☒ | QUARTERLY 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 |
symbol(s) on which registeredNASDAQNasdaq Stock Market LLC
Large Accelerated filer | ☐ | Accelerated filer | ☒ | |||
Non-accelerated filer | ☐ | Smaller reporting company | ☒ | |||
Emerging growth company | ☐ |
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PART I | FINANCIAL INFORMATION | |||||||||
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Item 1 | ||||||||||
3 | ||||||||||
4 | ||||||||||
5 | ||||||||||
6-7 | ||||||||||
8-35 | ||||||||||
Item 2 | 35-51 | |||||||||
Item 3 | 52 | |||||||||
Item 4 | 52 | |||||||||
PART II | OTHER INFORMATION | |||||||||
Item 1 | 53 | |||||||||
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Item 1A | 54 | |||||||||
Item 6 | 56 | |||||||||
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57 |
September 30, | December 31, | |||||||
2019 | 2018 | |||||||
Unaudited | Audited | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 17,427 | $ | 12,185 | ||||
Trade accounts receivable, net of allowance for doubtful accounts of $181 in 2019 and $177 in 2018 | 8,002 | 6,403 | ||||||
Inventory, net | 2,387 | 1,587 | ||||||
Prepaid expenses and other current assets | 1,389 | 1,045 | ||||||
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Total current assets | 29,205 | 21,220 | ||||||
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Property and equipment, net of accumulated depreciation of $6,433 in 2019 and $6,214 in 2018 | 543 | 552 | ||||||
Operating lease assets | 2,131 | — | ||||||
Other assets | 53 | 53 | ||||||
Intangible assets, net of accumulated amortization of $8,092 in 2019 and $7,809 in 2018 | 1,274 | 1,550 | ||||||
Goodwill | 8,362 | 8,362 | ||||||
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Total assets | $ | 41,568 | $ | 31,737 | ||||
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Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 1,255 | $ | 1,154 | ||||
Accrued and other expenses | 6,376 | 5,060 | ||||||
Notes payable - current portion | 3,250 | 1,851 | ||||||
Lease payable - current portion | 656 | 15 | ||||||
Deferred revenue | 5,016 | 5,165 | ||||||
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Total current liabilities | 16,553 | 13,245 | ||||||
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Lease payable, long-term portion | 1,548 | 38 | ||||||
Notes payable, long-term portion | 2,564 | 4,254 | ||||||
Convertible debentures payable tonon-related parties, at fair value | 11,197 | 6,300 | ||||||
Convertible debentures payable to related parties, at fair value | 1,113 | 670 | ||||||
Deferred revenue, long-term portion | 398 | 331 | ||||||
Deferred tax | 3 | 3 | ||||||
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Total liabilities | 33,376 | 24,841 | ||||||
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Commitments and Contingencies (Note 5 and 7) | ||||||||
Stockholders’ equity: | ||||||||
Preferred stock, $ .01 par value: authorized 1,000,000 shares; none issued. | — | — | ||||||
Common stock, $ .01 par value: authorized 30,000,000 shares; issued 19,500,301 in 2019 and 17,066,510 in 2018; outstanding 19,314,470 in 2019 and 16,880,679 in 2018 | 195 | 171 | ||||||
Additionalpaid-in capital | 230,389 | 218,914 | ||||||
Accumulated deficit | (220,977 | ) | (210,774 | ) | ||||
Treasury stock at cost, 185,831 shares in 2019 and 2018 | (1,415 | ) | (1,415 | ) | ||||
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Total stockholders’ equity | 8,192 | 6,896 | ||||||
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Total liabilities and stockholders’ equity | $ | 41,568 | $ | 31,737 | ||||
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September 30, | December 31, | |||||||
Assets | 2020 | 2019 | ||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 22,633 | $ | 15,313 | ||||
Trade accounts receivable, net of allowance for doubtful accounts of $216 in 2020 and $136 in 2019 | 8,376 | 9,819 | ||||||
Inventory, net | 3,146 | 2,611 | ||||||
Prepaid expenses and other current assets | 1,662 | 1,453 | ||||||
Total current assets | 35,817 | 29,196 | ||||||
Property and equipment, net of accumulated depreciation of $6,716 in 2020 and $6,510 in 2019 | 620 | 551 | ||||||
Operating lease assets | 1,945 | 2,406 | ||||||
Other assets | 101 | 50 | ||||||
Intangible assets, net of accumulated amortization of $8,418 in 2020 and $8,186 in 2019 | 962 | 1,183 | ||||||
Goodwill | 8,362 | 8,362 | ||||||
Total assets | $ | 47,807 | $ | 41,748 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 2,084 | $ | 1,990 | ||||
Accrued and other expenses | 4,679 | 6,590 | ||||||
Notes payable - current portion | 994 | 4,250 | ||||||
Lease payable - current portion | 822 | 758 | ||||||
Deferred revenue | 5,644 | 5,248 | ||||||
Total current liabilities | 14,223 | 18,836 | ||||||
Lease payable, long-term portion | 1,287 | 1,837 | ||||||
Notes payable, long-term portion | 6,729 | 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 revenue, long-term portion | 219 | 356 | ||||||
Deferred tax | 4 | 3 | ||||||
Total liabilities | 22,462 | 36,677 | ||||||
Commitments and Contingencies (Note 7) | ||||||||
Stockholders’ equity: | ||||||||
Preferred stock, $0.01 par value: authorized 1,000,000 shares; NaN issued. | — | — | ||||||
Common stock, $ 0.01 par value: authorized 30,000,000 shares; issued 23,155,482 as ofSeptember 30, 2020 | 231 | 195 | ||||||
Additional paid-in capital | 266,861 | 230,615 | ||||||
Accumulated deficit | (240,332 | ) | (224,324 | ) | ||||
Treasury stock at cost, 185,831 shares in 2020 and 2019 | (1,415 | ) | (1,415 | ) | ||||
Total stockholders’ equity | 25,345 | 5,071 | ||||||
Total liabilities and stockholders’ equity | $ | 47,807 | $ | 41,748 | ||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Revenue: | ||||||||||||||||
Products | $ | 5,156 | $ | 3,093 | $ | 13,331 | $ | 9,301 | ||||||||
Service and supplies | 2,701 | 3,099 | 8,628 | 9,366 | ||||||||||||
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Total revenue | 7,857 | 6,192 | 21,959 | 18,667 | ||||||||||||
Cost of revenue: | ||||||||||||||||
Products | 809 | 603 | 2,134 | 1,598 | ||||||||||||
Service and supplies | 891 | 752 | 2,466 | 2,743 | ||||||||||||
Amortization and depreciation | 103 | 99 | 297 | 306 | ||||||||||||
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Total cost of revenue | 1,803 | 1,454 | 4,897 | 4,647 | ||||||||||||
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Gross profit | 6,054 | 4,738 | 17,062 | 14,020 | ||||||||||||
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Operating expenses: | ||||||||||||||||
Engineering and product development | 2,485 | 2,035 | 6,751 | 7,431 | ||||||||||||
Marketing and sales | 3,588 | 2,100 | 9,281 | 6,272 | ||||||||||||
General and administrative | 1,872 | 1,778 | 5,276 | 5,419 | ||||||||||||
Amortization and depreciation | 69 | 74 | 206 | 234 | ||||||||||||
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Total operating expenses | 8,014 | 5,987 | 21,514 | 19,356 | ||||||||||||
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Loss from operations | (1,960 | ) | (1,249 | ) | (4,452 | ) | (5,336 | ) | ||||||||
Interest expense | (193 | ) | (118 | ) | (604 | ) | (373 | ) | ||||||||
Other income | 103 | 28 | 226 | 79 | ||||||||||||
Loss on fair value of convertible debentures | (900 | ) | — | (5,340 | ) | — | ||||||||||
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Other expense, net | (990 | ) | (90 | ) | (5,718 | ) | (294 | ) | ||||||||
Loss before income tax expense | (2,950 | ) | (1,339 | ) | (10,170 | ) | (5,630 | ) | ||||||||
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Tax expense | (6 | ) | (26 | ) | (33 | ) | (43 | ) | ||||||||
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Net loss and comprehensive loss | $ | (2,956 | ) | $ | (1,365 | ) | $ | (10,203 | ) | $ | (5,673 | ) | ||||
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Net loss per share: | ||||||||||||||||
Basic | $ | (0.15 | ) | $ | (0.08 | ) | $ | (0.57 | ) | $ | (0.34 | ) | ||||
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Diluted | $ | (0.15 | ) | $ | (0.08 | ) | $ | (0.57 | ) | $ | (0.34 | ) | ||||
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Weighted average number of shares used in computing loss per share: | ||||||||||||||||
Basic | 19,284 | 16,700 | 18,049 | 16,652 | ||||||||||||
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Diluted | 19,284 | 16,700 | 18,049 | 16,652 | ||||||||||||
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Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Revenue: | ||||||||||||||||
Products | $ | 4,538 | $ | 5,156 | $ | 11,220 | $ | 13,331 | ||||||||
Service and supplies | 2,591 | 2,701 | 8,027 | 8,628 | ||||||||||||
Total revenue | 7,129 | 7,857 | 19,247 | 21,959 | ||||||||||||
Cost of revenue: | ||||||||||||||||
Products | 1,345 | 809 | 2,899 | 2,134 | ||||||||||||
Service and supplies | 667 | 891 | 2,169 | 2,466 | ||||||||||||
Amortization and depreciation | 92 | 103 | 287 | 297 | ||||||||||||
Total cost of revenue | 2,104 | 1,803 | 5,355 | 4,897 | ||||||||||||
Gross profit | 5,025 | 6,054 | 13,892 | 17,062 | ||||||||||||
Operating expenses: | ||||||||||||||||
Engineering and product development | 1,849 | 2,485 | 5,938 | 6,751 | ||||||||||||
Marketing and sales | 2,979 | 3,588 | 9,218 | 9,281 | ||||||||||||
General and administrative | 1,834 | 1,872 | 6,476 | 5,276 | ||||||||||||
Amortization and depreciation | 52 | 69 | 153 | 206 | ||||||||||||
Total operating expenses | 6,714 | 8,014 | 21,785 | 21,514 | ||||||||||||
Loss from operations | (1,689 | ) | (1,960 | ) | (7,893 | ) | (4,452 | ) | ||||||||
Interest expense | (115 | ) | (193 | ) | (360 | ) | (604 | ) | ||||||||
Other income | 10 | 103 | 85 | 226 | ||||||||||||
Loss on extinguishment of debt | — | — | (341 | ) | — | |||||||||||
Loss on fair value of convertible debentures | — | (900 | ) | (7,464 | ) | (5,340 | ) | |||||||||
Other expense, net | (105 | ) | (990 | ) | (8,080 | ) | (5,718 | ) | ||||||||
Loss before income tax expense | (1,794 | ) | (2,950 | ) | (15,973 | ) | (10,170 | ) | ||||||||
Tax expense | (3 | ) | (6 | ) | (34 | ) | (33 | ) | ||||||||
Net loss and comprehensive loss | $ | (1,797 | ) | $ | (2,956 | ) | $ | (16,007 | ) | $ | (10,203 | ) | ||||
Net loss per share: | ||||||||||||||||
Basic | $ | (0.08 | ) | $ | (0.15 | ) | $ | (0.73 | ) | $ | (0.57 | ) | ||||
Diluted | $ | (0.08 | ) | $ | (0.15 | ) | $ | (0.73 | ) | $ | (0.57 | ) | ||||
Weighted average number of shares used in computing loss per share: | ||||||||||||||||
Basic | 23,173 | 19,284 | 21,827 | 18,049 | ||||||||||||
Diluted | 23,173 | 19,284 | 21,827 | 18,049 | ||||||||||||
For the nine months ended September 30, | ||||||||
2019 | 2018 | |||||||
(in thousands) | ||||||||
Cash flow from operating activities: | ||||||||
Net loss | $ | (10,203 | ) | $ | (5,673 | ) | ||
Adjustments to reconcile net loss to net cash used for operating activities: | ||||||||
Amortization | 283 | 286 | ||||||
Depreciation | 220 | 254 | ||||||
Bad debt provision | 62 | 101 | ||||||
Stock-based compensation expense | 856 | 1,187 | ||||||
Amortization of debt discount and debt costs | 109 | 129 | ||||||
Deferred tax expense | — | (13 | ) | |||||
Loss on disposal of assets | — | 12 | ||||||
Change in fair value of convertible debentures | 5,340 | — | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (1,672 | ) | 2,301 | |||||
Inventory | (800 | ) | 212 | |||||
Prepaid and other current assets | 165 | 1 | ||||||
Accounts payable | 101 | (490 | ) | |||||
Accrued expenses | 837 | (775 | ) | |||||
Deferred revenue | (70 | ) | 146 | |||||
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Total adjustments | 5,431 | 3,351 | ||||||
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Net cash used for operating activities | (4,772 | ) | (2,322 | ) | ||||
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Cash flow from investing activities: | ||||||||
Additions to patents, technology and other | (8 | ) | (9 | ) | ||||
Additions to property and equipment | (211 | ) | (107 | ) | ||||
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Net cash used for investing activities | (219 | ) | (116 | ) | ||||
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Cash flow from financing activities: | ||||||||
Stock option exercises | 1,396 | — | ||||||
Taxes paid related to restricted stock issuance | (106 | ) | (130 | ) | ||||
Principal payments of capital lease obligations | (10 | ) | (9 | ) | ||||
Principal repayment of debt financing, net | (1,400 | ) | — | |||||
Proceeds from Line of Credit, net | 1,000 | — | ||||||
Issuance costs from common stock | (997 | ) | — | |||||
Proceeds from issuance of common stock | 10,350 | — | ||||||
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Net cash provided by (used for) financing activities | 10,233 | (139 | ) | |||||
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Increase (decrease) in cash and equivalents | 5,242 | (2,577 | ) | |||||
Cash and equivalents, beginning of period | 12,185 | 9,387 | ||||||
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Cash and equivalents, end of period | $ | 17,427 | $ | 6,810 | ||||
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Supplemental disclosure of cash flow information: | ||||||||
Interest paid | $ | 404 | $ | 215 | ||||
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Taxes paid | $ | 33 | $ | 42 | ||||
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Right-of-use assets obtained in exchange for new operating lease liabilities | $ | 2,641 | $ | — | ||||
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See accompanying notes to consolidated financial statements.
iCAD, INC. AND SUBSIDIARIES
For the Nine Months ended September 30, | ||||||||
2020 | 2019 | |||||||
(in thousands) | ||||||||
Cash flow from operating activities: | ||||||||
Net loss | $ | (16,007 | ) | $ | (10,203 | ) | ||
Adjustments to reconcile net loss to net cash used for operating activities: | ||||||||
Amortization of Intangible Assets | 234 | 283 | ||||||
Depreciation | 206 | 220 | ||||||
Bad debt provision | 80 | 62 | ||||||
Stock-based compensation | 2,542 | 856 | ||||||
Amortization of debt discount and debt costs | 65 | 109 | ||||||
Loss on extinguishment of debt | 341 | — | ||||||
Deferred tax expense | 1 | — | ||||||
Change in fair value of convertible debentures | 7,464 | 5,340 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 1,151 | (1,672 | ) | |||||
Inventory | (535 | ) | (800 | ) | ||||
Prepaid and other current assets | 69 | 165 | ||||||
Accounts payable | 96 | 101 | ||||||
Accrued expenses | (2,322 | ) | 837 | |||||
Deferred revenue | 532 | (70 | ) | |||||
Total adjustments | 9,924 | 5,431 | ||||||
Net cash used for operating activities | (6,083 | ) | (4,772 | ) | ||||
Cash flow from investing activities: | ||||||||
Additions to patents, technology and other | (11 | ) | (8 | ) | ||||
Additions to property and equipment | (275 | ) | (211 | ) | ||||
Net cash used for investing activities | (286 | ) | (219 | ) | ||||
Cash flow from financing activities: | ||||||||
Issuance of common stock pursuant to stock option plans | 415 | 1,396 | ||||||
Issuance of common stock pursuant to Employee Stock Purchase Plan | 209 | — | ||||||
Taxes paid related to restricted stock issuance | (225 | ) | (106 | ) | ||||
Principal payments of capital lease obligations | — | (10 | ) | |||||
Principal repayment of debt financing | (4,638 | ) | (1,400 | ) | ||||
Proceeds from Line of Credit | 775 | 1,000 | ||||||
Repayment to Line of Credit | (2,000 | ) | — | |||||
Proceeds from debt financing | 6,957 | — | ||||||
Debt issuance costs | 22 | — | ||||||
Proceeds from issuance of common stock, net | 12,174 | 9,353 | ||||||
Net cash provided by financing activities | 13,689 | 10,233 | ||||||
Increase in cash and equivalents | 7,320 | 5,242 | ||||||
Cash and cash equivalents, beginning of period | 15,313 | 12,185 | ||||||
Cash and cash equivalents, end of period | $ | 22,633 | $ | 17,427 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Interest paid | $ | 127 | $ | 404 | ||||
Taxes paid | $ | 34 | $ | 33 | ||||
Issuance of stock upon conversion of debentures | 21,164 | — | ||||||
Right-of-use | $ | 69 | $ | 2,641 | ||||
See accompanying notes to condensed 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, 2018 | 17,066,510 | $ | 171 | $ | 218,914 | $ | (210,774 | ) | $ | (1,415 | ) | $ | 6,896 | |||||||||||
Issuance of common stock relative to vesting of restricted stock shares forfeited for tax obligations | 122,993 | 1 | (106 | ) | — | — | (106 | ) | ||||||||||||||||
Issuance of common stock pursuant to stock option plans | 428,980 | 4 | 1,392 | — | — | 1,396 | ||||||||||||||||||
Stock Issuance net of issuance costs | 1,881,818 | 19 | 9,334 | 9,353 | ||||||||||||||||||||
Stock-based compensation | — | — | 856 | — | — | 856 | ||||||||||||||||||
Net loss | — | — | — | (10,203 | ) | — | (10,203 | ) | ||||||||||||||||
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Balance at September 30, 2019 (Unaudited) | 19,500,301 | $ | 195 | $ | 230,390 | $ | (220,977 | ) | $ | (1,415 | ) | $ | 8,192 | |||||||||||
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Common Stock | Additional Paid-in Capital | Accumulated Deficit | Treasury Stock | Stockholders’ Equity | ||||||||||||||||||||
Number of Shares Issued | Par Value | |||||||||||||||||||||||
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 | 97,830 | — | (225 | ) | (225 | ) | ||||||||||||||||||
Issuance of common stock pursuant to stock option plans | 94,678 | 1 | 416 | — | — | 417 | ||||||||||||||||||
Stock Issuance Net | 1,562,500 | 16 | 12,158 | — | — | 12,174 | ||||||||||||||||||
Issuance of common stock pursuant Employee Stock Purchase Plan | 34,857 | 209 | 209 | |||||||||||||||||||||
Issuance of stock upon conversion of Debentures | 1,819,466 | 18 | 21,146 | — | — | 21,164 | ||||||||||||||||||
Stock-based compensation | — | — | 2,542 | 2,542 | ||||||||||||||||||||
Net loss | — | — | — | (16,007 | ) | — | (16,007 | ) | ||||||||||||||||
Balance at September 30, 2020 | 23,155,482 | $ | 231 | $ | 266,861 | $ | (240,332 | ) | $ | (1,415 | ) | $ | 25,345 | |||||||||||
Common Stock | Additional | |||||||||||||||||||||||
Number of | Paid-in | Accumulated | Treasury | Stockholders’ | ||||||||||||||||||||
Shares Issued | Par Value | Capital | Deficit | Stock | Equity | |||||||||||||||||||
Balance at June 30, 2019 (Unaudited) | 19,447,763 | $ | 194 | $ | 230,141 | $ | (218,021 | ) | $ | (1,415 | ) | $ | 10,899 | |||||||||||
Issuance of common stock relative to vesting of restricted stock shares forfeited for tax obligations | 51,871 | 1 | (91 | ) | — | — | (91 | ) | ||||||||||||||||
Issuance of common stock pursuant to stock option plans | 667 | — | — | — | — | — | ||||||||||||||||||
Stock-based compensation | 340 | 340 | ||||||||||||||||||||||
Net loss | — | — | — | (2,956 | ) | — | (2,956 | ) | ||||||||||||||||
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Balance at September 30, 2019 (Unaudited) | 19,500,301 | $ | 195 | $ | 230,390 | $ | (220,977 | ) | $ | (1,415 | ) | $ | 8,192 | |||||||||||
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Common Stock | Additional Paid-in Capital | Accumulated Deficit | Treasury Stock | Stockholders’ Equity | ||||||||||||||||||||
Number of Shares Issued | Par Value | |||||||||||||||||||||||
Balance at June 30, 2020 | 23,060,272 | $ | 231 | $ | 266,211 | $ | (238,535 | ) | $ | (1,415 | ) | $ | 26,492 | |||||||||||
Issuance of common stock relative to vesting of restricted stock | 29,106 | — | (94 | ) | — | — | (94 | ) | ||||||||||||||||
Issuance of common stock pursuant to stock option plans | 49,712 | — | 185 | — | — | 185 | ||||||||||||||||||
Stock Issuance Net | — | — | — | — | — | — | ||||||||||||||||||
Issuance of common stock pursuant Employee Stock Purchase Plan | 16,392 | — | 94 | — | — | 94 | ||||||||||||||||||
Issuance of stock upon conversion of Debentures | — | — | — | — | — | — | ||||||||||||||||||
Stock-based compensation | — | — | 465 | — | — | 465 | ||||||||||||||||||
Net loss | — | — | — | (1,797 | ) | — | (1,797 | ) | ||||||||||||||||
Balance at September 30, 2020 | 23,155,482 | $ | 231 | $ | 266,861 | $ | (240,332 | ) | $ | (1,415 | ) | $ | 25,345 | |||||||||||
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 18,385 shares forfeited for tax obligations | 201,918 | 2 | (132 | ) | — | — | (130 | ) | ||||||||||||||||
Stock-based compensation | — | — | 1,187 | — | — | 1,187 | ||||||||||||||||||
Net loss | — | — | — | (5,673 | ) | — | (5,673 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Balance at September 30, 2018 Unaudited | 16,913,430 | $ | 169 | $ | 218,444 | $ | (207,430 | ) | $ | (1,415 | ) | $ | 9,768 | |||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock | Additional Paid-in Capital | Accumulated Deficit | Treasury Stock | Stockholders’ Equity | ||||||||||||||||||||
Number of Shares Issued | Par Value | |||||||||||||||||||||||
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 shares forfeited for tax obligations | 122,993 | 1 | (106 | ) | — | — | (106 | ) | ||||||||||||||||
Issuance of common stock pursuant to stock option plans | 428,980 | 4 | 1,392 | — | — | 1,396 | ||||||||||||||||||
Stock Issuance net of issuance costs | 1,881,818 | 19 | 9,334 | 9,353 | ||||||||||||||||||||
Stock-based compensation | — | — | 856 | — | — | 856 | ||||||||||||||||||
Net loss | — | — | — | (10,203 | ) | — | (10,203 | ) | ||||||||||||||||
Balance at September 30, 2019 | 19,500,301 | $ | 195 | $ | 230,390 | $ | (220,977 | ) | $ | (1,415 | ) | $ | 8,192 | |||||||||||
Common Stock | Additional | |||||||||||||||||||||||
Number of | Paid-in | Accumulated | Treasury | Stockholders’ | ||||||||||||||||||||
Shares Issued | Par Value | Capital | Deficit | Stock | Equity | |||||||||||||||||||
Balance at June 30, 2018 (Unaudited) | 16,853,885 | $ | 168 | $ | 218,099 | $ | (206,065 | ) | $ | (1,415 | ) | $ | 10,787 | |||||||||||
Issuance of common stock relative to vesting of restricted stock, net of 18,385 shares forfeited for tax obligations | 59,545 | 1 | (68 | ) | — | — | (67 | ) | ||||||||||||||||
Stock-based compensation | — | — | 413 | — | — | 413 | ||||||||||||||||||
Net loss | — | — | — | (1,365 | ) | — | (1,365 | ) | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Balance at September 30, 2018 (Unaudited) | 16,913,430 | $ | 169 | $ | 218,444 | $ | (207,430 | ) | $ | (1,415 | ) | $ | 9,768 | |||||||||||
|
|
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|
|
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|
|
iCAD, INC. AND SUBSIDIARIES
Common Stock | Additional Paid-in Capital | Accumulated Deficit | Treasury Stock | Stockholders’ Equity | ||||||||||||||||||||
Number of Shares Issued | Par Value | |||||||||||||||||||||||
Balance at June 30, 2019 | 19,447,763 | $ | 194 | $ | 230,141 | $ | (218,021 | ) | $ | (1,415 | ) | $ | 10,899 | |||||||||||
Issuance of common stock relative to vesting of restricted stock shares forfeited for tax obligations | 51,871 | 1 | (91 | ) | — | — | (91 | ) | ||||||||||||||||
Issuance of common stock pursuant to stock option plans | 667 | — | — | — | — | — | ||||||||||||||||||
Stock-based compensation | 340 | 340 | ||||||||||||||||||||||
Net loss | — | — | — | (2,956 | ) | — | (2,956 | ) | ||||||||||||||||
Balance at September 30, 2019 | 19,500,301 | $ | 195 | $ | 230,390 | $ | (220,977 | ) | $ | (1,415 | ) | $ | 8,192 |
(Unaudited)
September 30, 2019
stockholders’ equity for the Company for the three and nine-month periods ended September 30, 2020 and 2019.
Lease Accounting
Adoption
On January 1, 2019,the
iCAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 2019
Three months ended September 30, 2019 | ||||||||||||
Reportable Segments | ||||||||||||
Detection | Therapy | Total | ||||||||||
Major Goods/Service Lines | ||||||||||||
Products | $ | 4,749 | $ | 841 | $ | 5,590 | ||||||
Service contracts | $ | 1,336 | $ | 446 | 1,782 | |||||||
Supply and source usage agreements | — | 465 | 465 | |||||||||
Professional services | — | 18 | 18 | |||||||||
Other | 2 | — | 2 | |||||||||
|
|
|
|
|
| |||||||
$ | 6,087 | $ | 1,770 | $ | 7,857 | |||||||
|
|
|
|
|
| |||||||
Timing of Revenue Recognition | ||||||||||||
Goods transferred at a point in time | $ | 4,749 | $ | 892 | $ | 5,641 | ||||||
Services transferred over time | 1,338 | 878 | 2,216 | |||||||||
|
|
|
|
|
| |||||||
$ | 6,087 | $ | 1,770 | $ | 7,857 | |||||||
|
|
|
|
|
| |||||||
Sales Channels | ||||||||||||
Direct sales force | $ | 3,467 | $ | 1,280 | $ | 4,747 | ||||||
OEM partners | 2,620 | — | 2,620 | |||||||||
Channel partners | — | 490 | 490 | |||||||||
|
|
|
|
|
| |||||||
$ | 6,087 | $ | 1,770 | $ | 7,857 | |||||||
|
|
|
|
|
|
iCAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 2019
Nine months ended September 30, 2019 | ||||||||||||
Reportable Segments | ||||||||||||
Detection | Therapy | Total | ||||||||||
Major Goods/Service Lines | ||||||||||||
Products | $ | 11,347 | $ | 3,410 | $ | 14,757 | ||||||
Service contracts | $ | 4,012 | $ | 1,437 | 5,449 | |||||||
Supply and source usage agreements | $ | — | $ | 1,528 | 1,528 | |||||||
Professional services | $ | — | $ | 59 | 59 | |||||||
Other | $ | 105 | $ | 61 | 166 | |||||||
|
|
|
|
|
| |||||||
$ | 15,464 | $ | 6,495 | $ | 21,959 | |||||||
|
|
|
|
|
| |||||||
Timing of Revenue Recognition | ||||||||||||
Goods transferred at a point in time | $ | 11,347 | $ | 3,668 | $ | 15,015 | ||||||
Services transferred over time | $ | 4,117 | $ | 2,827 | 6,944 | |||||||
|
|
|
|
|
| |||||||
$ | 15,464 | $ | 6,495 | $ | 21,959 | |||||||
|
|
|
|
|
| |||||||
Sales Channels | ||||||||||||
Direct sales force | $ | 8,441 | $ | 4,793 | $ | 13,234 | ||||||
OEM partners | $ | 7,023 | $ | — | 7,023 | |||||||
Channel partners | $ | — | $ | 1,702 | 1,702 | |||||||
|
|
|
|
|
| |||||||
$ | 15,464 | $ | 6,495 | $ | 21,959 | |||||||
|
|
|
|
|
|
iCAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 2019
Three months ended September 30, 2018 | ||||||||||||
Reportable Segments | ||||||||||||
Detection | Therapy | Total | ||||||||||
Major Goods/Service Lines | ||||||||||||
Products | $ | 2,394 | $ | 1,162 | $ | 3,556 | ||||||
Service contracts | 1,475 | 373 | 1,848 | |||||||||
Supply and source usage agreements | — | 599 | 599 | |||||||||
Professional services | — | 68 | 68 | |||||||||
Other | 58 | 63 | 121 | |||||||||
|
|
|
|
|
| |||||||
$ | 3,927 | $ | 2,265 | $ | 6,192 | |||||||
|
|
|
|
|
| |||||||
Timing of Revenue Recognition | ||||||||||||
Goods transferred at a point in time | 2,394 | 1,206 | $ | 3,600 | ||||||||
Services transferred over time | 1,533 | 1,059 | 2,592 | |||||||||
|
|
|
|
|
| |||||||
$ | 3,927 | $ | 2,265 | $ | 6,192 | |||||||
|
|
|
|
|
| |||||||
Sales Channels | ||||||||||||
Direct sales force | $ | 2,474 | $ | 1,798 | $ | 4,272 | ||||||
OEM partners | 1,453 | — | 1,453 | |||||||||
Channel partners | — | 467 | 467 | |||||||||
|
|
|
|
|
| |||||||
$ | 3,927 | $ | 2,265 | $ | 6,192 | |||||||
|
|
|
|
|
|
Three months ended September 30, 2020 | ||||||||||||
Reportable Segments | ||||||||||||
Detection | Therapy | Total | ||||||||||
Major Goods/Service Lines | ||||||||||||
Products | $ | 3,889 | $ | 1,038 | $ | 4,927 | ||||||
Service contracts | 1,400 | 347 | 1,747 | |||||||||
Supply and source usage agreements | — | 444 | 444 | |||||||||
Professional services | — | 9 | 9 | |||||||||
Other | 2 | — | 2 | |||||||||
$ | 5,291 | $ | 1,838 | $ | 7,129 | |||||||
Timing of Revenue Recognition | ||||||||||||
Goods transferred at a point in time | $ | 3,889 | $ | 1,051 | $ | 4,940 | ||||||
Services transferred over time | 1,402 | 787 | 2,189 | |||||||||
$ | 5,291 | $ | 1,838 | $ | 7,129 | |||||||
Sales Channels | ||||||||||||
Direct sales force | $ | 2,904 | $ | 857 | $ | 3,761 | ||||||
OEM partners | 2,387 | — | 2,387 | |||||||||
Channel partners | — | 981 | 981 | |||||||||
$ | 5,291 | $ | 1,838 | $ | 7,129 | |||||||
iCAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 2019
Nine months ended September 30, 2018 | ||||||||||||
Reportable Segments | ||||||||||||
Detection | Therapy | Total | ||||||||||
Major Goods/Service Lines | ||||||||||||
Products | $ | 7,369 | $ | 3,406 | $ | 10,775 | ||||||
Service contracts | 4,392 | 1,082 | 5,474 | |||||||||
Supply and source usage agreements | — | 1,686 | 1,686 | |||||||||
Professional services | — | 262 | 262 | |||||||||
Other | 167 | 303 | 470 | |||||||||
|
|
|
|
|
| |||||||
$ | 11,928 | $ | 6,739 | $ | 18,667 | |||||||
|
|
|
|
|
| |||||||
Timing of Revenue Recognition | ||||||||||||
Goods transferred at a point in time | $ | 7,369 | $ | 3,676 | $ | 11,045 | ||||||
Services transferred over time | $ | 4,559 | $ | 3,063 | 7,622 | |||||||
|
|
|
|
|
| |||||||
$ | 11,928 | $ | 6,739 | $ | 18,667 | |||||||
|
|
|
|
|
| |||||||
Sales Channels | ||||||||||||
Direct sales force | $ | 6,594 | $ | 5,756 | $ | 12,350 | ||||||
OEM partners | $ | 5,334 | $ | — | 5,334 | |||||||
Channel partners | $ | — | $ | 983 | 983 | |||||||
|
|
|
|
|
| |||||||
$ | 11,928 | $ | 6,739 | $ | 18,667 | |||||||
|
|
|
|
|
|
Nine months ended September 30, 2020 | ||||||||||||
Reportable Segments | ||||||||||||
Detection | Therapy | Total | ||||||||||
Major Goods/Service Lines | ||||||||||||
Products | $ | 9,690 | $ | 2,959 | $ | 12,649 | ||||||
Service contracts | 4,151 | 1,079 | 5,230 | |||||||||
Supply and source usage agreements | — | 1,305 | 1,305 | |||||||||
Professional services | — | 20 | 20 | |||||||||
Other | 43 | — | 43 | |||||||||
$ | 13,884 | $ | 5,363 | $ | 19,247 | |||||||
Timing of Revenue Recognition | ||||||||||||
Goods transferred at a point in time | $ | 9,731 | $ | 3,039 | $ | 12,770 | ||||||
Services transferred over time | 4,153 | 2,324 | 6,477 | |||||||||
$ | 13,884 | $ | 5,363 | $ | 19,247 | |||||||
Sales Channels | ||||||||||||
Direct sales force | $ | 7,785 | $ | 3,131 | $ | 10,916 | ||||||
OEM partners | 6,099 | — | 6,099 | |||||||||
Channel partners | — | 2,232 | 2,232 | |||||||||
$ | 13,884 | $ | 5,363 | $ | 19,247 | |||||||
Three months ended September 30, 2019 | ||||||||||||
Reportable Segments | ||||||||||||
Detection | Therapy | Total | ||||||||||
Major Goods/Service Lines | ||||||||||||
Products | $ | 4,749 | $ | 841 | $ | 5,590 | ||||||
Service contracts | 1,336 | 446 | 1,782 | |||||||||
Supply and source usage agreements | — | 465 | 465 | |||||||||
Professional services | — | 18 | 18 | |||||||||
Other | 2 | — | 2 | |||||||||
$ | 6,087 | $ | 1,770 | $ | 7,857 | |||||||
Timing of Revenue Recognition | ||||||||||||
Goods transferred at a point in time | $ | 4,749 | $ | 892 | $ | 5,641 | ||||||
Services transferred over time | 1,338 | 878 | 2,216 | |||||||||
$ | 6,087 | $ | 1,770 | $ | 7,857 | |||||||
Sales Channels | ||||||||||||
Direct sales force | $ | 3,467 | $ | 1,280 | $ | 4,747 | ||||||
OEM partners | 2,620 | — | 2,620 | |||||||||
Channel partners | — | 490 | 490 | |||||||||
$ | 6,087 | $ | 1,770 | $ | 7,857 | |||||||
Nine months ended September 30, 2019 | ||||||||||||
Reportable Segments | ||||||||||||
Detection | Therapy | Total | ||||||||||
Major Goods/Service Lines | ||||||||||||
Products | $ | 11,347 | $ | 3,410 | $ | 14,757 | ||||||
Service contracts | 4,012 | 1,437 | 5,449 | |||||||||
Supply and source usage agreements | — | 1,528 | 1,528 | |||||||||
Professional services | — | 59 | 59 | |||||||||
Other | 105 | 61 | 166 | |||||||||
$ | 15,464 | $ | 6,495 | $ | 21,959 | |||||||
Timing of Revenue Recognition | ||||||||||||
Goods transferred at a point in time | $ | 11,347 | $ | 3,668 | $ | 15,015 | ||||||
Services transferred over time | 4,117 | 2,827 | 6,944 | |||||||||
$ | 15,464 | $ | 6,495 | $ | 21,959 | |||||||
Sales Channels | ||||||||||||
Direct sales force | $ | 8,441 | $ | 4,793 | $ | 13,234 | ||||||
OEM partners | 7,023 | — | 7,023 | |||||||||
Channel partners | — | 1,702 | 1,702 | |||||||||
$ | 15,464 | $ | 6,495 | $ | 21,959 | |||||||
iCAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 2019
revenue on a straight-line basis over the specified term of the agreement, as this is consistent with how the service is consumed. Revenue for thelease andTopicASC 606,
SSP.
Contract balances | Balance at | |||
Setpember 30, 2019 | ||||
Receivables, which are included in “Trade accounts receivable” | $ | 8,002 | ||
Contract assets, which are included in “Prepaid and other current assets” | — | |||
Contract liabilities, which are included in “Deferred revenue” | 5,414 |
Contract balances | ||||
Balance at September 30, 2020 | ||||
Receivables, which are included in “Trade accounts receivable” | $ | 8,376 | ||
Contract assets, which are included in “Prepaid and other current assets” | 7 | |||
Contract liabilities, which are included in “Deferred revenue” | 5,863 |
iCAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 2019
2019.
Contract liabilities | September 30, 2019 | December 31, 2018 | ||||||
Short term | $ | 5,016 | $ | 5,165 | ||||
Long term | 398 | 331 | ||||||
|
|
|
| |||||
Total | $ | 5,414 | $ | 5,496 | ||||
|
|
|
|
iCAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 2019
Contract liabilities | September 30, 2020 | December 31, 2019 | ||||||
Short term | $ | 5,644 | $ | 5,248 | ||||
Long term | 219 | 356 | ||||||
Total | $ | 5,863 | $ | 5,604 | ||||
Nine Months Ended September 30, 2019 | ||||
Balance at beginning of period | $ | 5,496 | ||
Deferral of revenue | 7,813 | |||
Recognition of deferred revenue | (7,895 | ) | ||
|
| |||
Balance at end of period | $ | 5,414 | ||
|
|
Nine Months Ended September 30, | ||||
Balance at beginning of period | $ | 5,604 | ||
Deferral of revenue | 8,092 | |||
Recognition of deferred revenue | (7,833 | ) | ||
Balance at end of period | $ | 5,863 | ||
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Net loss | $ | (2,956 | ) | $ | (1,365 | ) | $ | (10,203 | ) | $ | (5,673 | ) | ||||
|
|
|
|
|
|
|
| |||||||||
Shares used in the calculation of basic and diluted net loss per share | 19,284 | 16,700 | 18,049 | 16,652 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Diluted shares used in the calculation of net loss per share | 19,284 | 16,700 | 18,049 | 16,652 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Net loss per share - basic and diluted | $ | (0.15 | ) | $ | (0.08 | ) | $ | (0.57 | ) | $ | (0.34 | ) | ||||
|
|
|
|
|
|
|
|
iCAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 2019
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Net loss | $ | (1,797 | ) | $ | (2,956 | ) | $ | (16,007 | ) | $ | (10,203 | ) | ||||
Shares used in the calculation of basic and diluted net loss per share | 23,173 | 19,284 | 21,827 | 18,049 | ||||||||||||
Diluted shares used in the calculation of net loss per share | 23,173 | 19,284 | 21,827 | 18,049 | ||||||||||||
Net loss per share - basic and dilute d | $ | (0.08 | ) | $ | (0.15 | ) | $ | (0.73 | ) | $ | (0.57 | ) | ||||
Period Ended | ||||||||
September 30, | ||||||||
2019 | 2018 | |||||||
Stock options | 1,509,292 | 1,462,439 | ||||||
Restricted stock | 191,909 | 502,868 | ||||||
Convertible Debentures | 1,742,500 | — | ||||||
|
|
|
| |||||
Stock options and restricted stock | 3,443,701 | 1,965,307 | ||||||
|
|
|
|
As of September 30, | ||||||||
2020 | 2019 | |||||||
Stock options | 1,971,704 | 1,509,292 | ||||||
Restricted stock | 29,166 | 191,909 | ||||||
Convertible Debentures | — | 1,742,500 | ||||||
Total | 2,000,870 | 3,443,701 | ||||||
as of September 30, | as of December | |||||||
2019 | 31, 2018 | |||||||
Raw materials | $ | 1,095 | $ | 606 | ||||
Work in process | 145 | 67 | ||||||
Finished Goods | 1,147 | 914 | ||||||
|
|
|
| |||||
Inventory | $ | 2,387 | $ | 1,587 | ||||
|
|
|
|
As of September 30, 2020 | As of December 31, 2019 | |||||||
Raw materials | $ | 1,422 | $ | 1,572 | ||||
Work in process | 324 | 39 | ||||||
Finished Goods | 1,629 | 1,469 | ||||||
Inventory Gross | 3,375 | 3,080 | ||||||
Inventory Reserve | (229 | ) | (469 | ) | ||||
Inventory Net | $ | 3,146 | $ | 2,611 | ||||
– Western Alliance Bank
iCAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 2019
thereunder, the “Initial Term Loan”) of $6.0 million and a $4.0 million revolving line of credit (amounts borrowed thereunder, the “Revolving Loans”). The Company also had the option to borrow an additional $3.0 million term loan under the Loan Agreement (amounts borrowed thereunder, the “Subsequent Term Loan” and together with the Initial Term Loan, the “Term Loan”), subject to meeting a Detection (as defined in the Loan Agreement) revenue minimum of at least $21.5 million for a trailing twelve month period ending on or prior to September 30, 2019. The Company did not meet the minimum Detection revenue minimum for the trailing twelve month period and accordingly is not eligible to borrow the additional $3.0 million.
The Company began repayment of the Initial Term Loan oncredit.
The maturity date of the Revolving Loans is March 1, 2022. However, the maturity date will become April 30, 2020, or April 30, 2021 if, on or before March 15, 2020 or 2021, as applicable, the Company does not agree in writingelected to repay all outstanding obligations (including accrued interest) and retire the revenue and adjusted EBITDA (as defined in the Loan Agreement) covenant levels negotiated with the Bank with respect to the upcoming 2020 or 2021 calendar year.
The Company drew $1.0 million of Revolving Loans during the quarter ended September 30, 2019. The outstanding amount of the revolving loan is classified as a current liability in notes payable. The outstanding Revolving Loans will accrue interest at a floating per annum rate equal to 1.50% above the prime rate (6.5% as of September 30, 2019) for periods when the ratio of the Company’s unrestricted cash to the Company’s outstanding liabilities to the Bank, plus the amount of the Company’s total liabilities that mature within one year is at least 1.25 to 1.0. At all other times, the interest rate will be 0.50% above the prime rate. Based on the measurement of the ratio at September 30, 2019, the interest rate was 5.5%. The outstanding Term Loans will accrue interest at a floating per annum rate equal to the prime rate. At September 30, 2019, the floating per annum rate was 5%.
If the Revolving Loans are paid in full and the Loan Agreement is terminated prior to the maturity date, then the Company will pay to the Bank a termination fee in an amount equal to two percent (2.0%) of the maximum revolving line of credit. If the Company prepays the Term Loans prior to the maturity date, then the Company will pay to the Bank an amount between 1.0% and 3.0% of the Term Loans, depending on when such Term Loans are repaid. In addition, the Loan Agreement requires the Company to pay a final payment of 8.5% of the Term Loans upon the earliest of the repayment of the Term Loans, the termination of the Loan Agreement and the maturity date. The Company is accruing such payment as additional interest expense. As of September 30, 2019 and December 31, 2018, the accrued final payment is approximately $260,000 and $162,000, respectively and is a component of the outstanding loan balance.
iCAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 2019
The Loan Agreement, as amended, includes certain covenants which require the Company to maintain minimum consolidated revenues of $13.0 million and $14.5 million during the trailing six month periods ending on September 30, 2019 and December 31, 2019, respectively, as well as an adjusted EBITDA level of $(4.0 million) during the trailing six month period ending on September 30, 2019. In addition, the Company and the Bank will be required to negotiate the covenants for the 2020 and 2021 fiscal years by March 15, 2020 and March 15, 2021 respectively. A failure to agree to such covenants by the specified dates in the agreement could lead to an acceleration of the Initial Term Loan maturity date to either April 30, 2020 or April 31, 2021, respectively. The Company is in compliance with the covenants for the trailing six month period ended September 30, 2019.
Obligations to the Bank under the Loan Agreement or otherwise are secured by a first priority security interest in substantially all of the assets, including intellectual property, accounts receivable, equipment, general intangibles, inventory and investment property, and all of the proceeds and products of the foregoing, of each of the Company and Xoft, Inc. and Xoft Solutions LLC, wholly-owned subsidiaries of the Company.
In connection with the Loan Agreement, the Company incurred approximately $74,000 of closing costs. The closing costs have been deducted from the carrying value of the debt and will be amortized through August 1, 2021, the maturity date of the Initial Term Loan.
The Company has evaluated the accounting impact of each of the modifications noted above, and as all have occurred within a 12 month period, each successive modification has been combined and compared to the terms of the originalSVB Loan Agreement. The Company has determined that modifications occurring at each modification date above are modificationsaccounted for this repayment and retirement as an extinguishment of the SVB Loan Agreement for accounting purposes. As such,Agreement. In addition to the outstanding principal and accrued interest, the Company has capitalized anywas required to pay the $510,000 final payment, a termination fee of $114,000 and other costs totaling $10,000. The Company also wrote off unamortized original closing costs paidas of the extinguishment date. The Company recorded a loss on extinguishment of approximately $341,000 related to the Bank as partrepayment and retirement of the modificationsSVB Loan Agreement. The loss on extinguishment was composed of approximately $185,000 for the unaccrued final payment, $114,000 termination fee, and has expensed any third party costs incurred. The additional$42,000
iCAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 2019
The carrying value of the Term Loans (net of debt issuance costs) as of September 30, 2019 and December 31, 2018 is as follows (in thousands):
September 30, 2019 | December 31, 2018 | |||||||
Principal Amount of Term Loan | $ | 4,600 | $ | 6,000 | ||||
Unamortized closing costs | (45 | ) | (57 | ) | ||||
Accrued Final Payment | 259 | 162 | ||||||
Amount Drawn on Line of Credit | 1,000 | — | ||||||
|
|
|
| |||||
Carrying amount of Term Loan | 5,814 | 6,105 | ||||||
|
|
|
| |||||
Less current portion of Term Loan | (3,250 | ) | (1,851 | ) | ||||
|
|
|
| |||||
Notes payable long-term portion | $ | 2,564 | $ | 4,254 | ||||
|
|
|
|
(b)
The
At any time prior to the maturity date, the Convertible Debentures are convertible into shares of the Company’s common stockwere converted, at a conversion price of $4.00 per share, atinto 1,742,500 shares of the Investor’s option, subject to certain anti-dilution adjustments.Company’s common stock. In accordance with the make-whole provisions in the Convertible Debentures,
iCAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 2019
The Investors also have the right to require the Company to repurchase the Convertible Debentures, at a repurchase price that would be at least 115% of the then outstanding principal, plus any accrued but unpaid interest, upon the occurrence of an event of default, as defined in the SPA. The Convertible Debentures will also accrue interest upon an event of default at a rate of the lesser of 10.0% or the maximum permitted by law.
The Convertible Debentures also include certain liquidated damages provisions, whereby the Company will be required to compensate the Investors for certain contingent events, such as the failure to timely deliver conversion shares of common stock, failure to timely pay any accrued interest when due and failure to timely report public information.
The Convertible Debentures are unsecured and structurally subordinated to the Company’s existing indebtedness. In connection with the issuance of the Convertible Debentures, the Company’s subsidiaries entered into a Subsidiary Guarantee, dated as of December 20, 2018, for the benefit of the Investors, pursuant to which the subsidiaries guaranteed the Company’s payments under the Convertible Debentures. The Company does not have any independent assets or operations that would not be part of the Subsidiary Guarantee, the guarantee is full and unconditional and joint and several and there are no restrictions on the Company’s ability to obtain funds from its subsidiaries.
In connection with the issuance, on December 20, 2018, the Company entered into a registration rights agreement (the “Registration Rights Agreement”) with the Investors, pursuant to which the Company agreed to file a registration statement with the SEC to register the resale of shares of common stock underlying the Convertible Debentures on or prior to January 31, 2019. The Company filed the Registration Rights Agreement with the SEC on January 31, 2019.
Certain Investors in the Convertible Debentures include directors and employees of the Company. These related parties purchased approximately 10% of the principal value of the Convertible Debentures, or $670,000. The Convertible Debentures issued to the related parties have substantially the same rights and provisions as the unrelated third party investors, with the exception of certain terms where the related parties received less favorable terms than the unrelated third parties (such as with determination of the make whole conversion rate, as defined in the Convertible Debentures; or limits on the impact of potential ‘down-round’ adjustments to the conversion price).
The Companyhad previously elected to make
iCAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 2019
Because
Fair Value Measurements Related to2019 valuation and the Convertible Debentures
Theprior measurement dates, the Company utilized a Monte Carlo simulation model to estimate the fair value of the Convertible Debentures as September 30, 2019.Debentures. The simulation model iswas designed to capture the potential settlement features of the Convertible Debentures, (the embedded features described above), in conjunction with simulated changes in the Company’s stock price and the probability of certain events occurring. The simulation utilizesutilized 100,000 trials or simulations to determine the estimated fair value.
Input | December 31, 2018 | September 30, 2019 | ||||||
Company’s stock price | $ | 3.70 | $ | 6.85 | ||||
Conversion price | $ | 4.00 | $ | 4.00 | ||||
Remaining term (years) | 2.97 | 2.22 | ||||||
Equity volatility | 54.00 | % | 52.00 | % | ||||
Risk free rate | 2.46 | % | 1.60 | % | ||||
Probabilty of default event1 | 0.81 | % | 0.55 | % | ||||
Utilization of Forced Conversion (if available)1 | 100.00 | % | 100.00 | % | ||||
Exercise of Default Redemption (if available)1 | 100.00 | % | 100.00 | % | ||||
Effective discount rate1 | 21.90 | % | 19.84 | % |
|
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. |
iCAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 2019
Debentures, or remaining term under the expectation of the Company’s election of its forced conversion right.
Convertible Debentures | December 31, 2018 | September 30, 2019 | ||||||
Fair value, in accordance with fair value option | $ | 6,970 | $ | 12,310 | ||||
|
|
|
| |||||
Principal value outstanding | $ | 6,970 | $ | 6,970 | ||||
|
|
|
|
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 |
iCAD, INC. AND SUBSIDIARIES
Notes
(Unaudited)
September 30, 2019
(c)stockholders’ equity.
Fiscal Year | Amount Due | |||
2019 | $ | 832 | ||
2020 | $ | 2,901 | ||
2021 | $ | 9,459 | ||
|
| |||
Total | $ | 13,192 | ||
|
|
Amount Due | ||||
2020 | $ | 94 | ||
2021 | 1,238 | |||
2022 | 2,875 | |||
2023 | 2,735 | |||
2024 | 1,003 | |||
Total | $ | 7,945 | ||
Three Months Ended September 30, 2019 | Nine Months Ended September 30, 2019 | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Cash interest expense | $ | 65 | $ | 78 | $ | 222 | $ | 219 | ||||||||
Interest on convertible debentures | 87 | — | 261 | — | ||||||||||||
Accrual of notes payable final payment | 33 | 31 | 98 | 129 | ||||||||||||
Amortization of debt costs | 7 | 8 | 21 | 22 | ||||||||||||
Interest expense capital lease | 1 | 1 | 2 | 3 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total interest expense | $ | 193 | $ | 118 | $ | 604 | $ | 373 | ||||||||
|
|
|
|
|
|
|
|
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Cash interest expense | $ | 94 | $ | 65 | $ | 232 | $ | 222 | ||||||||
Interest on convertible debentures | 0 | 87 | 49 | 261 | ||||||||||||
Accrual of notes payable final payment | 8 | 34 | 47 | 98 | ||||||||||||
Amortization of debt costs | 13 | 7 | 32 | 21 | ||||||||||||
Interest expense capital lease | 0 | 0 | 0 | 2 | ||||||||||||
Total interest expense | $ | 115 | $ | 193 | $ | 360 | $ | 604 | ||||||||
On January 1, 2019, the Company adopted
Under ASC 842,842”), the Company determines if an arrangement contains a lease at inception. A lease is a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment (i.e., an identified asset) for a period of time in exchange for consideration. Leases are classified as either operating leases or financing.financing leases. At lease inception, the Company recognizes a lease liability equal to the present value of the remaining lease payments, and a right of use asset equal to the lease liability, subject to certain adjustments, such as for lease incentives. The Company useduses its incremental borrowing rate to determine the present value of the lease payments. The Company determineddetermines the incremental borrowing rates for its leases by applying its applicable, fully collateralized borrowing rate, with adjustment as appropriate for the lease term. The lease term at the lease commencement
iCAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 2019
date is determined based on theconsideredconsiders a number of factors when evaluating whether the options in its lease contracts wereare reasonably certain of exercise, such as length of time before option exercise, expected value of the leased asset at the end of the initial lease term, importance of the lease to overall operations, costs to negotiate a new lease, and any contractual or economic penalties.is accountingaccounted for the complete agreement under ASC 606 upon adoption of ASC 842.
Required Disclosures under ASC 842
iCAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 2019
Lease Cost | Classification | Three Months Ended September 30, 2019 | Nine Months Ended September 30, 2019 | |||||||||
Operating lease cost | Operating expenses | $ | 208 | $ | 626 | |||||||
Finance lease costs | ||||||||||||
Amortization of leased assets | Amortization and depreciation | 4 | 11 | |||||||||
Interest on lease liabilities | Interest expense | 1 | 2 | |||||||||
|
|
|
| |||||||||
Total | $ | 213 | $ | 639 | ||||||||
|
|
|
|
Lease Cost | Classification | Three Months Ended September 30, 2020 | Year Ended December 31, 2019 | |||||||
Operating lease cost | Operating expenses | $ | 217 | $ | 804 | |||||
Finance lease costs | ||||||||||
Amortization of leased assets | Amortization and depreciation | 4 | 15 | |||||||
Interest on lease liabilities | Interest expense | 0 | 2 | |||||||
Total | $ | 221 | $ | 821 | ||||||
Three Months Ended September 30, 2019 | Nine Months Ended September 30, 2019 | |||||||
Cash paid for operating cash flows from operating leases | $ | 208 | $ | 626 | ||||
Cash paid for operating cash flows from finance leases | $ | 1 | $ | 2 | ||||
Cash paid for financing cash flows from finance leases | $ | 4 | $ | 11 |
| ||||
| ||||
| ||||
|
iCAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 2019
Three Months Ended September 30, 2020 | ||||
Cash paid from operating cash flows for operating leases | $ | 229 | ||
Cash paid from operating cash flows for finance leases | 0 | |||
Cash paid from financing cash flows for finance leases | 4 | |||
As of September 30, 2020 | ||||
Weighted-average remaining lease term of operating leases (in years) | 2.45 | |||
Weighted-average remaining lease term of finance leases (in years) | — | |||
Weighted-average discount rate for operating leases | 5.6 | % | ||
Weighted-average discount rate for finance leases | 0 |
Year Ended December 31: | Operating Leases | Finance Leases | Total | |||||||||
2019 (remaining period of year) | $ | 210 | $ | 4 | $ | 214 | ||||||
2020 | 694 | 11 | 705 | |||||||||
2021 | 660 | — | 660 | |||||||||
2022 | 667 | — | 667 | |||||||||
2023 | 168 | — | 168 | |||||||||
|
|
|
|
|
| |||||||
Total lease payments | 2,399 | 15 | 2,414 | |||||||||
Less: imputed interest | (209 | ) | (1 | ) | (210 | ) | ||||||
|
|
|
|
|
| |||||||
Total lease liabilities | 2,190 | 14 | 2,204 | |||||||||
Less: current portion of lease liabilities | (642 | ) | (14 | ) | (656 | ) | ||||||
|
|
|
|
|
| |||||||
Long-term lease liabilities | $ | 1,548 | $ | — | $ | 1,548 | ||||||
|
|
|
|
|
|
On August 12, 2019 the Company amended its San Jose facility lease. The amendment extended the term from March 31, 2020 to March 31, 2023 and resulted in an additional obligation of $1.9 million.
The cumulative effect of the changes made to the Company’s consolidated balance sheet for the adoption of Topic 842 were as follows (in thousands):
Selected Balance Sheet | Balance at December 31, 2018 | Adjustments Due to ASC 842 | Balance at January 1, 2019 | |||||||||
Assets | ||||||||||||
Operating lease assets | $ | — | $ | 907 | $ | 907 | ||||||
Liabilities | ||||||||||||
Deferred rent, current portion (within accrued expenses) | 92 | (92 | ) | — | ||||||||
Deferred rent, long-term portion (within other long-term liabilities) | 27 | (27 | ) | — | ||||||||
Lease payable - current portion | 15 | 780 | 795 | |||||||||
Lease payable, long-term portion | 38 | 179 | 217 |
In connection with the adoption of ASC 842, the Company recorded an immaterial expense of $14,000 in the quarter ended March 31, 2019 which would have been an opening retained earnings adjustment.
iCAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 2019
In accordance with the requirements of the new standard, the disclosure of the impact of the adoption on our consolidated balance sheet was as follows (in thousands):
As of September 30, 2019 | ||||||||||||
Selected Balance Sheet | As Reported | Balances without Adoption of ASC 842 | Effect of Change Increase (Decrease) | |||||||||
Assets | ||||||||||||
Operating lease assets | $ | 2,131 | $ | — | $ | 2,131 | ||||||
Liabilities | ||||||||||||
Lease payable - current portion | 656 | 15 | 641 | |||||||||
Lease payable, long-term portion | 1,548 | 8 | 1,540 |
Future minimum payments under our operating and capital leases as of December 31, 2018 are as follows (in thousands):
Payments due by period | ||||||||||||||||||||||||
Total | 2019 | 2020 | 2021 | 2022 | 2023 | |||||||||||||||||||
Operating Lease Obligations | $ | 2,399 | $ | 210 | $ | 694 | $ | 660 | $ | 667 | $ | 168 | ||||||||||||
Capital Lease Obligations | 15 | 4 | 11 | — | — | — | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
$ | 2,414 | $ | 214 | $ | 705 | $ | 660 | $ | 667 | $ | 168 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30, 2020: | Operating Leases | Finance Leases | Total | |||||||||
2020 | $ | 228 | — | 228 | ||||||||
2021 | 920 | — | 920 | |||||||||
2022 | 899 | — | 899 | |||||||||
2023 | 211 | — | 211 | |||||||||
2024 | 5 | — | 5 | |||||||||
Total lease payments | 2,263 | — | 2,263 | |||||||||
Less: imputed interest | (154 | ) | — | (154 | ) | |||||||
Total lease liabilities | 2,109 | — | 2,109 | |||||||||
Less: current portion of lease liabilities | (822 | ) | — | (822 | ) | |||||||
Long-term lease liabilities | $ | 1,287 | $ | — | $ | 1,287 | ||||||
Three Months Ended | Nine Months Ended | |||||||
September 30, | September 30, | |||||||
2019 | 2018 | 2019 | 2018 | |||||
Average risk-free interest rate | 1.60% | 2.89% | 1.99% | 2.50% | ||||
Expected dividend yield | None | None | None | None | ||||
Expected life | 3.5 years | 3.5 years | 3.5 years | 3.5 years | ||||
Expected volatility | 51.04% to 51.37% | 61.2% | 51.04% to 54.23% | 60.8% to 61.6% | ||||
Weighted average exercise price | $6.78 | $2.91 | $5.69 | $3.08 | ||||
Weighted average fair value | $2.63 | $1.34 | $2.26 | $1.41 |
iCAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 2019
Three Months Ended | Nine Months Ended | |||||||
September 30, | September 30, | |||||||
19 | 19 | |||||||
Average risk-free interest rate | 0.15% | 1.60% | 0.79% | 1.99% | ||||
Expected dividend yield | NaN | NaN | NaN | NaN | ||||
Expected life | 3.5 years | 3.5 years | 3.5 years | 3.5 years | ||||
Expected volatility | 66.0% to 66.0% | 51.04% to 51.37% | 50.2 to 65.7% | 51.04% to 54.23% | ||||
Weighted average exercise price | $8.84 | $6.78 | $10.08 | $5.69 | ||||
Weighted average fair value | $4.11 | $2.63 | $4.34 | $2.26 |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Cost of revenue | $ | 1 | $ | 1 | 2 | $ | 3 | |||||||||
Engineering and product development | 62 | 109 | 182 | 306 | ||||||||||||
Marketing and sales | 62 | 71 | 178 | 128 | ||||||||||||
General and administrative | 215 | 232 | 494 | 750 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
$ | 340 | $ | 413 | $ | 856 | $ | 1,187 | |||||||||
|
|
|
|
|
|
|
|
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
19 | ||||||||||||||||
Cost of revenue | $ | 3 | $ | 1 | $ | 28 | $ | 2 | ||||||||
Engineering and product development | 64 | 62 | 406 | 182 | ||||||||||||
Marketing and sales | 61 | 62 | 608 | 178 | ||||||||||||
General and administrative | 337 | 215 | 1,500 | 494 | ||||||||||||
$ | 465 | $ | 340 | $ | 2,542 | $ | 856 | |||||||||
Remaining expense | $ | 1,434 | ||
Weighted average term | 1.0 |
Remaining expense | $ | 1,060 | ||
Weighted average term | 1.0 |
During the three and nine months ended September 30, 2019, the
during the nine-month periods ended September 30, 2020 and 2019, respectively.
Period Ended | ||||||||
September 30, | ||||||||
Aggregate intrinsic value | 2019 | 2018 | ||||||
Stock options | $ | 4,154 | $ | 204 | ||||
Restricted stock | 1,315 | 1,463 |
iCAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 2019
As of | ||||||||
September 30, | ||||||||
Aggregate intrinsic value | 2020 | 2019 | ||||||
Stock options | $ | 6,679 | $ | 4,154 | ||||
Restricted stock | 257 | 1,315 |
2020.
iCAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 2019
to Dismiss as it relates to Yeda’s breach of contract and misappropriation of trade secrets claims. On October 22, 2019, Yeda filed an amendedAmended Complaint (the “Amended Complaint”) against only the Company asserting claims for (i) copyright infringement;infringement, and (ii) a replead breach of contract claim. The Company filed its Answer to Yeda’s Amended Complaint on November 5, 2019. TheYeda alleges, among other things, that the Company will vigorously defend againstinfringed upon Yeda’s source code, which was originally licensed to the claims assertedCompany, by Yedausing it in the Amended Complaint. The amount of the loss, if any, cannot be reasonably estimated at this time. Any amounts owed byproducts that the Company in connection with its indemnification obligationssold to Invivo relatedand that it is entitled to this action may reducedamages that could include, among other things, profits relating to the $350,000 holdback undersales of these products. If the Asset Purchase Agreement.
Company is found to have infringed Yeda’s copyright or breached its agreements with Yeda, the Company could be obligated to pay to Yeda substantial monetary damages.
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value.
iCAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 2019
◾ | Level 1 - Quoted prices in active markets for identical assets or liabilities. |
◾ | Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. |
◾ | Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value. |
2019.
Convertible Debentures.
Fair Value Measurements as of December 31, 2018 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets | ||||||||||||||||
Money market accounts | $ | 12,134 | $ | — | $ | — | $ | 12,134 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Assets | $ | 12,134 | $ | — | $ | — | $ | 12,134 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities | ||||||||||||||||
Convertible debentures | $ | — | $ | — | $ | 6,970 | $ | 6,970 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities | $ | — | $ | — | $ | 6,970 | $ | 6,970 | ||||||||
|
|
|
|
|
|
|
|
iCAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 2019
Fair Value Measurements as of September 30, 2019 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets | ||||||||||||||||
Money market accounts | $ | 17,427 | $ | — | $ | — | $ | 17,427 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Assets | $ | 17,427 | $ | — | $ | — | $ | 17,427 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities | ||||||||||||||||
Convertible debentures | $ | — | $ | — | $ | 12,310 | $ | 12,310 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities | $ | — | $ | — | $ | 12,310 | $ | 12,310 | ||||||||
|
|
|
|
|
|
|
|
Fair Value Measurements (in thousands) 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 | ||||||||
Fair Value Measurements as of September 30, 2020 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets | ||||||||||||||||
Money market accounts | $ | 22,633 | $ | $ | $ | 22,633 | ||||||||||
Total Assets | $ | 22,633 | $ | — | $ | — | $ | 22,633 | ||||||||
Nine months ended September 30, 2019 | ||||
Balance, December 31, 2018 | $ | 6,970 | ||
Fair value adjustment | 5,340 | |||
|
| |||
Balance, September 30, 2019 | $ | 12,310 | ||
|
|
Convertible Debentures | ||||
Balance, December 31, 2019 | $ | 13,642 | ||
Fair value adjustments | 7,522 | |||
Conversion | (21,164 | ) | ||
Balance as of September 30, 2020 | $ | — | ||
2020.
iCAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 2019
value.
iCAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 2019
Effective with the filing of the10-Q for the second quarter of 2013, the
iCAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 2019
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, 2018 | — | 8,362 | — | 8,362 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Balance at December 31, 2018 | $ | — | $ | 8,362 | $ | — | $ | 8,362 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Balance at September 30, 2019 | $ | — | $ | 8,362 | $ | — | $ | 8,362 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Accumulated Goodwill | $ | 47,937 | $ | 699 | $ | 6,270 | $ | 6,969 | ||||||||
Fair value allocation | (21,109 | ) | 7,663 | 13,446 | $ | 21,109 | ||||||||||
Accumulated impairment | (26,828 | ) | — | (19,716 | ) | $ | (19,716 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Balance at September 30, 2019 | $ | — | $ | 8,362 | $ | — | $ | 8,362 | ||||||||
|
|
|
|
|
|
|
|
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 September 30, 2020 | $ | — | $ | 8,362 | $ | — | $ | 8,362 | ||||||||
value.
A significant decrease in the market price of a long-lived asset (asset group);
A significant adverse change in the extent or manner in which a long-lived asset (asset group) is being used or in its physical condition;
A significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset (asset group), including an adverse action or assessment by a regulator;
An accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset (asset group);
A current period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset (asset group).
iCAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 2019
• | A significant decrease in the market price of a long-lived asset (or asset group); |
• | A significant adverse change in the extent or manner in which a long-lived asset (or asset group) is being used or in its physical condition; |
• | A significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset (or asset group), including an adverse action or assessment by a regulator; |
• | An accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset (or asset group); and |
• | A current operating period, or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset (or asset group). |
2020.
iCAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 2019
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
Segment revenues: | ||||||||||||||||
Detection | $ | 6,087 | $ | 3,927 | $ | 15,464 | $ | 11,928 | ||||||||
Therapy | 1,770 | 2,265 | 6,495 | 6,739 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total Revenue | $ | 7,857 | $ | 6,192 | $ | 21,959 | $ | 18,667 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Segment gross profit: | ||||||||||||||||
Detection | $ | 5,051 | $ | 3,454 | $ | 12,874 | $ | 10,439 | ||||||||
Therapy | 1,003 | 1,284 | 4,188 | 3,581 | ||||||||||||
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| |||||||||
Segment gross profit | $ | 6,054 | $ | 4,738 | $ | 17,062 | $ | 14,020 | ||||||||
|
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|
|
|
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| |||||||||
Segment operating income (loss): | ||||||||||||||||
Detection | $ | 943 | $ | 978 | $ | 1,918 | $ | 1,984 | ||||||||
Therapy | (1,022 | ) | (435 | ) | (1,065 | ) | (1,861 | ) | ||||||||
|
|
|
|
|
|
|
| |||||||||
Segment operating income (loss) | $ | (79 | ) | $ | 543 | $ | 853 | $ | 123 | |||||||
|
|
|
|
|
|
|
| |||||||||
General, administrative, depreciation and amortization expense | $ | (1,881 | ) | $ | (1,792 | ) | $ | (5,305 | ) | $ | (5,459 | ) | ||||
Interest expense | (193 | ) | (118 | ) | (604 | ) | (373 | ) | ||||||||
Other income | 103 | 28 | 226 | 79 | ||||||||||||
Fair value of convertible debentures | (900 | ) | — | (5,340 | ) | — | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Loss before income tax | $ | (2,950 | ) | $ | (1,339 | ) | $ | (10,170 | ) | $ | (5,630 | ) | ||||
|
|
|
|
|
|
|
|
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Segment revenues: | ||||||||||||||||
Detection | $ | 5,291 | $ | 6,087 | $ | 13,885 | $ | 15,464 | ||||||||
Therapy | 1,838 | 1,770 | 5,362 | 6,495 | ||||||||||||
Total Revenue | $ | 7,129 | $ | 7,857 | $ | 19,247 | $ | 21,959 | ||||||||
Segment gross profit: | ||||||||||||||||
Detection | $ | 4,227 | $ | 5,051 | $ | 11,227 | $ | 12,874 | ||||||||
Therapy | 798 | 1,003 | 2,665 | $ | 4,188 | |||||||||||
Segment gross profit | $ | 5,025 | $ | 6,054 | $ | 13,892 | $ | 17,062 | ||||||||
Segment operating income (loss): | ||||||||||||||||
Detection | $ | 866 | $ | 943 | $ | 721 | $ | 1,918 | ||||||||
Therapy | (711 | ) | (1,022 | ) | (2,149 | ) | $ | (1,065 | ) | |||||||
Segment operating income (loss) | $ | 155 | $ | (79 | ) | $ | (1,428 | ) | $ | 853 | ||||||
General, administrative, depreciation and amortization expense | $ | (1,844 | ) | $ | (1,881 | ) | $ | (6,465 | ) | $ | (5,305 | ) | ||||
Interest expense | (115 | ) | (193 | ) | (360 | ) | (604 | ) | ||||||||
Other income | 10 | 103 | 85 | 226 | ||||||||||||
Loss on extinguishment of debt | — | — | (341 | ) | — | |||||||||||
Fair value of convertible debentures | — | (900 | ) | (7,464 | ) | (5,340 | ) | |||||||||
Loss before income tax | $ | (1,794 | ) | $ | (2,950 | ) | $ | (15,973 | ) | $ | (10,170 | ) | ||||
iCAD, INC. AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(Unaudited)
September 30, 2019
adjustedon January 1, 2021 and continue to be reportedwill account for income taxes in accordance with our historic accounting under Topic 840. ASU
Note 14 – Subsequent Events
On November 13, 2019, the Company entered into a Fifth Loan Modification Agreement with the Bank. The Fifth Loan Modification Agreement amended the EBITDA covenant for thesix-month period ending December 31, 2019 to not more than $(4.0 million) from not more than $(2.0 million). All other terms of the Loan Agreement remained the same.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
ASU
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Therapy.
The Company intends to continue the extension of its image analysis and clinical decision support solutions for mammography and CT imaging. The Company believes that advances in digital imaging techniques, such as 3D mammography, should bolster its efforts to develop additional commercially viable CAD/advanced image analysis and workflow products.
There
Revenue: (in thousands)
Three months ended September 30, | ||||||||||||||||
2019 | 2018 | Change | % Change | |||||||||||||
Detection revenue | ||||||||||||||||
Product revenue | $ | 4,749 | $ | 2,394 | $ | 2,355 | 98.4 | % | ||||||||
Service revenue | 1,338 | 1,533 | (195 | ) | (12.7 | )% | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Subtotal | 6,087 | 3,927 | 2,160 | 55.0 | % | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Therapy revenue | ||||||||||||||||
Product revenue | 407 | 699 | (292 | ) | (41.8 | )% | ||||||||||
Service revenue | 1,363 | 1,566 | (203 | ) | (13.0 | )% | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Subtotal | 1,770 | 2,265 | (495 | ) | (21.9 | )% | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total revenue | $ | 7,857 | $ | 6,192 | $ | 1,665 | 26.9 | % | ||||||||
|
|
|
|
|
|
|
|
Total revenue increased by approximately $1.7 million, or 26.9%, from $6.2 million for the three
Three months ended September 30, | ||||||||||||||||
2020 | 2019 | Change | % Change | |||||||||||||
Detection revenue | ||||||||||||||||
Product revenue | $ | 3,889 | $ | 4,749 | $ | (860 | ) | (18.1 | )% | |||||||
Service revenue | 1,402 | 1,338 | 64 | 4.8 | % | |||||||||||
Subtotal | 5,291 | 6,087 | (796 | ) | (13.1 | )% | ||||||||||
Therapy revenue | ||||||||||||||||
Product revenue | 649 | 407 | 242 | 59.5 | % | |||||||||||
Service revenue | 1,189 | 1,363 | (174 | ) | (12.8 | )% | ||||||||||
Subtotal | 1,838 | 1,770 | 68 | 3.8 | % | |||||||||||
Total revenue | $ | 7,129 | $ | 7,857 | $ | (728 | ) | (9.3 | )% | |||||||
Detection product revenue increased by approximately $2.4 million, or 98.4%, from $2.4$7.1 million for the three months ended September 30, 20182020. The decrease is due to a decrease in Detection revenue of approximately $0.8 million offset by an increase in Therapy revenue of $0.1 million. The Company believes that Detection product revenue was adversely affected in the third quarter of 2020 by the
Nine months ended September 30, | ||||||||||||||||
2020 | 2019 | Change | % Change | |||||||||||||
Detection revenue | ||||||||||||||||
Product revenue | $ | 9,691 | $ | 11,347 | $ | (1,656 | ) | (14.6 | )% | |||||||
Service revenue | 4,194 | 4,117 | 77 | 1.9 | % | |||||||||||
Subtotal | 13,885 | 15,464 | (1,579 | ) | (10.2 | )% | ||||||||||
Therapy revenue | ||||||||||||||||
Product revenue | 1,529 | 1,984 | (455 | ) | (22.9 | )% | ||||||||||
Service revenue | 3,833 | 4,511 | (678 | ) | (15.0 | )% | ||||||||||
Subtotal | 5,362 | 6,495 | (1,133 | ) | (17.4 | )% | ||||||||||
Total revenue | $ | 19,247 | $ | 21,959 | $ | (2,712 | ) | (12.4 | )% | |||||||
Three months ended September 30, | ||||||||||||||||
2020 | 2019 | Change | % Change | |||||||||||||
Products | $ | 1,345 | $ | 809 | $ | 536 | 66.3 | % | ||||||||
Service and supplies | 667 | 891 | (224 | ) | (25.1 | )% | ||||||||||
Amortization and depreciation | 92 | 103 | (11 | ) | (10.7 | )% | ||||||||||
Total cost of revenue | $ | 2,104 | $ | 1,803 | $ | 301 | 16.7 | % | ||||||||
Gross profit | $ | 5,025 | $ | 6,054 | $ | (1,029 | ) | (17.0 | )% |
Three months ended September 30, | ||||||||||||||||
2020 | 2019 | Change | % Change | |||||||||||||
Detection gross profit | $ | 4,227 | $ | 5,051 | $ | (824 | ) | (16.3 | %) | |||||||
Therapy gross profit | 798 | 1,003 | (205 | ) | (20.4 | %) | ||||||||||
Gross profit | $ | 5,025 | $ | 6,054 | $ | (1,029 | ) | (17.0 | %) | |||||||
Therapy product revenue decreased by approximately $0.3 million, or 41.8%, from $0.7 million for the three months ended September 30, 2018 to $0.4 million for the three months ended September 30, 2019. Therapy product revenue related to the sale of our radiation therapy (“Axxent”) systems can vary significantly from quarter to quarter due to an increase or decrease in the number of units sold, as well as changes in average selling price based on our current inventory of controllers.
Therapy service and supply revenue decreased by approximately $0.2 million, or 13%, from $1.6 million for the three months ended September 30, 2018 to $1.4 million for the three months ended September 30, 2019. Source, service and disposable applicators saw a slight decline, and remain a significant component of Therapy service revenue.
Nine months ended September 30, | ||||||||||||||||
2019 | 2018 | Change | % Change | |||||||||||||
Detection revenue | ||||||||||||||||
Product revenue | $ | 11,347 | $ | 7,369 | $ | 3,978 | 54.0 | % | ||||||||
Service revenue | 4,117 | $ | 4,559 | (442 | ) | (9.7 | )% | |||||||||
|
|
|
|
|
|
|
| |||||||||
Subtotal | 15,464 | 11,928 | 3,536 | 29.6 | % | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Therapy revenue | ||||||||||||||||
Product revenue | 1,984 | 1,932 | 52 | 2.7 | % | |||||||||||
Service revenue | 4,511 | 4,807 | (296 | ) | (6.2 | )% | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Subtotal | 6,495 | 6,739 | (244 | ) | (3.6 | )% | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total revenue | $ | 21,959 | $ | 18,667 | $ | 3,292 | 17.6 | % | ||||||||
|
|
|
|
|
|
|
|
Total revenue increased by approximately $3.3 million, or 17.6%, from $18.7 million for the nine months ended September 30, 2018 to $22.0 million for the nine months ended September 30, 2019. The increase in revenue is due to an increase in Detection revenues of approximately $3.5 million offset by a slight decreased in Therapy revenue of $0.2 million.
Detection product revenue increased by approximately $4.0 million, or 54.0%, from $7.4 million for the nine month period ending September 2018 to $11.4 million for the nine month period ended September 30, 2019. The increase in Detection product revenue is due primarily to an increase in both direct and OEM customers with revenue from the Company’s 2D and Profound AI 3D imaging products.
Detection service and supplies revenue decreased $0.4 million, or 9.7%, from approximately $4.5 million for the nine months ended September 30, 2018 to $4.1 million for the nine months ended September 30, 2019. Detection service and supplies revenue reflects the sale of service contracts to our installed base of customers, and can vary from quarter to quarter.
Therapy product revenue was $1.9 million for the nine months ended September 30, 2018 and 2019. However, product revenue from the sale of our Axxent systems can vary significantly due to an increase or decrease in the number of units sold.
Therapy service and supply revenue decreased by approximately $0.3 million, or 6.2%, from $4.8 million for the nine months ended September 30, 2018 to $4.5 million for the nine months ended September 30, 2019 due to a slight decrease in source, service, and disposable applicator sales.
2020. Cost of Revenue and Gross Profit: (in thousands)
Three months ended September 30, | ||||||||||||||||
2019 | 2018 | Change | % Change | |||||||||||||
Products | $ | 809 | $ | 603 | $ | 206 | 34.2 | % | ||||||||
Service and supplies | 891 | 752 | 139 | 18.5 | % | |||||||||||
Amortization and depreciation | 103 | 99 | 4 | 4.0 | % | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Total cost of revenue | $ | 1,803 | $ | 1,454 | $ | 349 | 24.0 | % | ||||||||
|
|
|
|
|
|
|
| |||||||||
Gross profit | $ | 6,054 | $ | 4,738 | $ | 1,316 | 27.8 | % | ||||||||
Gross profit % | 77.1 | % | 76.5 | % | 0.5 | % | ||||||||||
Three months ended September 30, | ||||||||||||||||
2019 | 2018 | Change | % Change | |||||||||||||
Detection gross profit | $ | 5,051 | $ | 3,454 | $ | 1,597 | 46.2 | % | ||||||||
Therapy gross profit | 1,003 | 1,284 | (281 | ) | (21.9 | %) | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Gross profit | $ | 6,054 | $ | 4,738 | $ | 1,316 | 27.8 | % | ||||||||
|
|
|
|
|
|
|
| |||||||||
Gross profit % | 77.1 | % | 76.5 | % | 0.5 | % | ||||||||||
Nine months ended September 30, | ||||||||||||||||
2019 | 2018 | Change | % Change | |||||||||||||
Products | $ | 2,134 | $ | 1,598 | $ | 536 | 33.5 | % | ||||||||
Service and supplies | 2,466 | 2,743 | (277 | ) | (10.1 | )% | ||||||||||
Amortization and depreciation | 297 | 306 | (9 | ) | (2.9 | )% | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total cost of revenue | $ | 4,897 | $ | 4,647 | $ | 250 | 5.4 | % | ||||||||
|
|
|
|
|
|
|
| |||||||||
Gross profit | $ | 17,062 | $ | 14,020 | $ | 3,042 | 21.7 | % | ||||||||
Gross profit % | 77.7 | % | 75.1 | % | 2.6 | % |
Nine months ended September 30, | ||||||||||||||||
2019 | 2018 | Change | % Change | |||||||||||||
Detection gross profit | $ | 12,874 | $ | 10,439 | $ | 2,435 | 23.3 | % | ||||||||
Therapy gross profit | 4,188 | 3,581 | 607 | 17.0 | % | |||||||||||
|
|
|
|
|
|
|
| |||||||||
Gross profit | $ | 17,062 | $ | 14,020 | $ | 3,042 | 21.7 | % | ||||||||
|
|
|
|
|
|
|
| |||||||||
Gross profit % | 77.7 | % | 75.1 | % | 2.6 | % |
Gross profit for the three month period ended September 30, 2019 was $6.1 million, or 77.1% of revenue, as compared to $4.7 million, or 76.5% of revenue, in the three month period ended September 30, 2018.
Gross profit for the nine month period ended September 30, 2019 was $17.1 million, or 77.7% of revenue, as compared to $14.0 million, or 75.1% of revenue, in the nine month period ended September 30, 2018. Gross profit percent changes are primarily due to changes in the mix of business, additional manufacturing investments and amortization of acquired intangibles.
Cost of products increased by approximately $0.2 million from approximately $0.6 million for the three months ended September 30, 2018 to approximately $0.8 million for the three months ended September 30, 2019. The cost of product revenue as a percentage of product revenue was approximately 19.5% for the three months ended September 30, 2018 as compared to 15.7% for the three months ended September 30, 2019. Cost of products increased by approximately $0.5 million from approximately $1.6 million for the nine months ended September 30, 2018 to approximately $2.1 million for the nine months ended September 30, 2019. The cost of product revenue as a percentage of product revenue was approximately 17.2% for the nine months ended September 30, 20182019 as compared to 16.0% for the nine months ended September 30, 2019. The decrease in gross profit percentage in the three and nine months ended September 30, 2019 is due primarily to the increased cost of server hardware to support larger 3D images.
The cost of service and supplies was $0.8 million29.6% for the three months ended September 30, 2018 as compared2020. The increase in cost of products is primarily due to a hardware upgrade sale for the Detection business with a lower than standard average selling price and the mix of sales on the Therapy business with lower margins on sales outside of the United States.
Nine months ended September 30, | ||||||||||||||||
2020 | 2019 | Change | % Change | |||||||||||||
Products | $ | 2,899 | $ | 2,134 | $ | 765 | 35.8 | % | ||||||||
Service and supplies | 2,169 | 2,466 | (297 | ) | (12.0 | )% | ||||||||||
Amortization and depreciation | 287 | 297 | (10 | ) | (3.4 | )% | ||||||||||
Total cost of revenue | $ | 5,355 | $ | 4,897 | $ | 458 | 9.4 | % | ||||||||
Gross profit | $ | 13,892 | $ | 17,062 | $ | (3,170 | ) | (18.6 | )% |
Nine months ended September 30, | ||||||||||||||||
2020 | 2019 | Change | % Change | |||||||||||||
Detection gross profit | $ | 11,227 | $ | 12,874 | $ | (1,647 | ) | (12.8 | %) | |||||||
Therapy gross profit | 2,665 | 4,188 | (1,523 | ) | (36.4 | %) | ||||||||||
Gross profit | $ | 13,892 | $ | 17,062 | $ | (3,170 | ) | (18.6 | %) | |||||||
Amortization and depreciation was approximately $0.1 million for the three month period ended September 30, 2018 and 2019. It was $0.3 million27.0% for the nine months ended September 30, 20182020. The decrease in service and supplies costs is due primarily to decreased personnel costs in cost of sales.
Three months ended September 30, | ||||||||||||||||
2019 | 2018 | Change | Change % | |||||||||||||
Operating expenses: | ||||||||||||||||
Engineering and product development | $ | 2,485 | $ | 2,035 | $ | 450 | 22.1 | % | ||||||||
Marketing and sales | 3,588 | 2,100 | 1,488 | 70.9 | % | |||||||||||
General and administrative | 1,872 | 1,778 | 94 | 5.3 | % | |||||||||||
Amortization and depreciation | 69 | 74 | (5 | ) | (6.8 | )% | ||||||||||
|
|
|
|
|
|
|
| |||||||||
Total operating expenses | $ | 8,014 | $ | 5,987 | $ | 2,027 | 33.9 | % | ||||||||
|
|
|
|
|
|
|
|
Three months ended September 30, | ||||||||||||||||
Operating expenses: | 2020 | 2019 | Change | Change % | ||||||||||||
Engineering and product development | $ | 1,849 | $ | 2,485 | $ | (636 | ) | (25.6 | )% | |||||||
Marketing and sales | 2,979 | 3,588 | (609 | ) | (17.0 | )% | ||||||||||
General and administrative | 1,834 | 1,872 | (38 | ) | (2.0 | )% | ||||||||||
Amortization and depreciation | 52 | 69 | (17 | ) | (24.6 | )% | ||||||||||
Total operating expenses | $ | 6,714 | $ | 8,014 | $ | (1,300 | ) | (16.2 | )% | |||||||
2020. The Company took steps during the second quarter of 2020 to reduce operating expenses, including cutting
2019:
Nine months ended September 30, | ||||||||||||||||
Operating expenses: | 2020 | 2019 | Change | Change % | ||||||||||||
Engineering and product development | $ | 5,938 | $ | 6,751 | $ | (813 | ) | (12.0 | )% | |||||||
Marketing and sales | 9,218 | 9,281 | (63 | ) | (0.7 | )% | ||||||||||
General and administrative | 6,476 | 5,276 | 1,200 | 22.7 | % | |||||||||||
Amortization and depreciation | 153 | 206 | (53 | ) | (25.7 | )% | ||||||||||
Total operating expenses | $ | 21,785 | $ | 21,514 | $ | 271 | 1.3 | % | ||||||||
$0.1 million in Marketing and sales between the Detection and Therapy segments.
Amortization and Depreciation.Amortization and depreciation was primarily related to acquired intangible assets and depreciation related to machinery and equipment. Amortization and depreciation decreased by $5,000, or 6.8%, to approximately $69,000 for the threenine months ended September 30, 2019 from $74,000 for the three months ended September 30, 2018.
Nine months ended September 30, | ||||||||||||||||
2019 | 2018 | Change | Change % | |||||||||||||
Operating expenses: | ||||||||||||||||
Engineering and product development | $ | 6,751 | $ | 7,431 | $ | (680 | ) | (9.2 | )% | |||||||
Marketing and sales | 9,281 | 6,272 | 3,009 | 48.0 | % | |||||||||||
General and administrative | 5,276 | 5,419 | (143 | ) | (2.6 | )% | ||||||||||
Amortization and depreciation | 206 | 234 | (28 | ) | (12.0 | )% | ||||||||||
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Total operating expenses | $ | 21,514 | $ | 19,356 | $ | 2,158 | 11.1 | % | ||||||||
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Operating expenses increased by $2.2 million, or 11.1%, in the nine-month period ended September 30, 2019 compared to nine month period ended September 30, 2019.
Engineering and Product Development.Engineering and product development costs were approximately $6.8 million for the nine-month period ended September 30, 2019 down from $7.5 million for the same period last year, a reduction of $0.7 million, or 9.2%. Detection engineering and product development costs were $4.7 million and $5.0$6.5 million for the nine months ended September 30, 2019 and 2018, respectively for a decrease of $0.3 million, or 6%. Therapy engineering and product development costs were $2.0 million and $2.4 million for the nine months ended September 30, 2019 and 2018, respectively for a decrease of $0.4 million, or 16.7%.2020. The decrease in Detection engineering and product development costs for the nine months ended September 30, 2019increase is due primarily to clinical expensesincreases in the first quarter of 2018 related to the development of the Company’s breast tomosynthesis product. The decrease in Therapy engineeringstock compensation expense and product development costs for the nine months ended September 30, 2019 is due primarily to decreases in personnel and clinical trial costs that were higher in 2018.
Marketing and Sales.Marketing and sales expenses increased by $3.0 million, or 48.0%, from $6.3 million in the nine-month period ended September 30, 2018 to $9.3 million in the nine- month period ended September 30, 2019. Detection marketing and sales expense increased by $2.8 million, or 84.6%, from $3.3 million in the nine months ended September 30, 2018 to $6.1 million in the nine months ended September 30, 2019. Therapy marketing and sales expense increased by $0.2 million, or 6.7%, from $3.0 million in the nine months ended September 30, 2018 to $3.2 million in the nine months ended September 30, 2019. The increase in Detection marketing and sales expense is due primarily to an increase in personnellegal costs and commissions aswas offset by cost-cutting measures prompted by the Company has invested in additional commercial resources to help drive sales of the new Detection products. The increase in Therapy marketing and sales is due primarily to trade shows costs.
General and Administrative.General and administrative expenses decreased by $0.1 million, or 2.6%, from $5.4 million in the nine months ended September 30, 2018 as compared to approximately $5.3 million for the nine months ended September 30, 2019. The decrease in general and administrative expenses is due primarily to a decrease in personnel costs.
Three months ended September 30, | ||||||||||||||||
2019 | 2018 | Change | Change % | |||||||||||||
Interest expense | $ | (193 | ) | $ | (118 | ) | (75 | ) | 63.6 | % | ||||||
Interest income | 103 | 28 | 75 | 267.9 | % | |||||||||||
Loss on fair value of debentures | (900 | ) | — | (900 | ) | 0.0 | % | |||||||||
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$ | (990 | ) | $ | (90 | ) | $ | (900 | ) | 1000.0 | % | ||||||
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Tax benefit (expense) | $ | (6 | ) | $ | (26 | ) | $ | 20 | (76.9 | )% | ||||||
Nine months ended September 30, | ||||||||||||||||
2019 | 2018 | Change | Change % | |||||||||||||
Interest expense | $ | (604 | ) | $ | (373 | ) | $ | (231 | ) | 61.9 | % | |||||
Interest income | 226 | 79 | 147 | 186.1 | % | |||||||||||
Loss on fair value of debentures | (5,340 | ) | — | (5,340 | ) | 0.0 | % | |||||||||
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$ | (5,718 | ) | $ | (294 | ) | $ | (5,424 | ) | 1844.9 | % | ||||||
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Tax benefit (expense) | $ | (33 | ) | $ | (43 | ) | $ | 10 | (23.3 | )% |
Three months ended September 30, | ||||||||||||||||
2020 | 2019 | Change | Change % | |||||||||||||
Interest expense | $ | (115 | ) | $ | (193 | ) | $ | 78 | (40.4 | )% | ||||||
Other income | 10 | 103 | (93 | ) | (90.3 | )% | ||||||||||
Loss on fair value of debentures | — | (900 | ) | 900 | (100.0 | )% | ||||||||||
$ | (105 | ) | $ | (990 | ) | $ | 885 | (89.4 | )% | |||||||
Tax benefit (expense) | $ | (3 | ) | $ | (6 | ) | $ | 3 | (50.0 | )% |
Interest income. Interest2020. The decrease is due primarily to the interest on the Company’s loans with Silicon Valley Bank (“SVB”) and Western Alliance Bank (the “Bank”).
debentures.debenturesquarterthree months ended September 30, 2019, which reflectsreflected an increase in the fair value of the unsecured subordinated convertible debentures issuesissued in December 2018 (the “Convertible Debentures”) from approximately $11.4 million at June 30,March 31, 2019 to $12.3 million at September 30, 2019. Upon the consummation of the forced conversion, the Company issued 1,816,466 shares of common stock with a fair value of approximately $21.2 million, which was reclassified to stockholders’ equity during the three-month ending March 31, 2020. As a result of the forced conversion there was no fair value adjustment for the three months ended September 30, 2020.
Nine months ended September 30, | ||||||||||||||||
2020 | 2019 | Change | Change % | |||||||||||||
Interest expense | $ | (360 | ) | $ | (604 | ) | $ | 244 | (40.4 | )% | ||||||
Other income | 85 | 226 | (141 | ) | (62.4 | )% | ||||||||||
Loss on extinguishment of debt | (341 | ) | — | (341 | ) | 0.0 | % | |||||||||
Loss on fair value of debentures | (7,464 | ) | (5,340 | ) | (2,124 | ) | 39.8 | % | ||||||||
$ | (8,080 | ) | $ | (5,718 | ) | $ | (2,362 | ) | 41.3 | % | ||||||
Tax benefit (expense) | $ | (34 | ) | $ | (33 | ) | $ | (1 | ) | 3.0 | % |
Tax expense. The Company had tax expense of $6,000approximately $185,000 for the three-month periodunaccrued final payment, the $114,000 termination fee, and $42,000 for the unamortized and other closing costs. There were no such costs in 2019.
We believe
In March 2019, in connection with the Fourth Loan Modification Agreement, the Company and Silicon Valley Bank (the “Bank”) agreed to covenant levels for minimum revenue and EBITDA covenants (the “Covenants”) under the Loan Agreement for fiscal year 2019. The Company is in compliance with the Covenants for the quarter ended September 30, 2019. On November 13, 2019, the Company entered into a Fifth Loan Modification Agreement with the Bank. The Fifth Loan Modification Agreement amended the EBITDA covenant for the trailingsix-month period ending December 31, 2019 to not more than $(4.0 million) from not more than $(2.0 million). All other terms of the Loan Agreement remained the same.
For the nine months ended September 30, | ||||||||
2019 | 2018 | |||||||
(in thousands) | ||||||||
Net cash used for operating activities | $ | (4,772 | ) | $ | (2,322 | ) | ||
Net cash used for investing activities | (219 | ) | (116 | ) | ||||
Net cash provided by (used for) financing activities | 10,233 | (139 | ) | |||||
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Increase (decrease) in cash and equivalents | $ | 5,242 | $ | (2,577 | ) | |||
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For the nine-months ended September 30, | ||||||||
2020 | 2019 | |||||||
(in thousands) | ||||||||
Net cash used for operating activities | $ | (6,083 | ) | $ | (4,772 | ) | ||
Net cash used for investing activities | (286 | ) | (219 | ) | ||||
Net cash provided by financing activities | 13,689 | 10,233 | ||||||
Increase in cash and equivalents | $ | 7,320 | $ | 5,242 | ||||
In accordance with the transition disclosure requirements under ASC 840, the
Contractual Obligations | Payments due by period | |||||||||||||||||||
Total | Less than 1 year | 1-3 years | 3-5 years | 5+ years | ||||||||||||||||
Operating Lease Obligations | $ | 2,320 | $ | 694 | $ | 1,293 | $ | 333 | $ | — | ||||||||||
Capital Lease Obligations | 17 | 17 | — | — | — | |||||||||||||||
Settlement Obligations | 463 | 463 | — | — | — | |||||||||||||||
Notes Payable - principal and interest | 5,331 | 2,573 | 2,758 | — | — | |||||||||||||||
Convertible Debentures - principal and interest | 7,842 | 349 | 7,493 | — | — | |||||||||||||||
Other Commitments | 2,745 | 2,605 | 63 | 29 | 48 | |||||||||||||||
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Total Contractual Obligations | $ | 18,718 | $ | 6,701 | $ | 11,607 | $ | 362 | $ | 48 | ||||||||||
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2020:
Contractual Obligations | Payments due by period | |||||||||||||||||||
Total | Less than 1 year | 1-3 years | 3-5 years | 5+ years | ||||||||||||||||
Operating Lease Obligations | $ | 2,262 | $ | 918 | $ | 1,337 | $ | 7 | $ | — | ||||||||||
Capital Lease Obligations | 1 | 1 | — | — | — | |||||||||||||||
Settlement Obligations | 463 | 463 | — | — | — | |||||||||||||||
Notes Payable - principal and interest | 7,946 | 590 | 5,682 | 1,674 | — | |||||||||||||||
Other Commitments | 4,179 | 4,179 | — | — | ||||||||||||||||
Total Contractual Obligations | $ | 14,851 | $ | 6,151 | $ | 7,019 | $ | 1,681 | $ | — | ||||||||||
Inc which are reflected in accounts payable and accrued liabilities.
Convertible Debentures – principal and interest represents the payments due related to the 5.0% convertible notes due 2021 that were issued by the Company in December 2018.
Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
OurBank.
Item 4. | Controls and Procedures |
Ourprocedures.
Beginning January 1, 2019, the Company implemented ASC 842, “Leases.” In relation to the adoption
Item 1. |
Legal Proceedings |
period.
Item 1A. | Risk Factors: |
Given
On November 13, 2019,operations, our results for the Company entered into a Fifth Loan Modification Agreement with the Bank. The Fifth Loan Modification Agreement amended the EBITDA covenant for thesix-month periodquarter ending December 31, 20192020, and possibly future quarters, could reflect a continuing negative impact from the
The Foregoing descriptionwhich could permit acceleration of the Fifth Loan Modification Agreement doesoutstanding indebtedness and require the Company to repay such indebtedness before the scheduled due date. The Company was required, historically, to seek modifications from its prior lender to avoid
Item 6. | Exhibits |
Exhibit No. | Description | |
31.1 * | Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
31.2 * | Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | |
32.1 ** | Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
32.2 ** | Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | |
101 * | The following materials formatted in XBRL (eXtensible Business Reporting Language); (i) | |
104 * | Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101). |
* | Filed herewith |
** | Furnished herewith |
iCAD, Inc. | ||
(Registrant) |
: November | By: | /s/ Michael Klein | ||||
Name: | Michael Klein | |||||
Title: | Chief Executive Officer (Principal Executive Officer) |
: November | By: | /s/ R. Scott Areglado | ||||
Name: | R. Scott Areglado | |||||
Title: | Chief Financial Officer (Principal Financial Officer) |
54