Greetings, and welcome to Lucid Diagnostics Second Quarter 2020 Business Update Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I'd now like to turn the conference over to your host, Adrian Miller. Please proceed, sir.

Thank you, Operator. Good afternoon, everyone. This is Adrian Miller, Vice President of Investor Relations at Lucid Diagnostics. Thank you for participating in today's business update call. Joining me today on the call are Dr. Lishan Aklog, Chairman and CEO of Lucid Diagnostics, along with Dennis McGrath, the Chief Financial Officer of Lucid Diagnostics. The press release announcing our business update and financial results is available on Lucid's website. Please take a moment to read the disclaimer about the forward-looking statements in the press release. The business update press release and this conference call both include forward-looking statements, and these forward-looking statements are subject to known and unknown risks and uncertainties that may cause actual results to differ materially from the statements made. Factors that could cause actual results to differ are described in the disclaimer and in our filings with the Securities and Exchange Commission. For a list and description of these and other important risks and uncertainties that may affect future operations, see Part I Item 1A entitled Risk Factors in Lucid's most recent annual report on Form 10-K filed with the Securities and Exchange Commission and any subsequent updates filed in the quarterly report on Form 10-Q and any subsequent forms 8-K filings. Except as required by law, Lucid disclaims any intentions or obligations to publicly update or revise any forward-looking statements to reflect changes in expectations or in events, conditions or circumstances on which those expectations may be based or that may affect the likelihood that actual results will differ from those contained in the forward-looking statements. With that said, I would like to turn the call over to Lishan Aklog. Dr. Aklog?

Thank you, Adrian. Good afternoon, everyone, and thank you for joining us today. Before proceeding, I'd like to thank our long-term shareholders for your ongoing support and commitment. Our team is always is singularly focused on growing leased while enhancing long-term shareholder value. The past quarter and recent weeks have been anything, but routine. In fact, it has been a transformational period for Lucid during which we have achieved key milestones, which represents the final brick in the foundation, upon which we are building this company and driving its long-term growth stage. Since our inception, we've had in EsoGuard and EsoCheck, groundbreaking technologies, to prevent cancer deaths through early pre-cancer detection, targeting a massive addressable market. We now have a consensus among the major specialty societies, which explicitly support the use of our products for this purpose and expand the addressable market even further. And for the first time, we are truly from an operational perspective, an independent full-service medical diagnostic company capable of fulfilling the clinical and economic potential of these products. For example, we have our own growing sales and marketing team with now well owned proven sales training and sales processes, targeting physicians and institutions through two well-defined sales channels. We have our own expanding network of sites, our Lucid test centers, where patients referred for testing can quickly and conveniently undergo non-invasive cell sample collection. This network now incorporates a new paradigm, satellite Lucid Test Centers, which are co-located with physician practices and institutions. And perhaps, the most transformational milestone is that we have fully operationalized our own CLIA-certified and CAP-accredited laboratory, LucidDx lab, staffed by our own personnel, operating within our own quality standards and processes, and most importantly capable of submitting and aggressively pursuing claims directly with payers, which we recently began to. On…

Thanks Lishan, and good afternoon everyone. Our preliminary and summary financial results for the second quarter ended June 30 were reported in our press release that was published earlier today. Plan our file our quarterly report for Lucid Diagnostics on Form 10-Q with the SEC later today maybe even in a few minutes. At that time, it will be available at sec.gov and also on the Lucid website. As you already know from our previous corporate update calls that as a rule EsoGuard performer recognized as GAAP revenue when cash is collected by the company. Also as previously mentioned is more than likely will be true during this transition period of negotiating third-party private payer reimbursement contracts and related coverage policies. As part of the [Technical Difficulty] to our company-owned commercial clinical laboratory, we also contracted with a revenue cycle management company, or RCM as mentioned. The service provider will submit third-party claims on our behalf. The RCM service provider will also oversee payer claims, deals processes, patient billing, online payment collection and claims tracking. With the appropriate licenses and certifications for billing and credentialing secured and are recently having put in place [Technical Difficulty] back-office systems claims for approximately 1,000 tests performed since the establishment of our own lab are now being processed, including the [Technical Difficulty] three months ended June 30, 2022. Presently recognized revenue for GAAP purposes is subject to actual amounts collected during the period. Due to the delays as Lishan pointed out in receiving certain information from the [Technical Difficulty] related to establishing required lock boxes at JPMorgan our commercial bank. The initial batch claims were submitted by RCM, by our RCM on August [Technical Difficulty] accordingly since the RCM submitting process from [Technical Difficulty] June 30 there were no collections during the three months…

Thank you very much, sir. At this time we will be conducting a question-and-answer session [Operator Instructions] The first question comes from Ross Osborn from Cantor Fitzgerald. Please proceed with your question, Ross.

Hi, congrats on the strong volumes and thanks for taking questions.

Hi, Ross. How are you?

I am well. How are you guys.

Good.

Starting off, given the updated guidelines to include women, has any women been screened at this point? And then how should we think about your marketing efforts going forward to drive awareness of the female population?

Great question. So it gives me the opportunity to make a bit of a distinction here. So the -- for the -- sort of commercial experience for the tests that are being performed, we have not in any way limited tests or frankly argued strongly that women should not be tested. I don't have the numbers in terms of the breakdown, but there are definitely women who have undergone the test within the commercial side. And we expect that we'll be able to make that distinction a little bit more clearly given particularly that the ACG guideline has no longer hedging on that. It is important and it is actually one of the aspects, the advantages of us being pausing the BE1 study is that our clinical study that B1 and BE2 studies in particular did -- were actually designed only to enroll men, because we felt it would give us the best shot with -- in our discussions with the FDA, we knew that that would be an important consideration given those guidelines. So when we eventually reboot the B1 screening study, we will be able to expand -- we'll work with FDA to expand the inclusion criteria to be consistent with the updated guidelines, which include women.

Okay, great. And then maybe switching over to marketing efforts. Is there any feedback you can share on your advertising initiatives in existing markets? And then with the rollout of new geographies, what market development initiatives do you plan to undertake based upon your learnings from the initial markets?

Great. And thanks for asking, that gives me a chance to elaborate on something I didn’t earlier, which is that one of the things that we are definitely keeping at a low burn, and being cautious about is our DTC efforts. So as you know we do have our EsoGuard Telemedicine program in place. It's actually quite useful, because when we get self referrals from individuals who hear about us through various channels are the grade fine from the web. We have a mechanism, by which they can secure testing if they're in the vicinity of a test center or a practice that does it even if their primary care physician is not willing to order the test. So that's useful and we're happy we have that in place. We have some data back from the efforts within Phoenix, and we know that and we've mentioned we've done that on a limited basis. And we've had good responses. We've had good response with regard to general awareness, as well as people who have come to the test centers through the telemedicine program having directly heard from that. All that being said just one thing to emphasize, we are definitely looking to keep that in check and that's one of the things when this company-wide initiative that we've chosen to not invest significant resources. And because frankly that's paying for a test volume that's not reliably get reimbursed. So we have the results in place. We have the collateral in place. We have the telemedicine program in place and still useful at a low level. But our plans for the coming quarters until reimbursement is more predictable is to focus entirely on the other two sales channels focused -- targeting primary care physicians and specialists and institutions.

Okay, got it. Congrats again on the progress, and thanks for taking my questions.

Thanks Ross.

Thank you. The next question comes from Mike Matson from Needham & Company. Please proceed with your question Mike.

So, just on the PPO Agreements. I mean I've never heard this. I'm assuming they're smaller. Is that kind of the strategy to start with some smaller ones and sort of work your way up, or I guess just why these particular ones?

Yes. So, let me talk a little bit about them. So, these are secondary PPOs and there's an entire sort of market of secondary preferred provider organizations that are not small. Prime Health is the second largest in the country and has -- they don't fully report their numbers but are in the 10 million to 20 million covered lives. So, they're not small but they're really aggregators. They have providers within their network that they contract like us for set fees and they have clients which include some health plans employers, unions, and other entities that contract with them directly to provide -- to participate in these PPS services. So, they're not at the Blue Cross large nationwide or even large regional traditional healthcare plans, but they do similar purpose. And you hit it the right thing which is that they are lower-hanging fruit. So, it's a little bit certainly easier to make these arrangements. We've been quite gratified that we've been able to hold the line on payment as a percentage of our charges and payment numbers that are quite attractive to us and we'll see. We'll obviously know in the coming quarters how much traction we get from these. But they're a place to start while we are getting our clinical utility data set up in the claims history so that we could have the more fulsome conversations with them or our traditional health plans and as we start to see how the out-of-network payment trajectory plays out. As you know we our third-party laboratory was generating out-of-network receipts at a decent clip at a 50% to 60% sort of typical out of network coverage level and we're looking forward to seeing how whether if we can reproduce and increase that particularly with -- now that we have the ability to be more aggressive about pursuing those. So, past a question with regard to the secondary PPOs where we'll see that we'll see how they translate into receipts. But there are lots of them out there. We'll continue to report as we sign them up and continue to expand the number of covered lives that are covered with them.

Okay. Thanks. And I'm glad you mentioned that 50% to 60% number. So, I want to make sure I understand that correctly. So, that was for the prior lab that you guys were using that was doing their own sort of billing. So, I mean is that a reasonable kind of assumption for with this revenue cycle manager that you're now using that they could get maybe 50% to 60% of the test paid for?

Just to be clear not 50% to 60% of the tests they are receiving 50% to 60% of the less price basically we were charging return $2,000. And so -- and that's kind of a standard out of network. We weren't balanced billing the patients right? So those were -- they weren't balance on the patients. So that -- I think we were averaging about they were averaging about $1,100 which represents a bit more than 50% of our charge that's gratifying and we hope to reproduce that in terms of the percentage of tests that are actually generating that number and the trajectory we certainly hope to do better than they are because we're in a much stronger position to be aggressive in pursuing those claims. But we need a couple of quarters to see how that plays.

Okay. And I mean, is there any way to -- you've got the sales force out there, you've got these test centers. Is there any way to try to target patients that are, for example, in these PPOs or somehow more likely to actually resolve and you getting paid and getting a cash collection?

Yes.

We actually mentioned that and it was maybe kind of buried in the press release on the test centers and I'm not sure -- I don't remember if I reiterated that today. But absolutely, yes, because many of these are somewhat reasonable and even some are local. And so, when we -- now that we're kind of unshackled from the states that we had targeted because of low regulatory hurdles and we have the full regulatory program in place. We're free to pursue placement of test sensors wherever we choose. And so -- so absolutely we have been selecting -- we have a clear process where we're selecting the sites, the ones we've done so far and the sites that we're looking to complete for the rest of the year in areas that overlap with coverage, as well as I mentioned areas where we already have a presence with our sales force. So, yes, there's an opportunity to do that. We'll, obviously, have to see how that plays out in terms of yield.

Okay. And then, just finally on the satellite test centers. You kind of explained what it was, but I guess I was wondering kind of how that came about and why you opted to do that as opposed to just the -- just maintain the existing, kind of, test center model that you had.

Yes. It's not because there was any issue frankly with the -- to test center model. That's cranking along just as we've designed. It really arose from kind of spontaneously and I take -- I give credit to the team on the ground for their creative thinking around this from more of the other channel the engagements with specialty practices and institutions particularly large primary care and multi-specialty practices and for example community hospitals where in discussions with those -- that's a different, as I’ve mentioned before, that's a different engagement where we're not looking to just get them to order a test to send to our test center, but we're looking for them to kind of build a program. And as you go through the conversations around what that takes and how to put together the infrastructure and scheduling and so forth and who's going to do it, the conversation often comes up about, hey, we're trying to figure out who should do this within our team and which NP to allocate or other professionals to allocate to do the EsoCheck procedures. Then the question came up of could we be in a position, we have some extra capacity with our nurse practitioners in certain areas, could we provide a nurse practitioner to come in to a practice and utilize space that's provided to them to process patients, to do EsoCheck procedures that are referred from them, either as an interim step or maybe even potentially as a longer-term step. So it really was something that just came about creatively to facilitate the expansion of the second channel, the specialty and institutional channel. And when I first heard about it, I was really quite excited and interesting. It's something we had contemplated at the beginning. And we obviously, this time went through an exhaustive compliance assessment with our in-house and external team to make sure that it was being done in a properly compliant way. And it's been gratifying so far. So early, early, early efforts. Again, it doesn't -- not detracting from anything. It wasn't because other aspects of what -- of how we've been pursuing this have not worked or anything to do with our Lucid Test Centers. It's just frankly another opportunity to get patients in a room and get them to test.

Okay. Got it. Thank you.

Okay. Thanks, Mike.

Thank you. The next question comes from Ed Woo from Ascendiant Capital. Please proceed with your question, Ed.

Yes. Congratulations on the progress. As you guys continue with Stage 2 of moving out your test centers to a bigger market -- bigger population markets, are you having any issues finding labor, nurse practitioners or is the cost of these test centers going up as you go to bigger population areas?

So great question. So as I've kind of hinted both with regard to this and with regard to recruiting are -- the personnel for the laboratory, we are very much going to this with expecting headwinds. There's a tight labor market particularly for skilled personnel. And I don't mean to minimize the effort that our team has had and they've worked incredibly hard to fill these slots. But now they've done pretty well. And we've been able to get high caliber people. We have quite high standards. So, the interview process particularly for the sales reps is very rigorous now. We have a much better kind of profile of what these -- particularly the primary care sales reps would do. We know we have a much better sense over the past year as to what works and what doesn't. And so, we just had a training event last week and high-caliber folks and we've been able to get them in the door and excited about moving forward. So again that's just kudos to the team to overcome the -- these sort of broader headwinds to be able to continue to fill those roles.

Great. And then you start to open these test centers at more bigger markets is your rental costs...

Oh yes. Sorry. Yes. So I'll let Dennis comment on that but the general answer is no. I mean we 00 those numbers the kind of the two tests per week to break reimbursed test per week to breakeven are based on even somewhat conservative estimates of lease costs. And even in these larger cities, sure it costs more to rent the medical office in Orange County than it does in Boise Idaho, but that difference does not substantially change the overall model or the return on investment from them. Dennis, do you want to add anything to that?

Yes I agree with that. In a smaller markets the rental -- monthly rental is in the $1000 to $1500 a month range in some cities even lighter than that. And some of the bigger markets with bigger pricing -- it might range $1500 to $2500 a month. But as you can quickly see you're talking about a handful of tests over the course of a year to kind of pay for that. So, it really isn't a factor in the decision about where to place these. From a cost of labor standpoint your bigger markets are probably still trades within a fairly narrow range. You might see a 10% to 50% variance. But again, the conclusion in terms of how to cover the overhead there with a handful of treatment still applies even in the bigger markets we're experiencing.

Yes, it's really exciting because now it gives us the ability to do just like any business placing sites to do fairly sophisticated market analysis demographics. East traffic just all the things that you need to look for to try to make it easy to get a good catchment area to link it up with primary care and other health care institutions that you think are high-yield targets. And also, as I mentioned for the first time, putting test centers in areas where we already have personnel. And as you might imagine the personnel in Ohio and in Orange County who have been even in Texas who have been working hard on the non-LTC side are ecstatic to have an LTC that will help them -- will really help their efforts a lot. So it's a lot of fun at to try to figure those out.

Great. Well, I'm sure, you can't wait until they open one in the big apple, because if you could make it to New York, you can make it anywhere. Thanks a lot guys. Thank you for answering my question.

Thank you.

Thank you. The next question comes from Mark Massaro from BTIG. Please proceed with your question, Mark.

Hey, Mark.

Hey, guys. It's going to be tough to follow up that last comment about New York, but anyway congratulations on the really strong Q2. Certainly, your volumes beat my estimate, and I was not expecting revenue in Q2. And I apologize I've been jumping around different calls and missed your prepared remarks. But do you think Q3 is the period where you can start recognizing revenue or do you think it's going to take a little bit longer than that just given some of the administrative items you guys have laid out?

Yes. I'll defer that to Dennis. But I think…

So the second quarter had no revenue, because of getting set up with the revenue cycle management company. That's in place. And largely, it wasn't the revenue cycle management company. It was related to the IRS certain documents, we needed to get to going to open up the lockbox, which was a condition for the revenue cycle management company to put certain things in place. That's done. We started submitting claims on August 1. The overall guideline in terms of we'll recognize revenue upon collection. So we are submitting claims to payers. There's roughly 1,000 tests since we started our own lab 850 in the most recent quarter and submit it. If we use the experience from ResearchDx as a proxy for what might happen. Those that got paid were being paid an out-of-network rates in 50% to 60%, and actually that was increasing time. One of the things that ResearchDx didn't do that SYNERGEN will do for us and it's of our overall due to push just policies and contracts with the larger – appeal those denials which is a normal process for anybody at the early stages of reimbursement. It could also help in terms of the overall payment per claims submitted. So in terms of the third quarter, it's reasonable to expect that there'll be some revenue. How much of those claims that are submitted will get paid is still somewhat of an uncertainty, and it will take some time to catch up. I think we all know that reimbursement from your personal experience is all a little tiresome. But it is our expectation in the second half. We'll catch up on or have an explanation of benefit for many of those that we have submitted and understand where we stand with payments per claim submitted. So I can't give you a full answer that what you asked, but that gave you kind of the boundaries of what to expect.

Okay. That's helpful. And obviously, you guys are scaling the organization which is nice to see especially at a time when other companies are shrinking their organization. So, certainly some reps looking for jobs. Maybe can you just talk about of the 850 volumes you had in the quarter, how much of that was a repeat orders from existing physicians? And maybe how much of that was whether you want to call it same-store versus maybe additional reps contributing or volumes coming from territories that you didn't have set up like six months ago?

Yeah. I can't – I'm not sure, I certainly can't give you numbers on that. I can sort of qualitatively tell you that, often the assumption is that it's -- that you're going to again even early in our experience where we had very, very chunky volume with a few large providers like you folks representing a large portion that's obviously spread out substantially, and we do have sites that are generating repeat business. But there is a meaningful amount of new account openings. And again we're not really at the point where that the noise and those numbers is sufficiently limited to report on it, and make it useful. But we're seeing both, EC [ph] described -- let me just, sort of, a related point that you opened on, which is that we are expanding and we look to expand through the end of this year. But as I mentioned after we get to that $60 million total number and just under 40 reps. We'll likely slow that growth down quite a bit and look to do what you're saying, which is to drive in our existing areas at our existing geographies with our existing team, both same-store, as well as new account openings and kind of prior volume with the existing team really because of the broader initiative and focus we have on our runway and being conscious of that.

Excellent.

Yes, there are a couple of other things that we've talked about that might help in terms of that and we're still developing the kind of as you said same-store metrics. But one of the things that in Lishan’s prepared remarks is that the test centers out of the total tests are about two-thirds of the total and Lishan also talked about how we're growing the sales force and it takes about four months for them to be productive. We exited March the first quarter with 21 people in the sales force, which were designated as primary care folks. So if you think about four months produced the same store sales force of those reps, we're producing a great portion of that. Now we presently in August about a headcount of 40, and the primary care salespeople are at four [ph]. So to look at who was producing in the second quarter -- predominantly those 10 folks in the primary area and driving test to our test centers. So it's not completely responsive to your question, but I will give you a little bit more color in terms of why we're pretty optimistic about where we're headed.

Just to be clear, I just want to make one point to clarify that number just so people don't miss. So we -- the proportion of tests that are coming through our test centers has gone up and it was 20 at one point, now it's pushing 70%. So that's great, because it's sort of consistent with where we think the long-term model is. But I want to make sure that that doesn't, people don't interpret from that the other channel, the institutions and the specialty practices, which are longer lead times, right, because that's program building. That's not, hey, could you order -- maybe we could order test for this month. That part of the business grew as well. And we think it's an important part of the business as well. So we're not shifting from that group, from that channel to the primary care channel. We're growing both, but the growth has expanded. And my guess is we'll probably settle somewhere in this two-thirds, three-quarter range and we'll continue to have a reasonable proportion of the test coming through these specialty practices and institutions.

Great. Thank you very much. And I will leave it there.

Thanks Mark. Appreciate it.

Thank you. And ladies and gentlemen, we have reached the end of the question-and-answer session. Now I would like to turn the call back to Dr. Lishan Aklog for closing remarks. Thank you sir.

Great. Thank you, operator. And hey, thank you all for joining us today and for the great questions as always. We look forward to keeping you abreast of our progress for the news releases and periodic calls such as this one. And as always, the best way to keep up with recent news, updates and events is to sign up for our e-mail alerts on the Lucid Investor Relations website and to follow us on social media on Twitter and LinkedIn and YouTube. And you can also contact Adrian at akm@PAVmed.com. So thanks again and everyone have a great evening.

Thank you very much, sir. This concludes today's conference. You may disconnect your lines at this time and thank you very much for your participation.