge to operating expense. No impairment of long-lived assets was recorded during the six months ended June 30, 2021 and June 30, 2020.

Accrued Research and Development Costs

The Company records accrued expenses for estimated costs of its research and development activities conducted by third-party service providers, which include clinical trial activities. The Company records the estimated costs of research and development activities based upon the estimated amount of services or supplies provided but not yet invoiced and include these costs in accrued liabilities in the balance sheets and within research and development expense in the statements of operations. The Company records accrued expenses for these costs based on factors such as estimates of the work completed or supplies received and in accordance with agreements established with these vendors. Any payments made in advance of services or supplies provided are recorded as prepaid assets, which are expensed as the services or supplies are received.

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The Company estimates the amount of work completed through discussions with internal personnel and external service providers as to the progress or stage of completion of the services and the agreed-upon fee to be paid for such services. The Company makes significant judgments and estimates in determining the accrued balance in each reporting period. As actual costs become known, the Company adjusts its accrued estimates.

Redeemable Convertible Preferred Stock

The Company’s shares of preferred stock are assessed at issuance for classification and redemption features requiring bifurcation. The Company’s preferred stock is not mandatorily redeemable. The Company presents as temporary equity any stock which (i) the Company undertakes to redeem at a fixed or determinable price on the fixed or determinable date or dates; (ii) is redeemable at the option of the holders, or (iii) has conditions for redemption which are not solely within the control of the Company. The Company’s preferred stock is redeemable if the Company has not been dissolved within 90 days following the occurrence of certain deemed liquidation events, which the Company determined is not solely within its control and thus has classified shares of redeemable convertible preferred stock as temporary equity until such time as the conditions are removed or lapse. The Company initially records redeemable convertible preferred stock at fair value, net of issuance costs. Because the occurrence of a deemed liquidation event is not currently probable, the carrying values of the shares of redeemable convertible preferred stock are not being accreted to their redemption values. Subsequent adjustments to the carrying values of the shares of redeemable convertible preferred stock would be made only when a deemed liquidation event becomes probable.

In connection with the IPO on February 9, 2021, all outstanding shares of redeemable convertible preferred stock converted into 23,978,747 shares of common stock.

Deferred Offering Costs

The Company capitalized certain legal, professional accounting and other third-party fees that are directly associated with in-process equity financings, including the IPO, as deferred offering costs until such financings are consummated. After consummation of the financing, these costs are recorded as a reduction of the proceeds received from the equity financing. If a planned equity financing is abandoned, the deferred offering costs are expensed immediately as a charge to operating expenses in the condensed statements of operations. There was $0.0 and $2.2 million of deferred offering costs related to the Company’s IPO recorded as other assets on the Company’s balance sheet as of June 30, 2021 and December 31, 2020, respectively. The Company recorded additional offering costs between December 31, 2020 and February 9, 2021 and recorded $3.7 million as an offset to the IPO proceeds as additional paid in capital on the closing date.

Revenue Recognition

The Company recognizes revenue under Accounting Standards Codification (“ASC”) Topic 606 (“ASC 606”), “Revenue from Contracts with Customers” when a customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the Company performs the following five steps:

 

(i)

identify the contract(s) with a customer;

 

(ii)

identify the performance obligations in the contract;

 

(iii)

determine the transaction price;

 

(iv)

allocate the transaction price to the performance obligations in the contract; and

 

(v)

recognize revenue when (or as) the entity satisfies a performance obligation.

Under ASC 606, assuming all other revenue recognition criteria have been met, the Company will recognize revenue for arrangements upon the transfer of control of the Company’s products to its customers, which is currently upon the shipment of the product to the customer under the Company’s standard terms and conditions. There are no further performance obligations by the Company to the customer after shipment of the product. Control of the Company’s products is transferred at a point in time.

Revenue is measured based on the amount of consideration that the Company expects to receive as reduced by estimated discounts and allowances.

All of the Company’s revenue has been derived from sales of its test kits. During the first quarter 2021 the Company marketed its test products to physicians and licensed healthcare providers in the United States. On April 9, 2021, the Company received its first FDA EUA authorization for OTC non-prescription use and expanded its marketing to include domestic testing providers, distributors, businesses and international distributors.

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Collection of the Company’s net receivables generally occur within 30 days of billing. Contracts do not contain significant financing components based on the typical period of time between delivery of products and collection of consideration.

Costs to obtain or fulfill a contract are currently expensed when incurred because our performance obligation is satisfied at a point in time.

The Company invoices its customers upon shipment of product, and records its sales upon shipment in accordance with its standard terms and conditions, unless underlying customer contracts specify otherwise.

When necessary, the Company invoices and collects sales tax from its customers for sales of products. The Company has elected to exclude sales tax from the measurement of the transaction price.

The following table sets forth the Company’s revenue by geographic area based on the customers’ locations:

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended

June 30,