UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

~~FORM~~

~~10-Q~~

FORM

10-Q

(Mark One)

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

For the quarterly period ended ~~September 30, 2021~~March 31, 2022

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

For the transition period from

Commission file number

001-09341

iCAD, Inc.

(Exact name of registrant as specified in its charter)


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)

(603)

882-5200

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value	ICAD	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirement for the past 90 days. YES ☒ NO ☐.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). YES ☒ NO ☐.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, an emerging growth company or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule

12b-2

of the Exchange Act.

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act) YES ☐ NO ☒.

As of the close of business on ~~November 1, 2021,~~

May 10, 2022

, there were ~~25,109,380~~25,181,857 shares outstanding of the registrant’s Common Stock, $0.01 par value.

Table of Contents

iCAD, Inc.

INDEX


			Page
~~PART I~~	~~FINANCIAL INFORMATION~~
~~Item 1~~ PART I	~~Financial Statements (unaudited)~~ FINANCIAL INFORMATION

Item 1	Financial Statements

	Condensed Consolidated Balance Sheets as of ~~September 30, 2021~~March 31, 2022 (unaudited) and December 31, ~~2020~~2021			31

	Condensed Consolidated Statements of Operations (unaudited) for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and March 31, 2021 ~~and September 30, 2020~~			42

	Condensed Consolidated Statements of Cash Flows (unaudited) for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and March 31, 2021 ~~and September 30, 2020~~			53

	Consolidated Statements of Stockholders’ Equity (unaudited) for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and March 31, 2021 ~~and September 30, 2020~~			64

	Notes to Condensed Consolidated Financial Statements (unaudited)			85

Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations			2818

Item 3	Quantitative and Qualitative Disclosures about Market Risk			25

Item 4	Controls and Procedures			3925
~~Item 4~~
PART II	~~Controls and Procedures~~OTHER INFORMATION			3926
~~PART II~~
Item 1A	~~OTHER INFORMATION~~Risk Factors			4026

Item 1A6	~~Risk Factors~~Exhibits			4027
~~Item 6~~		~~Exhibits~~			41
	Signatures			4228

Table of Contents

iCAD, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(In thousands except for share data)


	March 31,			December 31,
	2022			2021
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	29,798		$	34,282
Trade accounts receivable, net of allowance for doubtful accounts of $573 in 2022 and $268 in 2021		10,309			8,891
Inventory, net		4,736			4,171
Prepaid expenses and other current assets		3,090			2,962

Total current assets		47,933			50,306

Property and equipment, net of accumulated depreciation of $7,192 in 2022 and $7,106 in 2021		947			882
Operating lease assets		859			1,059
Other assets		104			899
Intangible assets, net of accumulated amortization of $8,776 in 2022 and $8,724 in 2021		640			683
Goodwill		8,362			8,362

Total assets	$	58,845		$	62,191

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,681		$	2,779
Accrued and other expenses		5,128			5,642
Lease payable—current portion		887			889
Deferred revenue		5,765			5,652

Total current liabilities		14,461			14,962

Lease payable, long-term portion		54			266
Deferred revenue, long-term portion		571			441
Deferred tax		6			5

Total liabilities		15,092			15,674

Commitments and Contingencies (Note 13)		0			0
Stockholders’ equity:
Preferred stock, $0.01 par value: authorized 1,000,000 shares; NaN issued.		0—			0—
Common stock, $0.01 par value: authorized 60,000,000 shares; issued 25,359,175 as of March 31, 2022 and 25,326,086 as of December 31, 2021.
Outstanding 25,173,344 as of March 31, 2022 and 25,140,255		253			253
as of December 31, 2021.
Additional paid-in capital		301,640			300,859
Accumulated deficit		(256,725	)		(253,180	)
Treasury stock at cost, 185,831 shares in 2022 and 2021		(1,415	)		(1,415	)

Total stockholders’ equity		43,753			46,517

Total liabilities and stockholders’ equity	$	58,845		$	62,191

See accompanying notes to condensed consolidated financial statements.

Table of Contents

iCAD, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands except for per share data)


	Three Months Ended March 31,
	2022			2021
Revenue:
Products	$	4,560		$	5,557
Service and supplies		2,963			3,087

Total revenue		7,523			8,644
Cost of revenue:
Products		1,087			1,409
Service and supplies		1,049			867
Amortization and depreciation		75			79

Total cost of revenue		2,211			2,355

Gross profit		5,312			6,289

Operating expenses:
Engineering and product development		2,275			2,192
Marketing and sales		3,565			3,424
General and administrative		2,931			2,151
Amortization and depreciation		63			55

Total operating expenses		8,834			7,822

Loss from operations		(3,522	)		(1,533	)
Interest expense		(9	)		(112	)
Other income (expense)		(13	)		2

Other expense, net		(22	)		(110	)
Loss before income tax expense		(3,544	)		(1,643	)

Tax expense		(1	)		0

Net loss and comprehensive loss	$	(3,545)		$	(1,643)

Net loss per share:
Basic	$	(0.14	)	$	(0.07	)

Diluted	$	(0.14	)	$	(0.07	)

Weighted average number of shares used in computing loss per share:
Basic		25,160			23,929

Diluted		25,160			23,929

See accompanying notes to condensed consolidated financial statements.

   (Unaudited)

September 30,

December 31,


2021

2020

Assets

Current assets:

Cash and cash equivalents    $ 35,805 $ 27,186
Trade accounts receivable, net of allowance for doubtful accounts of $87 in 2021 and $111 in 2020    11,792 10,027
Inventory, net    3,290 3,144
Prepaid expenses and other current assets    1,989 1,945

Total current assets    52,876 42,302

Property and equipment, net of accumulated depreciation of $7,020 in 2021 and $6,778 in 2020    925 744
Operating lease assets    1,176 1,758
Other assets    1,657 1,527
Intangible assets, net of accumulated amortization of $8,667 in 2021 and $8,494 in 2020    741 889
Goodwill    8,362 8,362

Total assets    $ 65,737 $ 55,582

Liabilities and Stockholders’ Equity

Current liabilities:
Accounts payable    $ 2,651 $ 2,869
Accrued and other expenses    5,523 7,039
Lease payable
—
current portion
   856 726
Deferred revenue    5,930 6,117

Total current liabilities    14,960 16,751

Lease payable, long-term portion    431 1,075
Notes payable, long-term portion    —   6,960
Deferred revenue, long-term portion    520 267
Deferred tax    5 4

Total liabilities    15,916 25,057

Commitments and Contingencies    0 0
Stockholders’ equity:
Preferred stock, $0.01 par value: authorized 1,000,000 shares; NaN issued.    0—   0—
Common stock, $0.01 par value: authorized 60,000,000 shares; issued 25,287,837 as of September 30, 2021 and 23,693,735 as of December 31, 2020.
Outstanding 25,102,006 as of
September
30, 2021 and 23,508,575 as of December 31, 2020.
   253 236
Additional
paid-in
capital
   300,017 273,639
Accumulated deficit    (249,034 ) (241,935 )
Treasury stock at cost, 185,831 shares in 2021 and 2020    (1,415 ) (1,415 )

Total stockholders’ equity    49,821 30,525

Total liabilities and stockholders’ equity    $ 65,737 $ 55,582

Table of Contents

iCAD, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(Unaudited)


	For the three months ended March 31,
	2022			2021
	(in thousands)
Cash flow from operating activities:
Net loss	$	(3,545)		$	(1,643)
Adjustments to reconcile net loss to net cash used for operating activities:
Amortization		53			58
Depreciation		86			76
Bad debt provision		305			0
Stock-based compensation		655			935
Deferred tax		1			0
Amortization of debt discount and debt costs		0			12
Changes in operating assets and liabilities:
Accounts receivable		(1,723	)		(622	)
Inventory		(565	)		647
Prepaid and other assets		653			(89	)
Accounts payable		(98	)		(1,617	)
Accrued expenses		(514	)		(1,313	)
Deferred revenue		243			(7	)

Total adjustments		(904	)		(1,920	)

Net cash used for operating activities		(4,449	)		(3,563	)

Cash flow from investing activities:
Additions to patents, technology and other		(10	)		0
Additions to property and equipment		(151	)		(262	)

Net cash used for investing activities		(161	)		(262	)

Cash flow from financing activities:
Proceeds from option exercises pursuant to stock option plans		66			270
Proceeds from issuance of common stock pursuant to Employee Stock Purchase Plans		60			47
Proceeds from issuance of common stock, net		0			23,229

Net cash provided by financing activities		126			23,546

(Decrease) increase in cash and cash equivalents		(4,484	)		19,721
Cash and cash equivalents, beginning of period		34,282			27,186

Cash and cash equivalents, end of period	$	29,798		$	46,907

Supplemental disclosure of cash flow information:
Interest paid	$	9		$	92

Taxes paid	$	0		$	0

See accompanying notes to condensed consolidated financial statements.

Table of Contents

iCAD, INC. AND SUBSIDIARIES

~~Condensed~~ Consolidated Statements of ~~Operations~~Stockholders’ Equity Year to Date 2022

(Unaudited)

(In thousands except ~~for per share data)~~shares)


	Common Stock				Additional
	Number of Shares Issued		Par Value		Paid-in Capital		Accumulated Deficit			Treasury Stock			Stockholders’ Equity
Balance at December 31, 2021		25,326,086	$	253	$	300,859	$	(253,180	)	$	(1,415	)	$	46,517
Issuance of common stock relative to vesting of restricted stock		875		0		0		—			—			0
Issuance of common stock pursuant to stock option plans		22,833		0		66		—			—			66
Issuance of common stock pursuant Employee Stock Purchase Plans		9,381		0		60		—			—			60
Stock-based compensation		—		—		655		—			—			655
Net loss		—		—		—		(3,545	)		—			(3,545	)

Balance at March 31, 2022		25,359,175	$	253	$	301,640	$	(256,725	)	$	(1,415	)	$	43,753

Consolidated Statements of Stockholders’ Equity Year to Date 2021

(Unaudited)

(In thousands except shares)

Three Months Ended September 30,

Nine Months Ended September 30,


2021

2020

2021

2020

Revenue:

Products    $ 6,320 $ 4,538 $ 16,429 $ 11,220
Service and supplies    3,041 2,591 9,401 8,027

Total revenue    9,361 7,129 25,830 19,247
Cost of revenue:
Products    1,807 1,345 4,592 2,899
Service and supplies    763 667 2,462 2,169
Amortization and depreciation    79 92 237 287

Total cost of revenue    2,649 2,104 7,291 5,355

Gross profit    6,712 5,025 18,539 13,892

Operating expenses:
Engineering and product development    2,285 1,849 6,745 5,938
Marketing and sales    3,886 2,979 10,739 9,218
General and administrative    2,658 1,834 7,461 6,476
Amortization and depreciation    64 52 178 153

Total operating expenses    8,893 6,714 25,123 21,785

Loss from operations    (2,181 ) (1,689 ) (6,584 ) (7,893 )
Interest expense    0   (115 ) (141 ) (360 )
Other income    5 10 12 85
Loss on extinguishment of debt    0   —   (386 ) (341 )
Loss on fair value of convertible debentures    —   —   —   (7,464 )

Other income (expense), net    5 (105 ) (515 ) (8,080 )
Loss before income tax expense    (2,176 ) (1,794 ) (7,099 ) (15,973 )

Tax expense    —   (3 ) —   (34 )

Net loss and comprehensive loss    $ (2,176 ) $ (1,797 ) $ (7,099 ) $ (16,007 )

Net loss per share:
Basic    $ (0.09 ) $ (0.08 ) $ (0.29 ) $ (0.73 )

Diluted    $ (0.09 ) $ (0.08 ) $ (0.29 ) $ (0.73 )

Weighted average number of shares used in computing loss per share:
Basic    25,053 23,173 24,662 21,827

Diluted    25,053 23,173 24,662 21,827


	Common Stock				Additional
	Number of Shares Issued		Par Value		Paid-in Capital		Accumulated Deficit			Treasury Stock			Stockholders’ 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		0		0		—			—			0
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

See accompanying notes to condensed consolidated financial statements.

Table of Contents

~~iCAD, INC. AND SUBSIDIARIES~~

~~Condensed Consolidated Statements of Cash Flows~~

~~(Unaudited)~~

For the Nine Months ended
September 30,


2021

2020

   (in thousands)
Cash flow from operating activities:

Net loss    $ (7,099 ) $ (16,007 )
Adjustments to reconcile net loss to net cash used for operating activities:
Amortization    176 234
Depreciation    242 206
Bad debt provision    (25 ) 80
Stock-based compensation    2,102 2,542
Amortization of debt discount and debt costs    17 65
Loss on extinguishment of debt    386 341
Deferred tax expense    —   1
Change in fair value of convertible debentures    —   7,464
Changes in operating assets and liabilities:
Accounts receivable    (1,827 ) 1,151
Inventory    (146 ) (535 )
Prepaid and other assets    493 69
Accounts payable    (217 ) 96
Accrued expenses    (2,028 ) (2,322 )
Deferred revenue    65 532

Total adjustments    (762 ) 9,924

Net cash used for operating activities    (7,861 ) (6,083 )

Cash flow from investing activities:
Additions to patents, technology and other    (24 ) (11 )
Additions to property and equipment    (426 ) (275 )

Net cash used for investing activities    (450 ) (286 )

Cash flow from financing activities:
Issuance of common stock pursuant to stock option plans    933 415
Issuance of common stock pursuant to Employee Stock Purchase Plan    190 209
Proceeds from issuance of common stock, net    23,229 12,174
Taxes paid related to restricted stock issuance
(59

) (225 )
Principal payments of capital lease obligations    —   (4,638 )
Repayment of debt financing    (7,363 ) 775
Repayment on line of credit    —   (2,000 )
Proceeds from notes payable    —   6,957
Debt issuance costs    —   22

Net cash provided by financing activities    16,930 13,689

Increase in cash and equivalents    8,619 7,320
Cash and cash equivalents, beginning of period    27,186 15,313

Cash and cash equivalents, end of period    $ 35,805 $ 22,633

Supplemental disclosure of cash flow information:
Interest paid    $ 92 $ 127

Taxes paid    $ —   $ 34

Issuance of common stock upon conversion of debentures    —   21,164

Right-of-use
assets obtained in exchange for new operating lease liabilities
   $ —   $ 69

~~See accompanying notes to condensed consolidated financial statements.~~

~~Table of Contents~~

~~Consolidated Statements of Stockholders’ Equity Year to Date~~

~~(In thousands except shares)~~

Common Stock

Additional

Paid-in

Capital


Number of
Shares Issued

Par
Value

Accumulated
Deficit

Treasury
Stock

Stockholders’
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    43,831    1    (60 ) —   —   (59 )
Issuance of common stock, net    1,393,738    14    23,215 —   —   23,229
Issuance of common stock pursuant to stock option plans    138,450    2    931 —   —   933
Issuance of common stock pursuant Employee Stock Purchase Plan    17,412    —      190 —   —   190
Stock-based compensation    —      —      2,102 —   —   2,102
Net loss    —      —      —   (7,099 ) —   (7,099 )

Balance at September 30, 2021    25,287,837    $ 253    $ 300,017 $ (249,034 ) $ (1,415 ) $ 49,821

~~Consolidated Statements of Stockholders’ Equity Quarter to Date~~

~~(In thousands except shares)~~

Common Stock

Additional

Paid-in

Capital


Number of
Shares Issued

Par
Value

Accumulated
Deficit

Treasury
Stock

Stockholders’
Equity

Balance at June 30, 2021    25,213,302    251    299,049 (246,858 ) (1,415 ) $ 51,027
Issuance of common stock relative to vesting of restricted stock    14,665    1    (60 ) —   —   (59 )
Issuance of common stock, net    54,702    1    296 —   —   297
Issuance of common stock pursuant to stock option plans    —      —      —   —   —   —
Issuance of common stock pursuant Employee Stock Purchase Plan    5,168    —      76 —   —   76
Stock-based compensation    —      —      656 —   —   656
Net loss    —      —      —   (2,176 ) —   (2,176 )

Balance at September 30, 2021    25,287,837    $ 253    $ 300,017 $ (249,034 ) $ (1,415 ) $ 49,821

~~Table of Contents~~

~~Consolidated Statements of Stockholders’ Equity Year to Date~~

~~(In thousands except shares)~~

Common Stock

Additional

Paid-in
Capital


Number of
Shares Issued

Par
Value

Accumulated
Deficit

Treasury
Stock

Stockholders’
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, net    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

~~Consolidated Statements of Stockholders’ Equity Quarter to Date~~

~~(In thousands except shares)~~

Common Stock

Additional

Paid-in

Capital


Number of
Shares Issued

Par
Value

Accumulated
Deficit

Treasury
Stock

Stockholders’
Equity

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

~~Table of Contents~~

Notes to Condensed Consolidated Financial Statements:

Note 1 – ~~Basis of Presentation~~Organization and ~~Significant Accounting Policies~~Business

Basis of Presentation

The accompanying condensed consolidated financial statements of iCAD, Inc. and its subsidiaries (together “iCAD” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”)., which requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses during the reporting period and disclosure of contingent assets and liabilities at the date of the financial statements. Actual results could differ from those estimates. It is reasonably possible that changes may occur in the near term that would affect management’s estimates with respect to assets and liabilities. In the opinion of the Company’s management, these unaudited interim condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the financial position of the Company at ~~September 30, 2021,~~March 31, 2022, the results of operations of the Company for the ~~three~~three-month periods ended March 31, 2022 and ~~nine-months ended September 30,~~ 2021, ~~and 2020,~~ cash flows of the Company for the ~~nine-months~~three-month periods ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ and stockholders’ equity for the Company for the ~~three~~three-month periods ended March 31, 2022 and ~~nine-months ended September 30, 2021 and 2020.~~2021.

Although the Company believes that the disclosures made in these interim financial statements are adequate to make the information presented not misleading, certain information normally included in the footnotes prepared in accordance with US GAAP has been omitted as permitted by the rules and regulations of the Securities and Exchange Commission (the “SEC”). The accompanying interim financial statements should be read in conjunction with the audited financial statements and notes thereto included in the Company’s Annual Report on Form

10-K

for the fiscal year ended December 31, ~~2020~~2021, filed with the SEC on March ~~15, 2021.~~29, 2022. The results for the ~~three and nine-months~~three-month period ended ~~September 30, 2021~~March 31, 2022, are not necessarily indicative of the results that may be expected for the ~~fiscal year ending December 31, 2021,~~three-month period ended June 30, 2022, or any future period.

Principles of Consolidation and Business Segments

The consolidated financial statements include the accounts of iCAD, Inc. and its wholly owned subsidiaries: Xoft, Inc., Xoft Solutions, LLC, and iCAD France, LLC. All material inter-company transactions and balances have been eliminated in consolidation.

The Company

reports the results of 2

two

segments: Cancer Detection (“Detection”) and Cancer Therapy (“Therapy”). The Detection segment consists of advanced image analysis and workflow ~~products.~~products for the detection of cancer. The Therapy segment consists of radiation therapy (“~~Axxent”~~Xoft”, “Axxent”) ~~products.~~products for the treatment of certain cancers.

Risk and Uncertainty

On March

12, 2020, the World Health Organization declared

COVID-19

to be a pandemic. In an effort to contain and mitigate the spread of the

COVID-19

pandemic, the United States ~~many~~and most countries ~~in Europe, as well as Canada and China,~~of the world have imposed some level of unprecedented restrictions on travel, and there have been business closures and ~~reductions~~a substantial reduction in economic activity in countries that have had significant outbreaks of

COVID-19.

As a provider of devices and services to the health care industry, the Company’s operations have been materially affected in ~~part due to~~

~~stay-at-home~~

~~and social distancing orders as well as uncertainty in the market.~~all periods presented. Significant uncertainty remains as to the continuing impact of the

COVID-19

pandemic on the Company’s operations and on the global ~~economy as a whole.~~

~~Table of Contents~~

economy. It is currently not possible to predict ~~the duration of~~how long the pandemic will last or the time ~~needed~~that it will take for economic activity to return to prior levels. The

COVID-19

pandemic has resulted in significant financial market volatility and uncertainty. Although the United States and other countries have made significant progress related to vaccinating large portions of their populations, the efficacy of each individual vaccine against the multiple strains of the

~~COVID-19~~

~~virus is unknown. Moreover, a new “wave” of~~

~~COVID-19~~

~~cases may exacerbate the increased levels~~A continuing or worsening level of market disruption and volatility seen insince the ~~recent past~~start of the pandemic will have an adverse effect on the Company’s ability to access capital, on ~~its~~the Company’s business, results of the Company’s operations and financial condition, and on the market price of ~~its~~the Company’s common stock.

The Company’s results for the years ended December 31, 2021 and 2020, as well as all quarterly results beginning with the first quarter ~~ending September 30, 2021~~of 2020 through the first quarter of 2022, reflect a negative impact from the

COVID-19

pandemic, ~~due~~including but not limited to ~~some~~ healthcare ~~facilities’~~customers and potential customers providing additional focus on

~~COVID-19~~COVID-19;

pandemic-related public health impacts,

Table of Contents

including significant shifts in workforce availability and ~~from the effect~~priorities, on ~~our~~customer, supplier, and iCAD’s business processes; and effects on healthcare customers and po

~~ential~~potential customers of pandemic related supply chain ~~issues relating thereto. Although the Company does not provide guidance to investors relating to its future results of operations, its~~issues. The Company’s quarterly results for the quarter ending ~~December 31, 2021,~~June 30, 2022, and possibly future quarters, could reflect a ~~continued~~continuing negative impact from the

COVID-19

pandemic for similar or additional reasons. ~~The duration and severity of the pandemic is unknown, and so the continued effect on the Company’s results over the long term is uncertain.~~

Although the Company did not ~~experience~~see any material impact to trade accounts receivable losses in the ~~quarter~~three-month period ended ~~September 30, 2021,~~March 31, 2022, the Company’s exposure may increase if its customers are adversely affected by changes in healthcare laws, coverage, and reimbursement, economic pressures or uncertainty associated with local or global economic recessions, disruption associated with the current

COVID-19

pandemic, or other customer-specific factors. The Company has historically not ~~historically~~ experienced significant trade account receivable losses, but it is possible that there could be a material adverse impact from potential adjustments of the carrying amount of trade account receivables as clinical customers’ cash flows are impacted by ~~healthcare business considerations related~~their response to the

COVID-19

~~pandemic.~~

pandemic as well as public health considerations impacting their underlying businesses.

Economic, civil, military and political uncertainty may arise or increase in regions where the Company operates or derives revenue. Further, countries from which the Company derives revenue may experience military action and/or civil and political unrest; may be subject to government export controls, economic sanctions, embargoes, or trade restrictions; and experience currency, inflation, and interest rate uncertainties. For the fiscal year ended 2021, approximately 8.6% of the Company’s total revenue and approximately 39.0% of the Company’s export revenue was derived from customers located in Europe. In late February 2022, Russian military forces launched significant military action against Ukraine. Sustained conflict and disruption in the region is likely. The aggregate impact to Eastern Europe and Europe as a whole, as well as actions taken by other countries, including new and stricter sanctions by the United States, Canada, the United Kingdom, the European Union, and other countries and organizations against officials, individuals, regions, and industries in Russia, Belarus and Ukraine, and each country’s potential response to such sanctions, tensions and military actions, is not knowable at this time, and could have a material adverse effect on the Company, its business and operations. Any such material adverse effect from the conflict and enhanced sanctions activity may disrupt the Company’s sales to customers in the region. Prolonged unfavorable economic conditions or uncertainty may have an adverse effect on the Company’s sales and profitability.

Recently Adopted Accounting Pronouncements

On January 1, 2022, the Company adopted ASU No.

2020-06, Debt—Debt

with Conversion and Other Options (Subtopic

470-20)

and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic

815-40)—Accounting

for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU

2020-06”).”

The impact of adopting ASU

2020-06

had no impact on the Company’s consolidated financial statements.

~~There are no significant recently adopted accounting pronouncements. For~~Recently Issued Accounting Standards

In June 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU

2016-13,

“Financial Instruments—Credit Losses (Topic 326)” (“ASU

2016-13”),

which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost. ASU

2016-13

replaces the existing incurred loss impairment model with an expected loss model which requires the use of forward- looking information to calculate credit loss estimates. These changes will result in earlier recognition of credit losses. In November 2019, the FASB elected to defer the adoption date of ASU

2016-13

for public business entities that meet the definition of a ~~full list~~smaller reporting company to fiscal years beginning after December 15, 2022. Early adoption of the ~~Company’s response to all relevant recent accounting pronouncements, please refer to Note 13 below.~~guidance in ASU

2016-13

is permitted. The Company is currently evaluating the impact that the adoption of ASU

2016-13

will have on its consolidated financial statements.

Table of Contents

Note 2 - Fair Value Measurements

The Company follows the provisions of FASB ASC Topic 820, “

Fair Value Measurement and Disclosures

” (“ASC 820”), which defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and enhances disclosures about fair value measurements. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The Company applies the fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, which are the following:

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

The assigned level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Money market funds included in cash and cash equivalents in the accompanying consolidated balance sheet are considered a Level 1 measurement as they are valued at quoted market prices in active markets.

The following table sets forth the Company’s assets which are measured at fair value on a recurring basis by level within the fair value hierarchy (in thousand):


Fair Value Measurements (in thousands) as of March 31, 2022
	Level 1		Level 2		Level 3		Total
Assets
Money market accounts	$	24,235		—		—	$	24,235

Total Assets	$	24,235		—		—	$	24,235


Fair Value Measurements (in thousands) as of December 31, 2021
	Level 1		Level 2		Level 3		Total
Assets
Money market accounts	$	30,573		—		—	$	30,573

Total Assets	$	30,573		—		—	$	30,573

Table of Contents

There were no Level 3 instruments measured at fair value as of March 31, 2022 or December 31, 2021.

Note 3 - Revenue

Revenue Recognition

Revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration which the Company expects to be entitled to receive in exchange for these goods or services and excludes any sales incentives or taxes collected from customers which are subsequently remitted to government authorities.

~~Table of Contents~~

Disaggregation of Revenue

The following tables presents

the

Company’s revenues disaggregated

major good or service line, timing of revenue recognition, and sales channel, reconciled to its reportable segments (in thousands).

Three months ended September 30, 2021


Reportable Segments


Detection

Therapy

Total

Major Goods/Service Lines

Products    $ 4,454    $ 2,358    $ 6,812
Service contracts    1,554    398    1,952
Supply and source usage agreements    —      562    562
Professional services    —      35    35
Other    —      —      —

   $ 6,008    $ 3,353    $ 9,361
Timing of Revenue Recognition

Goods transferred at a point in time    $ 4,454    $ 2,393    $ 6,847
Services transferred over time    1,554    960    2,514

   $ 6,008    $ 3,353    $ 9,361
Sales Channels

Direct sales force    $ 3,629    $ 1,403    $ 5,032
OEM partners    2,379    —      2,379
Channel partners    —      1,950    1,950

   $ 6,008    $ 3,353    $ 9,361


Nine months ended September 30, 2021


Reportable Segments


Detection

Therapy

Total

Major Goods/Service Lines


Products    $ 11,778    $ 6,580    $ 18,358
Service contracts    4,737    1,109    5,846
Supply and source usage agreements    —      1,572    1,572
Professional services    —      54    54
Other    —      —      —

   $ 16,515    $ 9,315    $ 25,830

Timing of Revenue Recognition

Goods transferred at a point in time    $ 11,778    $ 6,633    $ 18,411
Services transferred over time    4,737    $ 2,682    7,419

   $ 16,515    $ 9,315    $ 25,830
Sales Channels

Direct sales force    $ 10,691    $ 3,632    $ 14,323
OEM partners    5,824    —      5,824
Channel partners    —      5,683    5,683

   $ 16,515    $ 9,315    $ 25,830

~~Table of Contents~~

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







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

118

Table of Contents

	Three months ended March 31, 2022
	Reportable Segments
	Detection		Therapy		Total
Major Goods/Service Lines
Products	$	3,864	$	696	$	4,560
Service		1,657		386		2,043
Sources and source usage agreements		—		413		413
Disposable applicators		—		415		415
Other		—		92		92

	$	5,521	$	2,002	$	7,523

Timing of Revenue Recognition
Goods transferred at a point in time	$	3,881	$	1,264	$	5,145
Services transferred over time		1,640		738		2,378

	$	5,521	$	2,002	$	7,523

Sales Channels
Direct sales force	$	2,895	$	815	$	3,710
OEM partners		2,626		—		2,626
Channel partners		—		1,187		1,187

	$	5,521	$	2,002	$	7,523


	Three months ended March 31, 2021
	Reportable Segments
	Detection		Therapy		Total
Major Goods/Service Lines
Products	$	4,161	$	1,396	$	5,557
Service		1,558		350		1,908
Sources and source usage agreements		—		629		629
Disposable applicators		—		495		495
Other		—		55		55

	$	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

~~Products.~~Products

. Product revenue consists of sales of cancer detection ~~products,~~systems and perpetual licenses and cancer therapy systems and cancer therapy ~~applicators (including disposable applicators) and other accessories that are typically shipped with a cancer therapy system.~~applicators. The Company transfers control and ~~generally~~ recognizes a sale when the product is shipped from the manufacturing or warehousing facility to the ~~customer unless an individual contract states otherwise.~~customer.

Table of Contents

Service ~~Contracts.~~

. The Company sells service contracts ~~under~~in which itthe Company provides professional services including product installations, maintenance, training and service repairs, and in certain cases leases equipment ~~leases,~~ to hospitals, imaging centers, ~~radiology~~radiological practices and radiation oncologists and treatment centers. These contracts represent separate performance obligations of the Company. The Company allocates revenue to each performance obligation based on the Standalone Selling Price (“SSP”). Revenue for lease and

~~non-lease~~

components, or the entire arrangement when accounted for under ASC 606, “Revenue from Contracts with Customers” (“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.

~~Supply~~Sources and Source Usage ~~Agreements.~~Agreements

. Revenue from ~~supply and~~sources is recognized upon transfer of control to the customer. Revenue from source usage agreements is recognized on a straight-line basis over the term of the ~~supply or~~ source ~~usage~~ agreement.

~~These agreements represent a separate performance obligation~~Disposable applicators

. Revenue for the sale of disposable applicators is recognized upon the ~~Company. The Company allocates revenue~~transfer of control to ~~each performance obligation based on~~ the ~~SSP.~~

customer.

~~Professional Services.~~Other

Revenue from fixed fee service contracts is recognized on a straight-line basis over the term of the agreement. Revenue from professional service contracts entered into with customers on a time and materials basis is recognized over the term of the agreement in proportion to the costs incurred in satisfying the obligations under the contract.

~~Other.~~

. Other revenue consists primarily of miscellaneous products and services. The Company transfers control and recognizes a sale when the installation services are performed or when the Company ships the product ~~is shipped~~ from the Company’s manufacturing or ~~warehousing~~warehouse facility to the ~~customer or the installation services are performed.~~customer.

Contract Balances

Contract liabilities are a component of deferred revenue, current contract assets are a component

of prepaid and other assets and

non-current

contract assets are a component of other assets.

The following table provides information about receivables, current and

non-current

contract assets, and contract liabilities from contracts with customers (in thousands).

~~Contract balances~~

Contract balances


Balance at

Balance at


September 30, 2021

December 31, 2020

Receivables, which are included in ‘Trade accounts
receivable’    $ 11,792    $ 10,027
Current

contract

assets,

which

are

included

in

“Prepaid

and
other assets”
   658    481
Non-current
contract assets, which are included in “other
assets”
   1,602    1,434
Contract liabilities, which are included in “Deferred
revenue”    6,450    6,384

	Balance at March 31, 2022		Balance at December 31, 2021
Receivables, which are included in ‘Trade accounts receivable’	$	10,309	$	8,891
Current contract assets, which are included in “Prepaid and other assets”	$	1,174	$	1,895
Non-current contract assets, which are included in “other assets”	$	49	$	844
Contract liabilities, which are included in “Deferred revenue”	$	6,336	$	6,093

Timing of revenue recognition may differ from timing of invoicing of customers. The Company records a receivable when revenue is recognized prior to receipt of cash payment and the Company has the unconditional right to such consideration, or unearned revenue when cash payments are received or due in advance of performance. For multi-year agreements, the Company generally invoices customers annually at the beginning of each annual service period.

The Company records net contract assets or contract liabilities on a

contract-by-contract

basis. The Company records a contract asset for unbilled revenue when the Company’s performance is in excess of amounts ~~invoiced~~billed or ~~invoiceable.~~billable. The Company classifies the net contract asset as either a current or

non-current

based on the expected timing of the Company’s right to ~~invoice~~bill under the terms of the contract. The current contract asset balance primarily relates to the net unbilled revenue balances with two significant customers, which the Company expects to be able to ~~invoice~~bill for within one year. The

non-current

contract asset balance consists of net unbilled revenue balances with one customer which the Company expects to be able to ~~invoice~~bill for in more than one year.

~~Table of Contents~~

Contract liabilities, or deferred revenue from contracts with customers, is primarily composed of fees related to long-term service arrangements, which are generally invoiced in advance. Deferred revenue also includes payments for installation and training that has not yet been completed and other offerings for which the Company has been paid in advance and earn

~~the revenue when it transfers control of the product or service. The balance of deferred revenue at September 30, 2021 and December 31, 2020 was as follows (in thousands):~~

Contract liabilities

September 30, 2021

December 31, 2020

Short term    $ 5,930    $ 6,117
Long term    520    267

Total    $ 6,450    $ 6,384

Changes in deferred revenue from contracts with customers were as follows (in thousands):


	Three Months Ended March 31, 2022
Balance at beginning of period	$	6,093
Deferral of revenue		2,940
Recognition of deferred revenue		(2,697	)

Balance at end of period	$	6,336

Nine Months Ended
September 30, 2021


Balance at beginning of period    $ 6,384
Deferral of revenue    9,761
Recognition of deferred revenue    (9,695 )

Balance at end of period    $ 6,450

The Company

expects to recognize estimated revenues related to performance obligation that

are

unsatisfied (or partially satisfied) in

the

amounts of approximately ~~$2.3 million in 2021, $4.3~~$5.9 million in 2022, ~~and $1.7~~

$2.2 million in 2023, $1.3 million in 2024, and $1.1 million in ~~2024, $1.1 million in 2025 and $0.2 million in 2026.~~

~~Note 2 – Net Loss per Common Share~~

~~The Company’s basic net loss per share is computed by dividing net loss by the weighted average number of shares of common stock outstanding for the period.~~

~~A summary of the Company’s calculation of net loss per share is as follows (in thousands except per share amounts):~~

Three Months Ended

Nine Months Ended


September 30,

September 30,


2021

2020

2021

2020

Net loss

$
(2,176
)

$
(1,797
)
$
(7,099
)
$
(16,007
)

Shares used in the calculation of basic and diluted net loss per share
   25,053    23,173    24,662    21,827

Diluted shares used in the calculation of net loss per share
   25,053    23,173    24,662    21,827

Net loss per share—basic and diluted
   $ (0.09 )    $ (0.08 )    $ (0.29 )    $ (0.73 )

~~Table of Contents~~

~~The shares of the Company’s common stock issuable upon the exercise of convertible securities, stock options and vesting of restricted stock that were excluded from~~

~~the~~

~~calculation of diluted net loss per share because their effect would have been antidilutive are as follows:~~

As of
September 30,



2021

2020


Stock options    2,509,511    1,971,704
Restricted stock    1,750    29,166

Total    2,511,261    2,000,870

~~Note 3 – Inventory~~

~~Inventory is valued at the lower of cost or net realizable value, with cost determined by the~~

~~first-in,~~

~~first-out~~

method. The Company regularly reviews inventory quantities on hand and records a reserve for excess and/or obsolete inventory primarily based upon the estimated usage of its inventory as well as other factors. Inventory consisted of the following (in thousands) and includes an inventory reserve of approximately

~~$0.2 million for both periods ended September 30, 2021~~

~~and~~

~~December 31, 2020.~~

September 30, 2021

December 31, 2020

Raw materials
   $ 1,845    $ 1,538
Work in process
   104    76
Finished Goods
   1,567    1,774





Inventory Gross
   3,516    3,388
Inventory Reserve
   (225
)

   (244 )




Inventory Net
   $ 3,290    $ 3,144

~~Table of Contents~~

~~Note 4 – Financing Arrangements~~

~~(a) Loan and Security Agreement – Western Alliance Bank~~

On March 30, 2020, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with Western Alliance Bank (the “Bank”) that provided an initial term loan (“Term Loan”) facility of $7.0 million and a $5.0 million revolving line of credit.

~~nterest in arrears on the Term Loan began to be repaid on April 1, 2020 and will continue to be paid on the first of each successive month thereafter until~~

~~the~~

principal repayment starts. Commencing on the principal repayment date March 1, 2022 and continuing on the first day of each month thereafter, the Company will make equal monthly payments of principal, together with applicable interest in arrears, to the Bank. The interest rate is set at 1% above the Prime Rate, which is defined in the Loan Agreement as the greater of 4.25% or the Prime Rate published in the Money Rates section of the Western Edition of the Wall Street Journal. The Prime Rate as of September 30, 2020 was 3.25%.

In connection with the Loan Agreement, the Company incurred approximately $141,000 of closing costs. The closing costs have been deduced from the carrying value of the debt and will be amortized through March 30, 2022, the maturity date of the Term Loan.

On April 27, 2021, the Company repaid its obligations in the aggregate amount of $7,354,283 and terminated the Loan Agreement with the Bank, and the Company’s collateral securing the facility was released. The Company accounted for this repayment and retirement as an extinguishment of the Loan Agreement. In addition to the outstanding principal and accrued interest, the Company was required to pay the $122,500 final payment, a termination fee of $50,000 and other closing costs totaling approximately $15,000. The Company also wrote off unamortized original closing costs as of the extinguishment date. The Company recorded a loss on extinguishment of approximately $386,000 related to the repayment and retirement of the Loan Agreement. The loss on extinguishment was composed of approximately $140,000 for a prepayment fee, $122,000 for the unaccrued final payment, $65,000 termination and other fees, and $58,000 for the unamortized and other closing costs from origination of the loan.

~~(b) Loan and Security Agreement – Silicon Valley Bank~~

On August 7, 2017, the Company entered into a Loan and Security Agreement, which was subsequently modified several times through November 1, 2019 (as amended, the “SVB Loan Agreement”), with Silicon Valley Bank 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, a termination fee of $114,000 and other costs totaling $10,000. The Company also wrote off unamortized original closing costs as of the extinguishment date. In March 2020 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 of unamortized and other closing costs.

~~Table of Contents~~

~~(c) Convertible Debentures~~

On December 20, 2018, the Company entered into a Securities Purchase Agreement (the “SPA”) with certain institutional and accredited investors (the “Investors”), including, but not limited to, all directors and executive officers of the Company at the time, pursuant to which the Investors purchased unsecured subordinated convertible debentures (the “Convertible Debentures”) with an aggregate principal amount of approximately $7.0 million in a private placement.

On February 21, 2020 (the “Conversion Date”), the conditions permitting a forced conversion were met, and the Company elected to exercise its forced conversion right under the terms of the Convertible Debentures.

As a result of this election, all of the outstanding Convertible Debentures were converted, at a conversion price of $4.00 per share, into 1,742,500 shares of the Company’s common stock. In accordance with the make-whole provisions in the Convertible Debentures, the Company also issued an additional 76,966 shares of its common stock. The make-whole amount represented the total interest which would have accrued through the maturity date of the Convertible Debentures, less the amounts previously paid, totaling $697,000. The conversion prices related to the make-whole amount were dependent on whether the Investors were related parties or unrelated third parties.

~~Accounting Considerations and Fair Value Measurements Related to the Convertible Debentures~~

~~The Company had previously elected to make~~

~~a one-time, irrevocable~~

election to utilize the fair value option to account for the Convertible Debentures as a single hybrid instrument at its fair value, with changes in fair value from period to period being recorded either in current earnings, or as an element of other comprehensive income (loss), for the portion of the change in fair value determined to relate to the Company’s own credit risk. The Company believed that the election of the fair value option allowed for a more meaningful representation of the total fair value of its obligation under the Convertible Debentures and allowed for a better understanding of how changes in the external market environment and valuation assumptions impact such fair value.

As of the December 31, 2019 valuation and the prior measurement dates, the Company utilized a Monte Carlo simulation model to estimate the fair value of the Convertible Debentures. The simulation model was designed to capture the potential settlement features of the Convertible Debentures, in conjunction with simulated changes in the Company’s stock price and the probability of certain events occurring. The simulation utilized 100,000 trials or simulations to determine the estimated fair value.

The simulation utilized the assumptions that if the Company was able to exercise its forced conversion right (if the requirements to do so were met), that it would do so in 100% of such scenarios. Additionally, if an event of default occurred during the simulated trial (based on the Company’s probability of default), the Investors would opt to redeem the Convertible Debentures in 100% of such scenarios. If neither event occurred during a simulated trial, the simulation assumed that the Investor would hold the Convertible Debentures until the maturity date. The value of the cash flows associated with each potential settlement were discounted to present value in each trial based on either the risk-free rate (for an equity settlement) or the effective discount rate (for a redemption or cash settlement).

The Company also recorded a final adjustment to the Convertible Debentures based on their fair value on the Conversion Date, just prior to the forced conversion being completed. Given that the Company’s prior simulation model included the assumption that the Company would elect to force conversion in 100% of scenarios when the requirements were met, the final valuation was based on the actual results of the forced conversion. As such, the Company based the final fair value adjustment to the Convertible Debentures just prior to conversion on the number of shares of common stock that were issued to the Investors upon conversion and the fair value of the Company’s common stock as of the Conversion Date.

2025.

~~Table of Contents~~

~~The key inputs to the valuation models that were utilized to estimate the fair value of the Convertible Debentures included:~~

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
Probability of default event
1
   0.45 % N/A
Utilization of Forced Conversion (if available)
1
   100.00 % 100.00 %
Exercise of Default Redemption (if available)
1
   100.00 % N/A
Effective discount rate
1
   18.52 % N/A

~~Represents a Level 3 unobservable input, as defined in Note 8—Fair Value Measurements, below.~~

~~The Company’s stock price was based on the closing stock price on the valuation date. The conversion price was based on the contractual conversion price included in the SPA.~~

The remaining term was determined based on the remaining time period to maturity of the Convertible Debentures, or remaining term under the expectation of the Company’s election of its forced conversion right.

The Company’s equity volatility estimate was based on the Company’s historical equity volatility, the Company’s implied and observed volatility of option pricing, and the historical equity and observed volatility of option pricing for a selection of public companies.

~~The risk-free rate was determined based on U.S. Treasury securities with similar terms.~~

~~The probability of the occurrence of a default event was based on Bloomberg’s~~

~~1-year~~

~~estimate of default risk for the Company (extrapolated over the remaining term).~~

The utilization of the forced conversion right and the default redemption right was based on management’s best estimate of both features being exercised upon the occurrence of the related contingent events.

~~The effective discount rate utilized at the December 31, 2019 valuation date was based on yields on~~

~~CCC-rated~~

debt instruments with terms equivalent to the remaining term of the Convertible Debentures. The credit rating estimate was based on the implied credit rating determined at issuance and no changes were identified by the Company that would impact this assessment.

1710

Table of Contents

~~The fair value and principal value of the Convertible Debentures as of December 31, 2019 and the Conversion Date was as follows (in thousands):~~

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

In February 2020 the Company recorded a loss from the change in fair value of the Convertible Debentures of approximately $7.5 million for period through the Conversion Date which is described in the additional fair value disclosures related to the Convertible Debentures in Note 8.

~~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.~~

~~(d) Principal and Interest Payments Related to Financing Arrangements~~

~~The Company no longer has any financing agreements as of September 30, 2021.~~

~~The following amounts are included in interest expense in the Company’s consolidated statement of operations for the three and nine months ended September 30, 2021 and 2020 (in thousands):~~

Three Months Ended
September 30,

Nine Months Ended
September 30,


2021

2020

2021

2020


Cash interest expense    $ 0      $ 94    $ 141    $ 232
Interest on convertible debentures    —      —      —      49
Accrual of notes payable final payment    —      8    —      47
Amortization of debt costs    —      13    —      32

Total interest expense    $ 0      $ 115    $ 141    $ 360

~~Table of Contents~~

Note 54 – ~~Lease Commitments~~

Net Loss per Common Share

~~Under ASC 842, “Leases” (“ASC 842”),~~The Company’s basic net loss per share is computed by dividing net loss by the ~~Company determines if an arrangement contains a lease at inception. A lease is a contract, or part~~weighted average number of ~~a contract, that conveys the right to control the use~~shares 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 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 uses its incremental borrowing rate to determine the present value of the lease payments. The Company determines the incremental borrowing rates for its leases by applying its applicable, fully collateralized borrowing rate, with adjustment as appropriatecommon stock outstanding for the ~~lease term. The lease term at the lease commencement date is determined based on the~~

~~non-cancellable~~

period for which the Company has the right to use the underlying asset, together with any periods covered by an option to extend the lease if the Company is reasonably certain to exercise that option. The Company considers a number of factors when evaluating whether the options in its lease contracts are 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.

~~Right-of-use~~

assets and obligations for short-term leases (leases with an initial term of 12 months or less) are not recognized in the consolidated balance sheet. Lease expense for short-term leases is recognized on a straight-line basis over the lease term. The Company does not sublease any of its leased assets to third parties. The Company’s lease agreements do not contain any residual value guarantees or restrictive covenants. The Company has lessor agreements that contain lease and

~~non-lease~~

~~components. As the Company has determined that the~~

~~non-lease~~

~~component of these agreements is the predominant component, the Company accounted for the complete agreement under ASC 606 upon adoption of ASC 842.~~

period.

~~ASC 842 includes a number of reassessment and~~

~~re-measurement~~

requirements for lessees based on certain triggering events or conditions, including whether a contract is or contains a lease, assessment of lease term and purchase options, measurement of lease payments, assessment of lease classification and assessment of the discount rate. The Company reviewed the reassessment and

~~re-measurement~~

~~requirements and identified two lease modifications which are reflected in the table below showing the maturity~~A summary of the Company’s ~~lease liabilities as~~calculation of September 30, 2021. This includes an extension of an operating lease for the facility leased by the Company in San Jose, California as well as some equipment. In addition, there were no impairment indicators identified during the quarter ended September 30, 2021 that required an impairment test for the Company’s

~~right-of-use~~

~~assets or other long-lived assets in accordance with ASC 360 10 “Property Plant and Equipment” (“ASC 360”).~~

~~Certain of the Company’s leases include variable lease costs to reimburse the lessor for real estate tax and insurance expenses, and certain~~

~~non-lease~~

~~components that transfer a distinct service to the Company, such as common area maintenance services. The Company has elected to not separate its accounting of lease components and~~

~~non-lease~~

~~components for real estate and equipment leases.~~

~~Table of Contents~~

~~Components of Leases:~~

~~The Company has leases for office space and office equipment. The leases have remaining lease terms ranging from less than one year to four years and six months as of September 30, 2021.~~

~~The components of lease expense for the three and nine months ended September 30, 2021 are~~net loss per share is as follows (in ~~thousands)~~thousands except per share amounts):

	Three Months Ended March 31,
	2022			2021
Net loss	$	(3,545)		$	(1,643)

Shares used in the calculation of basic and diluted net loss per share		25,160			23,929

Diluted shares used in the calculation of net loss per share		25,160			23,929

Net loss per share—basic and diluted	$	(0.14	)	$	(0.07	)

Lease Cost

Classification

Three Months Ended
September 30, 2021

Nine Months Ended
September 30, 2021

Operating lease cost—Right of Use Asset    Operating expenses    $ 214    $ 649
Operating lease cost—Variable    Operating expenses    63    $ 127

Total
      $ 277    $ 776

~~Other information related to leases was as follows (in thousands):~~

Three Months Ended
September 30, 2021

Nine Months Ended
September 30, 2021

Cash paid from operating cash flows for operating leases
   $ 230    $ 581


	As of September 30, 2021

~~Weighted-average remaining lease term of operating leases (in years)~~		~~1.47~~
~~Weighted-average discount rate for operating leases~~		~~5.5~~	%

~~Table of Contents~~

~~Maturity of the Company’s lease liabilities as of September 30, 2021 was as follows (in thousands):~~

As of September 30, 2021:

Operating
Leases


2021    229
2022    899
2023    211
2024    5

Total lease payments    1,344
Less: imputed interest    (57 )

Total lease liabilities    1,287
Less: current portion of lease liabilities    (856 )

Long-term lease liabilities    $ 431

~~Note 6 – Stockholders Equity~~

~~(a) Financing Activity~~

On March 2, 2021, the Company entered into an underwriting agreement with Guggenheim Securities, LLC, as representative of the several underwriters thereto, in connection with an underwritten public offering of 1,393,738The shares of the Company’s common stock issuable upon the exercise of stock options and vesting of restricted stock that were excluded from the calculation of diluted net loss per share because their effect would have been antidilutive are as follows:


	As of March 31,
	2022		2021
Stock options		2,894,449		2,246,776
Restricted stock		0		31,654

Total		2,894,449		2,278,430

Note 5 – Inventories

The Company values its inventory at the lower of cost or net realizable value. Cost includes materials, labor, and manufacturing overhead and is determined using the

first-in,

first-out

(FIFO) method. On a quarterly basis, management reviews inventory quantities on hand and analyzes the provision for excess and obsolete inventory based primarily on product expiration dating and estimated sales forecast, which is based on sales history and anticipated future demand. Inventory consisted of the following (in thousands) and includes an ~~offering price of $18.00 per share. The offering closed on March 5, 2021 for gross proceeds~~inventory reserve of approximately ~~$25.1~~$0.3 million at March 31, 2022 and ~~net proceeds of approximately $23.2~~$0.2 million ~~to the Company.~~at December 31, 2021.


	March 31, 2022			December 31, 2021
Raw materials	$	3,333		$	2,962
Work in process		504			173
Finished Goods		1,174			1,279

Inventory Gross		5,011			4,414
Inventory Reserve		(275	)		(243	)

Inventory Net	$	4,736		$	4,171

~~Table of Contents~~

~~(b) Stock-Based Compensation~~

~~The Company~~

~~granted options to purchase 403,000 and 831,938 shares of the Company’s stock during the three and nine months e~~

~~nded~~

September 30, 2021 respectively. Options granted under the Company’s stock incentive plans were valued utilizing the Black-Scholes model using the following assumptions and had the following fair values (in thousands):

Three Months Ended
September 30,

Nine Months Ended
September 30,



2021

2020

2021

2020


Average risk-free interest rate    0.41 % 0.15 % 0.28 % 0.79 %
Expected dividend yield    NaN NaN NaN NaN
Expected life    3.5 years 3.5 years 3.5 years 3.5 years
Expected volatility    65.57% to 67.42 % 66.0% to 66.0 % 65.57% to 67.42 % 50.2 to 65.7 %
Weighted average exercise price    $15.04 $8.84 $16.61 $10.08
Weighted average fair value    $6.18 $4.11 $7.34 $4.34

Three Months Ended
September 30,

Nine Months Ended
September 30,



2021

2020

2021

2020


Cost of revenue    $ 3    $ 3    $ 20    $ 28
Engineering and product development    73    64    281    406
Marketing and sales    149    61    629    608
General and administrative    431    337    1,172    1,500

   $ 656    $ 465    $ 2,102    $ 2,542

2211

Table of Contents

Note 6 - Goodwill

AsThe Company tests goodwill for impairment on an annual basis and between annual tests if events and circumstances indicate it is more likely than not that the fair value of ~~September 30, 2021, unrecognized compensation cost (in thousands) related to unvested options and unvested restricted stock and~~ the ~~weighted average term~~reporting unit is less than its carrying value. There were 0 impairment indicators present as of March 31, 2022.

Factors the Company considers important, which could trigger an impairment of such ~~equity instruments is as follows:~~

asset, include the following:

Remaining expense $ 4,972
Weighted average term 1.3

significant underperformance relative to historical or projected future operating results;

~~The~~significant changes in the manner or use of the assets or the strategy for the Company’s ~~restricted~~overall business;

significant negative industry or economic trends;

significant decline in the Company’s stock ~~awards typically vest~~price for a sustained period; and

a decline in ~~either one year or three equal annual installments with~~ the ~~first installment vesting one year from the grant date.~~

Company’s market capitalization below net book value.

Note 7 – Long-lived Assets

The Company

~~did 0t grant any shares~~ assesses long-lived assets for impairment if events and circumstances indicate it is more likely than not that the fair value of ~~restricted stock during~~ the ~~three-months ended September 30, 2021~~asset group is less than its carrying value.

There is no set interval or ~~2020.~~frequency for recoverability evaluation. Rather, the determination of when, if at all, an asset (or asset group) is evaluated for recoverability is based on “events and circumstances.” The ~~Company granted 22,488~~following factors are examples of events or changes in circumstances that indicate the carrying amount of an asset (or asset group) may not be recoverable and ~~0 shares of restricted stock during the nine-months ended September 30, 2021 and 2020, respectively.~~

~~The Company’s aggregate intrinsic value~~thus is to be evaluated for ~~stock options and restricted stock outstanding is as follows (in thousands):~~

recoverability.

As of September 30,


Aggregate intrinsic value
2021

2020

Stock options    $ 8,765    $ 6,679
Restricted stock    19    257

~~The Company~~

~~issued 54,702 and 138,450 shares of common stock upon the exercise of outstanding stock options~~A significant decrease in the ~~three and nine-months ended September 30, 2021 respectively. The Company received cash proceeds of approximately $0.3~~

~~million and~~

~~$0.9~~

~~million~~

in the three and nine-months ended September 30, 2021 respectively. The intrinsic value of restricted shares that vested in the three and nine months ended September 30, 2021 was $0.0 million and $0.5 million respectively. There were 19,863 and 49,904 restricted shares that vested in the three and nine months ended September 30, 2021 respectively.

~~Employee Stock Purchase Plan~~

~~In December 2019, the 2019 Employee Stock Purchase Plan (“ESPP”) was adopted by the Company’s Board of Directors (the “Board”) and approved by stockholders, effective January 1, 2020.~~

~~The ESPP~~

~~provides for the issuance of up to 950,000 shares of common stock, subject to adjustment in the event~~market price of a ~~stock split, stock dividend or other~~long-lived asset (or asset group);

A significant adverse change in the ~~Company’s capitalization. The ESPP may be terminated~~extent or ~~amended~~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 ~~the Board at any time. Certain amendments to the ESPP require stockholder approval.~~a regulator;

~~Substantially~~

~~all~~An accumulation of costs significantly in excess of the ~~Company’s employees whose customary employment is~~amount originally expected for ~~more than 20 hours~~the acquisition or construction of a ~~week are eligible to participate in the ESPP. Any employee who owns 5% or more of the voting power or value of the Company’s shares of common stock is not eligible to participate in the ESPP.~~long-lived asset (or asset group); and

Note 13 – ~~Recent Accounting Pronouncements~~

~~Recently Adopted Accounting Standards~~

Commitments and Contingencies

Other Commitments

~~In December 2019, the Financial Accounting Standard Board (the “FASB”) issued ASU~~

~~2019-12,~~

~~“Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes” (“ASU~~

~~2019-12”).~~

~~ASU~~

~~2019-12~~

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 US GAAP for other areas of Topic 740 by clarifying and amending existing guidance. ASU

~~2019-12~~

~~is effective for the Company for the fiscal year and interim periods therein beginning January 1, 2021. The Company notes that the adoption of ASU~~

~~2019-12~~

~~resulted in the reclassification of an immaterial amount from income tax expense to~~

~~non-income~~

~~tax included in operating expenses related to the accounting for state and franchise taxes, with no impact to the Company’s consolidated income, equity or cash flows.~~

~~Recently Issued Accounting Standards Not Yet Adopted~~

~~In June 2016, the FASB issued~~

~~ASU 2016-13, “Financial~~

~~Instruments—Credit Losses (Topic 326)”~~

~~(“ASU 2016-13”),~~

~~which requires the measurement and recognition of expected credit losses for financial assets held at amortized cost.~~

~~ASU 2016-13~~

replaces the existing incurred loss impairment model with an expected loss model which requires the use of forward-looking information to calculate credit loss estimates. These changes will result in earlier recognition of credit losses. In November 2019, the FASB elected to defer the adoption date of ASU

~~2016-13~~

~~for public business entities that meet the definition of a smaller reporting company to fiscal years beginning after December 15, 2022. Early adoption of the guidance in ASU~~

~~2016-13~~

~~is permitted.~~ The Company is obligated to pay approximately $5.8 million for firm purchase obligations to suppliers for future product and service deliverables and $0.2 million for minimum royalty obligations.

Litigation

The Company may be a party to various legal proceedings and claims arising out of the ordinary course of its business. Although the final results of all such matters and claims cannot be predicted with certainty, the Company currently ~~evaluating~~believes that there are no current proceedings or claims pending against it the ~~impact that the adoption~~ultimate resolution of ~~ASU~~

~~2016-13~~

~~will~~which would have a material adverse effect on its ~~consolidated~~ financial ~~statements.~~

~~In March 2020, the FASB issued ASU~~

~~2020-04,~~

~~“Reference Rate Reform (Topic 848): Facilitation~~condition or results of ~~the Effects of Reference Rate Reform on Financial Reporting” (“ASU~~

~~2020-04”). ASU~~

~~2020-04~~

was issued because the London Interbank Offered Rate (“LIBOR”) is a benchmark interest rate referenced in a variety of agreements that are used by all types of entities, and at the end of 2021, banks will no longer be required to report information that is used to determine LIBOR. As a result, LIBOR is expected to be discontinuedoperations, other than as ~~a benchmark interest rate. Other interest rates used globally could also be discontinued for similar reasons. ASU~~

~~2020-04~~

provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. Companies can apply the ASU immediately.set forth above. However, ~~the guidance will only be available for a limited time (generally through December 31, 2022). The Company is currently evaluating the impact that the adoption of ASU~~

~~2020-04~~

~~will have on its consolidated financial statements.~~

~~In August 2020, the FASB issued ASU~~

~~2020-06,~~

~~“Debt – Debt with Conversion and Other Options (Subtopic~~

~~470-20)~~

~~and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic~~

~~815-40):~~

~~Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (“ASU~~

~~2020-06”).~~

~~ASU~~

~~2020-06~~

was issued to simplify the accounting for convertible instruments by removing major separation models required under current U.S. GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument and more convertible preferred stock as a single equity instrument with no separate accounting for embedded conversion features. ASU

~~2020-06~~

~~removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. ASU~~

~~2020-06~~

~~also simplifies the diluted earnings per share calculation in certain areas. ASU~~

~~2020-06~~

~~is effective for~~should the Company fail to prevail in any legal matter or should several legal matters be resolved against the Company in the same reporting period, such matters could have a material adverse effect on the Company’s operating results and cash flows for that particular period. In all cases, at each reporting period, the ~~fiscal year~~Company evaluates whether or not a potential loss amount or a potential range of loss is probable and ~~interim periods therein beginning January 1, 2022. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of ASU~~

~~2020-06~~reasonably estimable under ASC 450, “Contingencies.” Legal costs are expensed as incurred.

~~will have on its consolidated financial statements.~~

Note 14 – Subsequent Events

~~None.~~The Company has evaluated events and transactions subsequent to the balance sheet date to the date of the filing and is not aware of any events or transactions that occurred subsequent to the balance sheet date that would require recognition or disclosure in the consolidated financial statements.

Item 2.

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

Certain information included in this Item 2 and elsewhere in this Form

10-Q

that are not historical facts contain statements that may be deemed “forward looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements involve or may involve a number of known and unknown risks, uncertainties and other factors that could cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievement expressed or implied by such forward looking statements. These risks and uncertainties include, but are not limited to the following: the continuing impact of the

COVID-19

pandemic, on the ~~Company’s~~continuing impact of military and political conflict in Eastern Europe the ability to achieve business and strategic objectives, the ~~global economy;~~risks of uncertainty of patent protection, the impact of supply and manufacturing constraints or difficulties, uncertainty of future sales ~~and expense~~ levels, protection of patents and other proprietary rights, the impact of supply and manufacturing constraints or difficulties, ~~regulatory changes and requirements applicable to the Company’s products,~~ product market acceptance, possible technological obsolescence of products, increased competition, ~~integration of acquired businesses, the impact of~~ litigation and/or

~~Table of Contents~~

government regulation, changes in Medicare reimbursement policies, risks relating to our existing and future debt obligations, competitive factors, the effects of a decline in the economy inor markets served by the Company, and other risks detailed in this report and in the Company’s other filings with the United States Securities and Exchange ~~Commission.~~Commission (the “SEC”). The words “believe”, “plan”, “intend”, “expect”, “estimate”, “anticipate”, “likely”, “seek”, “should”, “would”, “could” and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date the statement was made. Except as required by law, ~~iCAD undertakes~~we undertake no obligation to update any such forward-looking statements to reflect events or circumstances after the date of such statements.

Unless the context otherwise requires, the terms “iCAD”, the “Company”, “we”, “our”, “registrant”, and “us” mean iCAD, Inc. and its consolidated subsidiaries.

Results of Operations

Overview

iCAD, Inc. is a global medical technology company providing innovative cancer detection and therapy solutions. The Company reports in two segments: Detection and Therapy.

In the Detection segment, the Company’s solutions include (i) advanced image analysis and workflow solutions that enable healthcare professionals to better serve patients by identifying pathologies and pinpointing the most prevalent cancers earlier, and (ii) a ~~comprehensive range~~solutions suite of high-performance, Artificial Intelligence and Computer-Aided Detection (CAD) systems and workflow solutions for 2D and 3D mammography, Magnetic Resonance Imaging (MRI) and Computed Tomography (CT). that focus on cancer detection, breast density assessment, and short-term cancer risk estimation.

Table of Contents

In the Therapy segment, the Company offers the Xoft System, an isotope-free cancer ~~radiation~~ treatment platform technology. The Xoft System can be used for the treatment of early-stage breast cancer, endometrial cancer, cervical cancer and nonmelanoma skin ~~cancer.~~cancer and is in clinical studies for treatment of brain cancers.

On January 30, 2017, the Company completed the sale of certain intellectual property relating to the VersaVue Software and the DynaCAD product and related assets to Invivo for $3,200,000 in cash with a holdback amount of $350,000. The Company recently settled litigation with a third-party relating to this transaction, as further described in Note 7 hereto. The nine months ended September 30, 2020 and 2021 includes a $0.3 and $0.4 million charge related to the loss on the extinguishment of debt respectively, while the nine months ended September 30, 2020 included a $7.8 million charge related to the losses on the extinguishment of debentures and debt. In April 2021, the Company used approximately $7.4 million of cash to repay its credit facility in full.

The Company’s headquarters are located in Nashua, New Hampshire, with a manufacturing facility in New Hampshire, ~~and~~ an operations, research, development, manufacturing and warehousing facility in San Jose, ~~California.~~California, and an office in Lyon, France.

COVID-19

Impact

On March 12, 2020, the World Health Organization declared

COVID-19

to be a pandemic. In an effort to contain and mitigate the spread of the

COVID-19

pandemic, the United States ~~many~~and most countries ~~in Europe, as well as Canada and China,~~of the world have imposed some level of unprecedented restrictions on travel, and there have been business closures and a substantial reduction in economic activity in countries that have had significant outbreaks of

COVID-19.

As a provider of devices and services to the health care industry, the Company’s operations have been materially ~~affected.~~affected in all periods presented. Significant uncertainty remains as to the continuing impact of the

COVID-19

pandemic on the Company’s operations and on the global ~~economy as a whole.~~economy. It is currently not possible to predict how long the pandemic will last or the time that it will take for economic activity to return to prior levels. The

COVID-19

pandemic has resulted in significant financial market volatility and uncertainty. A continuing or worsening level of market disruption and volatility seen insince the ~~recent past~~start of the pandemic will have an adverse effect on the Company’s ability to access capital, on the Company’s business, results of the Company’s operations and financial condition, and on the market price of the Company’s common stock. The Company’s results for the ~~quarter ending September 30,~~years ended December 31, 2021 and 2020, as well as ~~our~~all quarterly results ~~for all prior quarters~~ beginning with Q1the first quarter of 2020 through the first quarter of 2022, reflect a negative impact from the

COVID-19

pandemic, ~~due~~including but not limited to ~~some~~ healthcare ~~facilities’~~customers and potential customers providing additional focus on

~~COVID-19~~COVID-19;

pandemic-related public health impacts, including significant shifts in workforce availability and ~~from the effect~~priorities, on ~~our~~customer, supplier, and iCAD’s business processes; and effects on healthcare customers and potential customers of pandemic related supply chain ~~issues relating thereto. Although the Company does not provide guidance to investors relating to the~~issues. The Company’s ~~results of operations, the Company’s~~quarterly results for the quarter ending ~~December 31, 2021,~~June 30, 2022, and possibly future quarters, could reflect a ~~continued~~continuing negative impact from the

COVID-19

pandemic for similar or additional reasons.

~~During the first quarter of fiscal 2020, the Company entered into an equity distribution agreement with JMP Securities to provide for an~~

~~at-~~

~~the-market~~

offering program to provide additional potential liquidity through the sale of common stock having a value of up to $25.0 million (the “ATM Facility”). On December 17, 2020 the Company sold 470,704 shares of common stock under the ATM Facility for gross proceeds of approximately $6.6 million and net proceeds of approximately $6.1 million. On March 2, 2021, the Company terminated the ATM Facility. Also on March 2, 2021, the Company entered into an underwriting agreement with Guggenheim Securities, LLC, as representative of the several underwriters thereto, in connection with an underwritten public offering of 1,393,738 shares of the Company’s common stock at an offering price of $18.00 per share. The offering closed on March 5, 2021 for gross proceeds of approximately $25.1 million and net proceeds of approximately $23.2 million to the Company. The Company believes that its current liquidity and capital resources are sufficient to sustain operations through at least the next 12 months, primarily due to cash on hand of ~~$35.8~~$29.7 million at ~~September 30, 2021~~March 31, 2022 and anticipated revenue and cash collections. However, the resurgence of the

COVID-19

pandemic could affect the Company’s ~~liquidity.~~

liquidity and capital resources.

~~Table of Contents~~

Eastern European Conflict Impact

In late February 2022, Russian military forces launched significant military action against Ukraine. Sustained conflict and disruption in the region is likely. The aggregate impact to Eastern Europe and Europe as a whole, as well as actions taken by other countries, including new and stricter sanctions by the United States, Canada, the United Kingdom, the European Union, and other countries and organizations against officials, individuals, regions, and industries in Russia, Belarus and Ukraine, and each country’s potential response to such sanctions, tensions and military actions, is not knowable at this time, and could have a material adverse effect on the Company, its business and operations. Any such material adverse effect from the conflict and enhanced sanctions activity may disrupt the Company’s sales to customers in the region. Prolonged unfavorable economic conditions or uncertainty may have an adverse effect on the Company’s sales and profitability. For the fiscal year ended 2021, approximately 8.6% of the Company’s total revenue and approximately 39.0% of the Company’s export revenue was derived from customers located in Europe.

Critical Accounting Estimates

The Company’s discussion and analysis of its financial condition, results of operations, and cash flows are based on the Company’s consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States.

The preparation of these financial statements requires ~~the Company~~us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates these estimates, including those related to revenue recognition, allowance for doubtful accounts, inventory valuation and obsolescence, intangible assets, goodwill, income taxes, contingencies, and litigation. Additionally, the Company uses assumptions and estimates in calculations to determine stock-based compensation, ~~the fair value of convertible debentures,~~ and evaluation of litigation. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Due to the

COVID-19

pandemic and its lingering impact, global armed conflicts and related political uncertainty, as well as dramatic inflation, there has been uncertainty and disruption in the global economy and financial markets. The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of the date of issuance of this Quarterly Report on Form

10-Q.

These estimates may change, as new events occur, and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.

Other than as described herein, there have been no additional material changes to ~~the Company’s~~our critical accounting policies as discussed in ~~the Company’s~~our 2021 Annual Report on Form

10-K

~~for~~ (the ~~fiscal year ended December 31, 2020 filed with the SEC on March 15, 2021 (the “2020~~“2021

10-K”).

For a comprehensive list of the Company’s critical accounting policies, reference should be made to the ~~2020~~2021

10-K.

3019

Three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 compared to three ~~and nine~~ months ended ~~September 30, 2020.~~March 31, 2021.

Revenue: (in thousands)

Three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:


	Three months ended September 30,									Three months ended March 31,
	2021		2020		Change		% Change			2022		2021		Change			% Change
Detection revenue
Product revenue	$	4,454	$	3,889	$	565		14.5	%	$	3,864	$	4,161	$	(297	)		(7.1	)%
Service and supplies revenue		1,554		1,402		152		10.8	%		1,657		1,558		99			6.4	%

Subtotal		6,008		5,291		717		13.6	%		5,521		5,719		(198	)		(3.5	)%

Therapy revenue
Product revenue		1,866		649		1,217		187.5	%		696		1,396		(700	)		(50.1	)%
Service and supplies revenue		1,487		1,189		298		25.1	%		1,306		1,529		(223	)		(14.6	)%

Subtotal		3,353		1,838		1,515		82.4	%		2,002		2,925		(923	)		(31.6	)%

Total revenue	$	9,361	$	7,129	$	2,232		31.3	%	$	7,523	$	8,644	$	(1,121	)		(13.0	)%

Total revenue ~~increased~~decreased by approximately ~~$2.2~~$1.1 million, or ~~31.3%~~13.0%, from ~~$7.1~~$8.6 million for the three months ended ~~September 30, 2020~~March 31, 2021 to ~~$9.4~~$7.5 million for the three months ended ~~September 30, 2021.~~March 31, 2022. The ~~increase~~change is due to ~~an increase~~decreases in Detection revenue of $0.2 million and Therapy revenue of ~~approximately $1.5~~$0.9 million, ~~and Detection revenue of $0.7 million.~~respectively.

Detection product revenue ~~increased~~decreased by approximately ~~$0.6~~$0.3 million, or ~~14.5%~~7.1%, from $4.2 million for the three months ended March 31, 2021 to $3.9 million for the three months ended ~~September 30, 2020 to $4.5 million for the three months ended September 30, 2021.~~March 31, 2022. The ~~overall increase~~change is due ~~primarily~~ to ~~an increase~~a decrease of $1.1 million in direct customer revenue related to ongoing COVID related restrictions early in the quarter combined with impact from the reorganization and refocusing of ~~$0.4~~the U.S. commercial organization offset by a $0.8 million ~~and an~~ increase in original equipment manufacturer customer ~~revenue of $0.2 million, in each case relating primarily to revenue from 3D imaging and density assessment products.~~revenue.

Detection service and supplies revenue, which is primarily sold to direct customers, increased by ~~$0.2~~$0.1 million, or ~~10.8%~~6.4%, from ~~$1.4 million in the three months ended September 30, 2020 to~~ $1.6 million in the three months ended ~~September 30, 2021.~~March 31, 2021 to $1.7 million in the three months ended March 31, 2022.

Therapy product revenue ~~increased~~decreased by ~~approximately $1.2~~$0.7 million, or ~~187.5%~~50.1%, from ~~$0.7~~$1.4 million for the three months ended ~~September 30, 2020~~March 31, 2021 to ~~$1.9~~$.7 million for the three months ended ~~September 30, 2021.~~March 31, 2022. The decline in Therapy product ~~revenue is related~~sales was largely due to the ~~sale~~timing of ~~the Company’s Axxent systems and can vary significantly from quarter to quarter due to changes in the number~~a significant additional capital raise by one of ~~units sold, and the average selling price. The Company believes that Therapy product revenue was adversely affected by the~~

~~COVID-19~~

~~pandemic during the three months ended September 30, 2020, due to~~

~~stay-at-home~~our skin distributors.

~~and social distancing orders as well as the uncertainty in the market.~~

Therapy service and supplies revenue ~~increased~~decreased by approximately ~~$0.3~~$0.2 million, or ~~25.1%~~14.6%, from ~~$1.2 million for the three months ended September 30, 2020 to~~ $1.5 million for the three months ended ~~September 30, 2021. The Company believes that Therapy service and supplies revenue, specifically the use of balloons~~March 31, 2021 to $1.3 million for ~~procedures, was adversely affected by the~~

~~COVID-19~~

~~pandemic during~~ the three months ended ~~September 30, 2020,~~March 31, 2022. The decline was largely due to

~~stay-at-home~~

reduced sales of sources for the Axxent system and ~~social distancing orders as well as the uncertainty~~a temporary reduction in ~~the market. The Company saw higher service and~~average selling price for certain supplies ~~revenues due~~ to ~~higher balloon sales in the three months ended September 30, 2021 as compared to the three months ended September 30, 2020. The Company is not able to predict how the~~

~~COVID-19~~certain customers, including clinical trial participants.

~~pandemic will affect future Therapy service and supplies revenue.~~

~~Table of Contents~~

~~Nine months ended September 30, 2021 and 2020:~~

Nine months ended September 30,


2021

2020

Change

% Change

Detection revenue

Product revenue
   $ 11,779    $ 9,691    $ 2,088    21.5 %
Service revenue
   $ 4,736    4,194    542    12.9 %








Subtotal
   16,515    13,885    2,630    18.9 %








Therapy revenue

Product revenue
   $ 4,650    1,529    3,121    204.1 %
Service revenue
   $ 4,665    3,833    832    21.7 %








Subtotal
   9,315    5,362    3,953    73.7 %








Total revenue
   $ 25,830    $ 19,247    $ 6,583    34.2 %

Total revenue increased by approximately $6.6 million, or 34.2%, from $19.2 million for the nine months ended September 30, 2020 to $25.8 million for the nine months ended September 30, 2021. The increase is due to an increase in Therapy revenue of approximately $4.0 million and an increase in Detection revenue of $2.6 million.

~~Detection~~

product revenue increased by approximately $2.1 million, or 21.5%, from $9.7 million for the nine months ended September 30, 2020 to $11.8 million for the nine months ended September 30, 2021. The overall increase is due primarily to an increase in direct customer revenue from 3D imaging and density assessment products. The Company believes that the

~~COVID-19~~

~~pandemic also adversely affected revenues during the nine months ended September~~

~~30, 2020.~~

Detection service and supplies revenue, which is primarily sold to direct customers, increased by $0.5 million, or 12.9%, from $4.2 million in the nine months ended September 30, 2020 to $4.7 million in the nine months ended September 30, 2021.

Therapy product revenue increased by approximately $3.1 million, or 204.1%, from $1.5 million for the nine months ended September 30, 2020 to $4.6 million for the nine months ended September 30, 2021. Therapy product revenue is related to the sale of the Company’s Axxent systems and can vary significantly from quarter to quarter due to changes in the number of units sold, and the average selling price. The Company believes that Therapy product revenue was adversely affected by the

~~COVID-19~~

~~pandemic during the nine months ended September 30, 2020, due to~~

~~stay-at-home~~

~~and social distancing orders as well as the uncertainty in the market.~~

Therapy service and supplies revenue increased by approximately $0.8 million, or 21.7%, from $3.8 million for the nine months ended September 30, 2020 to $4.7 million for the nine months ended September 30, 2021. The Company believes that Therapy service and supplies revenue, primarily the use of balloons for procedures, was adversely affected by the

~~COVID-19~~

~~pandemic during the nine months ended September 30, 2020, due to~~

~~stay-at-home~~

and social distancing orders as well as the uncertainty in the market. The Company saw higher service and supplies revenues due to higher balloon sales in the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020. The Company is not able to predict how the

~~COVID-19~~

~~pandemic will affect future Therapy service and supplies revenue.~~

3220

Table of Contents

Cost of Revenue and Gross Profit: (in thousands)

Three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:


	Three months ended September 30,										Three months ended March 31,
	2021		2020		Change			% Change			2022		2021		Change			% Change
Products	$	1,807	$	1,345	$	462			34.3	%	$	1,087	$	1,409	$	(322	)		(22.9	)%
Service and supplies		763		667		96			14.4	%		1,049		867		182			21.0	%
Amortization and depreciation		79		92		(13	)		(14.1	)%		75		79		(4	)		(5.1	)%

Total cost of revenue	$	2,649	$	2,104	$	545		��	25.9	%	$	2,211	$	2,355	$	(144	)		(6.1	)%

Gross profit	$	6,712	$	5,025	$	1,687			33.6	%


	Three months ended September 30,									Three months ended March 31,
	2021		2020		Change		% Change			2022		2021		Change			% Change
Detection gross profit	$	5,058	$	4,227	$	831		19.7	%	$	4,661	$	4,725	$	(64	)		(1.4	%)
Therapy gross profit		1,654		798		856		107.3	%		651		1,564		(913	)		(58.4	%)

Gross profit		6,712		5,025		1,687		33.6	%	$	5,312	$	6,289	$	(977	)		(15.5	%)

~~Table of Contents~~

Gross profit for the three months ended ~~September 30, 2021~~March 31, 2022 was approximately ~~$6.7~~$5.3 million, or ~~71.7%~~70.6% of revenue, as compared to ~~$5.0~~$6.3 million, or ~~70.5%~~72.8% of revenue, for the three months ended ~~September 30, 2020. The~~

~~COVID-19~~

~~pandemic adversely affected revenues~~March 31, 2021. Detection gross profit percentage increased from ~~Detection products and the Therapy segment in~~82.6% for the three months ended ~~September 30, 2020, which resulted in lower gross profit in both segments in 2020. The higher gross profit as a percentage of sales in~~March 31, 2021 to 84.4% for the three months ended ~~September 30, 2021 was primarily related to product mix, with lower margin~~March 31, 2022. Therapy ~~products being a greater~~gross profit percentage ~~of total sales in~~decreased from 53.5% for the three months ended ~~September 30,~~March 31, 2021 ~~than in~~to 32.5% for the three ~~month period~~months ended ~~September 30, 2020.~~March 31, 2022. Detection gross profit represented 75.1% of total Company gross profit for the three months ended March 31, 2021 compared to 87.7% for the three months ended March 31, 2022.

Cost of products ~~increased~~decreased by approximately ~~$0.5~~$0.3 million, or ~~34.3%~~22.9%, from ~~$1.3~~$1.4 million for the three months ended ~~September 30, 2020~~March 31, 2021 to ~~$1.8~~$1.1 million for the three months ended ~~September 30, 2021.~~March 31, 2022. Cost of product revenue as a percentage of product revenue was approximately ~~29.6%~~25.4% for the three months ended ~~September 30, 2020~~March 31, 2021 as compared to ~~28.6%~~23.8% for the three months ended ~~September 30, 2021.~~March 31, 2022. The ~~increase~~product mix in the three-month period ended March 31, 2022 compared to the same period in 2021 included more Detection products, which have a lower relative cost of products is primarily due to the increased sales in both Therapy and Detection. The decrease in cost of products as a percentage of product revenue in the three months ended September 30, 2021 was primarily due to a hardware upgrade sale for the Detection business with a lower than standard average selling price in the three months ended September 30, 2020.sales.

Cost

of service and supplies increased by approximately $0.1 million ~~or 14.4%,~~ from ~~$0.7~~$0.9 million for the three months ended ~~September 30, 2020~~March 31, 2021 to ~~$0.8~~$1.0 million for the three months ended ~~September 30, 2021.~~March 31, 2022. Cost of service and supplies revenue as a percentage of service and supplies revenue was approximately ~~25.7%~~28.1% for the three months ended ~~September 30, 2020~~March 31, 2021 as compared to ~~25.1%~~35.4% for the three months ended ~~September 30, 2021.~~March 31, 2022. The ~~lower~~ cost of service and supplies as a percentage of ~~sales~~revenue increased primarily as a result of a temporary reduction in ~~the three months ended September 30, 2021 was primarily related~~average selling price for certain supplies to an overall increase in service and supplies revenue of approximately 17.4% in the three month period ended September 30, 2021 compared to the three month period ended September 30, 2020 with only a limited increase in personnel costs

.certain customers, including clinical trial participants.

Amortization and depreciation, which relates primarily to acquired intangible assets and depreciation of machinery and equipment, was approximately $0.1 million for each of the three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020.~~2021.

~~Nine months ended September 30, 2021 and 2020:~~

2021

2020

Change

% Change

Products
   $ 4,592    $ 2,899    $ 1,693    58.4 %
Service and supplies
   2,462    2,169    293    13.5 %
Amortization and depreciation
   237    287    (50 )    (17.4 )%








Total cost of revenue
   $ 7,291    $ 5,355    $ 1,936    36.2 %








Gross profit
   $ 18,539    $ 13,892    $ 4,647    33.5 %

Nine months ended September 30,


2021

2020

Change

% Change

Detection gross profit
   $ 13,788    $ 11,227    $ 2,561    22.8 %
Therapy gross profit
   4,751    2,665    2,086    78.3 %








Gross profit
   18,539    13,892    4,647    33.5 %

Gross profit for the nine months ended September 30, 2021 was approximately $18.5 million, or 71.8% of revenue, as compared to $13.9 million, or 72.2% of revenue, for the nine months ended September 30, 2020. The

~~COVID-19~~

~~pandemic adversely affected revenues from Detection products and the Therapy segment in the nine month ended September 30, 2020, which~~

3421

Table of Contents

resulted in lower gross profit in both segments in 2020. The higher gross profit as a percentage of sales in the nine months ended September 30, 2020 was primarily related to product mix, with lower margin Therapy products being a greater percentage of total sales in the nine months ended September 30, 2021 than in the nine month period ended September 30, 2020.

Cost of products increased by approximately $1.7 million, or 58.4%, from $2.9 million for the nine months ended September 30, 2020 to $4.6 million for the nine months ended September 30, 2021. Cost of product revenue as a percentage of product revenue was approximately 25.8% for the nine months ended September 30, 2020 as compared to 28.0% for the nine months ended September 30, 2021. The increase in cost of products is primarily due to the increased sales in both Therapy and Detection resulting in increases in cost of products of $1.6 and $0.1 million respectively. The higher cost of products as a percentage of sales in the nine months ended September 30, 2021 was primarily related to product mix, with lower margin Therapy products being a greater percentage of total sales in the nine months ended September 30, 2021 than in the nine month period ended September 30, 2020.

~~Cost~~

of service and supplies increased by approximately $0.3 million, or 13.5%, from $2.2 million for the nine months ended September 30, 2020 to $2.5 million for the nine months ended September 30, 2021. Cost of service and supplies revenue as a percentage of service and supplies revenue was approximately 27.0% for the nine months ended September 30, 2020 as compared to 26.2% for the nine months ended September 30, 2021. The lower cost of service and supplies as a percentage of sales in the nine months ended September 30, 2021 was primarily related to an overall increase in service and supplies revenue of approximately 17.1% in the nine month period ended September 30, 2021 compared to the nine month period ended September 30, 2020 with only limited increase in personnel

~~costs~~

Amortization and depreciation, which relates primarily to acquired intangible assets and depreciation of machinery and equipment, was approximately $0.3 million for the nine months ended September 30, 2020 as compared to $0.2 million for the nine months ended September 30, 2021.

Operating Expenses: (in thousands)

Three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:


	Three months ended September 30,									Three months ended March 31,
	2021		2020		Change		Change %			2022		2021		Change $		Change %
Operating expenses:
Engineering and product development	$	2,285	$	1,849	$	436		23.6	%	$	2,275	$	2,192	$	83		3.8	%
Marketing and sales		3,886		2,979		907		30.4	%		3,565		3,424		141		4.1	%
General and administrative		2,658		1,834		824		44.9	%		2,931		2,151		780		36.3	%
Amortization and depreciation		64		52		12		23.1	%		63		55		8		14.5	%

Total operating expenses	$	8,893	$	6,714	$	2,179		32.5	%	$	8,834	$	7,822	$	1,012		12.9	%

Operating expenses increased by approximately ~~$2.2~~$1.0 million, or ~~32.5%~~12.9%, from ~~$6.7~~$7.8 million in the three months ended ~~September 30, 2020~~March 31, 2021 to ~~$8.9~~$8.8 million in the three months ended ~~September 30, 2021.~~March 31, 2022. The ~~Company took steps throughout 2020~~increase is largely due to ~~reduce operating~~limited employee-related expenses ~~during~~in the three-month period ended March 31, 2021 due to

COVID-19

pandemic response and ~~this was evident~~the subsequent restoration of the organization and resumption of activity in later 2021 resulting in higher employee related expenses, including travel, in the ~~three-months~~three-month period ended ~~September 30, 2020. The Company has since reinstated furloughed employees and resumed some business travel based on relaxation of~~

~~COVID-19~~

~~restrictions and the strength of the business, but the Company continues to take a disciplined approach with expenses, given the lingering risk of~~

~~COVID-19~~

~~related negative impacts to the business.~~March 31, 2022.

Engineering and Product Development

. Engineering and product development costs increased ~~by approximately $0.4 million, or 23.6%,~~slightly from ~~$1.9~~$2.2 million for the three months ended ~~September 30, 2020~~March 31, 2021 to $2.3 million for the ~~three-months~~three months ended ~~September 30, 2021.~~March 31, 2022. The increase iswas primarily ~~due to personnel costs~~ related to ~~reinstatement of furloughed employees.~~higher employee costs in 2022 offset by a reduction in external service and clinical study expenses.

Marketing and Sales

. Marketing and sales expenses increased by approximately ~~$0.9~~$0.2 million, or ~~30.4%~~4.1%, from ~~$3.0~~$3.4 million in the three months ended ~~September 30, 2020,~~March 31, 2021 to ~~$3.9~~$3.6 million in the three months ended ~~September 30, 2021.~~March 31, 2022. Detection marketing and sales expenses increased by approximately ~~$0.7~~$0.2 million from $2.4 million in the three months ended March 31, 2021 to $2.6 million in the three months ended March 31, 2022. The increase was primarily due to increased employee-related costs associated with the U.S. commercial group reorganization and refocusing and increased travel costs resulting from the reduction of pandemic travel restrictions. Therapy marketing and sales ~~increased by $0.2 million. The increases are primarily due to personnel costs and increased travel as compared to~~expenses remained flat at $1.0 million for each of the three months ended ~~September 30, 2020 when travel was impacted by the~~

~~COVID-19~~

~~pandemic.~~March 31, 2022 and 2021, respectively.

General and Administrative

. General and administrative expenses increased by approximately $0.8 million, or ~~44.9%~~36.3%, from ~~$1.8~~$2.1 million in the three months ended ~~September 30, 2020~~March 31, 2021 to ~~$2.7~~$2.9 million for the three months ended ~~September 30, 2021.~~March 31, 2022. The increase is ~~primarily~~ due to higher personnel costs ~~related to reinstatement of furloughed employees, new hires, consulting costs, and~~partially offset by reduced external services as multiple functions were brought

in-house,

recruiting costs associated with ~~recruiting personnel across~~ the ~~organization.~~

~~Table~~U.S. commercial group reorganization and refocusing, increased travel costs, and an increase of ~~Contents~~

~~Amortization and Depreciation.~~

Amortization and depreciation, which relates primarily to acquired intangible assets and depreciation of machinery and equipment, increased by approximately $12,000, or 23.1% from $52,000 for the three months ended September 30, 2020 to $64,000 for the three months ended September 30, 2021.

~~Other Income and Expense: (in thousands)~~

~~Three months ended September 30, 2021 and 2020:~~

Three months ended September 30,

   2021    2020    Change    Change %
Interest expense
   $ —      $ (115 )    $ 115    (100.0 )%
Other income
   5    10    (5 )    (50.0 )%








   $ 5    $ (105 )    $ 110    (104.8 )%








Tax benefit (expense)
   $ —      $ (3 )    $ 3    (100.0 )%

~~Interest expense~~

~~. Interest expense decreased $115,000, or 100%, from $115,000 in the three months ended September 30, 2020 to $0 for the three months ended September 30, 2021. The decrease is due~~$0.3 million to the ~~timing of termination of the Loan Agreement.~~

~~Other income~~

~~. Other income decreased by approximately $5,000, or 50.0%, from $10,000~~allowance for ~~the three months ended September 30, 2020 to $5,000 for the three months ended September 30, 2021.~~

~~Tax expense~~

. Tax expense decreased by approximately $3,000, or 100%, from $3,000 for the three months ended September 30, 2020 to $0 for the three months ended September 30, 2021. The Company has approximately $42,000 in

~~non-income~~

~~related tax expense classified in operating expenses under ASU~~

~~2019-12~~

~~that had previously been classified here in tax expense. Tax expense includes state~~

~~non-income~~

~~and franchise-based taxes.~~

~~Operating Expenses: (in thousands)~~

~~Nine months ended September 30, 2021 and 2020:~~

Nine months ended September 30,

   2021    2020    Change    Change %
Operating expenses:

Engineering and product development
   $ 6,745    $ 5,938    $ 807    13.6 %
Marketing and sales
   10,739    9,218    1,521    16.5 %
General and administrative
   7,461    6,476    985    15.2 %
Amortization and depreciation
   178    153    25    16.3 %








Total operating expenses
   $ 25,123    $ 21,785    $ 3,338    15.3 %

Operating expenses increased by approximately $3.3 million, or 15.3%, from $21.8 million in the nine months ended September 30, 2020 to $25.1 million in the nine months ended September 30, 2021. The Company took steps throughout 2020 to reduce operating expenses during the

~~COVID-19~~

~~pandemic and this was evident in the nine months ended September 30, 2020. The Company has since reinstated furloughed employees and resumed some business travel based on relaxation of~~

~~COVID-19~~

~~restrictions and the strength of the business, but the Company continues to take a disciplined approach with expenses, given the lingering risk of~~

~~COVID-19~~

~~related negative impacts to the business.~~

~~Engineering and Product Development~~

. Engineering and product development costs increased by approximately $0.8 million, or 13.6%, from $5.9 million for the nine months ended September 30, 2020, to $6.7 million for the nine months ended September 30, 2021. The increase is primarily due to personnel costs related to reinstatement of furloughed employees.

~~Marketing and Sales~~

. Marketing and sales expenses increased by approximately $1.5 million, or 16.5%, from $9.2 million in the nine months ended September 30, 2020, to $10.7 million in the nine months ended September 30, 2021. Detection marketing and sales increased by approximately $1.1 million and Therapy marketing and sales increased by $0.4 million. The increases are primarily due to personnel costs including new hires, commissions on higher sales, and increased travel as compared to the nine months ended September 30, 2020 when travel was impacted by the

~~COVID-19~~

~~pandemic.~~

~~Table of Contents~~

~~General and Administrative~~

. General and administrative expenses increased by approximately $1.0 million, or 15.2%, from $6.5 million in the nine months ended September 30, 2020 to $7.5 million for the nine months ended September 30, 2021. The increase is primarily due to personnel costs related to reinstatement of furloughed employees, new hires, consulting costs, and costs associated with recruiting personnel across the organization.doubtful accounts.

Amortization and Depreciation.

Amortization and depreciation, which relates primarily to acquired intangible assets and depreciation of machinery and equipment, ~~increased by~~was approximately ~~$25,000, or 16.3% from $153,000~~$0.1 million for each of the ~~nine~~three months ended ~~September 30, 2020, to $178,000 for the nine months ended September 30,~~March 31, 2022 and 2021.

Table of Contents

Other Income and Expense: (in thousands)

~~Nine~~Three months ended ~~September 30, 2021~~March 31, 2022 and ~~2020:~~2021:

Nine months ended September 30,

   2021    2020    Change    Change %
Interest expense
   $ (141 )    $ (360 )    $ 219    (60.8 )%
Other income
   12    85    (73 )    (85.9 )%
Loss on extinguishment of debt
   (386 )    (341 )    (45 )    13.2 %
Loss on fair value of debentures
   —      (7,464 )    7,464    (100.0 )%








   $ (515)    $ (8,080 )    $ 7,565    (93.6 )%








Tax benefit (expense)
   $ —      $ (34 )    $ 34    (100.0 )%


	Three months ended March 31,
	2022			2021			Change $			Change %
Interest expense	$	(9	)	$	(112	)	$	103			(92.0	)%
Other income (expense)		(13	)		2			(15	)		(750.0	)%

	$	(22	)	$	(110	)	$	88			(80.0	)%

Tax expense	$	(1	)	$	—		$		(1)		0.0	%

Interest expense

. Interest expense decreased ~~$219,000,~~by approximately $0.1 million, or ~~60.8%~~92.0%, from ~~$360,000 in~~$0.1 million for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 to ~~$141,000~~approximately $9,000 for the ~~nine~~three months ended ~~September 30, 2021.~~March 31, 2022. The decrease iswas due to the ~~timing of termination of~~Company retiring the Loan ~~Agreement.~~agreement with Western Alliance Bank on April 27, 2021.

Other income

. Other ~~income decreased~~expense increased by approximately ~~$73,000,~~$15,000, or ~~85.9%~~750.0%, from ~~$85,000~~other income of $2,000 for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 to ~~$12,000~~other expense of $13,000 for the ~~nine~~three months ended ~~September 30, 2021.~~

~~Loss on extinguishment of debt:~~

The Company recorded a loss on extinguishment of approximately $386,000 related to the repayment and retirement of the Loan Agreement as of the nine months ended September 30, 2021. The loss on extinguishment was composed of approximately $140,000 for a prepayment fee, $122,000 for the unaccrued final payment, $65,000 termination, and other fees, and $58,000 for the unamortized and other closing costs from opening the loan. In March 2020 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 of unamortized and other closing costs.

~~Loss on fair value of debentures~~

. The Company recorded a loss of approximately $7.5 million in the nine months ended September 30, 2020, which reflected an increase in the fair value of the unsecured subordinated convertible debentures issued in December 2018 from $13.7 million as of December 31, 2019 to $21.2 million as of February 21, 2020. Upon the consummation of the forced conversion of the debentures, 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 nine-months ending September 30, 2020. As a result of the forced conversion there was no fair value adjustment for the nine months ended September 30, 2021.2022.

Tax expense

. Tax expense ~~decreased~~increased by approximately ~~$34,000, or 100%, from $34,000 for~~$1,000 due to an increase in the ~~nine months ended September 30, 2020~~deferred tax liability related to ~~$0 for the nine months ended September 30, 2021. The Company has approximately $98,000 in~~

~~non-income~~

~~related tax expense classified in operating expenses under ASU~~

~~2019-12~~

~~that had previously been classified here in tax expense. Tax expense includes state~~

~~non-income~~

~~and franchise-based taxes.~~goodwill.

3723

Table of Contents

Liquidity and Capital Resources

The Company believes that its cash and cash equivalents balance of ~~$35.8~~$29.7 million as of ~~September 30, 2021,~~March 31, 2022, and projected cash balances are sufficient to sustain operations ~~for~~through at least the next ~~twelve months following the filing of this Form~~

~~10-Q.~~

12 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

COVID-19

pandemic could affect ~~the Company’s~~our liquidity. The Company will continue to closely monitor its liquidity and the capital and credit markets.

The Company’s cash on hand as of September 30, 2021 includes proceeds from the March 2, 2021 underwritten public offering described below. On April 27, 2021, the Company repaid its obligations in the aggregate amount of $7,354,283 under and terminated the Loan Agreement entered into with the Bank on March 30, 2020 and amended on June 22, 2020 and the Company’s collateral securing the facility was released.

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 $12.3 million. The Company also entered into the ATM Facility with JMP Securities in March 2020 to provide for additional potential liquidity. The ATM facility provided for the sale of common stock having a value of up to $25.0 million. On December 17, 2020 the Company sold 470,704 shares of common stock under the ATM Facility for gross proceeds of approximately $6.6 million and net proceeds of approximately $6.1 million. As of December 31, 2020, $18.4 million in capacity remained under the ATM Facility. On March 2, 2021, the Company terminated the ATM Facility.

On March 2, 2021, the Company entered into an underwriting agreement with Guggenheim Securities, LLC, as representative of the several underwriters thereto, in connection with an underwritten public offering of 1,393,738 shares of the Company’s common stock at an offering price of $18.00 per share. The offering closed on March 5, 2021 for gross proceeds of approximately $25.1 million and net proceeds of approximately $23.2 million to the Company.

~~The~~ Company had net working ~~capital~~Capital of ~~$38.0~~$33.5 million ~~as of September 30, 2021.~~at March 31, 2022. The ratio of current assets to current liabilities ~~as of September 30, 2021~~at March 31, 2022 and December 31, ~~2020~~2021 was ~~3.53~~3.32 and ~~2.53~~3.36, respectively.


	For the nine months ended September 30,						For the three months ended March 31,
	2021			2020			2022			2021
	(in thousands)						(in thousands)
Net cash used for operating activities	$	(7,861	)	$	(6,083	)	$	(4,449	)	$	(3,563	)
Net cash used for investing activities		(450	)		(286	)		(161	)		(262	)
Net cash provided by financing activities		16,930			13,689			126			23,546

Increase in cash and equivalents	$	8,619		$	7,320
(Decrease) increase in cash and cash equivalents							$	(4,484	)	$	19,721

Net cash used for operating activities for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 was ~~$7.9~~$4.4 million, compared to ~~$6.1~~$3.6 million for the ~~nine~~three months ended ~~September 30, 2020.~~March 31, 2021. The net cash used for operating activities for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 resulted primarily ~~reflects~~from the Company’s net loss and working capital changes resulting from ~~decreases~~increases in accounts ~~payable~~receivable and ~~accrued expenses as well as an increase~~inventory, which increased in ~~accounts receivable~~order to

de-risk

supply chain elongation, offset by a decrease in prepaid and other ~~assets. iCAD expects~~assets and decreases in accounts payable and accrued expenses. We expect that net cash used for or provided by operating activities ~~may~~to fluctuate in future periods as a result of a number of factors, including fluctuations in ~~the Company’s~~our operating results, the timing of when ~~the Company recognizes~~we recognize revenue, collections of accounts receivable, inventory expansion due to supply chain risk, and the timing of other payments.

Net cash used for investing activities for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 was ~~$450,000,~~$161,000, compared to ~~$286,000~~$262,000 for the ~~nine~~three months ended ~~September 30, 2020.~~March 31, 2021. The net cash used for investing activities for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020 was~~is primarily for purchases of property and equipment.

Net cash provided by financing activities for the ~~nine~~three months ended ~~September 30,~~March 31, 2021 was ~~$16.9~~$0.1 million, compared to ~~$13.7~~$23.6 million for the ~~nine~~three months ended ~~September 30, 2020.~~March 31, 2021. Net cash provided by financing activities for the ~~nine~~three months ended ~~September 30, 2021 was primarily~~March 31, 2022 is due to cash of $126,000 from the issuance of common stock pursuant the Company’s stock option and employee stock purchase plans. Net cash provided by financing activities for the three months ended March 2,31, 2021 is from the underwritten public offering of 1,393,738 shares of the Company’s common stock at an offering price of $18.00 per share resulting in net proceeds of approximately $23.2 ~~million. This was offset by repayment of the Loan Agreement to the Bank. The company also received $0.9~~million and $0.3 million from the issuance of common stock pursuant the Company’s stock option and employee stock purchase plans.

3824

Table of Contents

common stock pursuant the Company’s stock option plan and $0.2 million for from the issuance of common stock pursuant the Employee Stock Purchase Plan. Net cash provided by financing activities for the nine months ended September 30, 2020 was $13.7 million primarily from the $12.3 million in net proceeds from the issuance of common stock and $7.0 million from the Loan Agreement with the Bank, offset by $4.6 million in repayment of the term loan with SVB and $2.0 million in repayment of the revolving loan with SVB.

Recent Accounting Pronouncements

See Note 131 to the Condensed Consolidated Financial Statements.

Item

3.3

Quantitative and Qualitative Disclosures about Market Risk

The Company believes that it is not subject to material foreign currency exchange rate fluctuations, as substantially all of its sales and expenses are denominated in the U.S. dollar. The Company does not hold derivative securities and has not entered into contracts embedded with derivative instruments, such as foreign currency and interest rate swaps, options, forwards, futures, collars or warrants, either to hedge existing risks or for speculative purposes.

Item

Controls and Procedures

The Company’s management, with the participation of its principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, as of ~~September 30, 2021,~~March 31, 2022, the principal executive officer and principal financial officer concluded that the Company’s disclosure controls and procedures (as defined in Rule

13a-15(e)

of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) were effective at a reasonable level of assurance.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected. The Company conducts periodic evaluations to enhance, where necessary, its controls and procedures.

The Company’s principal executive officer and principal financial officer conducted an evaluation of the Company’s internal control over financial reporting (as defined in Rule

13a-15(f)

of the Exchange Act) and have determined there are no changes in its internal controls over financial reporting during the quarter ended ~~September 30, 2021~~March 31, 2022 that have materially affected or which are reasonably likely to materially affect internal control over financial reporting.

3925

Table of Contents

PART II OTHER INFORMATION

Item

1A.

Risk Factors:

~~iCAD operates~~We operate in a changing environment that involves numerous known and unknown risks and uncertainties that could materially adversely affect ~~the Company’s~~our operations. In addition to the risk ~~factor~~factors below, factors that have affected ~~the~~our Company are described in Part I, Item 1A of ~~the Company’s~~our Annual Report on Form

10-K

for the year ended December 31, ~~2020~~2021 as filed with the SEC on March ~~15, 2021~~29, 2022 and are incorporated by reference herein.

~~iCAD~~

The Company expects the novel coronavirus

(COVID-19)

pandemic, including the emergence of new variants, to have a significant effect on the Company’s results of operations. In addition, itthe pandemic has resulted in significant financial market volatility, and its impact on the global economy appears to be significant. A continuation or worsening of the pandemic will have a material adverse impact on the Company’s business, results of operations and financial condition and on the market price of the Company’s common stock.

~~On March 12, 2020, the World Health Organization declared~~

~~COVID-19~~

~~to be a pandemic. In an effort to contain and mitigate the spread of the~~

~~COVID-19~~

pandemic, the United States, many countries in Europe, as well as Canada and China, have imposed unprecedented restrictions on travel, and there have been business closures and a substantial reduction in economic activity in countries that have had significant outbreaks of

~~COVID-19.~~

As a provider of devices and services to the health care industry, the Company’s operations have been materially ~~affected. Significant uncertainty remains as~~affected, and may continue to be impacted, by the COVID-19 pandemic. Beginning with the first quarter of 2020 through the first quarter of 2022, the COVID-19 pandemic has presented a number of challenges and risks for the Company’s business, including, but not limited to the ~~impact~~following: decreased product demand due to reduced numbers of in-person meetings with potential clients; potential clients’ singular focus on surging COVID-19 infection rates following the

~~COVID-19~~

emergence of the Omicron variant, causing attention to be diverted from purchasing decisions; pandemic-related public health impacts, including significant shifts in workforce availability and priorities, on customer, supplier, and iCAD’s business process; supply chain interruptions; disruptions to the Company’s clinical trials; challenges operating in a virtual work environment; impacts resulting from travel limitations and mobility restrictions; and other challenges presented by disruptions to the Company’s normal operations in response to the pandemic, as well as uncertainties regarding the duration and severity of the pandemic on the global economy and the Company’s operations, and on the ~~global economy as a whole. It is currently not possible to predict how long~~unpredictable and periodic emergence of new variants of the ~~pandemic will last or the time that it will take for economic activity to return to prior levels.~~ COVID-19 virus.

The

COVID-19

pandemic has resulted in significant financial market volatility and uncertainty. A continuing or worsening ~~of the levels~~level of market disruption and volatility ~~seen in~~observed since the ~~recent past~~start of the pandemic will have an adverse effect on the Company’s ability to access capital, on ~~the Company’s~~its business, results of operations and financial condition, and on the market price of the Company’s common stock. ~~The Company’s results for the quarter ending September 30, 2021 reflect a negative impact from the~~

~~COVID-19~~

~~pandemic due to some healthcare facilities’ additional focus on~~

~~COVID-19~~

~~and from the effect on our customers and potential customers of supply chain issues relating thereto.~~ Although the Company does not provide guidance to investors relating to ~~our~~the Company’s results of operations, the Company’s quarterly results for the quarter ending ~~December 31, 2021,~~June 30, 2022, and possibly future quarters, could reflect a continuing negative impact from the

COVID-19

pandemic for similar or additional reasons. ~~Depending upon the duration and severity of the pandemic, the effect on the Company’s results over the long term is uncertain.~~

The Company’s exposure to trade accounts receivable losses may increase if its customers are adversely affected by changes in healthcare laws, coverage, and reimbursement, economic pressures or uncertainty associated with local or global economic recessions, disruption associated with the current

COVID-19

pandemic, or other customer-specific factors. The Company has historically not experienced significant trade account receivable losses, but it is possible that there could be a material adverse impact from potential adjustments of the carrying amount of trade account receivables as hospitals’ cash flows are impacted by their response to the

COVID-19

pandemic.

Instability in geographies where the Company has operations and personnel or where the Company derives revenue could have a material adverse effect on the Company’s business, customers, operations and financial results.

Economic, civil, military and political uncertainty may arise or increase in regions where the Company operates or derives revenue. Further, countries from which the Company derives revenue may experience military action and/or civil and political unrest; may be subject to government export controls, economic sanctions, embargoes, or trade restrictions; and experience currency, inflation, and interest rate uncertainties. For the fiscal year ended 2021, approximately 8.6% of the Company’s revenue was derived from customers located in Europe, and approximately 39.0% of the Company’s export revenue was derived from customers located in Europe. In late February 2022, Russian military forces launched significant military action against Ukraine. Sustained conflict and disruption in the region is likely. The aggregate impact to Eastern Europe and Europe as a whole, as well as actions taken by other countries, including new and stricter sanctions by the United States, Canada, the United Kingdom, the European Union, and other countries and organizations against officials, individuals, regions, and industries in Russia, Belarus and Ukraine, and each country’s potential response to such sanctions, tensions and military actions, is not knowable at this time, and could have a material adverse effect on the Company, its business and operations. Any such material adverse effect from the conflict and enhanced sanctions activity may disrupt the Company’s sales to customers in the region. Prolonged unfavorable economic conditions or uncertainty may have an adverse effect on the Company’s sales and profitability.

4026

Table of Contents

Item

Exhibits


Exhibit No.		Description

~~3.1~~		~~Certificate of Incorporation, as amended (incorporated by reference to Exhibit 3.1 to the Quarterly Report on Form~~ ~~10-Q~~ ~~filed on August 6, 2021).~~

10.1		~~2016 Stock Incentive Plan, as amended (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form~~ ~~10-Q~~ ~~filed on August 6, 2021).~~

~~10.2~~		Employment Agreement, ~~dated August 4, 2021,~~entered into March 22, 2022 and effective March 1, 2022 by and between ~~iCAD, Inc.~~the Company and ~~Charles Carter~~Stacey Stevens (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed on ~~August 6, 2021).~~March 28, 2022)

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) Condensed Consolidated Balance Sheets as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, (ii) Condensed Consolidated Statements of Operations for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ (iii) Condensed Consolidated Statements of Cash Flows for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ (iv) ~~Condensed~~Consolidated Statements of Stockholders’ Equity for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and March 31, 2021 ~~and September 30, 2020~~ and (v) Notes to Condensed Consolidated Financial Statements.

104*		Cover Page Interactive Data File (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101).

*	Filed herewith

**	Furnished herewith

4127

Table of Contents

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


iCAD, Inc.
~~iCAD, Inc.~~
(Registrant)


Date: ~~November 10, 2021~~ May 11, 2022	By:
			/s/ Charles R. Carter
	Name:	~~By:~~		~~/s/~~ Charles R. Carter
		~~Name:~~		~~Charles R. Carter~~
		Title:		Chief Financial Officer (Principal Financial Officer)

4228


	(Unaudited)
	September 30,			December 31,
	2021			2020
Assets
Current assets:
Cash and cash equivalents	$	35,805		$	27,186
Trade accounts receivable, net of allowance for doubtful accounts of $87 in 2021 and $111 in 2020		11,792			10,027
Inventory, net		3,290			3,144
Prepaid expenses and other current assets		1,989			1,945

Total current assets		52,876			42,302

Property and equipment, net of accumulated depreciation of $7,020 in 2021 and $6,778 in 2020		925			744
Operating lease assets		1,176			1,758
Other assets		1,657			1,527
Intangible assets, net of accumulated amortization of $8,667 in 2021 and $8,494 in 2020		741			889
Goodwill		8,362			8,362

Total assets	$	65,737		$	55,582

Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,651		$	2,869
Accrued and other expenses		5,523			7,039
Lease payable — current portion		856			726
Deferred revenue		5,930			6,117

Total current liabilities		14,960			16,751

Lease payable, long-term portion		431			1,075
Notes payable, long-term portion		—			6,960
Deferred revenue, long-term portion		520			267
Deferred tax		5			4

Total liabilities		15,916			25,057

Commitments and Contingencies	0			0
Stockholders’ equity:
Preferred stock, $0.01 par value: authorized 1,000,000 shares; NaN issued.		0—			0—
Common stock, $0.01 par value: authorized 60,000,000 shares; issued 25,287,837 as of September 30, 2021 and 23,693,735 as of December 31, 2020.
Outstanding 25,102,006 as of September 30, 2021 and 23,508,575 as of December 31, 2020.		253			236
Additional paid-in capital		300,017			273,639
Accumulated deficit		(249,034	)		(241,935	)
Treasury stock at cost, 185,831 shares in 2021 and 2020		(1,415	)		(1,415	)

Total stockholders’ equity		49,821			30,525

Total liabilities and stockholders’ equity	$	65,737		$	55,582


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Revenue:
Products	$	6,320		$	4,538		$	16,429		$	11,220
Service and supplies		3,041			2,591			9,401			8,027

Total revenue		9,361			7,129			25,830			19,247
Cost of revenue:
Products		1,807			1,345			4,592			2,899
Service and supplies		763			667			2,462			2,169
Amortization and depreciation		79			92			237			287

Total cost of revenue		2,649			2,104			7,291			5,355

Gross profit		6,712			5,025			18,539			13,892

Operating expenses:
Engineering and product development		2,285			1,849			6,745			5,938
Marketing and sales		3,886			2,979			10,739			9,218
General and administrative		2,658			1,834			7,461			6,476
Amortization and depreciation		64			52			178			153

Total operating expenses		8,893			6,714			25,123			21,785

Loss from operations		(2,181	)		(1,689	)		(6,584	)		(7,893	)
Interest expense		0			(115	)		(141	)		(360	)
Other income		5			10			12			85
Loss on extinguishment of debt		0			—			(386	)		(341	)
Loss on fair value of convertible debentures		—			—			—			(7,464	)

Other income (expense), net		5			(105	)		(515	)		(8,080	)
Loss before income tax expense		(2,176	)		(1,794	)		(7,099	)		(15,973	)

Tax expense		—			(3	)		—			(34	)

Net loss and comprehensive loss	$	(2,176	)	$	(1,797	)	$	(7,099	)	$	(16,007	)

Net loss per share:
Basic	$	(0.09	)	$	(0.08	)	$	(0.29	)	$	(0.73	)

Diluted	$	(0.09	)	$	(0.08	)	$	(0.29	)	$	(0.73	)

Weighted average number of shares used in computing loss per share:
Basic		25,053			23,173			24,662			21,827

Diluted		25,053			23,173			24,662			21,827


	For the Nine Months ended September 30,
	2021			2020
	(in thousands)
Cash flow from operating activities:
Net loss	$	(7,099	)	$	(16,007	)
Adjustments to reconcile net loss to net cash used for operating activities:
Amortization		176			234
Depreciation		242			206
Bad debt provision		(25	)		80
Stock-based compensation		2,102			2,542
Amortization of debt discount and debt costs		17			65
Loss on extinguishment of debt		386			341
Deferred tax expense		—			1
Change in fair value of convertible debentures		—			7,464
Changes in operating assets and liabilities:
Accounts receivable		(1,827	)		1,151
Inventory		(146	)		(535	)
Prepaid and other assets		493			69
Accounts payable		(217	)		96
Accrued expenses		(2,028	)		(2,322	)
Deferred revenue		65			532

Total adjustments		(762	)		9,924

Net cash used for operating activities		(7,861	)		(6,083	)

Cash flow from investing activities:
Additions to patents, technology and other		(24	)		(11	)
Additions to property and equipment		(426	)		(275	)

Net cash used for investing activities		(450	)		(286	)

Cash flow from financing activities:
Issuance of common stock pursuant to stock option plans		933			415
Issuance of common stock pursuant to Employee Stock Purchase Plan		190			209
Proceeds from issuance of common stock, net		23,229			12,174
Taxes paid related to restricted stock issuance		(59	)		(225	)
Principal payments of capital lease obligations		—			(4,638	)
Repayment of debt financing		(7,363	)		775
Repayment on line of credit		—			(2,000	)
Proceeds from notes payable		—			6,957
Debt issuance costs		—			22

Net cash provided by financing activities		16,930			13,689

Increase in cash and equivalents		8,619			7,320
Cash and cash equivalents, beginning of period		27,186			15,313

Cash and cash equivalents, end of period	$	35,805		$	22,633

Supplemental disclosure of cash flow information:
Interest paid	$	92		$	127

Taxes paid	$	—		$	34

Issuance of common stock upon conversion of debentures		—			21,164

Right-of-use assets obtained in exchange for new operating lease liabilities	$	—		$	69


	Common Stock				Additional Paid-in Capital
	Number of Shares Issued		Par Value		Additional Paid-in Capital			Accumulated Deficit			Treasury Stock			Stockholders’ 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		43,831		1		(60	)		—			—			(59	)
Issuance of common stock, net		1,393,738		14		23,215			—			—			23,229
Issuance of common stock pursuant to stock option plans		138,450		2		931			—			—			933
Issuance of common stock pursuant Employee Stock Purchase Plan		17,412		—		190			—			—			190
Stock-based compensation		—		—		2,102			—			—			2,102
Net loss		—		—		—			(7,099	)		—			(7,099	)

Balance at September 30, 2021		25,287,837	$	253	$	300,017		$	(249,034	)	$	(1,415	)	$	49,821


	Common Stock				Additional Paid-in Capital
	Number of Shares Issued		Par Value		Additional Paid-in Capital			Accumulated Deficit			Treasury Stock			Stockholders’ 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, net		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


	Three months ended September 30, 2021
	Reportable Segments
	Detection		Therapy		Total
Major Goods/Service Lines
Products	$	4,454	$	2,358	$	6,812
Service contracts		1,554		398		1,952
Supply and source usage agreements		—		562		562
Professional services		—		35		35
Other		—		—		—

	$	6,008	$	3,353	$	9,361
Timing of Revenue Recognition
Goods transferred at a point in time	$	4,454	$	2,393	$	6,847
Services transferred over time		1,554		960		2,514

	$	6,008	$	3,353	$	9,361
Sales Channels
Direct sales force	$	3,629	$	1,403	$	5,032
OEM partners		2,379		—		2,379
Channel partners		—		1,950		1,950

	$	6,008	$	3,353	$	9,361

	Nine months ended September 30, 2021
	Reportable Segments
	Detection		Therapy		Total
Major Goods/Service Lines

Products	$	11,778	$	6,580	$	18,358
Service contracts		4,737		1,109		5,846
Supply and source usage agreements		—		1,572		1,572
Professional services		—		54		54
Other		—		—		—

	$	16,515	$	9,315	$	25,830

Timing of Revenue Recognition
Goods transferred at a point in time	$	11,778	$	6,633	$	18,411
Services transferred over time		4,737	$	2,682		7,419

	$	16,515	$	9,315	$	25,830
Sales Channels
Direct sales force	$	10,691	$	3,632	$	14,323
OEM partners		5,824		—		5,824
Channel partners		—		5,683		5,683

	$	16,515	$	9,315	$	25,830


	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


	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


Contract balances
	Balance at		Balance at
	September 30, 2021		December 31, 2020
Receivables, which are included in ‘Trade accounts receivable’	$	11,792	$	10,027
Current contract assets, which are included in “Prepaid and other assets”		658		481
Non-current contract assets, which are included in “other assets”		1,602		1,434
Contract liabilities, which are included in “Deferred revenue”		6,450		6,384


Contract liabilities	September 30, 2021		December 31, 2020

Short term	$	5,930	$	6,117
Long term		520		267

Total	$	6,450	$	6,384


	Nine Months Ended September 30, 2021

Balance at beginning of period	$	6,384
Deferral of revenue		9,761
Recognition of deferred revenue		(9,695	)

Balance at end of period	$	6,450


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2021			2020			2021			2020
Net loss	$	(2,176	)	$	(1,797	)	$	(7,099	)	$	(16,007	)

Shares used in the calculation of basic and diluted net loss per share		25,053			23,173			24,662			21,827

Diluted shares used in the calculation of net loss per share		25,053			23,173			24,662			21,827

Net loss per share—basic and diluted	$	(0.09	)	$	(0.08	)	$	(0.29	)	$	(0.73	)


	As of September 30,

	2021		2020

Stock options		2,509,511		1,971,704
Restricted stock		1,750		29,166

Total		2,511,261		2,000,870


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
Probability of default event 1		0.45	%		N/A
Utilization of Forced Conversion (if available) 1		100.00	%		100.00	%
Exercise of Default Redemption (if available) 1		100.00	%		N/A
Effective discount rate 1		18.52	%		N/A


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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020

Cash interest expense	$	0	$	94	$	141	$	232
Interest on convertible debentures		—		—		—		49
Accrual of notes payable final payment		—		8		—		47
Amortization of debt costs		—		13		—		32

Total interest expense	$	0	$	115	$	141	$	360


Lease Cost	Classification	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021
Operating lease cost—Right of Use Asset	Operating expenses	$	214	$	649
Operating lease cost—Variable	Operating expenses		63	$	127

Total		$	277	$	776


	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021
Cash paid from operating cash flows for operating leases	$	230	$	581


As of September 30, 2021:	Operating Leases

2021		229
2022		899
2023		211
2024		5

Total lease payments		1,344
Less: imputed interest		(57	)

Total lease liabilities		1,287
Less: current portion of lease liabilities		(856	)

Long-term lease liabilities	$	431


	As of September 30,

Aggregate intrinsic value	2021		2020
Stock options	$	8,765	$	6,679
Restricted stock		19		257


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


	Three Months Ended March 31, 2022
Cash paid from operating cash flows for operating leases	$	229

	As of March 31, 2022
Weighted-average remaining lease term of operating leases (in year)		1.02
Weighted-average discount rate for operating leases		5.5	%


	Three Months Ended March 31,
	2022	2021
Average risk-free interest rate	1.46%	0.20%
Expected dividend yield	NaN	NaN
Expected life	3.5 years	3.5 years
Expected volatility	66.3% to 69.5%	66.0% to 66.0%
Weighted average exercise price	$5.22	$18.00
Weighted average fair value	$2.56	$8.37

	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 September 30, 2021		—			8,362			—			8,362

Large Accelerated filer

Accelerated filer

Non-accelerated
filer

Smaller reporting company

Emerging growth company