☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
2021
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 02-0377419 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
98 Spit Brook Road, Suite 100, Nashua, NH | 03062 | |
(Address of principal executive offices) | (Zip Code) |
Large Accelerated filer | ☐ | Accelerated filer | ||||
Non-accelerated filer | Smaller reporting company | ☒ | ||||
Emerging growth company | ☐ |
Page | ||||||
PART I | ||||||
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Item 1 | ||||||
3 | ||||||
4 | ||||||
5 | ||||||
6 | ||||||
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Item 2 | ||||||
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Item 3 | ||||||
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Item 4 | ||||||
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PART II | ||||||
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Item 1 | ||||||
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Item 1A | ||||||
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Item 6 | ||||||
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March 31, | December 31, | |||||||
2020 | 2019 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 14,256 | $ | 15,313 | ||||
Trade accounts receivable, net of allowance for doubtful accounts of $255 in 2020 and $136 in 2019 | 7,090 | 9,819 | ||||||
Inventory, net | 2,462 | 2,611 | ||||||
Prepaid expenses and other current assets | 1,497 | 1,453 | ||||||
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Total current assets | 25,305 | 29,196 | ||||||
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Property and equipment, net of accumulated depreciation of $6,580 in 2020 and $6,510 in 2019 | 636 | 551 | ||||||
Operating lease assets | 2,322 | 2,406 | ||||||
Other assets | 93 | 50 | ||||||
Intangible assets, net of accumulated amortization of $8,263 in 2020 and $8,186 in 2019 | 1,107 | 1,183 | ||||||
Goodwill | 8,362 | 8,362 | ||||||
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Total assets | $ | 37,825 | $ | 41,748 | ||||
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Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 1,674 | $ | 1,990 | ||||
Accrued and other expenses | 6,100 | 6,590 | ||||||
Notes payable - current portion | — | 4,250 | ||||||
Lease payable - current portion | 809 | 758 | ||||||
Deferred revenue | 5,259 | 5,248 | ||||||
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Total current liabilities | 13,842 | 18,836 | ||||||
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Lease payable, long-term portion | 1,707 | 1,837 | ||||||
Notes payable, long-term portion | 6,957 | 2,003 | ||||||
Convertible debentures payable tonon-related parties, at fair value | — | 12,409 | ||||||
Convertible debentures payable to related parties, at fair value | — | 1,233 | ||||||
Deferred revenue, long-term portion | 232 | 356 | ||||||
Deferred tax | 4 | 3 | ||||||
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Total liabilities | 22,742 | 36,677 | ||||||
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Commitments and Contingencies (Note 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 21,425,916 in 2020 and 19,546,151 in 2019 outstanding 21,240,085 in 2020 and 19,360,320 in 2019. | 215 | 195 | ||||||
Additionalpaid-in capital | 252,419 | 230,615 | ||||||
Accumulated deficit | (236,136 | ) | (224,324 | ) | ||||
Treasury stock at cost, 185,831 shares in 2020 and 2019 | (1,415 | ) | (1,415 | ) | ||||
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Total stockholders’ equity | 15,083 | 5,071 | ||||||
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Total liabilities and stockholders’ equity | $ | 37,825 | $ | 41,748 | ||||
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March 31, | December 31, | |||||||
2021 | 2020 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 46,907 | $ | 27,186 | ||||
Trade accounts receivable, net of allowance for doubtful accounts of $111 in 2021 and $111 in 2020 | 10,649 | 10,027 | ||||||
Inventory, net | 2,498 | 3,144 | ||||||
Prepaid expenses and other current assets | 2,188 | 1,945 | ||||||
Total current assets | 62,242 | 42,302 | ||||||
Property and equipment, net of accumulated depreciation of $6,854 in 2021 and $6,778 in 2020 | �� | 930 | 744 | |||||
Operating lease assets | 1,565 | 1,758 | ||||||
Other assets | 1,564 | 1,527 | ||||||
Intangible assets, net of accumulated amortization of $8,552 in 2021 and $8,494 in 2020 | 831 | 889 | ||||||
Goodwill | 8,362 | 8,362 | ||||||
Total assets | $ | 75,494 | $ | 55,582 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 1,251 | $ | 2,869 | ||||
Accrued and other expenses | 5,819 | 7,039 | ||||||
Notes payable - current portion | 269 | 0 | ||||||
Lease payable - current portion | 847 | 726 | ||||||
Deferred revenue | 5,957 | 6,117 | ||||||
Total current liabilities | 14,143 | 16,751 | ||||||
Lease payable, long-term portion | 860 | 1,075 | ||||||
Notes payable, long-term portion | 6,703 | 6,960 | ||||||
Deferred revenue, long-term portion | 420 | 267 | ||||||
Deferred tax | 4 | 4 | ||||||
Total liabilities | 22,130 | 25,057 | ||||||
Commitments and Contingencies (Note 7) | 0 | 0 | ||||||
Stockholders’ equity: | ||||||||
Preferred stock, $0.01 par value: authorized 1,000,000 shares; NaN . | 0— | 0— | ||||||
Common stock, $0.01 par value: authorized 30,000,000 shares; issued 25,143,432 a s of March 31, 2021 and 23,693,735 as of December 31, 2020. | ||||||||
Outstanding 24,957,601 as of March 31, 2021 and 23,508,575 as of December 31, 2020 . | 251 | 236 | ||||||
Additional paid-in capital | 298,106 | 273,639 | ||||||
Accumulated deficit | (243,578 | ) | (241,935 | ) | ||||
Treasury stock at cost, 185,831 shares in 2021 and 2020 | (1,415 | ) | (1,415 | ) | ||||
Total stockholders’ equity | 53,364 | 30,525 | ||||||
Total liabilities and stockholders’ equity | $ | 75,494 | $ | 55,582 | ||||
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Revenue: | ||||||||
Products | $ | 3,795 | $ | 3,822 | ||||
Service and supplies | 2,756 | 2,951 | ||||||
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Total revenue | 6,551 | 6,773 | ||||||
Cost of revenue: | ||||||||
Products | 1,017 | 680 | ||||||
Service and supplies | 927 | 717 | ||||||
Amortization and depreciation | 97 | 94 | ||||||
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Total cost of revenue | 2,041 | 1,491 | ||||||
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Gross profit | 4,510 | 5,282 | ||||||
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Operating expenses: | ||||||||
Engineering and product development | 2,211 | 2,127 | ||||||
Marketing and sales | 3,608 | 2,573 | ||||||
General and administrative | 2,532 | 1,546 | ||||||
Amortization and depreciation | 52 | 70 | ||||||
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Total operating expenses | 8,403 | 6,316 | ||||||
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Loss from operations | (3,893 | ) | (1,034 | ) | ||||
Interest expense | (130 | ) | (209 | ) | ||||
Other income | 42 | 59 | ||||||
Loss on extinguishment of debt | (341 | ) | — | |||||
Loss on fair value of convertible debentures | (7,464 | ) | (2,525 | ) | ||||
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Other expense, net | (7,893 | ) | (2,675 | ) | ||||
Loss before income tax expense | (11,786 | ) | (3,709 | ) | ||||
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Tax expense | (26 | ) | (8 | ) | ||||
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Net loss and comprehensive loss | $ | (11,812 | ) | $ | (3,717 | ) | ||
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Net loss per share: | ||||||||
Basic | $ | (0.59 | ) | $ | (0.22 | ) | ||
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Diluted | $ | (0.59 | ) | $ | (0.22 | ) | ||
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Weighted average number of shares used in computing loss per share: | ||||||||
Basic | 20,175 | 17,200 | ||||||
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Diluted | 20,175 | 17,200 | ||||||
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Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Revenue: | ||||||||
Products | $ | 5,557 | $ | 3,795 | ||||
Service and supplies | 3,087 | 2,756 | ||||||
Total revenue | 8,644 | 6,551 | ||||||
Cost of revenue: | ||||||||
Products | 1,409 | 1,017 | ||||||
Service and supplies | 867 | 927 | ||||||
Amortization and depreciation | 79 | 97 | ||||||
Total cost of revenue | 2,355 | 2,041 | ||||||
Gross profit | 6,289 | 4,510 | ||||||
Operating expenses: | ||||||||
Engineering and product development | 2,192 | 2,211 | ||||||
Marketing and sales | 3,424 | 3,608 | ||||||
General and administrative | 2,151 | 2,532 | ||||||
Amortization and depreciation | 55 | 52 | ||||||
Total operating expenses | 7,822 | 8,403 | ||||||
Loss from operations | (1,533 | ) | (3,893 | ) | ||||
Interest expense | (112 | ) | (130 | ) | ||||
Other income | 2 | 42 | ||||||
Loss on extinguishment of debt | — | (341 | ) | |||||
Loss on fair value of convertible debentures | — | (7,464 | ) | |||||
Other expense, net | (110 | ) | (7,893 | ) | ||||
Loss before income tax expense | (1,643 | ) | (11,786 | ) | ||||
Tax expense | 0 | (26 | ) | |||||
Net loss and comprehensive loss | $ | (1,643 | ) | $ | (11,812 | ) | ||
Net loss per share: | ||||||||
Basic | $ | (0.07 | ) | $ | (0.59 | ) | ||
Diluted | $ | (0.07 | ) | $ | (0.59 | ) | ||
Weighted average number of shares used in computing loss per share: | ||||||||
Basic | 23,929 | 20,175 | ||||||
Diluted | 23,929 | 20,175 | ||||||
For the three months ended March 31 | ||||||||
2020 | 2019 | |||||||
(in thousands) | ||||||||
Cash flow from operating activities: | ||||||||
Net loss | $ | (11,812 | ) | $ | (3,717 | ) | ||
Adjustments to reconcile net loss to net cash used for operating activities: | ||||||||
Amortization | 79 | 95 | ||||||
Depreciation | 70 | 69 | ||||||
Bad debt provision | 119 | — | ||||||
Stock-based compensation expense | 464 | 212 | ||||||
Amortization of debt discount and debt costs | 40 | 39 | ||||||
Loss on extinguishment of debt | 341 | — | ||||||
Deferred tax expense | 1 | — | ||||||
Change in fair value of convertible debentures | 7,464 | 2,525 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 2,610 | (984 | ) | |||||
Inventory | 149 | (403 | ) | |||||
Prepaid and other current assets | (72 | ) | (347 | ) | ||||
Accounts payable | (317 | ) | 330 | |||||
Accrued expenses | (439 | ) | 414 | |||||
Deferred revenue | (113 | ) | (46 | ) | ||||
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Total adjustments | 10,396 | 1,904 | ||||||
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Net cash used for operating activities | (1,416 | ) | (1,813 | ) | ||||
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Cash flow from investing activities: | ||||||||
Additions to patents, technology and other | (1 | ) | (1 | ) | ||||
Additions to property and equipment | (155 | ) | (28 | ) | ||||
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Net cash used for investing activities | (156 | ) | (29 | ) | ||||
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Cash flow from financing activities: | ||||||||
Stock option exercises | 196 | 1,175 | ||||||
Principal payments of capital lease obligations | — | (3 | ) | |||||
Principal repayment of debt financing | (4,638 | ) | (200 | ) | ||||
Repayment of line of credit | (2,000 | ) | — | |||||
Proceeds from debt financing | 7,000 | — | ||||||
Debt issuance costs | (43 | ) | — | |||||
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Net cash provided by financing activities | 515 | 972 | ||||||
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Decrease in cash and equivalents | (1,057 | ) | (870 | ) | ||||
Cash and equivalents, beginning of period | 15,313 | 12,185 | ||||||
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Cash and equivalents, end of period | $ | 14,256 | $ | 11,315 | ||||
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Supplemental disclosure of cash flow information: | ||||||||
Interest paid | $ | 122 | $ | 82 | ||||
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Taxes paid | $ | 26 | $ | 8 | ||||
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Issuance of stock upon conversion of debentures | 21,164 | — | ||||||
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Right-of-use assets obtained in exchange for new operating lease liabilities | $ | 69 | $ | 907 | ||||
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For the three months ended March 31, | ||||||||
2021 | 2020 | |||||||
(in thousands) | ||||||||
Cash flow from operating activities: | ||||||||
Net loss | $ | (1,643 | ) | $ | (11,812 | ) | ||
Adjustments to reconcile net loss to net cash used for operating activities: | ||||||||
Amortization | 58 | 78 | ||||||
Depreciation | 76 | 71 | ||||||
Bad debt provision | — | 119 | ||||||
Stock-based compensation | 935 | 464 | ||||||
Amortization of debt discount and debt costs | 12 | 40 | ||||||
Loss on extinguishment of debt | — | 341 | ||||||
Deferred tax expense | — | 1 | ||||||
Change in fair value of convertible debentures | — | 7,464 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (622 | ) | 2,610 | |||||
Inventory | 647 | 149 | ||||||
Prepaid and other assets | (89 | ) | (72 | ) | ||||
Accounts payable | (1,617 | ) | (317 | ) | ||||
Accrued expenses | (1,313 | ) | (439 | ) | ||||
Deferred revenue | (7 | ) | (113 | ) | ||||
Total adjustments | (1,920 | ) | 10,396 | |||||
Net cash used for operating activities | (3,563 | ) | (1,416 | ) | ||||
Cash flow from investing activities: | ||||||||
Additions to patents, technology and other | — | (1 | ) | |||||
Additions to property and equipment | (262 | ) | (155 | ) | ||||
Net cash used for investing activities | (262 | ) | (156 | ) | ||||
Cash flow from financing activities: | ||||||||
Issuance of common stock pursuant to stock option plans | 270 | 196 | ||||||
Issuance of common stock pursuant to Employee Stock Purchase Plan | 47 | — | ||||||
Proceeds from issuance of common stock, net | 23,229 | — | ||||||
Principal repayment of debt financing | — | (4,638 | ) | |||||
Repayment on line of credit | — | (2,000 | ) | |||||
Proceeds from notes payable | — | 7,000 | ||||||
Debt issuance costs | — | (43 | ) | |||||
Net cash provided by financing activities | 23,546 | 515 | ||||||
Increase (decrease in cash and equivalents) | 19,721 | (1,057 | ) | |||||
Cash and cash equivalents, beginning of period | 27,186 | 15,313 | ||||||
Cash and cash equivalents, end of period | $ | 46,907 | $ | 14,256 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Interest paid | $ | 92 | $ | 122 | ||||
Taxes paid | $ | — | $ | 26 | ||||
Issuance of common stock upon conversion of debentures | — | 21,164 | ||||||
Right-of-use | $ | — | $ | 69 | ||||
iCAD, INC. AND SUBSIDIARIES
Common Stock | Additional | ||||||||||||||||||||||||
Number of | Paid-in | Accumulated | Treasury | Stockholders’ | |||||||||||||||||||||
Shares Issued | Par Value | Capital | Deficit | Stock | Equity | ||||||||||||||||||||
Balance at December 31, 2020 | 23,694,406 | $ | 236 | $ | 273,639 | $ | (241,935 | ) | (1,415 | ) | $ | 30,525 | |||||||||||||
Issuance of common stock relative to vesting of restricted stock | 20,000 | — | — | — | — | — | |||||||||||||||||||
Issuance of common stock, net | 1,393,738 | 14 | 23,215 | — | — | 23,229 | |||||||||||||||||||
Issuance of common stock pursuant to stock option plans | 28,934 | 1 | 270 | — | — | 271 | |||||||||||||||||||
Issuance of common stock pursuant Employee Stock Purchase Plan | 6,354 | — | 47 | — | — | 47 | |||||||||||||||||||
Stock-based compensation | — | — | 935 | — | — | 935 | |||||||||||||||||||
Net loss | — | — | — | (1,643 | ) | — | (1,643 | ) | |||||||||||||||||
Balance at March 31, 2021 | 25,143,432 | $ | 251 | $ | 298,106 | $ | (243,578 | ) | $ | (1,415 | ) | $ | 53,364 |
to Date
Common Stock | Additional | |||||||||||||||||||||||
Number of | Paid-in | Accumulated | Treasury | Stockholders’ | ||||||||||||||||||||
Shares Issued | Par Value | Capital | Deficit | Stock | Equity | |||||||||||||||||||
Balance at December 31, 2019 | 19,546,151 | $ | 196 | $ | 230,616 | $ | (224,325 | ) | $ | (1,415 | ) | $ | 5,071 | |||||||||||
Issuance of common stock relative to vesting of restricted stock | 23,500 | — | — | — | — | — | ||||||||||||||||||
Issuance of common stock pursuant to stock option plans | 36,799 | 1 | 195 | — | — | 196 | ||||||||||||||||||
Issuance of stock for Debentures | 1,819,466 | 18 | 21,146 | — | — | 21,164 | ||||||||||||||||||
Stock-based compensation | 464 | 464 | ||||||||||||||||||||||
Net loss | — | — | — | (11,812 | ) | — | (11,812 | ) | ||||||||||||||||
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Balance at March 31, 2020 | 21,425,916 | $ | 215 | $ | 252,421 | $ | (236,137 | ) | $ | (1,415 | ) | $ | 15,083 | |||||||||||
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Common Stock | Additional | |||||||||||||||||||||||
Number of | Paid-in | Accumulated | Treasury | Stockholders’ | ||||||||||||||||||||
Shares Issued | Par Value | Capital | Deficit | Stock | Equity | |||||||||||||||||||
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 | 23,500 | — | — | — | — | — | ||||||||||||||||||
Issuance of common stock pursuant to stock option plans | 36,799 | 1 | 195 | — | — | 196 | ||||||||||||||||||
Issuance of stock upon conversion of Debentures | 1,819,466 | 18 | 21,146 | — | — | 21,164 | ||||||||||||||||||
Stock-based compensation | 464 | 464 | ||||||||||||||||||||||
Net loss | — | — | — | (11,812 | ) | — | (11,812 | ) | ||||||||||||||||
Balance at March 31, 2020 | 21,425,916 | $ | 215 | $ | 252,420 | $ | (236,137 | ) | $ | (1,415 | ) | $ | 15,083 |
(In thousands except shares)
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 | 66,334 | 1 | (1 | ) | — | — | — | |||||||||||||||||
Issuance of common stock pursuant to stock option plans | 367,421 | 3 | 1,172 | — | — | 1,175 | ||||||||||||||||||
Stock-based compensation | — | — | 212 | — | — | 212 | ||||||||||||||||||
Net loss | — | — | — | (3,717 | ) | — | (3,717 | ) | ||||||||||||||||
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Balance at March 31, 2019 | 17,500,265 | $ | 175 | $ | 220,297 | $ | (214,491 | ) | $ | (1,415 | ) | $ | 4,566 | |||||||||||
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stockholders’ equity for the Company for the three-month periods ended March 31, 2021 and 2020.
Our results for the quarter ending March 31, 20202021 reflect a negative impact from among other things, theas shipping, logistics, acceptance and installation and training have been delayed and ordering patterns disrupted. due to some healthcare facilities’ additional focus onwe dothe Company does not provide guidance to investors relating to ourits future results of operations, we expect that ourits results for the quarter ending June 30, 2020,2021, and possibly future quarters, willcould reflect a continued negative impact from theDepending upon theThe duration and severity of the pandemic is unknown, and so the continuingcontinued effect on ourthe Company’s results over the long term is uncertain.
The Company’s exposure
Three months ended March 31, 2020 | ||||||||||||
Reportable Segments | ||||||||||||
Detection | Therapy | Total | ||||||||||
Major Goods/Service Lines | ||||||||||||
Products | $ | 3,100 | $ | 1,346 | $ | 4,446 | ||||||
Service contracts | 1,347 | 347 | 1,694 | |||||||||
Supply and source usage agreements | — | 371 | 371 | |||||||||
Professional services | — | 11 | 11 | |||||||||
Other | 29 | — | 29 | |||||||||
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$ | 4,476 | $ | 2,075 | $ | 6,551 | |||||||
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Timing of Revenue Recognition | ||||||||||||
Goods transferred at a point in time | $ | 3,129 | $ | 1,383 | $ | 4,512 | ||||||
Services transferred over time | 1,347 | 692 | 2,039 | |||||||||
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$ | 4,476 | $ | 2,075 | $ | 6,551 | |||||||
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Sales Channels | ||||||||||||
Direct sales force | $ | 2,172 | $ | 1,469 | $ | 3,641 | ||||||
OEM partners | 2,304 | — | 2,304 | |||||||||
Channel partners | — | 606 | 606 | |||||||||
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$ | 4,476 | $ | 2,075 | $ | 6,551 | |||||||
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Three months ended March 31, 2021 | ||||||||||||
Reportable Segments | ||||||||||||
Detection | Therapy | Total | ||||||||||
Major Goods/Service Lines | ||||||||||||
Products | $ | 4,161 | $ | 2,103 | $ | 6,264 | ||||||
Service contracts | 1,558 | 340 | 1,898 | |||||||||
Supply and source usage agreements | — | 481 | 481 | |||||||||
Professional services | — | 1 | 1 | |||||||||
$ | 5,719 | $ | 2,925 | $ | 8,644 | |||||||
Timing of Revenue Recognition | ||||||||||||
Goods transferred at a point in time | $ | 4,161 | $ | 2,104 | $ | 6,265 | ||||||
Services transferred over time | 1,558 | 821 | 2,379 | |||||||||
$ | 5,719 | $ | 2,925 | $ | 8,644 | |||||||
Sales Channels | ||||||||||||
Direct sales force | $ | 3,875 | $ | 674 | $ | 4,549 | ||||||
OEM partners | 1,844 | — | 1,844 | |||||||||
Channel partners | — | 2,251 | 2,251 | |||||||||
$ | 5,719 | $ | 2,925 | $ | 8,644 |
Three months ended March 31, 2019 | ||||||||||||
Reportable Segments | ||||||||||||
Detection | Therapy | Total | ||||||||||
Major Goods/Service Lines | ||||||||||||
Products | $ | 2,790 | $ | 1,519 | $ | 4,309 | ||||||
Service contracts | 1,322 | 516 | 1,838 | |||||||||
Supply and source usage agreements | — | 537 | 537 | |||||||||
Professional services | — | 33 | 33 | |||||||||
Other | 56 | — | 56 | |||||||||
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$ | 4,168 | $ | 2,605 | $ | 6,773 | |||||||
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Timing of Revenue Recognition | ||||||||||||
Goods transferred at a point in time | $ | 2,790 | $ | 1,632 | $ | 4,422 | ||||||
Services transferred over time | 1,378 | 973 | 2,351 | |||||||||
|
|
|
|
|
| |||||||
$ | 4,168 | $ | 2,605 | $ | 6,773 | |||||||
|
|
|
|
|
| |||||||
Sales Channels | ||||||||||||
Direct sales force | $ | 2,057 | $ | 1,812 | $ | 3,869 | ||||||
OEM partners | 2,111 | — | 2,111 | |||||||||
Channel partners | — | 793 | 793 | |||||||||
|
|
|
|
|
| |||||||
$ | 4,168 | $ | 2,605 | $ | 6,773 | |||||||
|
|
|
|
|
|
Three months ended March 31, 2020 | ||||||||||||
Reportable Segments | ||||||||||||
Detection | Therapy | Total | ||||||||||
Major Goods/Service Lines | ||||||||||||
Products | $ | 3,100 | $ | 1,346 | $ | 4,446 | ||||||
Service contracts | 1,347 | 347 | 1,694 | |||||||||
Supply and source usage agreements | — | 371 | 371 | |||||||||
Professional services | — | 11 | 11 | |||||||||
Other | 29 | 0 | 29 | |||||||||
$ | 4,476 | $ | 2,075 | $ | 6,551 | |||||||
Timing of Revenue Recognition | ||||||||||||
Goods transferred at a point in time | $ | 3,129 | $ | 1,383 | $ | 4,512 | ||||||
Services transferred over time | 1,347 | 692 | 2,039 | |||||||||
$ | 4,476 | $ | 2,075 | $ | 6,551 | |||||||
Sales Channels | ||||||||||||
Direct sales force | $ | 2,172 | $ | 1,469 | $ | 3,641 | ||||||
OEM partners | 2,304 | — | 2,304 | |||||||||
Channel partners | — | 606 | 606 | |||||||||
$ | 4,476 | $ | 2,075 | $ | 6,551 |
accordance with ASC 606. The consideration allocated to the lease component was recognized as lease 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 thenon-lease components, or the entire arrangement when accounted for under ASC 606,, is recognized on a straight-line basis over the term of the agreement. The service contracts range from 12 months to 48 months. The Company typically receives payment at the inception of the contract and recognizes revenue on a straight-line basis over the term of the agreement.
customer or the installation services are performed.
Balance at | ||||
March 31, 2020 | ||||
Receivables, which are included in ‘Trade accounts receivable’ | $ | 7,090 | ||
Contract assets, which are included in “Prepaid and other current assets” | 14 | |||
Contract liabilities, which are included in “Deferred revenue” | 5,491 |
Balance at March 31, 2021 | Balance at December 31, 2020 | |||||||
Receivables, which are included in ‘Trade accounts receivable’ | $ | 10,649 | $ | 10,027 | ||||
Current contract assets, which are included in “Prepaid and other assets” | 701 | 481 | ||||||
Non-current contract assets, which are included in “other assets” | 1,478 | 1,434 | ||||||
Contract liabilities, which are included in “Deferred revenue” | 6,377 | 6,384 |
Deferrednet unbilled revenue balances with one customer which the Company expects to be able to bill for in more than one year.
The balance of deferred revenue at March 31, 20202021 and December 31, 20192020 is as follows (in thousands):
Contract liabilities
March 31, 2020 | December 31, 2019 | |||||||
Short term | $ | 5,259 | $ | 5,248 | ||||
Long term | 232 | 356 | ||||||
|
|
|
| |||||
Total | $ | 5,491 | $ | 5,604 | ||||
|
|
|
|
Contract liabilities | March 31, 2021 | December 31, 2020 | ||||||
Short term | $ | 5,957 | $ | 6,117 | ||||
Long term | 420 | 267 | ||||||
Total | $ | 6,377 | $ | 6,384 | ||||
Three Months Ended | ||||
March 31, 2020 | ||||
Balance at beginning of period | $ | 5,604 | ||
Deferral of revenue | 2,226 | |||
Recognition of deferred revenue | (2,339 | ) | ||
|
| |||
Balance at end of period | $ | 5,491 | ||
|
|
We expect to recognize approximately $4.8 million of the deferred amount in 2020, $0.5 million in 2021, and $0.2 million thereafter.
Three Months Ended March 31, 2021 | ||||
Balance at beginning of period | $ | 6,384 | ||
Deferral of revenue | 3,259 | |||
Recognition of deferred revenue | (3,266 | ) | ||
Balance at end of period | $ | 6,377 | ||
Three Months Ended | ||||||||
March 31, | ||||||||
2020 | 2019 | |||||||
Net loss | $ | (11,812 | ) | $ | (3,717 | ) | ||
|
|
|
| |||||
Shares used in the calculation of basic and diluted net loss per share | 20,175 | 17,200 | ||||||
|
|
|
| |||||
Diluted shares used in the calculation of net loss per share | 20,175 | 17,200 | ||||||
|
|
|
| |||||
Net loss per share - basic and diluted | $ | (0.59 | ) | $ | (0.22 | ) | ||
|
|
|
|
Three Months Ended | ||||||||
March 31, | ||||||||
2021 | 2020 | |||||||
Net loss | $ | (1,643 | ) | $ | (11,812 | ) | ||
Shares used in the calculation of basic and diluted net loss per share | 23,929 | 20,175 | ||||||
Diluted shares used in the calculation of net loss per share | 23,929 | 20,175 | ||||||
Net loss per share - basic and diluted | $ | (0.07 | ) | $ | (0.59 | ) | ||
Period Ended | ||||||||
March 31, | ||||||||
2020 | 2019 | |||||||
Stock options | 1,747,363 | 1,548,818 | ||||||
Restricted stock | 74,492 | 270,064 | ||||||
Convertible Debentures | — | 1,742,500 | ||||||
|
|
|
| |||||
Stock options and restricted stock | 1,821,855 | 3,561,382 | ||||||
|
|
|
|
As of | ||||||||
March 31, | ||||||||
2021 | 2020 | |||||||
Stock options | 2,246,776 | 1,747,363 | ||||||
Restricted stock | 31,654 | 74,492 | ||||||
Total | 2,278,430 | 1,821,855 | ||||||
as of March 31, 2020 | as of December 31, 2019 | |||||||
Raw materials | $ | 1,502 | $ | 1,572 | ||||
Work in process | 97 | 39 | ||||||
Finished Goods | 1,147 | 1,469 | ||||||
|
|
|
| |||||
Inventory Gross | 2,746 | 3,080 | ||||||
Inventory Reserve | (284 | ) | (469 | ) | ||||
|
|
|
| |||||
Inventory Net | $ | 2,462 | $ | 2,611 | ||||
|
|
|
|
March 31, 2021 | December 31, 2020 | |||||||
Raw materials | $ | 1,305 | $ | 1,538 | ||||
Work in process | 194 | 76 | ||||||
Finished Goods | 1,238 | 1,774 | ||||||
Inventory Gross | 2,737 | 3,388 | ||||||
Inventory Reserve | (239 | ) | (244 | ) | ||||
Inventory Net | $ | 2,498 | $ | 3,144 | ||||
On August 7, 2017, the Company entered into a Loan and Security Agreement, which has since been modified, most recently by the Fifth Loan Modification Agreement dated as of November 1, 2019 (as amended, the “SVB Loan Agreement”) with Silicon Valley Bank (“SVB”) that provided an initial term loan facility of $6.0 million and a $4.0 million revolving line of credit.
On March 30, 2020, the Company elected to repay all outstanding obligations (including accrued interest) and retire the SVB Loan Agreement. The Company accounted for this repayment and retirement as an extinguishment of the SVB Loan Agreement. In addition to the outstanding principal and accrued interest, the Company was required to pay the $510,000 final payment (of which approximately $325,000 was accrued through March 31, 2020), a termination fee of $114,000 and other costs totaling $10,000. The Company also wrote off any unamortized original closing costs as of the extinguishment date. The Company recorded a loss on extinguishment of approximately $341,000 related to the repayment and retirement of the SVB Loan Agreement. The loss on extinguishment was composed of approximately $185,000 for the unaccrued final payment, $114,000 termination fee, and $42,000 for the unamortized and other closing costs.
(b) Loan and Security Agreement – Western Alliance Bank
The Prime Rate as of March 31, 2020 was 3.25%.
The Company did not draw against its revolving line of credit as of March 31, 2020. The interest rate on such borrowings, if the Company were to take an advance, is three quarters percent (0.75%) above the Prime Rate as defined above.
On June 21, 2019, the Company commenced paying interest to the Investors on the outstanding principal amount of the Convertible Debentures at the rate of 5.0% per annum, payable semi-annually on December 21st and June 21st as well as on each conversion date (as to that principal amount then being converted) and on the maturity date. The Convertible Debentures were due to mature on December 21, 2021.
At any time prior to the maturity date, the Convertible Debentures were convertible into shares of the Company’s common stock at a conversion price of $4.00 per share, at an Investor’s option, subject to certain anti-dilution adjustments. Upon the satisfaction of certain conditions, the Company had the right to cause the Investors to convert all or part of the then outstanding principal amount of the Convertible Debentures (a “Forced Conversion”). In connection with such Forced Conversion, the Company was required to pay accrued but unpaid interest, an interest make-whole amount determined based on the timing of the Forced Conversion and interest payments made to that date, liquidated damages and other amounts owing to the Investors under the Convertible Debentures. The conversion price in both the optional conversion and Forced Conversion provisions were subject to adjustment due to certain ‘down-round’ dilutive issuances as well for typical anti-dilutive actions, such as stock splits and stock dividends.
The Convertible Debentures also included certain liquidated damages provisions, whereby the Company would have been 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 issue certain public reports.
Certain Investors in the Convertible Debentures included directors and employees of the Company. These related parties comprised approximately 9.6% of the principal value of the Convertible Debentures, or $670,000. The Convertible Debentures issued to the related parties had 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 SPA; or limits on the impact of potential ‘down-round’ adjustments to the conversion price).
On the Conversion Date, the required conditions were met, and the Company elected to exercise its forced conversion right under the terms of the Convertible Debentures.
Input | December 31, 2019 | February 21, 2019 | ||||||||
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 |
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 Probability 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 |
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 | ||||
|
|
|
|
The
Convertible Debentures | December 31, 2019 | February 21, 2020 | ||||||
Fair value, in accordance with fair value option | $ | 13,642 | $ | 21,164 | ||||
Principal value outstanding | $ | 6,970 | $ | 6,970 | ||||
Fiscal Year | Amount Due | |||
2020 | $ | 281 | ||
2021 | $ | 1,238 | ||
2022 | $ | 2,875 | ||
2023 | $ | 2,735 | ||
2024 | $ | 1,004 | ||
|
| |||
Total | $ | 8,133 | ||
|
|
as of March 31, 2021:
Fiscal Year | Amount Due | |||
2021 | 281 | |||
2022 | 3,224 | |||
2023 | 3,636 | |||
2024 | 712 | |||
Total | $ | 7,853 |
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Cash interest expense | $ | 43 | $ | 82 | ||||
Interest on convertible debentures | 49 | 87 | ||||||
Accrual of notes payable final payment | 31 | 32 | ||||||
Amortization of debt costs | 7 | 7 | ||||||
Interest expense capital lease | — | 1 | ||||||
|
|
|
| |||||
Total interest expense | $ | 130 | $ | 209 | ||||
|
|
|
|
Three Months Ended March 31, | ||||||||
2021 | 2020 | |||||||
Cash interest expense | $ | 92 | $ | 43 | ||||
Interest on convertible debentures | — | 49 | ||||||
Accrual of notes payable final payment | 7 | 31 | ||||||
Amortization of debt costs | 13 | 7 | ||||||
Total interest expense | $ | 112 | $ | 130 | ||||
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 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.
Certain of the Company’s leases include variable lease costs to reimburse the lessor for real estate tax and insurance expenses, and certaintheits accounting forof lease components andleases.
Required Disclosures under ASC 842
leases
2021
Lease Cost | Classification | Three Months Ended March 31, 2020 | ||||
Operating lease cost | Operating expenses | $ | 224 | |||
Finance lease costs | ||||||
Amortization of leased assets | Amortization and depreciation | 4 | ||||
Interest on lease liabilities | Interest expense | 1 | ||||
|
| |||||
Total | $ | 229 | ||||
|
|
Lease Cost | Classification | Three Months Ended March 31, 2021 | ||||
Operating lease cost - Right of Use Asset | Operating expenses | $ | 217 | |||
Operating lease cost - Variable | Operating expenses | 57 | ||||
Finance lease costs | ||||||
Amortization of leased assets | Amortization and depreciation | 0 | ||||
Interest on lease liabilities | Interest expense | 0 | ||||
Total | $ | 274 |
Three Months Ended March 31, 2020 | ||||
Cash paid for operating cash flows from operating leases | $ | 216 | ||
Cash paid for operating cash flows from finance leases | 1 | |||
Cash paid for financing cash flows from finance leases | 4 |
| ||||
| ||||
| ||||
|
Three Months Ended March 31, 2021 | ||||
Cash paid from operating cash flows for operating leases | $ | 118 | ||
As of March 31, 2021 | ||||
Weighted-average remaining lease term of operating leases (in years) | 1.96 | |||
Weighted-average discount rate for operating leases | 5.5 | % |
Three Months Ended March 31: | Operating Leases | Finance Leases | Total | |||||||||
2020 | 692 | 9 | 701 | |||||||||
2021 | 920 | — | 920 | |||||||||
2022 | 899 | — | 899 | |||||||||
2023 | 211 | — | 211 | |||||||||
2024 | 5 | — | 5 | |||||||||
|
|
|
|
|
| |||||||
Total lease payments | 2,727 | 9 | 2,736 | |||||||||
Less: imputed interest | (219 | ) | (1 | ) | (220 | ) | ||||||
|
|
|
|
|
| |||||||
Total lease liabilities | 2,508 | 8 | 2,516 | |||||||||
Less: current portion of lease liabilities | (801 | ) | (8 | ) | (809 | ) | ||||||
|
|
|
|
|
| |||||||
Long-term lease liabilities | $ | 1,707 | $ | — | $ | 1,707 | ||||||
|
|
|
|
|
|
Three Months Ended March 31, 2021: | Operating Leases | |||
2021 | 692 | |||
2022 | 899 | |||
2023 | 211 | |||
2024 | 5 | |||
Total lease payments | 1,807 | |||
Less: imputed interest | (100 | ) | ||
Total lease liabilities | 1,707 | |||
Less: current portion of lease liabilities | (847 | ) | ||
Long-term lease liabilities | $ | 860 | ||
Three Months Ended March 31, | ||||
2020 | 2019 | |||
Average risk-free interest rate | 1.24% | 2.38% | ||
Expected dividend yield | None | None | ||
Expected life | 3.5 years | 3.5 years | ||
Expected volatility | 50.2% to 64.0% | 53.1% to 54.2% | ||
Weighted average exercise price | $8.26 | $4.35 | ||
Weighted average fair value | $3.19 | $1.78 | ||
Remaining expense | $1,632 | $1,579 | ||
Weighted average term | 1.0 | 1.0 |
The Company’s stock-based compensation expense, including options and restricted stock by category is as follows (in thousands):
Three Months Ended March 31, | ||||||||
2020 | 2019 | |||||||
Cost of revenue | $ | 1 | $ | 1 | ||||
Engineering and product development | 54 | 87 | ||||||
Marketing and sales | 58 | 59 | ||||||
General and administrative | 351 | 65 | ||||||
|
|
|
| |||||
$ | 464 | $ | 212 | |||||
|
|
|
|
March 31, | ||||
2021 | 2020 | |||
Average risk-free interest rate | 0.20% | 1.24% | ||
Expected dividend yield | NaN | NaN | ||
Expected life | 3.5 years | 3.5 years | ||
Expected volatility | 66.0% to 66.0% | 50.2% to 64.0% | ||
Weighted average exercise price | $18.00 | $8.26 | ||
Weighted average fair value | $8.37 | $3.19 |
Three Months Ended | ||||||||
March 31, | ||||||||
2021 | 2020 | |||||||
Cost of revenue | $ | 14 | $ | 1 | ||||
Engineering and product development | 149 | 54 | ||||||
Marketing and sales | 353 | 58 | ||||||
General and administrative | 419 | 351 | ||||||
$ | 935 | $ | 464 | |||||
Remaining expense | $ | 1,632 | ||
Weighted average term | 1.0 |
Remaining expense | $ | 3,823 | ||
Weighted average term | 1.26 |
During
Three Months Ended March 31, | ||||||||
Aggregate intrinsic value | 2020 | 2019 | ||||||
Stock options | $ | 4,749 | $ | 2,273 | ||||
Restricted stock | 547 | 1,396 |
As of | ||||||||
March 31, | ||||||||
Aggregate intrinsic value | 2021 | 2020 | ||||||
Stock options | $ | 29,305 | $ | 2,273 | ||||
Restricted stock | 672 | 1,396 |
No
Foreign Tax Claim
In July 2007, a dissolved former Canadian subsidiary of the Company, CADx Medical Systems Inc. (“CADx Medical”), received a taxre-assessment of approximately $6,800,000 from the Canada Revenue Agency (“CRA”) resulting from the CRA’s audit of CADx Medical’s Canadian federal tax return for the year ended December 31, 2002. In February 2010, the CRA reviewed the matter and reduced the taxre-assessment to approximately $703,000, excluding interest and penalties. The CRA has the right to pursue the matter until July 2020. The Company believes that it is not liable for there-assessment against CADx Medical and continues to defend its position. As the Company believes that the probability of a loss is remote, no accrual has been recorded for this matter as of March 31, 2020.
deliverables
Convertible Debentures.
Fair Value Measurements (000’s) 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 (000’s) as of March 31, 2020 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets | ||||||||||||||||
Money market accounts | $ | 14,256 | $ | — | $ | — | $ | 14,256 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Assets | $ | 14,256 | $ | — | $ | — | $ | 14,256 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Liabilities | ||||||||||||||||
Convertible debentures | $ | — | $ | — | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
| |||||||||
Total Liabilities | $ | — | $ | — | $ | — | $ | — | ||||||||
|
|
|
|
|
|
|
|
The following sets forth a reconciliation
Fair Value Measurements as of December 31, 2020 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets | ||||||||||||||||
Money market accounts | $ | 27,186 | — | — | $ | 27,186 | ||||||||||
Total Assets | $ | 27,186 | — | — | $ | 27,186 | ||||||||||
Fair Value Measurements (in thousands) as of March 31, 2021 | ||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets | ||||||||||||||||
Money market accounts | $ | 46,907 | — | — | $ | 46,907 | ||||||||||
Total Assets | $ | 46,907 | — | — | $ | 46,907 | ||||||||||
2021.
2021.
March 31, 2021.
The Company considered the goodwill impairment factors due to the uncertainty around the potential impact of theCOVID-19 pandemic on the Company’s continuing operations and on the global economy as a whole. Under this consideration the Company performed scenario testing of the projections to the most recent impairment analysis performed as of October 1, 2019. The Company concluded that it did not have a triggering event or impairment indicators in the quarter ended March 31, 2020.
Note 12 below.
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 December 31, 2019 | $ | — | $ | 8,362 | $ | — | $ | 8,362 | ||||||||
|
|
|
|
|
|
|
| |||||||||
Balance at March 31, 2020 | $ | — | $ | 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 | ) | ||||||||||
Balance at December 31, 2020 and March 31, 2021 | — | 8,362 | — | 8,362 | ||||||||||||
value.
2021.
Three Months Ended | ||||||||
March 31, | ||||||||
2020 | 2019 | |||||||
Segment revenues: | ||||||||
Detection | $ | 4,476 | $ | 4,168 | ||||
Therapy | 2,075 | 2,605 | ||||||
|
|
|
| |||||
Total Revenue | $ | 6,551 | $ | 6,773 | ||||
|
|
|
| |||||
Segment gross profit: | ||||||||
Detection | $ | 3,467 | $ | 3,467 | ||||
Therapy | 1,043 | 1,815 | ||||||
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Segment gross profit | $ | 4,510 | $ | 5,282 | ||||
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Segment operating income (loss): | ||||||||
Detection | $ | (346 | ) | $ | 302 | |||
Therapy | (1,006 | ) | 221 | |||||
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Segment operating income (loss) | $ | (1,352 | ) | $ | 523 | |||
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General, administrative, depreciation and amortization expense | $ | (2,541 | ) | $ | (1,557 | ) | ||
Interest expense | (130 | ) | (209 | ) | ||||
Other income | 42 | 59 | ||||||
Loss on extinguishment of debt | (341 | ) | — | |||||
Fair value of convertible debentures | (7,464 | ) | (2,525 | ) | ||||
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Loss before income tax | $ | (11,786 | ) | $ | (3,709 | ) | ||
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Three Months Ended | ||||||||
March 31, | ||||||||
2021 | 2020 | |||||||
Segment revenues: | ||||||||
Detection | $ | 5,719 | $ | 4,476 | ||||
Therapy | 2,925 | 2,075 | ||||||
Total Revenue | $ | 8,644 | $ | 6,551 | ||||
Segment gross profit: | ||||||||
Detection | $ | 4,725 | $ | 3,467 | ||||
Therapy | 1,564 | 1,043 | ||||||
Segment gross profit | $ | 6,289 | $ | 4,510 | ||||
Segment operating income (loss): | ||||||||
Detection | $ | 941 | $ | (346 | ) | |||
Therapy | (312 | ) | (1,006 | ) | ||||
Segment operating income (loss) | $ | 629 | $ | (1,352 | ) | |||
General, administrative, depreciation and amortization expense | $ | (2,162 | ) | $ | (2,541 | ) | ||
Interest expense | (112 | ) | (130 | ) | ||||
Other income | 2 | 42 | ||||||
Loss on extinguishment of debt | — | (341 | ) | |||||
Fair value of convertible debentures | — | (7,464 | ) | |||||
Loss before income tax | $ | (1,643 | ) | $ | (11,786 | ) | ||
On January 1, 2020,
In December 2019, the FASB issued ASU2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU2019-12”). ASU2019-12 is intended to simplify the accounting for income taxes by removing certain exceptions to the general principles in Topic 740. The amendments also improve consistent application of and simplify GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU2019-12 is effective for the Company for the fiscal year and interim periods therein beginning January 1, 2021. The Company is currently evaluating the impact that the adoption of ASU2019-12 will have on its consolidated financial statements.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
“Safe Harbor” Statement under the Private Securities Litigation Reform Act of 1995:
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Except as required by law, we undertake no obligation to update any such forward-looking statements to reflect events or circumstances after the date of such statements.
On April 27, 2020, the Company issued 1,562,500 shares of common stock to several institutional investors at a price of $8.00 per share in a registered direct offering. The gross proceeds of the offering were approximately $12.5 million, and the Company received net proceeds of approximately $12.2 million.
Estimates
States.
Revenue: (in thousands)
Three months ended March 31, | ||||||||||||||||
2020 | 2019 | Change | % Change | |||||||||||||
Detection revenue | ||||||||||||||||
Product revenue | $ | 3,100 | $ | 2,790 | $ | 310 | 11.1 | % | ||||||||
Service and supplies revenue | 1,376 | 1,378 | (2 | ) | (0.1 | )% | ||||||||||
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Subtotal | 4,476 | 4,168 | 308 | 7.4 | % | |||||||||||
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Therapy revenue | ||||||||||||||||
Product revenue | 695 | 1,032 | (337 | ) | (32.7 | )% | ||||||||||
Service and supplies revenue | 1,380 | 1,573 | (193 | ) | (12.3 | )% | ||||||||||
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Subtotal | 2,075 | 2,605 | (530 | ) | (20.3 | )% | ||||||||||
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Total revenue | $ | 6,551 | $ | 6,773 | $ | (222 | ) | (3.3 | )% | |||||||
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Total revenue decreased by approximately $0.2 million, or 3.3%, from $6.8 million for the three-months
Detection product
Three months ended March 31, | ||||||||||||||||
2021 | 2020 | Change | % Change | |||||||||||||
Detection revenue | ||||||||||||||||
Product revenue | $ | 4,161 | $ | 3,100 | $ | 1,061 | 34.2 | % | ||||||||
Service and supplies revenue | 1,558 | 1,376 | 182 | 13.2 | % | |||||||||||
Subtotal | 5,719 | 4,476 | 1,243 | 27.8 | % | |||||||||||
Therapy revenue | ||||||||||||||||
Product revenue | 1,396 | 695 | 701 | 100.9 | % | |||||||||||
Service and supplies revenue | 1,529 | 1,380 | 149 | 10.8 | % | |||||||||||
Subtotal | 2,925 | 2,075 | 850 | 41.0 | % | |||||||||||
Total revenue | $ | 8,644 | $ | 6,551 | $ | 2,093 | 31.9 | % | ||||||||
Detection service and supplies revenue remained relatively the same at $1.4$1.6 million in each of the three months ended March 31, 2019 and 2020. The Company did not see a significant impact of theCOVID-19 pandemic on service revenue for the three months ended March 31, 2020, however the Company is not able to estimate the extent of the negative impact that theCOVID-19 pandemic will have on future service revenues.
2021.
Therapy service and supplysupplies revenue.
Three months ended March 31, | ||||||||||||||||
2021 | 2020 | Change | % Change | |||||||||||||
Products | $ | 1,409 | $ | 1,017 | $ | 392 | 38.5 | % | ||||||||
Service and supplies | 867 | 927 | (60 | ) | (6.5 | )% | ||||||||||
Amortization and depreciation | 79 | 97 | (18 | ) | (18.6 | )% | ||||||||||
Total cost of revenue | $ | 2,355 | $ | 2,041 | $ | 314 | 15.4 | % | ||||||||
Gross profit | $ | 6,289 | $ | 4,510 | $ | 1,779 | 39.4 | % | ||||||||
Three months ended March 31, | ||||||||||||||||
2021 | 2020 | Change | % Change | |||||||||||||
Detection gross profit | $ | 4,725 | $ | 3,467 | $ | 1,258 | 36.3 | % | ||||||||
Therapy gross profit | 1,564 | 1,043 | 521 | 50.0 | % | |||||||||||
Gross profit | $ | 6,289 | $ | 4,510 | $ | 1,779 | 39.4 | % | ||||||||
Gross profit % | 72.8 | % | 68.8 | % |
Cost of Revenue and Gross Profit: (in thousands)
Three months ended March 31, | ||||||||||||||||
2020 | 2019 | Change | % Change | |||||||||||||
Products | $ | 1,017 | $ | 680 | $ | 337 | 49.6 | % | ||||||||
Service and supplies | 927 | 717 | 210 | 29.3 | % | |||||||||||
Amortization and depreciation | 97 | 94 | 3 | 3.2 | % | |||||||||||
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Total cost of revenue | $ | 2,041 | $ | 1,491 | $ | 550 | 36.9 | % | ||||||||
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Gross profit | $ | 4,510 | $ | 5,282 | $ | (772 | ) | (14.6 | )% | |||||||
Gross profit % | 68.8 | % | 78.0 | % | ||||||||||||
Three months ended March 31, | ||||||||||||||||
2020 | 2019 | Change | % Change | |||||||||||||
Detection gross profit | $ | 3,467 | $ | 3,467 | $ | — | .0 | % | ||||||||
Therapy gross profit | 1,043 | 1,815 | (772 | ) | (42.5 | %) | ||||||||||
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Gross profit | $ | 4,510 | $ | 5,282 | $ | (772 | ) | (14.6 | %) | |||||||
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Gross profit % | 68.8 | % | 78.0 | % |
Gross profit for the three months ended March 31, 2020 was $4.5 million, or 68.8%, of revenue, as compared to $5.3 million, or 78.0% of revenue, for the three months period ended March 31, 2019. TheCOVID-19 pandemic impacted order volumes of the Detection products in March 2020, resulting in a lower than expected gross profit in the segment. The Company had increased personnel and other fixed costs prior to the onset of theCOVID-19 pandemic. Accordingly, gross profit was negatively impacted in both segments without the commensurate increase in revenue.
Cost of products increased by approximately $0.3 million, or 49.6%, from $0.7 million for the three months ended March 31, 2019 to $1.0 million for the three months ended March 31, 2020.2021. Cost of product revenue as a percentage of product revenue was approximately 17.8%26.8% for the three months ended March 31, 20192020 as compared to 26.8% for the three-months ended March 31, 2020. The increase is due primarily to increased costs for server hardware and increased personnel costs.
Cost of service and supplies increased by approximately $0.2 million, or 29.3%, from $0.7 million37.1% for the three months ended March 31, 2019 as compared2021. The increase in cost of products is primarily due to the increased sales in the both Therapy and Detection resulting in increases in cost of products of $0.3 and $0.1 million respectively.
Amortization and depreciation expense remained consistent at approximately $0.1 million31.5% for the three months ended March 31, 2020 and 2019.
Operating Expenses: (in thousands)
Three months ended March 31, | ||||||||||||||||
2020 | 2019 | Change | Change % | |||||||||||||
Operating expenses: | ||||||||||||||||
Engineering and product development | $ | 2,211 | $ | 2,127 | $ | 84 | 3.9 | % | ||||||||
Marketing and sales | 3,608 | 2,573 | 1,035 | 40.2 | % | |||||||||||
General and administrative | 2,532 | 1,546 | 986 | 63.8 | % | |||||||||||
Amortization and depreciation | 52 | 70 | (18 | ) | �� | (25.7 | )% | |||||||||
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Total operating expenses | $ | 8,403 | $ | 6,316 | $ | 2,087 | 33.0 | % | ||||||||
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Operating expenses increased by approximately $2.1 million, or 33.0%, from $6.3 million in the three months ended March 31, 2019 to $8.4 million in the three months ended March 31, 2020. The Company’s operating expenses continued to grow throughout 2019 and the Company had the same expectation for three months ended March 31, 2020 due to the expectation of increased sales orders, shipments, and overall revenue.2021. Although the onset of theCOVID-19 pandemic impactedservice and supplies revenue due to its onset lateincreased, there was still a 6.5% decrease in the three-month period ended March 31, 2020, the Company was unable to make significant changes to operating expenses for the period. The Company has since taken steps to lower operating expensesservice and will continue to assess its cost structure while theCOVID-19 pandemic is still impacting the Company. These steps include but are not limited to cuttingnon-essential travel, employee furloughs and terminations, and cutting most in person trade shows.
Engineering and Product Development. Engineering and product developmentsupplies costs increased by $0.1 million, or 3.9%, from $2.1 million for the three months ended March 31, 2019 to $2.2 million for the three months ended March 31, 2020. Detection engineering and product development costs remained relatively constant at $1.4 million in both periods. Therapy engineering and product development costs increased $0.1 million, from $0.7 million in the three months ended March 31, 2019 to $0.8 million for the three months ended March 31, 2020. The increase was due primarily to increaseda decrease in personnel costs.
Marketing and Sales. Marketing and sales expenses increased by $1.0 million, or 40.2%, from $2.6 million in the three months ended March 31, 2019 to $3.6 million in the three months ended March 31, 2020. Detection marketing and sales expense increased by $0.7 million, or 40%, from $1.7 million in the three months ended March 31, 2019 to $2.4 million in the three months ended March 31, 2020. Therapy marketing and sales expense increased by $0.3 million, or 44.6%, from $0.9 million in the three months ended March 31, 2019 to $1.2 million in the three months ended March 31, 2020. The increase in both Detection and Therapy marketing and sales expense is due primarily to increased personnel costs and commissions as the Company has invested in additional commercial resources to help drive sales of the new Detection products.
General and Administrative. General and administrative expenses increased by $1.0 million, or 63.8%, from $1.5 million in the three months ended March 31, 2019 to $2.5 million for the three months ended March 31, 2020. The increase is due primarily to increases in stock compensation expense, legal and other costs associated with the conversion of the debentures, and personnel costs.
Amortization and Depreciation.
Three months ended March 31, | ||||||||||||||||
2021 | 2020 | Change $ | Change % | |||||||||||||
Operating expenses: | ||||||||||||||||
Engineering and product development | $ | 2,192 | $ | 2,211 | $ | (19 | ) | (0.9 | )% | |||||||
Marketing and sales | 3,424 | 3,608 | (184 | ) | (5.1 | )% | ||||||||||
General and administrative | 2,151 | 2,532 | (381 | ) | (15.0 | )% | ||||||||||
Amortization and depreciation | 55 | 52 | 3 | 5.8 | % | |||||||||||
Total operating expenses | $ | 7,822 | $ | 8,403 | $ | (581 | ) | (6.9 | )% | |||||||
Other Income and Expense: (in thousands)
Three months ended March 31, | ||||||||||||||||
2020 | 2019 | Change | Change % | |||||||||||||
Interest expense | $ | (130 | ) | $ | (209 | ) | $ | 79 | (37.8 | )% | ||||||
Loss on extinguishment of debt | $ | (341 | ) | $ | — | $ | (341 | ) | 0.0 | % | ||||||
Other income | 42 | 59 | (17 | ) | (28.8 | )% | ||||||||||
Loss on fair value of debentures | (7,464 | ) | (2,525 | ) | (4,939 | ) | 195.6 | % | ||||||||
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$ | (7,893 | ) | $ | (2,675 | ) | $ | (5,218 | ) | 195.1 | % | ||||||
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Tax expense | $ | (26 | ) | $ | (8 | ) | $ | (18 | ) | 225.0 | % |
Interest expense. Interest expense decreased by approximately $0.1 million, or 37.8%, from $0.2 million2020 to $55,000 for the three months ended March 31, 2019 to2021.
Three months ended March 31, | ||||||||||||||||
2021 | 2020 | Change $ | Change % | |||||||||||||
Interest expense | $ | (112 | ) | $ | (130 | ) | $ | 18 | (13.8 | )% | ||||||
Loss on extinguishment of debt | — | (341 | ) | 341 | (100.0 | )% | ||||||||||
Other income | 2 | 42 | (40 | ) | (95.2 | )% | ||||||||||
Loss on fair value of debentures | — | (7,464 | ) | 7,464 | (100.0 | )% | ||||||||||
$ | (110 | ) | $ | (7,893 | ) | $ | 7,783 | (98.6 | )% | |||||||
Tax expense | $ | — | $ | (26 | ) | $ | 26 | (100.0 | )% |
2020 and 2021.
2020 to $2,000 for the three months ended March 31, 2021.
debt: debt:Agreement.Agreement as of the three months ended March 31, 2020. The loss on extinguishment was composed of approximately $185,000 for the unaccrued final payment, the $114,000 termination fee, $42,000 for the unamortized and other closing costs. There were no such costs in 2019.
2021.
The Company’s cash on hand includes proceeds from the Loan Agreement entered into with Western Alliance Bank on March 31, 2020. The Company’s Loan Agreement includes certain financial covenants tied to minimum revenue and maximum net loss.
Subsequent to March 31, 2020 the Company, in accordance with the Loan Agreement, triggered the equity event that relieved the covenant related to maximum net loss, leaving only the minimum revenue requirement. The COVID-19 pandemic has resulted in significant financial market volatility2021, and uncertainty. A continuation or worsening of the levels of market disruption and volatility seen in the recent past could have an adverse effect on the Company’s ability to maintain compliance with the minimum revenue covenant. If at any point the Company is not in compliance with the covenant and is unable to obtain an amendment or waiver, such noncompliance may result in an event of default under the Loan Agreement, which could permit acceleration of the outstanding indebtedness and require the Company to repay such indebtedness before the scheduled due date.
The Company believes even if that event of default were to occur, our current liquidity and capital resourcesprojected cash balances are sufficient to sustain operations through at least the next 12 months, primarily due to cash on hand, which now includes an additional estimated $12.2 million the Company received following the sale of 1,562,500 shares of the Company’s common stock at $8.00 per share, pursuant to a registered direct offering which closed on April 27, 2020. The Company also entered into an equity distribution agreement with JMP Securities to provide for anat-the-market offering program to provide additional potential liquidity through the sale of common stock having a value of up to $25.0 million. Our projected cash needs include planned capital expenditures, loan interest payments, lease commitments, and other long-term obligations.months. The Company’s ability to generate cash adequate to meet its future capital requirements will depend primarily on operating cash flow. If sales or cash collections are reduced from current expectations, or if expenses and cash requirements are increased, the Company may require additional financing, although there are no guarantees that the Company will be able to obtain the financing if necessary. In addition, the resurgence of the
As
For the three months ended March 31, | ||||||||
2020 | 2019 | |||||||
(in thousands) | ||||||||
Net cash used for operating activities | $ | (1,416 | ) | $ | (1,813 | ) | ||
Net cash used for investing activities | (156 | ) | (29 | ) | ||||
Net cash provided by financing activities | 515 | 972 | ||||||
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Decrease in cash and equivalents | $ | (1,057 | ) | $ | (870 | ) | ||
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at March 31, 2021 and December 31, 2020 was 4.40 and 2.53 respectively.
For the three months ended March 31, | ||||||||
2021 | 2020 | |||||||
(in thousands) | ||||||||
Net cash used for operating activities | $ | (3,563 | ) | $ | (1,416 | ) | ||
Net cash used for investing activities | (262 | ) | (156 | ) | ||||
Net cash provided by financing activities | 23,546 | 515 | ||||||
Increase (decrease) in cash and equivalents | $ | 19,721 | $ | (1,057 | ) | |||
Contractual Obligations
Payments due by period | ||||||||||||||||||||
Total | Less than 1 year | 1-3 years | 3-5 years | 5+ years | ||||||||||||||||
Operating Lease Obligations | $ | 2,640 | $ | 880 | $ | 1,760 | $ | — | ||||||||||||
Capital Lease Obligations | 9 | 9 | — | — | — | |||||||||||||||
Settlement Obligations | 463 | 463 | — | — | — | |||||||||||||||
Notes Payable - principal and interest | 8,133 | 373 | 4,021 | 3,739 | — | |||||||||||||||
Other Commitments | 5,905 | 5,874 | 31 | |||||||||||||||||
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Total Contractual Obligations | $ | 17,150 | $ | 7,599 | $ | 5,812 | $ | 3,739 | $ | — | ||||||||||
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Operating and Capital Lease Obligations are the minimum payments due under these obligations.
Settlement Obligations represent the remaining payments under the settlement agreement with Hologic, Inc.
Notes Payable – principal and interest represents the payments due under the term loan from the Bank.
Other Commitments represent firm purchase obligations to suppliers for future product and service deliverables.
Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
Item 4. | Controls and Procedures |
procedures.
Item 1. | Legal Proceedings |
Escrowed Amount, if any, under the Asset Purchase Agreement.
Item 1A. | Risk Factors: |
herein.
These effects could impact the Company’s ability to remain in compliance with its minimum revenue covenant under its Loan and Security Agreement with Western Alliance Bank. If at any point the Company is not in compliance with such covenant and is unable to obtain an amendment or waiver, such noncompliance may result in an event of default under the Loan Agreement, which could permit acceleration of the outstanding 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 non-compliance with its earlier covenants. With the COVID-19 pandemic affecting the world economy, the company cannot assure that it will be able to continue to satisfy the applicable minimum revenue covenant.
On March 20, 2019, the Company issued 3,377 shares of its common stock to certain holders of its Convertible Debentures as a make-whole payment under the Securities Purchase Agreement pursuant to which the Convertible Debentures were issued. Such shares of common stock were exempt from registration in reliance on Section 3(a)(9) of the Securities Act of 1933, as amended.
ContentsItem 5. Other Information.
Given the timing of the events, the following information is included in this Form 10-Q pursuant to Item 5.02 “Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers,” Item 5.08 “Shareholder Director Nominations,” and Item 8.01 “Other Information” of Form 8-K in lieu of filing a Form 8-K.
Bonus Awards
On May 7, 2020, the Compensation Committee and the Company’s Board of Directors approved bonus payments to the Company’s officers attributable to performance for the year ended December 31, 2019, as follows: Michael Klein, Chief Executive Officer, was awarded $95,370, with $71,527 of such amount to be paid in stock options granted on May 7, 2020; Stacey Stevens, President, was awarded $163,519, with $122,639 of such amount to be paid in stock options granted on May 7, 2020; R. Scott Areglado, Chief Financial Officer, was awarded $94,500, with $70,875 of such amount to be paid in stock options granted on May 7, 2020; and Jonathan Go, Chief Technology Officer was awarded $135,000, with $101,250 of such amount to be paid in stock options granted on May 7, 2020. In addition, on May 7, 2020, the Compensation Committee and the Company’s Board of Directors approved an additional bonus payment to Michael Klein, the Company’s Chief Executive Officer, for his performance during 2020, in the form of a cash bonus of $32,408 and options to purchase up to 18,373 shares of the Company’s common stock. All options are immediately exercisable at an exercise price of $12.84 per share.
Scheduling of Annual Meeting; Stockholder Proposals and Nominations
On May 7, 2020, the Company scheduled its 2020 annual meeting of stockholders (the “2020 Annual Meeting”) to be held virtually via the internet, on June 26, 2020. The Company has established April 29, 2020, as the record date for determining stockholders entitled to notice of, and to vote at, the 2020 Annual Meeting.
Because the date of the 2020 Annual Meeting will be more than 30 days from the anniversary of the Company’s 2019 annual meeting of stockholders, the deadline for submission of proposals by stockholders for inclusion in the Company’s proxy materials in accordance with Rule 14a-8 under the Exchange Act, will be the close of business on May 21, 2020, which the Company has determined to be a reasonable time before it expects to begin to print and distribute its proxy materials prior to the 2020 Annual Meeting. Any such proposal must also meet the requirements set forth in the rules and regulations of the Exchange Act and the Company’s Amended and Restated Bylaws (the “Bylaws”) in order to be eligible for inclusion in the proxy materials for the 2020 Annual Meeting.
In accordance with the Bylaws, any stockholder who wishes to nominate a person for election as a director or submit a proposal for inclusion at the 2020 Annual Meeting must provide written notice (“Stockholder Notice”) on or before May 21, 2020. Any Stockholder Notice must comply with the specific requirements set forth in the Bylaws in order to be considered at the 2020 Annual Meeting. Any such proposal must be mailed to the Nominating and Corporate Governance Committee, c/o Corporate Secretary, iCAD, Inc., 98 Spit Brook, Suite 100, Nashua, NH 03062, and received by May 21, 2020.
Item 6. | Exhibits |
* | Filed herewith |
** | Furnished herewith |
|
iCAD, Inc. |
(Registrant) |
Date: May | By: | /s/ Michael Klein | ||||||
Name: | Michael Klein | |||||||
Title: | Chief Executive Officer | |||||||
(Principal Executive Officer) | ||||||||
Date: May | By: | /s/ R. Scott Areglado | ||||||
Name: | R. Scott Areglado | |||||||
Title: | Chief Financial Officer | |||||||
(Principal Financial Officer) |
50