(Amendment No. 1)
☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
2020
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
_ of1-9341
98 Spit Brook Road, Suite 100, Nashua, New Hampshire | 03062 | |
(Address of principal executive offices) | (Zip Code) |
$.01$0.01 par value
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of RegulationS-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form10-K or any amendment to this Form10-K.
Large Accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer | Smaller reporting company | ☒ | ||||
Emerging growth company | ☐ |
EXPLANATORY NOTE
This Amendment No. 1 on Form10-K/A (the “Amendment”) amendsCertain portions of the registrant’s definitive Proxy Statement for its 2021 Annual Meeting of Stockholders are incorporated by reference into Items 10, 11, 12, 13 and 14 of Part III of this Annual Report on Form
Item 1 . | Business . |
Item 1A. | Risk Factors. |
Item 1B. | Unresolved Staff Comments. |
Item 2. | Properties. |
Item 3. | Legal Proceedings. |
Item 4. | Mine Safety Disclosures. |
Item 5. | Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. |
Item 6 . | Selected Financial Data . |
Item 7 . | Management’s Discussion and Analysis of Financial Condition and Results of Operations . |
1) | Identify the contract(s) with a customer |
2) | Identify the performance obligations in the contract |
3) | Determine the transaction price |
4) | Allocate the transaction price to the performance obligations in the contract |
5) | Recognize revenue when (or as) the Company satisfies a performance obligation |
Twelve months ended December 31, | ||||||||||||||||
2020 | 2019 | $ Change | % Change | |||||||||||||
Detection revenue | ||||||||||||||||
Product revenue | $ | 16,291 | $ | 16,788 | $ | (497 | ) | (3.0 | )% | |||||||
Service revenue | 5,706 | 5,531 | 175 | 3.2 | % | |||||||||||
Subtotal | 21,997 | 22,319 | (322 | ) | (1.4 | )% | ||||||||||
Therapy revenue | ||||||||||||||||
Product revenue | 2,612 | 2,979 | (367 | ) | (12.3 | )% | ||||||||||
Service revenue | 5,089 | 6,042 | (953 | ) | (15.8 | )% | ||||||||||
Subtotal | 7,701 | 9,021 | (1,320 | ) | (14.6 | )% | ||||||||||
Total revenue | $ | 29,698 | $ | 31,340 | $ | (1,642 | ) | (5.2 | )% | |||||||
Twelve months ended December 31, | ||||||||||||||||
2020 | 2019 | Change | % Change | |||||||||||||
Products | $ | 5,000 | $ | 3,278 | $ | 1,722 | 52.5 | % | ||||||||
Service and supplies | 2,965 | 3,438 | (473 | ) | (13.8 | )% | ||||||||||
Amortization and depreciation | 379 | 397 | (18 | ) | 100.0 | % | ||||||||||
Total cost of revenue | $ | 8,344 | $ | 7,113 | $ | 1,231 | 17.3 | % | ||||||||
Gross profit | $ | 21,354 | $ | 24,227 | $ | (2,873 | ) | (11.9 | )% | |||||||
profit % | 71.9 | % | 77.3 | % | ||||||||||||
For the year ended December 31, | ||||||||||||||||
2020 | 2019 | Change | % Change | |||||||||||||
Detection gross profit | $ | 17,856 | $ | 18,627 | $ | (771 | ) | (4.1 | )% | |||||||
Therapy gross profit | 3,498 | 5,600 | (2,102 | ) | (37.5 | )% | ||||||||||
Gross profit | $ | 21,354 | $ | 24,227 | $ | (2,873 | ) | (11.9 | )% | |||||||
Year ended December 31, | ||||||||||||||||
2020 | 2019 | Change | Change % | |||||||||||||
Operating expenses: | ||||||||||||||||
Engineering and product development | $ | 8,114 | $ | 9,271 | $ | (1,157 | ) | (12.5 | )% | |||||||
Marketing and sales | 13,312 | 13,634 | (322 | ) | (2.4 | )% | ||||||||||
General and administrative | 9,117 | 7,443 | 1,674 | 22.5 | % | |||||||||||
Amortization and depreciation | 199 | 276 | (77 | ) | (27.9 | )% | ||||||||||
Total operating expenses | $ | 30,742 | $ | 30,624 | $ | 118 | 0.4 | % | ||||||||
Year ended December 31, | ||||||||||||||||
2020 | 2019 | Change | Change% | |||||||||||||
Interest expense | $ | (476 | ) | $ | (784 | ) | $ | 308 | (39.3 | )% | ||||||
Interest income | 97 | 344 | (247 | ) | (71.8 | )% | ||||||||||
Loss on extinguishment of debt | (341 | ) | — | (341 | ) | 0.0 | % | |||||||||
Loss on fair value of debentures | (7,464 | ) | (6,671 | ) | (793 | ) | 11.9 | % | ||||||||
$ | (8,184 | ) | $ | (7,111 | ) | $ | (1,073 | ) | 15.1 | % | ||||||
Tax expense | $ | 38 | $ | 43 | $ | (5 | ) | (11.6 | )% |
Twelve months ended December 31, | ||||||||||||||||
2019 | 2018 | Change | % Change | |||||||||||||
Detection revenue | ||||||||||||||||
Product revenue | $ | 16,788 | $ | 10,783 | $ | 6,005 | 55.7 | % | ||||||||
Service revenue | 5,531 | 6,081 | (550 | ) | (9.0 | )% | ||||||||||
Subtotal | 22,319 | 16,864 | 5,455 | 32.3 | % | |||||||||||
Therapy revenue | ||||||||||||||||
Product revenue | 2,979 | 2,328 | 651 | 28.0 | % | |||||||||||
Service revenue | 6,042 | 6,429 | (387 | ) | (6.0 | )% | ||||||||||
Subtotal | 9,021 | 8,757 | 264 | 3.0 | % | |||||||||||
Total revenue | $ | 31,340 | $ | 25,621 | $ | 5,719 | 22.3 | % | ||||||||
Twelve months ended December 31, | ||||||||||||||||
2019 | 2018 | Change | % Change | |||||||||||||
Products | $ | 3,278 | $ | 2,161 | $ | 1,117 | 51.7 | % | ||||||||
Service and supplies | 3,438 | 3,627 | (189 | ) | (5.2 | )% | ||||||||||
Amortization and depreciation | 397 | 403 | (6 | ) | 100.0 | % | ||||||||||
Total cost of revenue | $ | 7,113 | $ | 6,191 | $ | 922 | 14.9 | % | ||||||||
Gross profit | $ | 24,227 | $ | 19,430 | $ | 4,797 | 24.7 | % | ||||||||
profit % | 77.3 | % | 75.8 | % |
For the year ended December 31, | ||||||||||||||||
2019 | 2018 | Change | % Change | |||||||||||||
Operating expenses: | ||||||||||||||||
Engineering and product development | $ | 9,271 | $ | 9,445 | $ | (174 | ) | (1.8 | )% | |||||||
Marketing and sales | 13,634 | 8,693 | 4,941 | 56.8 | % | |||||||||||
General and administrative | 7,443 | 9,117 | (1,674 | ) | (18.4 | )% | ||||||||||
Amortization and depreciation | 276 | 305 | (29 | ) | (9.5 | )% | ||||||||||
Total operating expenses | $ | 30,624 | $ | 27,560 | $ | 3,064 | 11.1 | % | ||||||||
For the year ended December 31, | ||||||||||||||||
2019 | 2018 | Change | Change % | |||||||||||||
Interest expense | $ | (784 | ) | $ | (504 | ) | (280 | ) | 55.6 | % | ||||||
Interest income | 344 | 110 | 234 | 212.7 | % | |||||||||||
Financing costs | — | (451 | ) | 451 | (100.0 | )% | ||||||||||
Loss on fair value of debentures | (6,671 | ) | — | (6,671 | ) | — | ||||||||||
$ | (7,111 | ) | $ | (845 | ) | $ | (6,266 | ) | 741.5 | % | ||||||
Income tax (benefit) expense | $ | 43 | $ | 42 | 1 | 2.4 | % |
Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Segment revenues: | ||||||||||||
Detection | $ | 21,997 | $ | 22,319 | $ | 16,864 | ||||||
Therapy | 7,701 | 9,021 | 8,757 | |||||||||
Total Revenue | $ | 29,698 | $ | 31,340 | $ | 25,621 | ||||||
Segment gross profit: | ||||||||||||
Detection | $ | 17,856 | $ | 18,627 | $ | 14,709 | ||||||
Therapy | 3,498 | 5,600 | 4,721 | |||||||||
Segment gross profit | $ | 21,354 | $ | 24,227 | $ | 19,430 | ||||||
Segment operating income (loss): | ||||||||||||
Detection | $ | 2,719 | $ | 2,564 | $ | 3,412 | ||||||
Therapy | (3,028 | ) | (1,476 | ) | (2,373 | ) | ||||||
Segment operating income (loss) | $ | (309 | ) | $ | 1,088 | $ | 1,039 | |||||
General administrative | $ | (9,079 | ) | $ | (7,486 | ) | $ | (9,169 | ) | |||
Interest expense | (476 | ) | (784 | ) | (504 | ) | ||||||
Financing costs | — | — | (451 | ) | ||||||||
Loss on extinguishment of debt | (341 | ) | ||||||||||
Other income | 97 | 345 | 110 | |||||||||
Fair value of convertible debentures | (7,464 | ) | (6,671 | ) | ||||||||
Loss before income tax | $ | (17,572 | ) | $ | (13,508 | ) | $ | (8,975 | ) | |||
Item 7A. | Quantitative and Qualitative Disclosures about Market Risk. |
Item 8. | Financial Statements and Supplementary Data. |
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. |
Item 9A. | Controls and Procedures. |
Except as described above, no other changes have been made to the Original Filing. The Original Filing, as amended, continues to speakits disclosure controls and procedures as of the dateend of the Original Filing,period covered by this annual report on Form
change during such period.
Item 9B. | Other Information. |
Item 10 . |
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The specific experience, qualifications, attributes and skills listed below for each director led our Board to the conclusion that such individuals should serve on the Board. This conclusion is also based on the Board’s belief that eachrequired by this Item 10 of our directors has a reputation for integrity, honesty and adherence to high ethical standards, and has demonstrated business acumen, an ability to exercise sound judgment, and commitment to iCAD and our Board.
There are no family relationships among any of the directors or executive officers of iCAD.
Name | Age | Principal Occupation or Employment | Director/Officer | |||||
Michael Klein | 64 | Chief Executive Officer, Chairman of the Board, and Director | 2018 | |||||
Dr. Rakesh Patel | 45 | Director | 2018 | |||||
Andy Sassine | 54 | Director | 2015 | |||||
Dr. Susan Wood | 56 | Director | 2018 |
Name | Age | Principal Occupation or Employment | Director/Officer | |||||
R. Scott Areglado | 55 | Interim Chief Financial Officer, Vice President and Corporate Controller | 2018 | |||||
Jonathan Go | 55 | Chief Technology Officer | 2019 | |||||
Stacey Stevens | 48 | President | 2006 |
Mr. Michael Klein has served as the Chief Executive Officer at Inflection Point Consulting, an executive coaching and consulting firm with a focus on medical technology, biopharma and healthcare services, since December 2014. Prior to that, he was the Chief Executive Officer at US HIFU, LLC (f/k/a SonaCare Medical, LLC), a global leader in minimally invasive high intensity focused ultrasound technologies, from December 2011 to November 2014. From April 2011 to December 2011, Mr. Klein was the President of the Civco Radiation Oncology Division within Roper Industries, a diversified industrial company that produces engineered products for global niche markets. He was President and Chief Executive Officer of Xoft, Inc., a medical device company, a position he held from December 2004 until the sale of Xoft to the Company in December 2010. Prior to joining Xoft, from 2000 to 2004, Mr. Klein served as Chairman, President and Chief Executive Officer of R2 Technology, Inc., a breast and lung cancer computer aided detection company. Mr. Klein received a Bachelor of Arts degree from the University at Albany, SUNY. Mr. Klein also received his MBA from the New York Institute of Technology and completed his post-graduate Executive Education Studies at Harvard University and Babson College. We believe Mr. Klein’s qualifications to serve on our Board of Directors include his significant experience as an executivewill be included in the healthcare industry, his understanding of our products and markets and his previous tenure on our board.
Dr. Rakesh Patel has served as medical director of Radiation Oncology and Chair of the Multi-Disciplinary Breast Care Program at Good Samaritan Hospital since July 2013. In addition, he has served asco-founder of the TME Breast Care Network, ahigh-end physicianpeer-to-peer knowledge-sharing, research, education and consulting company, since January 2013. Dr. Patel has also served as Chief Executive Officer of Precision Cancer Specialists Medical Group, an organization whose core mission isCompany’s 2021 Proxy Statement to improve quality and access to advanced, targeted radiation therapy, since December 2016. He previously served on the board of directors of Radion, Inc., a company that improved quality of access for patients and doctors with an innovativee-collaboration platform, the assets of which were acquired by the Company in July 2014. Prior to that, Dr. Patel was the founder and served on the board of directors of BrachySolutions, Inc. (acquired by Radion Inc.), a telehealth company focused on improving quality and access to advanced brachytherapy globally via custome-learning modules. He holds a Bachelor of Science degree from the University of Notre Dame and an M.D. from Indiana University School of Medicine. Dr. Patel completed his radiation oncology residency at the University of Wisconsin-Madison. We believe Dr. Patel’s qualifications to serve on our Board of Directors include his expertise in the medical field as well as his understanding of our products and markets.
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Mr. Andy Sassine currently serves as a director and Chief Financial Officer of Arcturus Therapeutics, Ltd.. Mr. Sassine also serves on the board of directors of Gemphire Therapeutics, Inc., a NASDAQ traded, clinical-stage biopharma focused on developing and commercializing therapies for Dyslipidemia and NASH. Mr. Sassine served in various positions at Fidelity Investments from 1999 to 2012, rising to the position of Portfolio Manager. Prior to joining Fidelity, he served as a vice president in the Acquisition Finance Group at Fleet National Bank. Mr. Sassine previously served on the boards of MYnd Analytics, Inc., Acorn Energy, Freedom Meditech, Inc., and MD Revolution. Mr. Sassine was a member of the Henry B. Tippie College of Business, University of Iowa Board of Advisors from 2009 to 2018 and served on the Board of Trustees at the Clarke Schools for Hearing and Speech from 2009 to 2014. Mr. Sassine holds a Bachelor of Arts degree from the University of Iowa and an MBA from the Wharton School at the University of Pennsylvania. We believe Mr. Sassine’s extensive knowledge and experience as a fund manager and board member of othersimilarly-sized companies qualifies him to serve as a member of our Board of Directors.
Dr. Susan Wood has served as the President and Chief Executive Officer of Vida Diagnostics, Inc., a leader in precision imaging and AI for pulmonary medicine, since September 2009. From July 2005 to December 2008, she held the position of Executive Vice President of Marketing and Technology for Vital Images, Inc., an innovative software company specializing in cardiovascular applications for advanced analysis software. Dr. Wood holds multiple patents in the field of computer-aided detection and quantitative imaging; has authored numerous book chapters, peer-reviewed papers, abstracts, and has served as an invited speaker at numerous conferences in the area of three-dimensional imaging of the thorax, quantitative imaging and computer-aided detection. She holds a Bachelor of Science in Engineering from the University of Maryland, College Park and a Master of Science in Biomedical Engineering from Duke University. Dr. Wood also holds a Ph.D. from the Johns Hopkins Medical Institutions, School of Hygiene and Public Health. We believe Dr. Wood’s qualifications to serve on our Board of Directors include her expertise in the medical field her prior business experience in the medical field and her knowledge of our markets.
Mr. R. Scott Aregladois the Company’s Interim Chief Financial Officer. From May 2011 until December 2018, Mr. Areglado served as Company’s Vice President and Corporate Controller, and from September to November 2016, he served as interim Chief Financial Officer. From 2005 to 2010, Mr. Areglado served as Vice President and Controller at AMICAS, Inc., a NASDAQ-listed image and information management solutions company serving the healthcare industry, where he led financial statement preparation and accounting operations for the company. Mr. Areglado has more than 25 years of experience in finance and accounting and was a licensed Certified Public Accountant from 1990 to 2007. Mr. Areglado received an MBA degree from the Franklin W. Olin Graduate School of Business at Babson College and a Bachelor of Business Administration degree in Accounting from the University of Massachusetts, Amherst.
Mr. Jonathan Go is the Company’s Chief Technology Officer. Mr. Go brings more than twenty five years of software development experience in the medical industry to iCAD. Prior to joining iCAD, Mr. Go served as Vice President of Engineering at Merge eMed, a provider of RIS/PACS solutions for imaging centers, specialty practices and hospitals. At Merge eMed, Mr. Go was responsible for software development, product management, testing, system integration and technical support for all of eMed’s products. Before joining Merge eMed, Mr. Go was
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Director of Engineering at Cedara Software in Toronto. Cedara Software is focused on the development of custom engineered software applications and development tools for medical imaging OEMs. At Cedara, Mr. Go built the workstation program, developing multiple specialty workstations that have been adopted by a large number of OEM partners. Mr. Go earned a Bachelor of Science in Electrical Engineering from the University of Michigan and a Masters of Science in Electrical Engineering and Biomedical Engineering from the University of Michigan.
Ms. Stacey Stevenshas served as the Company’s President since March 2019. From February 2016 to March 2019, Ms. Stevens served as the Company’s Executive Vice President, Chief Strategy and Commercial Officer, and from June 2006 to February 2016, she served as the Company’s Senior Vice President of Marketing and Strategy. Prior to joining iCAD, Ms. Stevens held a number of sales, business development, and marketing management positions with Philips Medical Systems, Agilent Technologies, Inc. and Hewlett Packard’s Healthcare Solutions Group (which was acquired in 2001 by Philips Medical Systems). From February 2005 to June 2006, she was Vice President, Marketing Planning at Philips Medical Systems, where she was responsible for the leadership of all global marketing planning functions for Philips’ Healthcare Business. From 2003 to January 2005, she was Vice President of Marketing for the Cardiac and Monitoring Systems Business Unit of Philips, where she was responsible for all marketing and certain direct sales activities of Philips America’s Field Operations. Prior to that, Ms. Stevens held several key marketing management positions in the Ultrasound Business Unit of Hewlett-Packard/Agilent and Philips Medical Systems. Ms. Stevens earned a Bachelor of Arts Degree in Political Science from the University of New Hampshire, and an MBA from Boston University’s Graduate School of Management.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires certain of our officers and our directors, and persons who own more than 10 percent of a registered class of our equity securities, to file reports of ownership and changes in ownershipbe filed with the SEC. Officers, directors, and greater than 10 percent stockholders are required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.
Based solely on our review of copies of such forms received by us, we believe that during the year ended December 31, 2018, other than as set forth below, all filing requirements applicable to all of our officers, directors, and greater than 10% beneficial stockholders were timely complied with.
The following filers submitted Form 3s one day late: Michael Klein, Rakesh Patel and Susan Alyson Wood.
The following filers submitted Form 4s two days late in connection with awardsthe solicitation of restricted stock: Richard Christopher, Kenneth Ferryproxies for the Company’s 2021 Annual Meeting of Stockholders (the “2021 Proxy Statement”) and Stacey Stevens.
is incorporated herein by reference.
Item 11 . | Executive Compensation . |
Item 12 . | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters . |
Item 13 . | Certain Relationships and Related Transactions, and Director Independence . |
Item 14 . | Principal Accounting Fees and Services . |
Item 15 . | Exhibits, Financial Statement Schedules. |
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Code of Ethics
We have adopted a comprehensive Code of Business Conduct and Ethics that covers all of our employees. Copies of the Code of Business Conduct and Ethics can be obtained, without charge, upon written request addressed to:
iCAD, Inc.
98 Spit Brook Road, Suite 100
Nashua, NH 03062
Attention: Corporate Secretary
Audit Committee and Audit Committee Financial Expert
Our Board of Directors maintains an Audit Committee which is composed of Dr. Patel, Dr. Wood and Mr. Sassine, who serves as its chairman. Our Board has determined that each member of the Audit Committee meets the definition of an “Independent Director” under the applicable listing rules of the Nasdaq and the rules and regulations of the SEC. The Board has also determined that Mr. Sassine qualifies as an “audit committee financial expert” under the rules and regulations of the SEC.
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Summary Compensation Table
The following table sets forth summary information relating to all compensation awarded to, earned by or paid to our named executive officers for services rendered during the fiscal years noted below.
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SUMMARY COMPENSATION TABLE
Name and Principal Position | Year | Salary $ | Stock Awards (1) $ | Option Awards (2) $ | Non-Equity Incentive Plan Compensation (3) $ | All Other Compensation $ | Total $ | |||||||||||||||||||||
Michael Klein | ||||||||||||||||||||||||||||
Chief Executive Officer | 2018 | 14,423 | — | 1,617,848 | — | 1,236 | 1,633,507 | |||||||||||||||||||||
Stacey Stevens | ||||||||||||||||||||||||||||
President | 2018 | 305,000 | 95,150 | — | — | 32,600 | 432,750 | |||||||||||||||||||||
2017 | 283,000 | 134,750 | — | 48,110 | 32,400 | 498,260 | ||||||||||||||||||||||
2016 | 283,000 | 173,250 | — | 101,800 | 29,030 | 587,080 | ||||||||||||||||||||||
Richard Christopher (4) | ||||||||||||||||||||||||||||
Former Chief Financial Officer | 2018 | 295,000 | 86,500 | — | — | 32,208 | 413,708 | |||||||||||||||||||||
2017 | 285,000 | 179,666 | — | 48,250 | 31,977 | 544,893 | ||||||||||||||||||||||
2016 | 16,442 | 175,000 | — | 7,892 | 1,246 | 200,580 | ||||||||||||||||||||||
Kenneth Ferry (5) | ||||||||||||||||||||||||||||
Former Chief Executive Officer | 2018 | 470,000 | 207,600 | — | — | 61,547 | 739,147 | |||||||||||||||||||||
2017 | 455,000 | 269,500 | — | 106,356 | 72,784 | 903,640 | ||||||||||||||||||||||
2016 | 455,000 | 346,500 | — | 225,225 | 64,087 | 1,090,812 |
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Narrative Disclosure to Summary Compensation Table
Executive Compensation Philosophy and Objectives
The Compensation Committee’s executive compensation objectives are to attract and retain highly qualified individuals with a demonstrated record of achievement; reward past performance; provide incentives for future performance; and align the interests of the named executive officers with the interests of the stockholders. In order to accomplish this we offer a competitive total compensation package that consists of base salary; annualnon-equity incentive compensation opportunities; long-term incentives in the form of equity awards; and employee benefits.
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The Compensation Committee believes that compensation for the named executive officers should be based on our performance. Therefore, for current officers the Compensation Committee has developed variable compensation packages based largely on Company financial performance. The Compensation Committee also considers our industry and geographic location norms in determining the various elements and amounts of compensation for our named executive officers.
Elements of Executive Compensation
The Compensation Committee establishes a total targeted cash compensation amount for each named executive officer, which includes base salary andnon-equity incentive compensation. This is intended to incentivize named executive officers to achieve the targeted financial results for our business and to compensate them appropriately if they successfully achieved such performance. The elements of our executive compensation program are designed to deliver bothyear-to-year and long-term stockholder value increases. A portion of the executives’ compensation isat-risk, and equity-based compensation includes a mix of incentives that vest subject to time or a combination of Company performance and time, tying the executive to both our short-term and long-term success.
The Compensation Committee also considers each named executive officer’s current salary and prior-year incentive compensation along with the appropriate balance between long-term and short-term incentives.
Our executive compensation program consists of the following annual elements:
21.1 | ||
23.1 | Consent of BDO USA, LLP, Independent Registered Public Accounting Firm. | |
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 materials formatted in | |
104 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101). |
Key Compensation Governance Attributes
The following are best practices
* | Denotes a management compensation plan or arrangement. |
** | The Registrant has omitted certain schedules and exhibits pursuant to Item 601(b)(2) of Regulation S-K and shall furnish supplementally to the SEC copies any of the omitted schedules and exhibits upon request by the SEC. |
Item 16. | Form 10-K Summary. |
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/s/ Michael Klein | |
Michael Klein | ||
Chief Executive Officer, Executive Chairman |
Signature | Title | Date | ||
/s/ Michael Klein | Executive Chairman, Director, Chief Executive Officer (Principal Executive Officer) | March 15, 2021 | ||
Michael Klein | ||||
/s/ R. Scott Areglado | Chief Financial Officer (Principal Financial and Accounting Officer) | March 15, 2021 | ||
R. Scott Areglado | ||||
/s/ Nathaniel Dalton | Director | March 15, 2021 | ||
Nathaniel Dalton | ||||
/s/ Rakesh Patel | Director | March 15, 2021 | ||
Rakesh Patel, MD | ||||
/s/ Andy Sassine | Director | March 15, 2021 | ||
Andy Sassine | ||||
/s/ Susan Wood | Director | March 15, 2021 | ||
Susan Wood, Ph.D |
Page | ||||
| F-2 | |||
F-4 | ||||
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| F-5 | ||
F-6 | ||||
F-7 | ||||
F-8–F-50 |
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How Determine NEO CompensationRolehave audited the accompanying consolidated balance sheets of iCAD, Inc. (the “Company”) as of December 31, 2020 and 2019, the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the Compensation Committeethree years in the period ended December 31, 2020, and the related notes (collectively referred to as the “consolidated financial statements”). All compensationIn our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020named executive officersopinion.
December 31, | December 31, | |||||||
Assets | 2020 | 2019 | ||||||
(in thousands except shares and per share data) | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 27,186 | $ | 15,313 | ||||
Trade accounts receivable, net of allowance for doubtful | ||||||||
accounts of $111 in 2020 and $136 in 2019 | 10,027 | 9,819 | ||||||
Inventory, net | 3,144 | 2,611 | ||||||
Prepaid expenses and other current assets | 1,945 | 1,453 | ||||||
Total current assets | 42,302 | 29,196 | ||||||
Property and equipment: | ||||||||
Equipment | 6,765 | 6,304 | ||||||
Leasehold improvements | 62 | 62 | ||||||
Furniture and fixtures | 319 | 319 | ||||||
Marketing assets | 376 | 376 | ||||||
7,522 | 7,061 | |||||||
Less accumulated depreciation and amortization | 6,778 | 6,510 | ||||||
Property and equipment, net | 744 | 551 | ||||||
Other assets: | ||||||||
Operating lease assets | 1,758 | 2,406 | ||||||
Other assets | 1,527 | 50 | ||||||
Intangible assets, net of accumulated amortization of $8,494 in 2020 and $8,186 in 2019 | 889 | 1,183 | ||||||
Goodwill | 8,362 | 8,362 | ||||||
Total other assets | 12,536 | 12,001 | ||||||
Total assets | $ | 55,582 | $ | 41,748 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 2,869 | $ | 1,990 | ||||
Accrued and other expenses | 7,039 | 6,590 | ||||||
Notes payable, current | — | 4,250 | ||||||
Lease payable, current | 726 | 758 | ||||||
Deferred revenue, current | 6,117 | 5,248 | ||||||
Total current liabilities | 16,751 | 18,836 | ||||||
Lease payable, long-term | 1,075 | 1,837 | ||||||
Deferred revenue, long-term | 267 | 356 | ||||||
Notes payable, long-term | 6,960 | 2,003 | ||||||
Convertible debentures payable to non-related parties, at fair value | — | 12,409 | ||||||
Convertible debentures payable to related parties, at fair value | — | 1,233 | ||||||
Deferred tax | 4 | 3 | ||||||
Total liabilities | 25,057 | 36,677 | ||||||
Commitments and contingencies (Note 9) | 0 | 0 | ||||||
Stockholders’ equity: | ||||||||
Preferred stock, $ .01 par value: authorized 1,000,000 shares; NaN issued. | 0— | 0— | ||||||
Common stock, $ .01 par value: authorized 30,000,000 shares; issued 23,693,735 in 2020 and 19,546,151 in 2019. Outstanding 23,508,575 in 2020 and 19,360,320 in 2019. | 236 | 196 | ||||||
Additional paid-in capital | 273,639 | 230,615 | ||||||
Accumulated deficit | (241,935 | ) | (224,325 | ) | ||||
Treasury stock at cost, 185,831 shares in 2019 and 2018 | (1,415 | ) | (1,415 | ) | ||||
Total stockholders’ equity | 30,525 | 5,071 | ||||||
Total liabilities and stockholders’ equity | $ | 55,582 | $ | 41,748 | ||||
See accompanying notes to consolidated financial statements. |
For the Years Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
(in thousands except per share data) | ||||||||||||
Revenue: | ||||||||||||
Products | $ | 18,903 | $ | 19,767 | $ | 13,111 | ||||||
Service and supplies | 10,795 | 11,573 | 12,510 | |||||||||
Total revenue | 29,698 | 31,340 | 25,621 | |||||||||
Cost of Revenue: | ||||||||||||
Products | 5,000 | 3,278 | 2,161 | |||||||||
Service and supplies | 2,965 | 3,438 | 3,627 | |||||||||
Amortization and depreciation | 379 | 397 | 403 | |||||||||
Total cost of revenue | 8,344 | 7,113 | 6,191 | |||||||||
Gross profit | 21,354 | 24,227 | 19,430 | |||||||||
Operating expenses: | ||||||||||||
Engineering and product development | 8,114 | 9,271 | 9,445 | |||||||||
Marketing and sales | 13,312 | 13,634 | 8,693 | |||||||||
General and administrative | 9,117 | 7,443 | 9,117 | |||||||||
Amortization and depreciation | 199 | 276 | 305 | |||||||||
Total operating expenses | 30,742 | 30,624 | 27,560 | |||||||||
Loss from operations | (9,388 | ) | (6,397 | ) | (8,130 | ) | ||||||
Other expense | ||||||||||||
Interest expense | (476 | ) | (784 | ) | (504 | ) | ||||||
Interest income | 97 | 344 | 110 | |||||||||
Financing costs | — | — | (451 | ) | ||||||||
Loss on extinguishment of debt | (341 | ) | — | — | ||||||||
Loss on fair value of convertible debentures | (7,464 | ) | (6,671 | ) | — | |||||||
Other expense, net | (8,184 | ) | (7,111 | ) | (845 | ) | ||||||
Loss before income tax expense | (17,572 | ) | (13,508 | ) | (8,975 | ) | ||||||
Income tax expense | 38 | 43 | 42 | |||||||||
Net loss and comprehensive loss | $ | (17,610 | ) | $ | (13,551 | ) | $ | (9,017 | ) | |||
Net loss per share: | ||||||||||||
Basic | $ | (0.80 | ) | $ | (0.74 | ) | $ | (0.54 | ) | |||
Diluted | $ | (0.80 | ) | $ | (0.74 | ) | $ | (0.54 | ) | |||
Weighted average number of shares used in computing net loss per share: | ||||||||||||
Basic | 22,140 | 18,378 | 16,685 | |||||||||
Diluted | 22,140 | 18,378 | 16,685 | |||||||||
See accompanying notes to consolidated financial statements. |
Common Stock | Additional | |||||||||||||||||||||||
Number of | Paid-in | Accumulated | Treasury | Stockholders’ | ||||||||||||||||||||
Shares Issued | Par Value | Capital | Deficit | Stock | Equity | |||||||||||||||||||
Balance at December 31, 2017 | 16,711,512 | $ | 167 | $ | 217,389 | $ | (201,865 | ) | $ | (1,415 | ) | $ | 14,276 | |||||||||||
Cumulative impact from the adoption of ASC 606 (see Note 1) | — | — | — | 108 | — | 108 | ||||||||||||||||||
Issuance of common stock relative to vesting of restricted stock, net of 56,946 shares forfeited for tax obligations | 265,442 | 3 | (183 | ) | — | — | (180 | ) | ||||||||||||||||
Issuance of common stock pursuant to stock option plans | 89,556 | 1 | 203 | — | — | 204 | ||||||||||||||||||
Stock-based compensation | — | — | 1,505 | — | — | 1,505 | ||||||||||||||||||
Net loss | — | — | — | (9,017 | ) | — | (9,017 | ) | ||||||||||||||||
Balance at December 31, 2018 | 17,066,510 | $ | 171 | $ | 218,914 | $ | (210,774 | ) | $ | (1,415 | ) | $ | 6,896 | |||||||||||
Issuance of common stock relative to vesting of restricted stock, net of 29,887 shares forfeited for tax obligations | 167,843 | 2 | (198 | ) | — | — | (196 | ) | ||||||||||||||||
Issuance of common stock pursuant to stock option plans | 429,980 | 4 | 1,396 | — | — | 1,400 | ||||||||||||||||||
Issuance of common stock, net | 1,881,818 | 19 | 9,334 | — | — | 9,353 | ||||||||||||||||||
Stock-based compensation | — | — | 1,169 | — | — | 1,169 | ||||||||||||||||||
Net Loss | — | — | — | (13,551 | ) | — | (13,551 | ) | ||||||||||||||||
Balance at December 31, 2019 | 19,546,151 | $ | 196 | $ | 230,615 | $ | (224,325 | ) | $ | (1,415 | ) | $ | 5,071 | |||||||||||
Issuance of common stock relative to vesting of restricted stock, net of 20,247 shares forfeited for tax obligations | 97,830 | — | (225 | ) | — | — | (225 | ) | ||||||||||||||||
Issuance of common stock pursuant to stock option plans | 155,149 | 1 | 728 | — | — | 729 | ||||||||||||||||||
Issuance of common stock, net | 2,033,204 | 20 | 18,264 | — | — | 18,284 | ||||||||||||||||||
Issuance of common stock pursuant employee stock purchase plan | 42,606 | 1 | 267 | — | — | 268 | ||||||||||||||||||
Issuance of common stock upon conversion of debentures | 1,819,466 | 18 | 21,146 | — | — | 21,164 | ||||||||||||||||||
Stock-based compensation | — | — | 2,844 | — | — | 2,844 | ||||||||||||||||||
Net loss | — | — | — | (17,610 | ) | — | (17,610 | ) | ||||||||||||||||
Balance at December 31, 2020 | 23,694,406 | $ | 236 | $ | 273,639 | $ | (241,935 | ) | $ | (1,415 | ) | $ | 30,525 | |||||||||||
For the Years Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
(in thousands) | ||||||||||||
Cash flow from operating activities: | ||||||||||||
Net loss | $ | (17,610 | ) | $ | (13,551 | ) | $ | (9,017 | ) | |||
Adjustments to reconcile net loss to net cash used for operating activities: | ||||||||||||
Amortization | 309 | 377 | 383 | |||||||||
Depreciation | 268 | 297 | 325 | |||||||||
Bad debt provision | 94 | 62 | 225 | |||||||||
Stock-based compensation expense | 2,844 | 1,169 | 1,505 | |||||||||
Amortization of debt discount and debt costs | 78 | 149 | 170 | |||||||||
Loss on extinguishment of debt | 341 | — | — | |||||||||
Deferred tax | 1 | 1 | (12 | ) | ||||||||
Loss on disposal of assets | — | — | 12 | |||||||||
Change in fair value of convertible debentures | 7,464 | 6,671 | — | |||||||||
Changes in operating assets and liabilities, net of acquisition: | ||||||||||||
Accounts receivable | (302 | ) | (3,478 | ) | 2,003 | |||||||
Inventory | (533 | ) | (1,024 | ) | 536 | |||||||
Prepaid and other assets | (1,390 | ) | 294 | 172 | ||||||||
Accounts payable | 878 | 836 | (209 | ) | ||||||||
Accrued and other expenses | (207 | ) | 982 | 494 | ||||||||
Deferred revenue | 780 | 108 | (454 | ) | ||||||||
Total adjustments | 10,625 | 6,444 | 5,150 | |||||||||
Net cash used for operating activities | (6,985 | ) | (7,107 | ) | (3,867 | ) | ||||||
Cash flow used for investing activities: | ||||||||||||
Additions to patents, technology and other | (13 | ) | (10 | ) | (15 | ) | ||||||
Additions to property and equipment | (461 | ) | (296 | ) | (301 | ) | ||||||
Net cash provided by (used for) investing activities | (474 | ) | (306 | ) | (316 | ) | ||||||
Cash flow from financing activities: | ||||||||||||
Issuance of common stock for cash, net | 18,285 | 9,353 | — | |||||||||
Issuance of common stock pursuant to Employee Stock Purchase Plan | 266 | — | — | |||||||||
Issuance of common stock pursuant to stock option plans | 729 | 1,400 | 204 | |||||||||
Taxes paid related to restricted stock issuance | (225 | ) | (196 | ) | (180 | ) | ||||||
Proceeds from convertible debentures | — | — | 6,970 | |||||||||
Principal payments of capital lease obligations | — | (16 | ) | (13 | ) | |||||||
Proceeds from notes payable | 6,957 | — | — | |||||||||
Principal repayment of notes payable | (4,638 | ) | (2,000 | ) | — | |||||||
Debt issuance costs | (42 | ) | — | — | ||||||||
Proceeds from line of credit | 775 | 3,000 | — | |||||||||
Repayment line of credit | (2,775 | ) | (1,000 | ) | — | |||||||
Net cash provided by financing activities | 19,332 | 10,541 | 6,981 | |||||||||
Increase in cash and equivalents | 11,873 | 3,128 | 2,798 | |||||||||
Cash and equivalents, beginning of year | 15,313 | 12,185 | 9,387 | |||||||||
Cash and equivalents, end of year | $ | 27,186 | $ | 15,313 | $ | 12,185 | ||||||
Supplemental disclosure of cash flow information: | ||||||||||||
Interest paid | $ | 272 | $ | 643 | $ | 294 | ||||||
Taxes paid | $ | 38 | $ | 43 | $ | 51 | ||||||
Right-of-use | 69 | 3,105 | — | |||||||||
Issuance of common stock upon conversion of debentures | $ | 21,164 | — | — | ||||||||
(1) | Summary of Significant Accounting Policies |
2020 | 2019 | 2018 | ||||||||||
Balance at beginning of period | $ | 136 | $ | 177 | $ | 107 | ||||||
Additions charged to costs and expenses | 94 | 62 | 225 | |||||||||
Reductions | (119 | ) | (103 | ) | (155 | ) | ||||||
Balance at end of period | $ | 111 | $ | 136 | $ | 177 | ||||||
Inventory balances, net of reserves, were as follows: | ||||||||
December 31, | December 31, | |||||||
2020 | 2019 | |||||||
Raw materials | $ | 1,356 | $ | 1,265 | ||||
Work in process | 76 | 39 | ||||||
Finished Goods | 1,712 | 1,307 | ||||||
Inventory Net | $ | 3,144 | $ | 2,611 | ||||
Estimated life | ||
Equipment | 3 -5 years | |
Leasehold improvements | 3-5 years | |
Furniture and fixtures | 3-5 years | |
Marketing assets | 3-5 years |
Consolidated | ||||||||||||||||
reporting unit | Detection | Therapy | Total | |||||||||||||
Accumulated Goodwill | $ | 47,937 | $ | — | $ | — | $ | 47,937 | ||||||||
Accumulated impairment | (26,828 | ) | — | — | (26,828 | ) | ||||||||||
Fair value allocation | (21,109 | ) | 7,663 | 13,446 | — | |||||||||||
Acquisition of DermEbx and Radion | — | — | 6,154 | 6,154 | ||||||||||||
Acquisition measurement period adjustments | — | — | 116 | 116 | ||||||||||||
Acquisition of VuComp | — | 1,093 | — | 1,093 | ||||||||||||
Sale of MRI assets | — | (394 | ) | (394 | ) | |||||||||||
Impairment | — | — | (19,716 | ) | (19,716 | ) | ||||||||||
Prior to December 31, 2019 | — | 8,362 | — | 8,362 | ||||||||||||
Balance at December 31, 2020 | $ | — | $ | 8,362 | $ | — | $ | 8,362 | ||||||||
Weighted | ||||||||||||
average | ||||||||||||
2020 | 2019 | useful life | ||||||||||
Gross Carrying Amount | ||||||||||||
Patents and licenses | $ | 595 | $ | 581 | 5 years | |||||||
Technology | 8,257 | 8,257 | 10 years | |||||||||
Customer relationships | 272 | 272 | 7 years | |||||||||
Tradename | 259 | 259 | 10 years | |||||||||
Total amortizable intangible assets | 9,383 | 9,369 | ||||||||||
Accumulated Amortization | ||||||||||||
Patents and licenses | $ | 529 | $ | 520 | ||||||||
Technology | 7,571 | 7,299 | ||||||||||
Customer relationships | 135 | 108 | ||||||||||
Tradename | 259 | 259 | ||||||||||
Total accumulated amortization | 8,494 | 8,186 | ||||||||||
Total amortizable intangible assets, net | $ | 889 | $ | 1,183 | ||||||||
Estimated | ||||
For the years ended | amortization | |||
December 31: | expense | |||
2021 | 291 | |||
2022 | 207 | |||
2023 | 186 | |||
2024 | 103 | |||
2025 | 102 | |||
$ | 889 | |||
1) | Identify the contract(s) with a customer |
2) | Identify the performance obligations in the contract |
both capable of being distinct, whereby the customer can benefit from the good or service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the goods or services is separately identifiable from other promises in the contract. To the extent a contract includes multiple promised goods or services, the Company must apply judgment to determine whether promised goods or services are capable of being distinct and distinct in the context of the contract. If these criteria are not met the promised goods or services are accounted for as a combined performance obligation. The Company’s contracts typically do not include options that would result in a material right. If options to purchase additional goods or services are included in customer contracts, the Company evaluates the option in order to determine if the Company’s arrangement include promises that may represent a material right and needs to be accounted for as a performance obligation in the contract with the customer. The Company did not note any significant provisions within its typical contracts that would create a material right. |
3) | Determine the transaction price |
4) | Allocate the transaction price to the performance obligations in the contract |
5) | Recognize revenue when (or as) the Company satisfies a performance obligation |
Year ended December 31, 2020 | ||||||||||||
Reportable Segments | ||||||||||||
Detection | Therapy | Total | ||||||||||
Major Goods/Service Lines | ||||||||||||
Products | $ | 16,291 | $ | 4,535 | $ | 20,826 | ||||||
Service contracts | 5,661 | 1,333 | 6,994 | |||||||||
Supply and source usage agreements | — | 1,804 | 1,804 | |||||||||
Professional services | — | 29 | 29 | |||||||||
Other | 45 | — | 45 | |||||||||
$ | 21,997 | $ | 7,701 | $ | 29,698 | |||||||
Timing of Revenue Recognition | ||||||||||||
Goods transferred at a point in time | $ | 16,332 | $ | 4,624 | $ | 20,956 | ||||||
Services transferred over time | 5,665 | 3,077 | 8,742 | |||||||||
$ | 21,997 | $ | 7,701 | $ | 29,698 | |||||||
Sales Channels | ||||||||||||
Direct sales force | $ | 13,809 | $ | 3,773 | $ | 17,582 | ||||||
OEM partners | 8,188 | — | 8,188 | |||||||||
Channel partners | — | 3,928 | 3,928 | |||||||||
$ | 21,997 | $ | 7,701 | $ | 29,698 | |||||||
Year ended December 31, 2019 | ||||||||||||
Reportable Segments | ||||||||||||
Detection | Therapy | Total | ||||||||||
Major Goods/Service Lines | ||||||||||||
Products | $ | 16,788 | $ | 4,957 | $ | 21,745 | ||||||
Service contracts | 5,370 | 1,814 | 7,184 | |||||||||
Supply and source usage agreements | — | 2,036 | 2,036 | |||||||||
Professional services | — | 153 | 153 | |||||||||
Other | 161 | 61 | 222 | |||||||||
$ | 22,319 | $ | 9,021 | $ | 31,340 | |||||||
Timing of Revenue Recognition | ||||||||||||
Goods transferred at a point in time | $ | 16,949 | $ | 5,391 | $ | 22,340 | ||||||
Services transferred over time | 5,370 | 3,630 | 9,000 | |||||||||
$ | 22,319 | $ | 9,021 | $ | 31,340 | |||||||
Sales Channels | ||||||||||||
Direct sales | $ | 11,968 | $ | 5,804 | $ | 17,772 | ||||||
OEM partners | 10,351 | — | 10,351 | |||||||||
Channel partners | — | 3,217 | 3,217 | |||||||||
$ | 22,319 | $ | 9,021 | $ | 31,340 | |||||||
Year ended December 31, 2018 | ||||||||||||
Reportable Segments | ||||||||||||
Detection | Therapy | Total | ||||||||||
Major Goods/Service Lines | ||||||||||||
Products | $ | 10,783 | $ | 4,393 | $ | 15,176 | ||||||
Service contracts | 5,311 | 1,450 | 6,761 | |||||||||
Supply and source usage agreements | — | 2,261 | 2,261 | |||||||||
Professional services | — | 264 | 264 | |||||||||
Other | 229 | 389 | 618 | |||||||||
$ | 16,323 | $ | 8,757 | $ | 25,080 | |||||||
Timing of Revenue Recognition | ||||||||||||
Goods transferred at a point in time | $ | 10,835 | $ | 4,676 | $ | 15,511 | ||||||
Services transferred over time | 5,488 | 4,081 | 9,569 | |||||||||
$ | 16,323 | $ | 8,757 | $ | 25,080 | |||||||
Sales Channels | ||||||||||||
Direct sales force | $ | 8,335 | $ | 7,554 | $ | 15,889 | ||||||
OEM partners | 7,988 | — | 7,988 | |||||||||
Channel partners | — | 1,203 | 1,203 | |||||||||
$ | 16,323 | $ | 8,757 | $ | 25,080 | |||||||
Total Revenue | ||||||||||||
Revenue from contracts with customers | $ | 16,323 | $ | 8,757 | $ | 25,080 | ||||||
Revenue from lease components | 541 | — | 541 | |||||||||
$ | 16,864 | $ | 8,757 | $ | 25,621 | |||||||
Balance at December 31, 2020 | Balance at December 31, 2019 | |||||||
Receivables, which are included in “Trade accounts receivable” | $ | 10,027 | $ | 9,819 | ||||
Current contract assets, which are included in “Prepaid and other assets” | 481 | 14 | ||||||
Non-current contract assets, which are included in “other assets” | 1,434 | 0 | ||||||
Contract liabilities, which are included in “Deferred revenue” | 6,384 | 5,604 |
Contract liabilities | December 31, 2020 | December 31, 2019 | ||||||
Short term | $ | 6,117 | $ | 5,248 | ||||
Long term | 267 | 356 | ||||||
Total | $ | 6,384 | $ | 5,604 | ||||
Year Ended December 31, 2020 | Year Ended December 31, 2019 | |||||||
Balance at beginning of period | $ | 5,604 | $ | 5,209 | ||||
Deferral of revenue | 11,212 | 11,005 | ||||||
Recognition of deferred revenue | (10,432 | ) | (10,610 | ) | ||||
Balance at end of period | $ | 6,384 | $ | 5,604 | ||||
Years Ended December 31, | ||||||||
2020 | 2019 | |||||||
Balance at beginning of period | $ | 379 | $ | 282 | ||||
Deferral of costs to obtain a contract | 157 | 294 | ||||||
Recognition of costs to obtain a contract | (130 | ) | (197 | ) | ||||
Balance at end of period | $ | 406 | $ | 379 | ||||
2020 | 2019 | 2018 | ||||||||||
Beginning accrual balance | $ | 17 | $ | 12 | $ | 10 | ||||||
Warranty provision | 58 | 41 | 19 | |||||||||
Usage | (58 | ) | (36 | ) | (17 | ) | ||||||
Ending accrual balance | $ | 17 | $ | 17 | $ | 12 | ||||||
2020 | 2019 | 2018 | ||||||||||
Net loss available to common shareholders | $ | (17,610 | ) | $ | (13,551 | ) | $ | (9,017 | ) | |||
Basic shares used in the calculation of earnings per share | 22,140 | 18,378 | 16,685 | |||||||||
Effect of dilutive securities: | ||||||||||||
Stock options | — | — | — | |||||||||
Restricted stock | — | — | — | |||||||||
Diluted shares used in the calculation of earnings per share | 22,140 | 18,378 | 16,685 | |||||||||
Net loss per share : | ||||||||||||
Basic | $ (0.80 | ) | $ (0.74 | ) | $ (0.54 | ) | ||||||
Diluted | $ (0.80 | ) | $ (0.74 | ) | $ (0.54 | ) |
Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Common stock options | 1,869,507 | 1,550,662 | 1,983,477 | |||||||||
Restricted Stock | 29,166 | 150,909 | 423,202 | |||||||||
Convertible Debentures | — | 1,742,500 | 1,742,500 | |||||||||
1,898,673 | 3,444,071 | 4,149,179 | ||||||||||
Fair Value Measurements as of December 31, 2020 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets | ||||||||||||||||
Money market accounts | $ | 27,186 | 0— | 0— | $ | 27,186 | ||||||||||
Total Assets | $ | 27,186 | 0— | 0— | $ | 27,186 | ||||||||||
Liabilities | ||||||||||||||||
Convertible debentures | 0— | 0— | 0— | 0— | ||||||||||||
Total Liabilities | 0— | 0— | 0 | 0 | ||||||||||||
Fair Value Measurements as of December 31, 2019 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets | ||||||||||||||||
Money market accounts | $ | 15,313 | — | — | $ | 15,313 | ||||||||||
Total Assets | $ | 15,313 | — | — | $ | 15,313 | ||||||||||
Liabilities | ||||||||||||||||
Convertible debentures | — | — | $ | 13,642 | $ | 13,642 | ||||||||||
Total Liabilities | — | — | $ | 13,642 | $ | 13,642 | ||||||||||
Convertible Debentures | ||||
Balance, December 20, 2019 | $ | 13,642 | ||
Issuances | 0 | |||
Fair value adjustments | 7,522 | |||
Conversion | (21,164 | ) | ||
Balance, December 31, 2020 | $ | 0 | ||
Rolethe adoption, the Company elected the package of practical expedients, which among other things, permits the carry forward of historical lease classifications. The Company did not elect to use the practical expedient permitting the use of hindsight in determining the lease term and in assessing impairment of right-of-use assets. The adoption of the standard did not have a material impact on our CEOoperating results or cash flows. See Note 5 for the disclosures required upon adoption of ASC 842.
(2) | Sale of MRI Assets |
(3) | Financing Arrangements |
December 31, 2020 (Western Alliance Bank) * | ||||
Principal Amount of Term Loan | $ | 7,000 | ||
Unamortized closing costs | (63 | ) | ||
Accrued Final Payment | 23 | |||
Amount Drawn on Line of Credit | — | |||
Carrying amount of Term Loan | 6,960 | |||
Less current portion of Term Loan | 0 | |||
Notes payable long-term portion | $ | 6,960 | ||
* No December 31, 2019 balance. Debt opened in 2020 |
December 31, 2019 (Silicon Valley Bank) * | ||||
Principal Amount of Term Loan | $ | 4,000 | ||
Unamortized closing costs | (40 | ) | ||
Accrued Final Payment | 293 | |||
Amount Drawn on Line of Credit | 2,000 | |||
Carrying amount of Term Loan | 6,253 | |||
Less current portion of Term Loan | (4,250 | ) | ||
Notes payable long-term portion | $ | 2,003 | ||
* No December 31, 2020 balance. Debt closed in 2020 |
Input | December 31, 2019 | February 21, 2020 | ||||||
Company’s stock price | $ | 7.77 | $ | 11.64 | ||||
Conversion price | 4.00 | 4.00 | ||||||
Remaining term (years) | 1.97 | 0.00 | ||||||
Equity volatility | 49.00 | % | N/A | |||||
Risk free rate | 1.57 | % | N/A | |||||
1 Probabilty of default event | 0.45 | % | N/A | |||||
1 Utilization of Forced Conversion (if available) | 100.00 | % | 100.00 | % | ||||
1 Exercise of Default Redemption (if available) | 100.00 | % | N/A | |||||
1 Effective discount rate | 18.52 | % | N/A | |||||
1 Represents a Level 3 unobservable input, as defined in Note 8 - Fair Value Measurements, below. |
Convertible Debentures | December 31, 2019 | February 21, 2020 | ||||||
Fair value, in accordance with fair value option | $ | 13,642 | $ | 21,164 | ||||
Principal value outstanding | $ | 6,970 | $ | 6,970 | ||||
Fiscal Year | Amount Due | |||
2021 | 1,238 | |||
2022 | 2,875 | |||
2023 | 2,735 | |||
2024 | 1,003 | |||
Total | $ | 7,851 | ||
Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Cash interest expense, notes payable | $ | 327 | $ | 274 | $ | 299 | ||||||
Cash interest expense, convertible debentures | 49 | 349 | 9 | |||||||||
Amortization of debt costs | 45 | 28 | 29 | |||||||||
Accrual of notes payable final payment | 55 | 131 | 163 | |||||||||
Interest expense capital lease | — | 2 | 4 | |||||||||
Total interest expense | $ | 476 | $ | 784 | $ | 504 | ||||||
(4) | Accrued and Other Expenses |
2020 | 2019 | |||||||
Accrued salary and related expenses | $ | 3,654 | $ | 3,200 | ||||
Accrued accounts payable | 2,405 | 2,718 | ||||||
Accrued professional fees | 598 | 510 | ||||||
Other accrued expenses | 382 | 162 | ||||||
$ | 7,039 | $ | 6,590 | |||||
(5) | Leases |
RoleCompany in New Hampshire and the facility lease in California. In addition, there were no impairment indicators identified during the year ended December 31, 2020 that required an impairment test for the Company’s
Year Ended December 31, | ||||||||||
Lease Cost | Classification | 2020 | 2019 | |||||||
Operating lease cost - Right of Use | Operating expenses | $ | 884 | $ | 804 | |||||
Operating lease cost - Variable Costs | Operating expenses | 165 | $ | 173 | ||||||
Finance lease costs | ||||||||||
Amortization of leased assets | Amortization and depreciation | 12 | 15 | |||||||
Interest on lease liabilities | Interest expense | 1 | 2 | |||||||
Total | $ | 1,062 | $ | 994 | ||||||
Other information related to leases was as follows (in thousands): | ||||||||||
2020 | 2019 | |||||||||
Cash paid for operating cash flows from operating leases | $ | 909 | $ | 840 | ||||||
Cash paid for operating cash flows from finance leases | 1 | 2 | ||||||||
Cash paid for financing cash flows from finance leases | 13 | 17 | ||||||||
2020 | 2019 | |||||||||
Weighted-average remaining lease term of operating leases (in years) | 2.21 | 3.12 | ||||||||
Weighted-average remaining lease term of finance leases (in years) | — | 1.00 | ||||||||
Weighted-average discount rate for operating leases | 5.6 | % | 5.6 | % | ||||||
Weighted-average discount rate for finance leases | 0 | 5.4 | % |
Year Ended December 31, 2020: | Operating Leases | |||
2021 | $ | 920 | ||
2022 | 899 | |||
2023 | 211 | |||
2024 | 5 | |||
Total lease payments | 2,035 | |||
Less: imputed interest | (234 | ) | ||
Total lease liabilities | 1,801 | |||
Less: current portion of lease liabilities | (726 | ) | ||
Long-term lease liabilities | $ | 1,075 | ||
(6) | Stockholders’ Equity |
Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contractual Term | ||||||||||
Outstanding, December 31, 2018 | 1,983,477 | $ | 4.25 | |||||||||
Granted | 392,270 | $ | 5.81 | |||||||||
Exercised | (379,980 | ) | $ | 3.39 | ||||||||
Forfeited | (445,105 | ) | $ | 6.06 | ||||||||
Outstanding, December 31, 2019 | 1,550,662 | $ | 4.33 | 5.0 | ||||||||
Granted | 563,502 | $ | 10.09 | |||||||||
Exercised | (155,149 | ) | $ | 4.70 | ||||||||
Forfeited | (89,508 | ) | $ | 2.51 | ||||||||
Outstanding, December 31, 2020 | 1,869,507 | $ | 5.91 | 6.0 | ||||||||
Exercisable at December 31, 2018 | 1,296,439 | $ | 4.90 | |||||||||
Exercisable at December 31, 2019 | 881,461 | $ | 4.43 | |||||||||
Exercisable at December 31, 2020 | 1,540,287 | $ | 5.55 | |||||||||
Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Cost of revenue | $ | 30 | $ | 3 | $ | 4 | ||||||
Engineering and product development | 376 | 226 | 399 | |||||||||
Marketing and sales | 657 | 226 | 190 | |||||||||
General and administrative expense | 1,781 | 713 | 912 | |||||||||
$ | 2,844 | $ | 1,168 | $ | 1,505 | |||||||
Year Ended December 31, | ||||||
2020 | 2019 | 2018 | ||||
Average risk-free interest rate | 0.65% | 1.88% | 2.65% | |||
Expected dividend yield | NaN | NaN | NaN | |||
Expected life | 3.5 | 3.5 | 3.5 | |||
Expected volatility | 50.17-66.04% | 50.01% to 54.23% | 50.4% to 61.6% | |||
Weighted average exercise price | $10.14 | $5.92 | $2.96 | |||
Weighted average fair value | $4.37 | $2.34 | $1.23 |
During 2018, the Compensation Committee engaged Pearl Meyer & Partners (“Pearl Meyer”), an independent compensation consultant, for general executive compensation support. In preparation for 2018 executive compensation determinations, Pearl Meyer updated the group of peer companiesclosing market price used to benchmark executive compensationdetermine the intrinsic values are as follows:
Years Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Outstanding | $ | 13,626 | $ | 5,465 | $ | 1,021 | ||||||
Exercisable | 11,786 | 3,067 | 499 | |||||||||
Exercised | 1,037 | 509 | 224 | |||||||||
Company’s stock price at December 31 | $ | 13.20 | $ | 7.77 | $ | 3.70 |
8
2018 Director Compensation Table*
DIRECTOR COMPENSATION
Fees Earned or | Option | Stock | ||||||||||||||||
Paid in Cash | Awards (1) | Awards (2) | Total | |||||||||||||||
Name (2) | ($) | ($) | ($) | ($) | ||||||||||||||
Dr. Rakesh Patel | (3) | 12,024 | — | 12,024 | ||||||||||||||
Andrew Sassine | (4) | — | 30,978 | 21,750 | 52,729 | |||||||||||||
Susan Wood | (3) | — | 12,636 | — | 12,636 | |||||||||||||
Dr. Lawrence Howard | (5) | — | 52,500 | 13,000 | 65,500 | |||||||||||||
Dr. Rachel Brem | (4) | — | 42,175 | 13,000 | 55,175 | |||||||||||||
Anthony Ecock | (5) | — | 37,500 | 13,000 | 50,500 | |||||||||||||
Dr. Robert Goodman | (5) | — | 26,249 | 13,000 | 39,249 | |||||||||||||
Steven Rappaport | (5) | — | 43,125 | 13,000 | 56,125 | |||||||||||||
Somu Subramaniam | (5) | — | 33,125 | 13,000 | 46,125 | |||||||||||||
Dr. Elliot Sussman | (5) | 43,125 | 13,000 | 56,125 |
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Directors may elect to elect to receive their annual retainers in the form of quarterly stock options in lieu of cash (the “Quarterly Stock Options”). The Quarterly Stock Options are vested upon grant. For all directors other than Mr. Klein, Dr. Patel, Mr. Sassine, Dr. Wood and Ms. Brem, represents Quarterly Stock Options only.
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As of the date of this Amendment, all shares
Years Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Beginning outstanding balance | 150,909 | 423,202 | 415,147 | |||||||||
Granted | — | 15,990 | 379,439 | |||||||||
Vested | (118,077 | ) | (197,730 | ) | (322,388 | ) | ||||||
Forfeited | (3,666 | ) | (90,553 | ) | (48,996 | ) | ||||||
Ending outstanding balance | 29,166 | 150,909 | 423,202 | |||||||||
Years Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Outstanding | $ | 385 | $ | 1,173 | $ | 1,566 | ||||||
Vested | 1,559 | 1,536 | 1,193 | |||||||||
Company’s stock price at December 31 | $ | 13.20 | $ | 7.77 | $ | 3.70 |
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Narrative to Director Compensation Table
Compensationthe event of directors is determineda stock split, stock dividend or other change in the Company’s capitalization. The ESPP may be terminated or amended by the Board of Directors at any time. Certain amendments to the ESPP require stockholder approval.
9
For fiscal 2018, annual cash compensation fornon-employee directors was $35,000 and $65,000 for the chairman of the board. Additional retainers for eachnon-employee directorrespective quarterly accumulation period. Employees who served on one or more board committees in 2018 were as follows:
Member | Chair | |||||||
Audit Committee | $ | 7,500 | $ | 15,000 | ||||
Compensation Committee | $ | 5,000 | $ | 10,000 | ||||
Nominating and Governance Committee | $ | 2,500 | $ | 5,000 |
Directors can elect to receive their quarterly board compensation in cash, orparticipate in the formESPP may purchase shares by authorizing payroll deductions of (i) restricted stock based onup to 15% of their base compensation during an accumulation period. Unless the cash equivalentparticipating employee withdraws from participation, accumulated payroll deductions are used to purchase shares of the closing price of the Company’s common stock on the last tradingbusiness day of each quarter,the accumulation period (the “Purchase Date”) at a price equal to 85% of the lower of the fair market value on (i) the Purchase Date or (ii) the first day of such accumulation period. Under applicable tax rules, no employee may purchase more than $25,000 worth of common stock, options, with an exercise pricevalued at the start of the purchase period, under the ESPP in any calendar year.
(7) | Income Taxes |
2020 | 2019 | 2018 | ||||||||||
Current provision (benefit): | ||||||||||||
Federal | $ | 0— | $ | — | $ | — | ||||||
State | 37 | 42 | 54 | |||||||||
$ | 37 | $ | 42 | $ | 54 | |||||||
Deferred provision: | ||||||||||||
Federal | $ | 1 | $ | 1 | $ | (10 | ) | |||||
State | — | — | (2 | ) | ||||||||
$ | 1 | $ | 1 | $ | (12 | ) | ||||||
Total | $ | 38 | $ | 43 | $ | 42 | ||||||
2020 | 2019 | 2018 | ||||||||||
Federal statutory rate | 21.0 | % | 21.0 | % | 21.0 | % | ||||||
State income taxes, net of federal benefit | 2.4 | % | 1.7 | % | 3.6 | % | ||||||
Net state impact of deferred rate change | (0.7 | %) | (2.0 | %) | 0.6 | % | ||||||
Stock compensation expense | 0.9 | % | (10.7 | %) | (1.1 | %) | ||||||
Tax amortization on goodwill | 0.0 | % | 0.0 | % | 0.1 | % | ||||||
Goodwill impairment | 0.0 | % | 0.0 | % | 0.0 | % | ||||||
Other permanent differences | (0.1 | %) | 0.0 | % | (0.5 | %) | ||||||
Change in valuation allowance | (13.4 | %) | (6.0 | %) | (27.6 | %) | ||||||
Tax credits | 1.4 | % | 2.8 | % | 3.1 | % | ||||||
Federal Rate Change | 0.0 | % | 0.0 | % | 0.0 | % | ||||||
Accrual to tax return | 0.0 | % | 1.3 | % | 0.3 | % | ||||||
Increase Xoft NOLs under 382 Study | 0.0 | % | 0.0 | % | 0.0 | % | ||||||
Change in FV of convertible debt | (9.0 | %) | (10.4 | %) | 0.0 | % | ||||||
Foreign Rate Differential | 0.0 | % | 0.2 | % | 0.0 | % | ||||||
True Ups - NOL Expiration/162(m) limits | (2.8 | %) | 0.0 | % | 0.0 | % | ||||||
Effective income tax | (0.3 | %) | (0.3 | % ) | (0.5 | % ) | ||||||
2020 | 2019 | |||||||
Inventory (Section 263A) | $ | 248 | $ | 242 | ||||
Inventory reserves | 60 | 118 | ||||||
Receivable reserves | 28 | 35 | ||||||
Other accruals | 1,081 | 1,151 | ||||||
Deferred revenue | 75 | 123 | ||||||
Accumulated depreciation/amortization | 37 | 66 | ||||||
Stock options | 459 | 267 | ||||||
Developed technology | 1,449 | 1,702 | ||||||
Tax credits | 3,859 | 3,663 | ||||||
NOL carryforward | 36,078 | 33,640 | ||||||
Lease liability | 415 | 625 | ||||||
Net deferred tax assets | 43,789 | 41,632 | ||||||
Valuation allowance | (43,356 | ) | (41,025 | ) | ||||
Right of Use Asset | (433 | ) | (607 | ) | ||||
Goodwill tax amortization | (4 | ) | (3 | ) | ||||
Deferred tax liability | $ | (4 | ) | $ | (3 | ) | ||
Such restricted stock is fully vested and such stock options are fully exercisable at the time of grant. For 2018, all directors electedlimitations related to receive their compensation in the form of stock options.
In November 2018, the Company updated the equity compensation components of itsnon-employee director compensation program. Newly appointednon-employee directors receive aone-time initial award of stock options to purchase 40,000 shares of our common stock, which vest in four equal quarterly installmentsXoft. Approximately $656,000 can be used annually through the first anniversary of the date of grant. Continuing directors receive an annual award of stock options to purchase 20,000 shares of our common stock, which also vest in four equal quarterly installments through the first anniversary of the date of grant.
Outstanding Equity Awards at December 31, 2018
The following table sets forth information regarding unexercised options and unvested stock awards outstanding at December 31, 2018 for each of our named and former executive officers.
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Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Option Exercise Price ($) | Option Expiration Date | Number of Shares of Restricted Stock That Have Not Vested (#) (2) | Market Value of Shares or Units of Stock That Have Not Vested ($) (3) | ||||||||||||||||||
Michael Klein | — | 559,809 | 2.89 | 11/16/2028 | ||||||||||||||||||||
Stacey Stevens | 10,000 | — | 5.10 | 7/8/2021 | 12,500 | 46,250 | ||||||||||||||||||
6,667 | — | 2.90 | 2/7/2022 | 27,500 | 101,750 | |||||||||||||||||||
40,000 | — | 2.27 | 9/25/2022 | 29,167 | 107,918 | |||||||||||||||||||
20,000 | — | 6.68 | 6/19/2024 | |||||||||||||||||||||
25,000 | (1) | — | 9.00 | 2/5/2025 | ||||||||||||||||||||
Kenneth Ferry(4) | 60,000 | — | 5.75 | 3/29/2021 | 50,000 | 185,000 | ||||||||||||||||||
60,000 | — | 5.10 | 7/8/2021 | 60,000 | 222,000 | |||||||||||||||||||
40,000 | — | 2.90 | 2/7/2022 | 58,333 | 215,832 | |||||||||||||||||||
60,444 | — | 2.27 | 9/25/2022 | |||||||||||||||||||||
60,000 | — | 6.68 | 6/19/2024 | |||||||||||||||||||||
40,000 | — | 9.00 | 2/5/2025 | |||||||||||||||||||||
Richard Christopher(5) | 16,666 | 61,664 | ||||||||||||||||||||||
25,000 | 92,500 | |||||||||||||||||||||||
38,889 | 143,889 |
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2029. The Company has available tax credit carryforwards (adjusted to reflect provisions of the Tax Reform Act of 1986) to offset future income tax liabilities totaling approximately $3.9 million. The credits expire in various years through 2039. The Company has additional tax credits of $1.8 million related to Xoft which have been fully reserved for and as a result no deferred settlementtax asset has been recorded. These credits expire in various years through 2030.
(8) | Segment Reporting, Geographical Information and Major Customers |
Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Segment revenues: | ||||||||||||
Detection | $ | 21,997 | $ | 22,319 | $ | 16,864 | ||||||
Therapy | 7,701 | 9,021 | 8,757 | |||||||||
Total Revenue | $ | 29,698 | $ | 31,340 | $ | 25,621 | ||||||
Segment gross profit: | ||||||||||||
Detection | $ | 17,856 | $ | 18,627 | $ | 14,709 | ||||||
Therapy | 3,498 | 5,600 | 4,721 | |||||||||
Segment gross profit | $ | 21,354 | $ | 24,227 | $ | 19,430 | ||||||
Segment operating income (loss): | ||||||||||||
Detection | $ | 2,719 | $ | 2,564 | $ | 3,412 | ||||||
Therapy | (3,028 | ) | (1,476 | ) | (2,373 | ) | ||||||
Segment operating income (loss) | $ | (309 | ) | $ | 1,088 | $ | 1,039 | |||||
General administrative | $ | (9,079 | ) | $ | (7,486 | ) | $ | (9,169 | ) | |||
Interest expense | (476 | ) | (784 | ) | (504 | ) | ||||||
Financing costs | — | — | (451 | ) | ||||||||
Loss on extinguishment of debt | (341 | ) | ||||||||||
Other income | 97 | 345 | 110 | |||||||||
Fair value of convertible debentures | (7,464 | ) | (6,671 | ) | ||||||||
Loss before income tax | $ | (17,572 | ) | $ | (13,508 | ) | $ | (8,975 | ) | |||
Year Ended December 31, | ||||||||||||
2020 | 2019 | 2018 | ||||||||||
Detection depreciation and amortization | ||||||||||||
Depreciation | $ | 115 | $ | 103 | $ | 106 | ||||||
Amortization | 164 | 240 | 248 | |||||||||
Therapy depreciation and amortization | ||||||||||||
Depreciation | $ | 124 | $ | 166 | $ | 177 | ||||||
Amortization | 128 | 128 | 129 |
Percent of Export sales | ||||||||||||
Region | 2020 | 2019 | 2018 | |||||||||
Europe | 45 | % | 57 | % | 51 | % | ||||||
Taiwan | 13 | % | 15 | % | 22 | % | ||||||
Canada | 5 | % | 7 | % | 7 | % | ||||||
China | 22 | % | 8 | % | 0 | % | ||||||
Other | 15 | % | 13 | % | 20 | % | ||||||
Total | 100 | % | 100 | % | 100 | % | ||||||
Total Export sales | $ | 6,081 | $ | 3,788 | $ | 3,255 |
Percent of Export sales | ||||||||||||
Region | 2020 | 2019 | 2018 | |||||||||
France | 41 | % | 34 | % | 36 | % | ||||||
Spain | 17 | % | 12 | % | 8 | % | ||||||
Germany | 12 | % | 4 | % | 3 | % | ||||||
Italy | 8 | % | 2 | % | 1 | % | ||||||
United Kingdon | 6 | % | 2 | % | 0 | % |
F-48 OEM partners represented $4.4 million or 44% of outstanding receivables as of December 31, 2020, with GE Healthcare accounting for $1.5 million or 34% of this amount. The four largest Therapy customers composed $1.7 million or 17% of outstanding receivables as of |
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Employment Agreements and Severance and Change in Control Agreements
Mr. Michael Klein
On November 19, 2018 the Company entered into an employment agreement with Mr. Klein to serve as Executive Chairman and Interim CEO of the Company for a term of two years ending on the earlier termination of the agreement or December 31, 2020. OnThe largest Detection direct customer represents $1.1 million or 11% of outstanding receivables as of December 12, 2018,31, 2020. These
(9) | Commitments and Contingencies |
11
Mr. Klein is also entitled to customary benefits, including participation in employee benefit plans as well as a monthly automobile allowance. Mr. Klein’s employment agreement providesagreements provide that if his employment is terminated without “cause” or if he terminates his employment for “good reason” (as such terms are defined in Mr. Klein’s employment agreement), in each case while he serves as CEO, then: (i) hecause, the executive will continue to receive an amount equal to histheir respective base salary then in effect for the 12 month periods(i) fifteen months from the date of his termination;termination, for Mr. Klein, (ii) he will receiveeighteen months from the date of termination, for Ms. Stevens, and (iii) twenty-four months from the date of termination, for Mr. Ferry, and in each case, plus the pro rata portion of any incentiveannual bonus ifearned in any earned for the fiscalemployment year of his termination; and (iii) he will receive reimbursement of monthly premiums for continued health benefits for 18 months. If the aggregate amount of payments under (i) and (ii) are less than $250,000, then Mr. Klein shall be entitled to $250,000.
In the event that within 12 months of a “change in control”, if Mr. Klein’s employment is terminated by the Company without “cause” or he terminates his employment for “good reason”, in each case while he serves as CEO, then (i) he will continue to receive an amount equal to his base salary for the period of 24 months fromthrough the date of his termination; (ii) he will receive the pro rata portion of any incentive bonus, if any, earned for the fiscal year of his termination, and (iii) all unvested stock options and other equity awards granted by the Company shall immediately vest and become exercisable and shall remain exercisable for not less than 180 days thereafter.
Ms. Stacey Stevens
On June 25, 2008, we entered into an employment agreement with Ms. Stevens, which provides for her employment for an initial term through December 31, 2011, with automaticone-year renewals thereafter subject to certain conditions. Ms. Stevens is also entitled to customary benefits, including participation in employee benefit plans as well as a monthly automobile allowance. Ms. Stevens’ employment agreement also provides for her eligibility to receive, during each year of her employment under the agreement, a target annual incentive bonus of 40% of her base salary if the Company achieves certain goals and objectives determined by the Board.
Ms. Stevens’ employment agreement provides that if her employment is terminated without “cause,” (i) she will continue to receive an amount equal to her base salary for the period of 12 months from the date of her termination, (ii) she will receive the pro rata portion of any incentive bonus, if any, earned for the fiscal year of her termination, and (iii) she will receive continued health benefits for 12 months.
On December 22, 2016, we amended Ms. Stevens employment agreement to provide that if she is terminated without “cause” within three months of a “change in control,” then (i) she will continue to receive an amount equal to her base salary for 18 months from the date of her termination, (ii) she will receive the pro rata portion of any incentive bonus, if any, earned for the fiscal year of her termination, and (iii) all unvested stock options and other equity awards granted by the Company shall immediately vest and become exercisable and shall remain exercisable for not less than 180 days thereafter.
On March 12, 2019, the Company’s Board elected Ms. Stevens to serve as President. In connection with Ms. Steven’s election to President, the Board approved (i) an annual base salary increase to $323,000 from $305,000, and (ii) an increase in target bonus to 45% of annual base salary, from 40% of annual base salary.
12
In October 2015, the Company and Ms. Stevens entered into a Change of Control Bonus Agreement (“the Bonus Agreement”). The Bonus Agreement provides that upon a “change of control” of the Company, Ms. Stevens will be entitled to a cash bonus. A “change of control” is defined to mean a sale of all or substantially all of the assets of the Company or the acquisition of more than 50% of the outstanding equity or ownership interests by any one person or group of persons. The amount of the bonus will be based upon the product of (i) the number of shares of the Company’s outstanding equity interest as of the closing of the transaction resulting in a change of control multiplied by (ii) the price of one such interest as of such closing as reported on the principal stock exchange on which such equity interests are traded. If such amount is greater than $100 million, but does not exceed $150 million, the Company will pay Ms. Stevens 0.50% of such amount. In the event such amount exceeds $150 million, the Company will pay Ms. Stevens 0.75% of such amount. The Bonus Agreement terminates upon the earliest of (i) payment of a change of control bonus, (ii) Ms. Stevens’ termination of employment prior to a change of control, or (c) by mutual agreement of the Company and Ms. Stevens. No benefits will be paid for such bonus if Ms. Stevens incurs a separation from service with the Company for any reason, subject to certain exceptions, at any time prior to a change of control.
The Bonus Agreement also amends the provisions of Ms. Stevens’ employment agreement related to Section 280G of the Internal Revenue Code. It provides that the Company will pay Ms. Stevens the greater of (i) all of the payments and benefits payable under the Bonus Agreement and all other agreements between the Company and Ms. Stevens as a result of a change in ownership or control or (ii) one dollar less than the amount of such payments and benefits that would subject Ms. Stevens to the tax imposed by Section 4999 of the Code, whichever gives Ms. Stevens the highest netafter-tax amount.
Mr. Kenneth Ferry, our Former Chief Executive Officer.
On December 22, 2016, we entered into an employment agreement with Mr. Ferry, which provided for his employment2019 and has completed all payments as Chief Executive Officer for an initial term throughof December 31, 2018,2020.
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Mr. Ferry was also entitled to customary benefits, including participation in employee benefit planscovenant as well as monthly automobilean agreement not to seek further damages with respect to the alleged patent violations. In return, the Company had a remaining obligation to pay a minimum annual royalty payment of $250,000 payable through 2016. In addition to the minimum annual royalty payments, the litigation settlement agreement with Hologic also provides for payment of royalties if such royalties exceed the minimum payment based upon a specified percentage of future net sales on any products that practice the licensed rights. The estimated fair value of the patent license and housing allowances. Mr. Ferry’s employment agreement provided that if his employment
In the event that within 12 months of a “change in control”, either (i) Mr. Ferry was terminated byclaims cannot be predicted with certainty, the Company without “cause”currently believes that there are no current proceedings or (ii) he terminated his agreement for “good reason”, then (i) heclaims pending against it of which the ultimate resolution would continue to receive an amount equal to his base salary for the periodhave a material adverse effect on its financial condition or results of 24 months from the date of his termination, (ii) he would receive the pro rata portion of any incentive bonus, if any, earned for the fiscal year of his termination, and (iii) all unvested stock options and other equity awards granted byoperations. However, should the Company would immediately vestfail to prevail in any legal matter or should several legal matters be resolved against us in the same reporting period, such matters could have a material adverse effect on the Company’s operating results and become exercisable and would remain exercisablecash flows for not less than 180 days thereafter.
Mr. Richard Christopher, our Former Executive Vice President, Chief Financial Officer.
On November 4, 2016, we entered into an employment agreement, effective December 5, 2016 with Mr. Christopher. Mr. Christopher resigned fromthat particular period. In all cases, at each reporting period, the Company effective January 11, 2019,evaluates whether or not a potential loss amount or a potential range of loss is probable and his employment agreement is no longer in effect.
On March 22, 2018, the Board approved an annual base salary for Mr. Christopher of $295,000. Mr. Christopher was also entitled to customary benefits, including participation in employee benefit plansreasonably estimable under ASC 450, “Contingencies.” Legal costs are expensed as well as a monthly automobile allowance. Mr. Christopher’s employment agreement also provided for his eligibility to receive, during each year of his employment under the agreement, a target annual incentive bonus of 40% of his base salary if we achieved goals and objectives determined by the Board.
Mr. Christopher’s employment agreement provided that if his employment was terminated without “cause” or if he terminated his employment for “good reason,” then (i) he would continue to receive an amount equal to his base salary for the period of 12 months from the date of his termination, (ii) he would receive the pro rata portion of any incentive bonus, if any, earned for the fiscal year of his termination, (iii) he would receive continued health benefits for 12 months, and (iv) all earned but unvested stock options and other equity awards granted by the Company would immediately vest and become exercisable and would remain exercisable for not less than 180 days thereafter.
incurred.
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The following table sets forth certain information regarding the beneficial ownership of our common stock as of March 31, 2019 by (i) each person who is known to us to own beneficially more than 5% of the outstanding shares of our common stock, (ii) each of our named executive officers, and (iii) each of our directors. Unless otherwise indicated below, the address of each beneficial owner is c/o iCAD, Inc. 98 Spit Brook Road, Suite 100, Nashua, New Hampshire 03062.
Name of Beneficial Owner | Beneficially Owned (1) (2) | Percentage of Class | ||||||
Michael Klein(3) | 93,302 | * | ||||||
Dr. Rakesh Patel(4) | 96,335 | * | ||||||
Andrew Sassine(5) | 1,294,233 | 7.5 | % | |||||
Dr. Susan Wood(6) | 26,584 | * | ||||||
Stacey Stevens(7) | 245,990 | 1.4 | % | |||||
Jonathan Go(8) | 230,103 | 1.3 | % | |||||
R. Scott Areglado(9) | 60,742 | * | ||||||
Richard Christopher(10) | 117,854 | * | ||||||
Kenneth Ferry(11) | 481,636 | 2.8 | % | |||||
All named executive officers and directors as a group (9 persons) | 2,646,779 | 14.88 | % |
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Transactions with Related Persons
On December 20, 2018,2016, the Company entered into a Securitiesan Asset Purchase Agreement pursuantwith Invivo Corporation. In accordance with the agreement, the Company sold to which it issued unsecured subordinated convertible debentures (the “Debentures”)Invivo all right, title and interest to certain institutionalintellectual property relating to the Company’s VersaVue Software and accredited investorsDynaCAD product and related assets for $3.2 million. The Company closed the transaction on January 30, 2017 less a holdback reserve of the Company, in an aggregate principal amount$350,000 for a net of approximately $6.5$2.9 million. Certain investors in
Review, Approval or Ratification of Transactions with Related Persons
We have adopted written policies and procedures for transactions with related persons. The charter of our Audit Committee (the “Charter”Complaint”) requires that the Audit Committee review and approve or disapprove the entry by us into transactions, arrangements and relationships where the aggregate amount involved could reasonably be expected to exceed $120,000 in any calendar year and in which a related person has a direct or indirect interest. A related person is (i) any of our directors, nominees for director or executive officers, (ii) any immediate family member of any of our directors, nominees for director or executive officers, and (iii) any person, and his or her immediate family members, or entity, including affiliates, that was a beneficial owner of 5% or more of any of our outstanding equity securities at the time the transaction occurred or existed.
The Charter provides that the Audit Committee shall approve only those related person transactions that are determined to be in, or not inconsistent with, the best interests ofagainst the Company and its stockholders, taking into account all available factsInvivo in the United States District Court for the Southern District of New York, captioned Yeda Research and circumstances asDevelopment Company Ltd. v. iCAD, Inc. and Invivo Corporation, Case No.
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important to a review of the transaction prior to its approval. Following receipt of the necessary information, a discussion is held of the relevant factors if deemed to be necessary by the Audit Committee prior to approval. If a discussion is not deemed to be necessary, approval may be given by written consent of the Audit Committee. This approval authority may also be delegatedDecember 21, 2018. On January 18, 2019, Yeda filed Oppositions to the chairperson of the Audit Committee in certain circumstances. No related person transaction may be entered into priorMotions to Dismiss. The Company and Invivo submitted responses to the completionOpposition to the Motion to Dismiss on February 8, 2019. The Court held oral argument on the Motions to Dismiss on March 27, 2019. On September 5, 2019, the Court granted Invivo’s Motion to Dismiss in its entirety and granted the Company’s Motion to Dismiss as it relates to Yeda’s breach of these procedures.
Director Independence
contract and misappropriation of trade secrets claims. On October 22, 2019, Yeda filed an Amended Complaint against only the Company asserting claims for (i) copyright infringement; and (ii) a replead breach of contract claim. The Board has determined all ofCompany filed its members meetAnswer to Yeda’s Amended Complaint on November 5, 2019. Yeda alleges, among other things, that the director independence requirements under the applicable listing rules of the Nasdaq and the rules and regulations of the SEC.
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Aggregate fees for professional services rendered forCompany infringed upon Yeda’s source code, which was originally licensed to the Company, by BDO, its independent registered public accounting firm, as of or forusing it in the fiscal years ended December 31, 2018products that the Company sold to Invivo and 2017 were:
Fiscal Year Ended | ||||||||
Services Rendered(1) | December 31, 2018 | December 31, 2017 | ||||||
Audit Fees | $ | 387,485 | $ | 343,269 | ||||
Audit Related Fees | — | — | ||||||
Tax Fees | — | — | ||||||
All Other Fees | — | — | ||||||
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Total | $ | 387,485 | $ | 343,269 | ||||
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Audit Fees.Audit fees for the fiscal years ended December 31, 2018 and 2017 relatethat it is entitled to professional services rendered for the audits of our financial statements, quarterly reviews, issuance of consents, and assistance with review of documents filed with the SEC.
Audit-Related Fees.No audit-related fees were paid to BDO for the fiscal years ended December 31, 2018 and 2017.
Tax Fees. No tax fees were paid to BDO for the fiscal years ended December 31, 2018 and 2017.
All Other Fees. Nodamages that could include, among other fees were paid to BDO for the fiscal years ended December 31, 2018 and 2017.
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The Audit Committee Charter provides that one of the Audit Committee’s responsibilities ispre-approval of all audit, audit related, tax services and other services performed by our independent registered public accounting firm. Unless the specific service has been previouslypre-approved with respect to that year, the Audit Committee must approve the permitted service before the Company’s independent registered public accounting firm is engaged to perform it. The Audit Committeepre-approves proposed services and fee estimates for these services. The Audit Committee chairperson or his or her designee has been designated by the Audit Committee topre-approve any services arising during the year that were notpre-approved by the Audit Committee. Servicespre-approved by the Audit Committee chairperson are communicatedthings, profits relating to the full Audit Committee atsales of these products. If the Company is found to have infringed Yeda’s copyright or breached its next regular meeting andagreements with Yeda, the Audit Committee reviews services and fees for the fiscal year at each such meeting. PursuantCompany could be obligated to these procedures, the Audit Committeepre-approved all of the audit services provided by BDOpay to us during the fiscal years ended December 31, 2018 and 2017.
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PART IV
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
iCAD, INC.
Date: April 30, 2019
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