Quarterly Report (10-q)
May 04 2021 - 8:19AM
Edgar (US Regulatory)
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icad:TwoZeroOneNineEmployeeStockPurchasePlanMember 2019-12-01 2019-12-31 0000749660 icad:VersaVueSoftwareAndDynaCadProductAndRelatedAssetsMember icad:AssetPurchaseAgreementMember 2016-12-31 0000749660 icad:VersaVueSoftwareAndDynaCadProductAndRelatedAssetsMember icad:AssetPurchaseAgreementMember 2017-06-30 0000749660 us-gaap:MeasurementInputSharePriceMember us-gaap:ConvertibleDebtMember 2020-02-21 0000749660 us-gaap:MeasurementInputConversionPriceMember us-gaap:ConvertibleDebtMember 2020-02-21 0000749660 us-gaap:MeasurementInputExpectedTermMember us-gaap:ConvertibleDebtMember 2020-02-21 0000749660 us-gaap:MeasurementInputUtilizationRateMember us-gaap:ConvertibleDebtMember 2020-02-21 0000749660 us-gaap:SubsequentEventMember 2021-04-27 2021-04-27 0000749660 us-gaap:SubsequentEventMember 2021-04-13 2021-04-13 0000749660 icad:VersaVueSoftwareAndDynaCadProductAndRelatedAssetsMember icad:AssetPurchaseAgreementMember us-gaap:SubsequentEventMember 2021-04-13 0000749660 us-gaap:CommonStockMember 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SECURITIES AND EXCHANGE COMMISSION
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☒
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended March 31, 2021
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☐
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from
to
Commission file number
001-09341
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of
incorporation or organization)
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98 Spit Brook Road, Suite 100, Nashua, NH
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(Address of principal executive offices)
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(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
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Common Stock, $0.01 par value
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The Nasdaq Stock Market LLC
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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.
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Large Accelerated filer
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☐
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Accelerated filer
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☐
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Non-accelerated
filer
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☒
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Smaller reporting company
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☒
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Emerging growth company
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☐
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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
April 30, 2021
, there were
24,983,491 shares outstanding of the registrant’s Common Stock, $0.01 par value.
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Page
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3
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4
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5
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6
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7
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30
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40
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40
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41
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41
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42
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43
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44
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iCAD, INC. AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In thousands except for share data)
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Assets
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Cash and cash equivalents
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$
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46,907
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$
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27,186
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Trade accounts receivable, net of allowance for doubtful accounts of $111 in 2021 and $111 in 2020
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10,649
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10,027
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2,498
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3,144
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Prepaid expenses and other current assets
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2,188
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1,945
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62,242
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42,302
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Property and equipment, net of accumulated depreciation of $6,854 in 2021 and $6,778 in 2020
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930
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744
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1,565
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1,758
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1,564
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1,527
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Intangible assets, net of accumulated amortization of $8,552 in 2021 and $8,494 in 2020
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831
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889
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8,362
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8,362
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$
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75,494
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$
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55,582
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Liabilities and Stockholders’ Equity
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$
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1,251
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$
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2,869
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Accrued and other expenses
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5,819
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7,039
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Notes payable - current portion
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269
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—
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Lease payable - current portion
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847
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726
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5,957
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6,117
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Total current liabilities
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14,143
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16,751
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Lease payable, long-term portion
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860
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1,075
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Notes payable, long-term portion
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6,703
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6,960
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Deferred revenue, long-term portion
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420
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267
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4
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4
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22,130
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25,057
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Commitments and Contingencies (Note 7)
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Preferred stock, $0.01 par value: authorized 1,000,000 shares; none
issued
.
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—
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—
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Common stock, $0.01 par value: authorized 30,000,000 shares; issued 25,143,432
a
s of March 31, 2021 and 23,693,735 as of December 31, 2020
.
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Outstanding 24,957,601 as of March 31, 2021 and 23,508,575 as of December 31, 2020
.
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251
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236
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Additional
paid-in
capital
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298,106
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273,639
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(243,578
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)
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(241,935
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)
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Treasury stock at cost, 185,831 shares in 2021 and 2020
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(1,415
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)
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(1,415
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)
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Total stockholders’ equity
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53,364
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30,525
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Total liabilities and stockholders’ equity
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$
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75,494
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$
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55,582
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See accompanying notes to condensed consolidated financial statements.
iCAD, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(In thousands except for per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,557
|
|
|
$
|
3,795
|
|
|
|
|
|
3,087
|
|
|
|
2,756
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,644
|
|
|
|
6,551
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,409
|
|
|
|
1,017
|
|
|
|
|
|
867
|
|
|
|
927
|
|
Amortization and depreciation
|
|
|
79
|
|
|
|
97
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,355
|
|
|
|
2,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,289
|
|
|
|
4,510
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineering and product development
|
|
|
2,192
|
|
|
|
2,211
|
|
|
|
|
|
3,424
|
|
|
|
3,608
|
|
General and administrative
|
|
|
2,151
|
|
|
|
2,532
|
|
Amortization and depreciation
|
|
|
55
|
|
|
|
52
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,822
|
|
|
|
8,403
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,533
|
)
|
|
|
(3,893
|
)
|
|
|
|
|
|
|
|
|
(112
|
)
|
|
|
(130
|
)
|
|
|
|
|
2
|
|
|
|
42
|
|
Loss on extinguishment of debt
|
|
|
—
|
|
|
|
(341
|
)
|
Loss on fair value of convertible debentures
|
|
|
—
|
|
|
|
(7,464
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(110
|
)
|
|
|
(7,893
|
)
|
Loss before income tax expense
|
|
|
(1,643
|
)
|
|
|
(11,786
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
|
(26
|
)
|
|
|
|
|
|
|
|
|
|
|
Net loss and comprehensive loss
|
|
$
|
(1,643
|
)
|
|
$
|
(11,812
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.07
|
)
|
|
$
|
(0.59
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.07
|
)
|
|
$
|
(0.59
|
)
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares used in computing loss per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
23,929
|
|
|
|
20,175
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,929
|
|
|
|
20,175
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
iCAD, INC. AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Cash flow from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(1,643
|
)
|
|
$
|
(11,812
|
)
|
Adjustments to reconcile net loss to net cash used for operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
58
|
|
|
|
78
|
|
|
|
|
|
76
|
|
|
|
71
|
|
|
|
|
|
—
|
|
|
|
119
|
|
|
|
|
|
935
|
|
|
|
464
|
|
Amortization of debt discount and debt costs
|
|
|
12
|
|
|
|
40
|
|
Loss on extinguishment of debt
|
|
|
—
|
|
|
|
341
|
|
|
|
|
|
—
|
|
|
|
1
|
|
Change in fair value of convertible debentures
|
|
|
—
|
|
|
|
7,464
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
(622
|
)
|
|
|
2,610
|
|
|
|
|
|
647
|
|
|
|
149
|
|
|
|
|
|
(89
|
)
|
|
|
(72
|
)
|
|
|
|
|
(1,617
|
)
|
|
|
(317
|
)
|
|
|
|
|
(1,313
|
)
|
|
|
(439
|
)
|
|
|
|
|
(7
|
)
|
|
|
(113
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,920
|
)
|
|
|
10,396
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used for operating activities
|
|
|
(3,563
|
)
|
|
|
(1,416
|
)
|
|
|
|
|
|
|
|
|
|
|
Cash flow from investing activities:
|
|
|
|
|
|
|
|
|
Additions to patents, technology and other
|
|
|
—
|
|
|
|
(1
|
)
|
Additions to property and equipment
|
|
|
(262
|
)
|
|
|
(155
|
)
|
|
|
|
|
|
|
|
|
|
|
Net cash used for investing activities
|
|
|
(262
|
)
|
|
|
(156
|
)
|
|
|
|
|
|
|
|
|
|
|
Cash flow from financing activities:
|
|
|
|
|
|
|
|
|
Issuance of common stock pursuant to stock option plans
|
|
|
270
|
|
|
|
196
|
|
Issuance of common stock pursuant to Employee Stock Purchase Plan
|
|
|
47
|
|
|
|
—
|
|
Proceeds from issuance of common stock, net
|
|
|
23,229
|
|
|
|
—
|
|
Principal repayment of debt financing
|
|
|
—
|
|
|
|
(4,638
|
)
|
Repayment on line of credit
|
|
|
—
|
|
|
|
(2,000
|
)
|
Proceeds from notes payable
|
|
|
—
|
|
|
|
7,000
|
|
|
|
|
|
—
|
|
|
|
(43
|
)
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by financing activities
|
|
|
23,546
|
|
|
|
515
|
|
|
|
|
|
|
|
|
|
|
|
Increase
in cash and equivalents
|
|
|
19,721
|
|
|
|
(1,057
|
)
|
Cash and cash equivalents, beginning of period
|
|
|
27,186
|
|
|
|
15,313
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
46,907
|
|
|
$
|
14,256
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
$
|
92
|
|
|
$
|
122
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
—
|
|
|
$
|
26
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common stock upon conversion of debentures
|
|
|
—
|
|
|
|
21,164
|
|
|
|
|
|
|
|
|
|
|
|
assets obtained in exchange for new operating lease liabilities
|
|
$
|
—
|
|
|
$
|
69
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated financial statements.
Consolidated Statements of Stockholders’ Equity Year to Date
(In thousands except shares)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2020
|
|
|
23,694,406
|
|
|
$
|
236
|
|
|
$
|
273,639
|
|
|
$
|
(241,935
|
)
|
|
(1,415
|
)
|
|
$
|
30,525
|
|
Issuance of common stock relative to vesting of restricted stock
|
|
|
20,000
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Issuance of common stock, net
|
|
|
1,393,738
|
|
|
|
14
|
|
|
|
23,215
|
|
|
|
—
|
|
|
|
—
|
|
|
|
23,229
|
|
Issuance of common stock pursuant to stock option plans
|
|
|
28,934
|
|
|
|
1
|
|
|
|
270
|
|
|
|
—
|
|
|
|
—
|
|
|
|
271
|
|
Issuance of common stock pursuant Employee Stock Purchase Plan
|
|
|
6,354
|
|
|
|
—
|
|
|
|
47
|
|
|
|
—
|
|
|
|
—
|
|
|
|
47
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
935
|
|
|
|
—
|
|
|
|
—
|
|
|
|
935
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,643
|
)
|
|
|
—
|
|
|
|
(1,643
|
)
|
Balance at March 31, 2021
|
|
|
25,143,432
|
|
|
$
|
251
|
|
|
$
|
298,106
|
|
|
$
|
(243,578
|
)
|
|
$
|
(1,415
|
)
|
|
$
|
53,364
|
|
Consolidated Statements of Stockholders’ Equity Quarter to Date
(In thousands except shares)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2019
|
|
|
19,546,151
|
|
|
$
|
196
|
|
|
$
|
230,615
|
|
|
$
|
(224,325
|
)
|
|
$
|
(1,415
|
)
|
|
|
5,071
|
|
Issuance of common stock relative to vesting of restricted stock
|
|
|
23,500
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Issuance of common stock pursuant to stock option plans
|
|
|
36,799
|
|
|
|
1
|
|
|
|
195
|
|
|
|
—
|
|
|
|
—
|
|
|
|
196
|
|
Issuance of stock upon conversion of Debentures
|
|
|
1,819,466
|
|
|
|
18
|
|
|
|
21,146
|
|
|
|
—
|
|
|
|
—
|
|
|
|
21,164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
464
|
|
|
|
|
|
|
|
|
|
|
|
464
|
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(11,812
|
)
|
|
|
—
|
|
|
|
(11,812
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2020
|
|
|
21,425,916
|
|
|
$
|
215
|
|
|
$
|
252,420
|
|
|
$
|
(236,137
|
)
|
|
$
|
(1,415
|
)
|
|
|
15,083
|
|
Notes to Condensed Consolidated Financial Statements:
Note 1 – Basis of Presentation and Significant Accounting Policies
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”). 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 March 31, 2021, the results of operations of the Company for the three -month periods ended March 31, 2021 and 2020, cash flows of the Company for the three-month periods ended March 31, 2021 and 2020, and stockholders’ equity for the Company for the three-month periods ended March 31, 2021 and 2020.
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 filed with the SEC on March 15, 2020, as amended on April 30, 2021. The results for the three -month period ended March 31, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2021, or any future period.
The Company reports the results of two segments: Cancer Detection (“Detection”) and Cancer Therapy (“Therapy”). The Detection segment consists of advanced image analysis and workflow products. The Therapy segment consists of radiation therapy (“Axxent”) products.
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, imposed unprecedented restrictions on travel, and there have been business closures and reductions 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
and social distancing orders as well as uncertainty in the market. 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.
It is currently not possible to predict the duration of the pandemic or the time needed 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 significant 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 of market disruption and volatility seen in the recent past will have an adverse effect on the Company’s ability to access capital, on its business, results of operations and financial condition, and on the market price of its common stock.
The Company’s results for the quarter ending March 31, 2021 reflect a negative impact from the
COVID-19
pandemic due to some healthcare facilities’ additional focus on
COVID-19.
Although the Company does not provide guidance to investors relating to its future results of operations, its results for the quarter ending June 30, 2021, and possibly future quarters, could reflect a continued negative impact from the
COVID-19
pandemic for similar 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 any material impact to trade accounts receivable losses in the quarter ended March 31, 2021, 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 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 hospitals’ cash flows are impacted by their response to the
COVID-19
pandemic.
Recently Adopted Accounting Pronouncements
There are no significant recently adopted accounting pronouncements. For a full list of the Company’s response to all relevant recent accounting pronouncements, please refer to Note 13 below.
Revenue is recognized wh
e
n 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.
Disaggregation of Revenue
The following tables presents the Company’s revenues disaggregated by major good or service line, timing of revenue recognition, and sales channel, reconciled to its reportable segments (in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Major Goods/Service Lines
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,161
|
|
|
$
|
2,103
|
|
|
$
|
6,264
|
|
|
|
|
|
1,558
|
|
|
|
340
|
|
|
|
1,898
|
|
Supply and source usage agreements
|
|
|
—
|
|
|
|
481
|
|
|
|
481
|
|
|
|
|
|
—
|
|
|
|
1
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,719
|
|
|
$
|
2,925
|
|
|
$
|
8,644
|
|
Timing of Revenue Recognition
|
|
|
|
|
|
|
|
|
|
|
|
|
Goods transferred at a point in time
|
|
$
|
4,161
|
|
|
$
|
2,104
|
|
|
$
|
6,265
|
|
Services transferred over time
|
|
|
1,558
|
|
|
|
821
|
|
|
|
2,379
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,719
|
|
|
$
|
2,925
|
|
|
$
|
8,644
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,875
|
|
|
$
|
674
|
|
|
$
|
4,549
|
|
|
|
|
|
1,844
|
|
|
|
—
|
|
|
|
1,844
|
|
|
|
|
|
—
|
|
|
|
2,251
|
|
|
|
2,251
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,719
|
|
|
$
|
2,925
|
|
|
$
|
8,644
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Major Goods/Service Lines
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,100
|
|
|
$
|
1,346
|
|
|
$
|
4,446
|
|
|
|
|
|
1,347
|
|
|
|
347
|
|
|
|
1,694
|
|
Supply and source usage agreements
|
|
|
—
|
|
|
|
371
|
|
|
|
371
|
|
|
|
|
|
—
|
|
|
|
11
|
|
|
|
11
|
|
|
|
|
|
29
|
|
|
|
—
|
|
|
|
29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,476
|
|
|
$
|
2,075
|
|
|
$
|
6,551
|
|
Timing of Revenue Recognition
|
|
|
|
|
|
|
|
|
|
|
|
|
Goods transferred at a point in time
|
|
$
|
3,129
|
|
|
$
|
1,383
|
|
|
$
|
4,512
|
|
Services transferred over time
|
|
|
1,347
|
|
|
|
692
|
|
|
|
2,039
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,476
|
|
|
$
|
2,075
|
|
|
$
|
6,551
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,172
|
|
|
$
|
1,469
|
|
|
$
|
3,641
|
|
|
|
|
|
2,304
|
|
|
|
—
|
|
|
|
2,304
|
|
|
|
|
|
—
|
|
|
|
606
|
|
|
|
606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,476
|
|
|
$
|
2,075
|
|
|
$
|
6,551
|
|
Product revenue consists of sales of cancer detection products, cancer therapy systems, cancer therapy applicators (including disposable applicators) and other accessories that are typically shipped with a cancer therapy system. The Company transfers control and recognizes a sale when the product is shipped from the manufacturing or warehousing facility to the customer.
The Company sells service contracts in which it provides professional services, including product installations, maintenance, training, and service repairs, and in certain cases leases equipment, to hospitals, imaging centers, radiology practices, radiation oncologists and treatment centers. These contracts represent separate performance obligations to 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 and Source Usage Agreements.
Revenue from supply and 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 to the Company. The Company allocates revenue to each performance obligation based on the SSP.
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 revenue consists primarily of miscellaneous products and services. The Company transfers control and recognizes a sale when the product is shipped from the manufacturing or warehousing facility to the customer or the installation services are performed.
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).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables, which are included in ‘Trade accounts receivable’
|
|
$
|
10,649
|
|
|
$
|
10,027
|
|
Current contract assets, which are included in “Prepaid and other assets”
|
|
|
701
|
|
|
|
481
|
|
Non-current
contract assets, which are included in “other assets”
|
|
|
1,478
|
|
|
|
1,434
|
|
Contract liabilities, which are included in “Deferred revenue”
|
|
|
6,377
|
|
|
|
6,384
|
|
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’s accounts receivable from contracts with customers, net of allowance for doubtful accounts, was $10.6 million and $10.0 million as of March 31, 2021 and December 31, 2020, respectively.
The Company records net contract assets or contract liabilities on a
basis. The Company records a contract asset for unbilled revenue when the Company’s performance is in excess of amounts billed or 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 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 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 bill for in more than one year.
Contract liabilities, or deferred revenue from contracts with customers, is primarily composed of fees related to long-term service arrangements, which are generally billed 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 March 31, 2021 and December 31, 2020 is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,957
|
|
|
$
|
6,117
|
|
|
|
|
|
420
|
|
|
|
267
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,377
|
|
|
$
|
6,384
|
|
|
|
|
|
|
|
|
|
|
|
Changes in deferred revenue from contracts with customers were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
Balance at beginning of period
|
|
$
|
6,384
|
|
|
|
|
|
3,259
|
|
Recognition of deferred revenue
|
|
|
(3,266
|
)
|
|
|
|
|
|
|
|
|
|
$
|
6,377
|
|
|
|
|
|
|
|
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):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares used in the calculation of basic and diluted net loss per share
|
|
|
23,929
|
|
|
|
20,175
|
|
|
|
|
|
|
|
|
|
|
|
Diluted shares used in the calculation of net loss per share
|
|
|
23,929
|
|
|
|
20,175
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per share - basic and diluted
|
|
$
|
(0.07
|
)
|
|
$
|
(0.59
|
)
|
|
|
|
|
|
|
|
|
|
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,246,776
|
|
|
|
1,747,363
|
|
|
|
|
|
31,654
|
|
|
|
74,492
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,278,430
|
|
|
|
1,821,855
|
|
|
|
|
|
|
|
|
|
|
|
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 March 31, 2021 and December 31, 2020.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,305
|
|
|
$
|
1,538
|
|
|
|
|
|
194
|
|
|
|
76
|
|
|
|
|
|
1,238
|
|
|
|
1,774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,737
|
|
|
|
3,388
|
|
|
|
|
|
(239
|
)
|
|
|
(244
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,498
|
|
|
$
|
3,144
|
|
|
|
|
|
|
|
|
|
|
|
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.
The Loan Agreement was amended effective June 16, 2020. The Loan Agreement, as amended, requires the Company to either (i) meet a minimum revenue covenant based on certain testing periods (to be agreed upon and set in good faith by the Company and the Bank) or (ii) maintain a ratio of unrestricted cash at the Bank to aggregate indebtedness owed to the Bank of at least 1.25 to 1.00 (the “Unrestricted Cash Covenant”). In accordance with the amendment, the Company and the Bank agreed that if there is not
revenue covenant in place, the Company shall, at all times, be required to comply with the Unrestricted Cash Covenant. As of March 31, 2021, the Company was in compliance with the Unrestricted Cash Covenant
.
If at any point the Company is not in compliance with certain covenants under the Loan Agreement and is unable to obtain an amendment or waiver, such noncompliance may result in an event of default under the Loan Agreement, which could permit acceleration of the outstanding indebtedness and require the Company to repay such indebtedness before the scheduled due date. The Company was required, periodically in the past, to seek modifications from its prior lender to avoid
non-compliance
with its earlier covenants.
Interest 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 March 31, 2020 was 3.25%.
The Company has the option to prepay all, but not less than all, of the Term Loan advanced by the Bank under the Loan Agreement. The Company prepayment is subject to payment of (1) all outstanding principal of the Term Loan plus accrued and unpaid interest thereon through the prepayment date, (2) the final payment ($122,500 or 1.75% of the original loan amount), (3) a 2% of principal if prepaid after March 30, 2021 but before June 30, 2022, or 1% of principal if prepaid after March 30, 2022) plus (4) all other obligations that are due and payable, including the Bank’s expenses and interest at the default rate with respect to any past due amounts.
Obligations to the Bank under the Loan Agreement are secured by a first priority security interest in the Company’s assets, except for certain permitted liens that have priority to the Bank’s security interest by operation of law.
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.
The maturity date of the revolving loan is March 30, 2022 and there was no outstanding amount as of March 31, 2021.
On April 27, 2021, the Company repaid its obligations in the aggregate amount of $7,354,283 under and terminated the Loan Agreement with the Bank, and its collateral securing the facility was released.
(b) Loan and Security Agreement – Silicon Valley Bank
On August 7, 2017, the Company entered into a Loan and Security Agreement, which has since been 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.
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.
(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.
The Company notes that the key inputs to the valuation models that were utilized to estimate the fair value of the Convertible Debentures included:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7.77
|
|
|
$
|
11.64
|
|
|
|
|
|
4.00
|
|
|
|
4.00
|
|
|
|
|
|
1.97
|
|
|
|
0.00
|
|
|
|
|
|
49.00
|
%
|
|
|
N/A
|
|
|
|
|
|
1.57
|
%
|
|
|
N/A
|
|
Probability of default event
|
|
|
0.45
|
%
|
|
|
N/A
|
|
Utilization of Forced Conversion (if available)
|
|
|
100.00
|
%
|
|
|
100.00
|
%
|
Exercise of Default Redemption (if available)
|
|
|
100.00
|
%
|
|
|
N/A
|
|
|
|
|
|
18.52
|
%
|
|
|
N/A
|
|
|
1
|
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.
The fair value and principal value of the Convertible Debentures as of December 31, 2019 and the Conversion Date was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair value, in accordance with fair value option
|
|
$
|
13,642
|
|
|
$
|
21,164
|
|
|
|
|
|
|
|
|
|
|
|
Principal value outstanding
|
|
$
|
6,970
|
|
|
$
|
6,970
|
|
|
|
|
|
|
|
|
|
|
|
t
he 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
Future principal, interest payments, and final payment related to the Loan Agreement are as follows (in thousands) as of March 31, 2021:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
281
|
|
|
|
|
|
3,224
|
|
|
|
|
|
3,636
|
|
|
|
|
|
712
|
|
|
|
|
|
|
|
|
|
|
$
|
7,853
|
|
The following amounts are included in interest expense in the Company’s consolidated statement of operations for the three months ended March 31, 2021 and 2020 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
92
|
|
|
$
|
43
|
|
Interest on convertible debentures
|
|
|
—
|
|
|
|
49
|
|
Accrual of notes payable final payment
|
|
|
7
|
|
|
|
31
|
|
Amortization of debt costs
|
|
|
13
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
112
|
|
|
$
|
130
|
|
|
|
|
|
|
|
|
|
|
|
Note 5 – Lease Commitments
Under ASC 842, “Leases” (“ASC 842”), the Company determines if an arrangement contains a lease at inception. A lease is a contract, or part of a contract, that conveys the right to control the use of identified property, plant or equipment (i.e., an identified asset) for a period of time in exchange for consideration. Leases are classified as either operating leases or financing 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 appropriate 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.
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.
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 of the Company’s lease liabilities as of March 31, 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 March 31, 2021 that required an impairment test for the Company’s
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
.
The Company has leases for office space and office equipment. The leases have remaining lease terms ranging from less than one year to three years and three months as of March 31, 2021
.
The components of lease expense for the period are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating lease cost - Right of Use Asset
|
|
|
|
$
|
217
|
|
Operating lease cost - Variable
|
|
Operating expenses
|
|
|
|
|
|
Finance lease costs
|
|
|
|
|
|
|
Amortization of leased assets
|
|
Amortization and depreciation
|
|
|
—
|
|
Interest on lease liabilities
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
274
|
|
Other information related to leases was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid from operating cash flows for operating leases
|
|
$
|
118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average remaining lease term of operating leases (in years)
|
|
|
1.96
|
|
Weighted-average discount rate for operating leases
|
|
|
5.5
|
%
|
Maturity of the Company’s lease liabilities as of March 31, 2021 was as follows (in thousands):
|
|
|
|
|
|
Three Months Ended March 31, 2021:
|
|
|
|
|
|
|
|
692
|
|
|
|
|
|
899
|
|
|
|
|
|
211
|
|
|
|
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
1,807
|
|
|
|
|
|
(100
|
)
|
|
|
|
|
|
|
|
|
|
|
1,707
|
|
Less: current portion of lease liabilities
|
|
|
(847
|
)
|
|
|
|
|
|
|
Long-term lease liabilities
|
|
$
|
860
|
|
|
|
|
|
|
|
Note 6 – Stockholders Equity
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.
(b) Stock-Based Compensation
The Company granted options to purchase 428,938 shares of the Company’s stock during the three months ended March 31, 2021. 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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average risk-free interest rate
|
|
0.20%
|
|
1.24%
|
|
|
|
None
|
|
None
|
|
|
|
3.5 years
|
|
3.5 years
|
|
|
|
66.0% to 66.0%
|
|
50.2% to 64.0%
|
Weighted average exercise price
|
|
$18.00
|
|
$8.26
|
Weighted average fair value
|
|
$8.37
|
|
$3.19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
14
|
|
|
$
|
1
|
|
Engineering and product development
|
|
|
149
|
|
|
|
54
|
|
|
|
|
|
353
|
|
|
|
58
|
|
General and administrative
|
|
|
419
|
|
|
|
351
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
935
|
|
|
$
|
464
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2021, unrecognized compensation cost (in thousands) related to unvested options and unvested restricted stock and the weighted average term of such equity instruments is as follows:
The Company’s restricted stock awards typically vest in either one year or three equal annual installments with the first installment vesting one year from the grant date.
The Company granted 22,488 and 0 shares of restricted stock during the three-month period ended March 31, 2021 and 2020, respectively.
The Company’s aggregate intrinsic value for stock options and restricted stock outstanding is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Aggregate intrinsic value
|
|
|
|
|
|
|
|
|
|
$
|
29,305
|
|
|
$
|
2,273
|
|
|
|
|
|
672
|
|
|
|
1,396
|
|
The Company issued 48,934 shares of common stock upon the exercise of outstanding stock options in the three-month periods ended March 31, 2021. The Company received cash proceeds of approximately $271,000 in the three -month period ended March 31, 2021. The intrinsic value of restricted shares that vested in the three months ended March 31, 2021 was $0.3 million.
There were
20,000 restricted shares
that
vested in the three months ended March 31, 2021.
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 of a stock split, stock dividend or other change in the Company’s capitalization. The ESPP may be terminated or amended by the Board at any time. Certain amendments to the ESPP require stockholder approval.
Substantially all of the Company’s employees whose customary employment is for more than 20 hours 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.
Any eligible employee can enroll in the ESPP as of the beginning of a respective quarterly accumulation period. Employees who participate in the ESPP may purchase shares by authorizing payroll deductions of up to
15
% of their base compensation during an accumulation period. Unless the participating employee withdraws from participation, accumulated payroll deductions are used to purchase shares of common stock on the last business day of the accumulation period (the “Purchase Date”) at a price equal to
85
% of the lower of the fair market value on (i) the Purchase Date or (ii) the first day of such accumulation period. Under applicable tax rules, no employee may purchase more than $
25,000
worth of common stock, valued at the start of the purchase period, under the ESPP in any calendar year.
The Company issued 6,354 shares under the ESPP in the three -month period ended March 31, 2021. The Company recorded approximately $
of stock-based compensation expense pursuant to ESPP for the three-month period ended March 31, 2021. The next accumulation period under the ESPP commenced on January 31, 2021 and ended on March 31, 2021, and the related shares purchased by the participants were issued in April 2021. As of March 31, 2021, the Company recorded a liability of $
82,000
related to employee withholdings in connection with the ESPP accumulation period ended March 31, 2021, which was included as a component of accrued expenses and other current liabilities.
Note 7 – Commitments and Contingencies
The Company is obligated to pay approximately $4.1 million for firm purchase obligations to suppliers for future product and service deliverables
and $0.5 million for minimum royalty obligations.
In December 2016, the Company entered into an Asset Purchase Agreement (the “Asset Purchase Agreement”) with Invivo Corporation (“Invivo”). In accordance with the Asset Purchase Agreement, the Company sold to Invivo all right, title and interest to certain intellectual property relating to the Company’s VersaVue Software and DynaCAD product and related assets
for $3.2 million. The Company closed the transaction on January 30, 2017 less a holdback reserve of $350,000
(the “Escrowed Amount”) for net proceeds of approximately
$2.9 million.
On September 5, 2018, third-party Yeda Research and Development Company Ltd. (“Yeda”), filed a complaint (the “Complaint”) against the Company and Invivo in the United States District Court for the Southern District of New York, captioned Yeda Research and Development Company Ltd. v. iCAD, Inc. and Invivo Corporation, Case No. 1:18-cv-08083-GBD, related to the Company’s sale of the VersaVue software and DynaCAD product under the Asset Purchase Agreement. Yeda alleged, among other things, that the Company infringed upon Yeda’s source code, which was originally licensed to the Company, by using it in the products that the Company sold to Invivo and that it is entitled to damages that could include, among other things, profits relating to the sales of these products On April 13, 2021, the Company and Yeda entered into a Settlement and Release Agreement (the “Settlement Agreement”) whereby the Company furnished to Yeda a one-time cash payment of
$85,000
and received a full, non-conditional release from Yeda of any and all claims related to the Complaint and the subject of the Complaint. Neither the Company nor Invivo acknowledged any wrongdoing at any point in connection with the Complaint or the subject matter thereof. The Escrowed Amount was reserved, in part, to cover any legal expenses related to the Asset Purchase Agreement and the transactions contemplated therein. The remaining balance of the Escrowed Amount following such expenses is due and payable to the Company in accordance with the terms of the Asset Purchase Agreement. However, the Company is unaware of the amount Invivo may claim it is entitled to of the Escrowed Amount, if any, under the Asset Purchase Agreement.
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 believes that there are no current proceedings or claims pending against it the ultimate resolution of which would have a material adverse effect on its financial condition or results of operations. However, 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. The Company may be a party to certain actions that have been filed against the Company which are being vigorously defended. The Company has determined that potential losses in these matters are neither probable or reasonably possible at this time. In all cases, at each reporting period, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under ASC 450, “Contingencies.” Legal costs are expensed as incurred.
Note 8 - 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 accounting standard describes a fair value hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, that may be used to measure fair value, 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.
|
A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
The Company’s financial instruments consist of cash and cash equivalents, accounts receivable, accounts payable, and notes payable and convertible debentures. Due to their short-term nature and market rates of interest, the carrying amounts of the financial instruments (except the Convertible Debentures, which were measured at fair value in accordance with the fair value option election) approximated fair value as of February 21, 2020 and December 31, 2019.
The Company’s assets and liabilities that are measured at fair value on a recurring basis include the Company’s money market accounts and Convertible Debentures.
The money market accounts are included in cash and cash equivalents in the accompanying consolidated balance sheet and are considered a Level 1 measurement as they are valued at quoted market prices in active markets.
The Convertible Debentures were recorded as a separate component of the Company’s consolidated balance sheet and are considered a Level 3 measurement due to the utilization of significant unobservable inputs in their valuation. See Note 4(b) for a discussion of these fair value measurements.
The following table sets forth the Company’s assets and liabilities which are measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements as of December 31, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
27,186
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
27,186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
27,186
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
27,186
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements (in thousands) as of March 31, 2021
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
46,907
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
46,907
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
46,907
|
|
|
|
—
|
|
|
|
—
|
|
|
$
|
46,907
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Coronavirus Aid, Relief, and Economic Security Act was enacted on March 27, 2020 and did not have a material impact on the Company’s provision for income taxes for the three months ended March 31, 2021.
The Company recorded an income tax provision of $0 for the three months ended March 31, 2021,
and $26,000 for the three months ended March 31, 2020.
The Company adopted ASU
as of January 1, 2021, in accordance with this provision
and state franchise taxes are now classified as a component of operating expenses in General and Administrative expense. Income based tax expense will continue to be recognized as tax expense in the Consolidated Financial Statements. Tax expense for three months ended March 31, 2020 represent
and state franchise tax, however the expense was not reclassified to operating expenses in accordance with ASU
The Company had no material unrecognized tax benefits and a deferred tax liability of approximately $4,000 related to tax amortizable goodwill. No other adjustments were required under ASC 740, “Income Taxes.” The Company does not expect that its unrecognized tax benefits will materially increase within the next 12 months. The Company did not recognize any interest or penalties related to uncertain tax positions at March 31, 2021.
The Company files United States federal income tax returns and income tax returns in various states and local jurisdictions. The Company’s three preceding tax years remain subject to examination by federal and state tax authorities. In addition, because the Company has net operating loss carry-forwards, the Internal Revenue Service and state jurisdictions are permitted to audit earlier years and propose adjustments up to the amount of net operating loss generated in those years. The Company is not currently under examination by any federal or state jurisdiction for any tax years.
The 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 the reporting unit is less than its carrying value. There were no impairment indicators present as of March 31, 2021.
Factors the Company considers important, which could trigger an impairment of such asset, include the following:
|
|
•
|
|
significant underperformance relative to historical or projected future operating results;
|
|
|
•
|
|
significant changes in the manner or use of the assets or the strategy for the Company’s overall business;
|
|
|
•
|
|
significant negative industry or economic trends;
|
|
|
•
|
|
significant decline in the Company’s stock price for a sustained period; and
|
|
|
•
|
|
a decline in the Company’s market capitalization below net book value.
|
The Company would record an impairment charge when such assessment indicates that the fair value of a reporting unit is less than the carrying value. In evaluating potential impairments outside of the annual measurement date, judgment is required in determining whether an event has occurred that may impair the value of goodwill or intangible assets.
The Company utilizes either discounted cash flow models or other valuation models, such as comparative transactions and market multiples, to determine the fair value of reporting units. The Company makes assumptions about future cash flows, future operating plans, discount rates, comparable companies, market multiples, purchase price premiums and other factors in those models. Different assumptions and judgment determinations could yield different conclusions that would result in an impairment charge to income in the period that such change or determination was made.
The Company determines the fair values for each reporting unit using a weighting of the income approach and the market approach. For purposes of the income approach, fair value is determined based on the present value of estimated future cash flows, discounted at an appropriate risk adjusted rate. The Company uses internal forecasts to estimate future cash flows and includes estimates of long-term future growth rates based on its most recent views of the long-term forecast for each segment. Accordingly, actual results can differ from those assumed in the Company’s forecasts. Discount rates are derived from a capital asset pricing model and by analyzing published rates for industries relevant to the Company’s reporting units to estimate the cost of equity financing. The Company uses discount rates that are commensurate with the risks and uncertainty inherent in the respective businesses of its reporting units and in the Company’s internally developed forecasts.
In the market approach, the Company uses a valuation technique in which values are derived based on market prices of publicly traded companies with similar operating characteristics and in similar industries. A market approach allows for comparison to actual market transactions and multiples. It can be somewhat limited in its application because the population of potential comparable publicly-traded companies can be limited due to differing characteristics of the comparative business and the Company, as well as the fact that market data may not be available for divisions within larger conglomerates or
non-public
subsidiaries that could otherwise qualify as comparable, and the specific circumstances surrounding a market transaction (e.g., synergies between the parties, terms and conditions of the transaction, etc.) may be different or irrelevant with respect to the business.
The Company corroborates the total fair values of the reporting units using a market capitalization approach; however, this approach cannot be used to determine the fair value of each reporting unit. The blend of the income approach and market approach is more closely aligned to the business profile of the Company, including markets served and products available. In addition, required rates of return, along with uncertainties inherent in the forecast of future cash flows, are reflected in the selection of the discount rate. In addition, under the blended approach, reasonably likely scenarios and associated sensitivities can be developed for alternative future states that may not be reflected in an observable market price. The Company will assess each valuation methodology based upon the relevance and availability of the data at the time the valuation is performed and weights the methodologies appropriately.
The Company has two operating segments, Detection and Therapy, as further discussed in Note 12 below.
A rollforward of goodwill activity by reportable segment is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated
reporting unit
|
|
|
Detection
|
|
|
Therapy
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
47,937
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
47,937
|
|
|
|
|
|
(26,828
|
)
|
|
|
—
|
|
|
|
—
|
|
|
|
(26,828
|
)
|
|
|
|
|
(21,109
|
)
|
|
|
7,663
|
|
|
|
13,446
|
|
|
|
—
|
|
Acquisition of DermEbx and Radion
|
|
|
—
|
|
|
|
—
|
|
|
|
6,154
|
|
|
|
6,154
|
|
Acquisition measurement period adjustments
|
|
|
—
|
|
|
|
—
|
|
|
|
116
|
|
|
|
116
|
|
|
|
|
|
—
|
|
|
|
1,093
|
|
|
|
—
|
|
|
|
1,093
|
|
|
|
|
|
—
|
|
|
|
(394
|
)
|
|
|
|
|
|
|
(394
|
)
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(19,716
|
)
|
|
|
(19,716
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2020 and March 31, 2021
|
|
|
—
|
|
|
|
8,362
|
|
|
|
—
|
|
|
|
8,362
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note 11 – Long-lived assets
The Company assesses long-lived assets for impairment if events and circumstances indicate it is more likely than not that the fair value of the asset group is less than its carrying value.
There is no set interval or 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 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 thus is to be evaluated for recoverability.
|
|
•
|
|
A significant decrease in the market price of a long-lived asset (or asset group);
|
|
|
•
|
|
A significant adverse change in the extent or manner in which a long-lived asset (or asset group) is being used or in its physical condition;
|
|
|
•
|
|
A significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset (or asset group), including an adverse action or assessment by a regulator;
|
|
|
•
|
|
An accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction of a long-lived asset (or asset group); and
|
|
|
•
|
|
A current operating period, or cash flow loss combined with a history of operating or cash flow losses or a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset (or asset group).
|
The Company determined there were no such triggering events in the quarter ended March 31, 2021.
If the carrying amount of an asset or asset group (in use or under development) is evaluated and found not to be fully recoverable (e.g., the carrying amount exceeds the estimated gross, undiscounted cash flows from use and disposition), then an impairment loss must be recognized. The impairment loss is measured as the excess of the carrying amount over the fair value of the asset (or asset group). The Company determined the “Asset Group” of the Company to be the assets of the Therapy segment and the Detection segment, which the Company considers to be the lowest level for which the identifiable cash flows were largely independent of the cash flows of other assets and liabilities.
A considerable amount of judgment and assumptions are required in performing the impairment tests, principally in determining the fair value of the asset group and the reporting unit. While the Company believes that its judgments and assumptions are reasonable, different assumptions could change the estimated fair values and, therefore additional impairment charges could be required. Significant negative industry or economic trends, disruptions to the Company’s business, loss of significant customers, inability to effectively integrate acquired businesses, unexpected significant changes or planned changes in use of the assets may adversely impact the assumptions used in the fair value estimates and ultimately result in future impairment charges.
Note 12 – Segment Reporting
Operating segments are defined as components of an enterprise that engage in business activities for which discrete financial information is available and regularly reviewed by the chief operating decision maker (“CODM”) in deciding how to allocate resources and assess performance.
The Company’s CODM is the Chief Executive Officer. Each reportable segment generates revenue from the sale of medical equipment and related services and/or sale of supplies. The Company has determined there are two segments, Detection and Therapy.
The Detection segment consists of the Company’s advanced image analysis and workflow products, and the Therapy segment consists of the Company’s radiation therapy products, “Axxent,” and related services. The primary factors used by the Company’s CODM to allocate resources are based on revenues, gross profit, operating income, and earnings or loss before interest, taxes, depreciation, amortization, and other specific and
non-recurring
items of each segment. Included in segment operating income are stock compensation, amortization of technology and depreciation expense. There are no intersegment revenues.
The Company does not track assets by operating segment and the Company’s CODM does not use asset information by segment to allocate resources or make operating decisions.
Segment revenues, gross profit, segment operating income or loss, and a reconciliation of segment operating income or loss to US GAAP loss before income tax is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
March 31,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,719
|
|
|
$
|
4,476
|
|
|
|
|
|
2,925
|
|
|
|
2,075
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8,644
|
|
|
$
|
6,551
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,725
|
|
|
$
|
3,467
|
|
|
|
|
|
1,564
|
|
|
|
1,043
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,289
|
|
|
$
|
4,510
|
|
|
|
|
|
|
|
|
|
|
|
Segment operating income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
941
|
|
|
$
|
(346
|
)
|
|
|
|
|
(312
|
)
|
|
|
(1,006
|
)
|
|
|
|
|
|
|
|
|
|
|
Segment operating income (loss)
|
|
$
|
629
|
|
|
$
|
(1,352
|
)
|
|
|
|
|
|
|
|
|
|
|
General, administrative, depreciation and amortization expense
|
|
$
|
(2,162
|
)
|
|
$
|
(2,541
|
)
|
|
|
|
|
(112
|
)
|
|
|
(130
|
)
|
|
|
|
|
2
|
|
|
|
42
|
|
Loss on extinguishment of debt
|
|
|
—
|
|
|
|
(341
|
)
|
Fair value of convertible debentures
|
|
|
—
|
|
|
|
(7,464
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(1,643
|
)
|
|
$
|
(11,786
|
)
|
|
|
|
|
|
|
|
|
|
|
Note 13 - Recent Accounting Pronouncements
Recently Adopted Accounting Standards
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 currently evaluating the impact that the adoption of ASU
2016-13
will have on its consolidated financial statements.
In March 2020, the FASB issued ASU
2020-04,
“Reference Rate Reform (Topic 848): Facilitation 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 discontinued 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. 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 the Company for the fiscal year 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
will have on its consolidated financial statements.
Note 14 – Subsequent Events
Settlement with Yeda Research and Development Company Ltd.
On April 13, 2021, as described in Part II, Item 1 and Note 7 of the Notes to the Condensed Consolidated Financial Statements herein, the Company and Yeda entered into the Settlement Agreement, whereby the Company furnished to Yeda a
one-time
cash payment of $85,000 and received a full,
non-conditional
release from Yeda of any and all claims related to the Complaint and the subject matter of the Complaint. Neither the Company nor Invivo acknowledged any wrongdoing at any point in connection with the Complaint or the subject matter thereof. As described elsewhere in this report, the Escrowed Amount, being $350,000,
was held back in reserve from the gross proceeds furnished in connection with the Asset Purchase Agreement, in part, to cover any legal expenses related to the Asset Purchase Agreement and the transactions contemplated therein. The remaining balance of the Escrowed Amount following such expenses is due and payable to the Company in accord with the terms of the Asset Purchase Agreement. However, the Company is unaware of the amount Invivo may claim it is entitled to of the Escrowed Amount, if any, under the Asset Purchase Agreement.
Termination of Western Alliance Bank Loan and Security Agreement
On April 27, 2021, as described in Note 4 of the Notes to the Condensed Consolidated Financial Statements herein, the Company repaid its obligations in the aggregate amount of $7,354,283 under and terminated the Loan Agreement with the Bank, and its collateral securing the facility was released.
|
|
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 following: the impact of the
COVID-19
pandemic on the Company’s business and the global economy; 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 our products, product market acceptance, possible technological obsolescence of products, increased competition, integration of acquired businesses, the impact of litigation and/or government regulation, changes in Medicare reimbursement policies,
competitive factors, the effects of a decline in the economy in markets served by the Company and other risks detailed in the Company’s other filings with the Securities and Exchange Commission. 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, we undertake no obligation to update any such forward-looking statements to reflect events or circumstances after the date of such statements.
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 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).
In the Therapy segment, the Company offers the Xoft System, an isotope-free cancer 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.
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 “Item 1—Legal Proceedings” and Note 7 hereto. The three months ended March 31, 2020 included a $7.8 million charge related to the losses on the extinguishment of debentures and debt, and 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.
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, our operations have been materially affected. Significant uncertainty remains as to the continuing impact of the
COVID-19
pandemic on our operations and on the global economy as a whole. 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 worsening level of market disruption and volatility seen in the recent past will have an adverse effect on our ability to access capital, on our business, results of operations and financial condition, and on the market price of our common stock. Our results for the quarter ending March 31, 2021 reflect a negative impact from the
COVID-19
pandemic, due to some healthcare facilities’ additional focus on
COVID-19.
Although we do not provide guidance to investors relating to our results of operations, our results for the quarter ending June 30, 2021, and possibly future quarters, could reflect a continued negative impact from the
COVID-19
pandemic for similar 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 $46.9 million at March 31, 2021 and anticipated revenue and cash collections. However, the resurgence of the
COVID-19
pandemic could affect our liquidity.
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 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, 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 our critical accounting policies as discussed in our 2020 Annual Report on Form
10-K
(the “2020
10-K”).
For a comprehensive list of the Company’s critical accounting policies, reference should be made to the 2020
10-K.
Three months ended March 31, 2021 compared to three months ended March 31, 2020.
Three months ended March 31, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,161
|
|
|
$
|
3,100
|
|
|
$
|
1,061
|
|
|
|
34.2
|
%
|
Service and supplies revenue
|
|
|
1,558
|
|
|
|
1,376
|
|
|
|
182
|
|
|
|
13.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,719
|
|
|
|
4,476
|
|
|
|
1,243
|
|
|
|
27.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,396
|
|
|
|
695
|
|
|
|
701
|
|
|
|
100.9
|
%
|
Service and supplies revenue
|
|
|
1,529
|
|
|
|
1,380
|
|
|
|
149
|
|
|
|
10.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,925
|
|
|
|
2,075
|
|
|
|
850
|
|
|
|
41.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8,644
|
|
|
$
|
6,551
|
|
|
$
|
2,093
|
|
|
|
31.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue increased by approximately $2.1 million, or 31.9%, from $6.6 million for the three months ended March 31, 2020 to $8.6 million for the three months ended March 31, 2021. The increase is due to an increase in Detection revenue of approximately $1.2 million and an increase in Therapy revenue of $0.9 million.
Detection product revenue increased by approximately $1.1 million, or 34.2%, from $3.1 million for the three months ended March 31, 2020 to $4.2 million for the three months ended March 31, 2021. The overall increase is due primarily to an increase in direct customer revenue of $1.7 million offset by a decrease in original equipment manufacturer customer revenue of $0.5 million, in each case relating primarily to revenue from 3D imaging and density assessment products.
Detection service and supplies revenue, which is primarily sold to direct customers, increased by $0.2 million, or 13.2%, from $1.4 million in the three months ended March 31, 2020 to $1.6 million in the three months ended March 31, 2021.
Therapy product revenue increased by approximately $0.7 million, or 100.9%, from $0.7 million for the three months ended March 31, 2020 to $1.4 million for the three months ended March 31, 2021. Therapy product revenue is related to the sale of our Axxent systems and can vary significantly from quarter to quarter due to changes in the number of units sold, and the average selling price.
Therapy service and supplies revenue increased by approximately $0.1 million, or 10.8%, from $1.4 million for the three months ended March 31, 2020 to $1.5 million for the three months ended March 31, 2021. The Company believes that Therapy service and supplies revenue, specifically the use of balloons for procedures, was adversely affected by the
COVID-19
pandemic during the three months ended March 31, 2020, due to
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 three months ended March 31, 2021 as compared to the three months ended March 31, 2020. The Company is not able to predict how the
COVID-19
pandemic will affect future Therapy service and supplies revenue.
Cost of Revenue and Gross Profit: (in thousands)
Three months ended March 31, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1,409
|
|
|
$
|
1,017
|
|
|
$
|
392
|
|
|
|
38.5
|
%
|
|
|
|
|
867
|
|
|
|
927
|
|
|
|
(60
|
)
|
|
|
(6.5
|
)%
|
Amortization and depreciation
|
|
|
79
|
|
|
|
97
|
|
|
|
(18
|
)
|
|
|
(18.6
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,355
|
|
|
$
|
2,041
|
|
|
$
|
314
|
|
|
|
15.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,289
|
|
|
$
|
4,510
|
|
|
$
|
1,779
|
|
|
|
39.4
|
%
|
|
|
|
|
|
|
Three months ended March 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
4,725
|
|
|
$
|
3,467
|
|
|
$
|
1,258
|
|
|
|
36.3
|
%
|
|
|
|
|
1,564
|
|
|
|
1,043
|
|
|
|
521
|
|
|
|
50.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
6,289
|
|
|
$
|
4,510
|
|
|
$
|
1,779
|
|
|
|
39.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
72.8
|
%
|
|
|
68.8
|
%
|
|
|
|
|
|
|
|
|
Gross profit for the three months ended March 31, 2021 was approximately $6.3 million, or 72.8% of revenue, as compared to $4.5 million, or 68.8% of revenue, for the three months ended March 31, 2020. The
COVID-19
pandemic adversely affected revenues from Detection products and the Therapy segment in the three months ended March 31, 2020, and as a result, lower gross profit in both segments in 2020. The Company also underwent cost cutting efforts throughout 2020 and has been able to maintain a lower cost structure, specifically personnel costs, as compared to 2020, through March 31, 2021.
Cost of products increased by approximately $0.4 million, or 38.5%, from $1.0 million for the three months ended March 31, 2020 to $1.4 million for the three months ended March 31, 2021. Cost of product revenue as a percentage of product revenue was approximately 26.8% for the three months ended March 31, 2020 as compared to 37.1% for the three months ended March 31, 2021. The increase in cost of products is primarily due to the increased sales in the both Therapy and Detection resulting in increases in cost of products of $0.3 and $0.1 million respectively.
Cost of service and supplies was relatively flat at approximately $0.9 million for both the three months ended March 31, 2021 and 2020. Cost of service and supplies revenue as a percentage of service and supplies revenue was approximately 33.6% for the three months ended March 31, 2020 as compared to 31.5% for the three months ended March 31, 2021. Although the service and supplies revenue increased, there was still a 6.5% decrease in service and supplies costs due primarily to a decrease in personnel costs.
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 March 31, 2021 and 2020.
Operating Expenses: (in thousands)
Three months ended March 31, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Change $
|
|
|
Change %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Engineering and product development
|
|
$
|
2,192
|
|
|
$
|
2,211
|
|
|
$
|
(19
|
)
|
|
|
(0.9
|
)%
|
|
|
|
|
3,424
|
|
|
|
3,608
|
|
|
|
(184
|
)
|
|
|
(5.1
|
)%
|
General and administrative
|
|
|
2,151
|
|
|
|
2,532
|
|
|
|
(381
|
)
|
|
|
(15.0
|
)%
|
Amortization and depreciation
|
|
|
55
|
|
|
|
52
|
|
|
|
3
|
|
|
|
5.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7,822
|
|
|
$
|
8,403
|
|
|
$
|
(581
|
)
|
|
|
(6.9
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses decreased by approximately $0.6 million, or 6.9%, from $8.4 million in the three months ended March 31, 2020 to $7.8 million in the three months ended March 31, 2021. The Company took steps throughout 2020 to reduce operating expenses during the
COVID-19
pandemic and continues to take a disciplined approach with expenses. Although the Company reinstated furloughed employees, many expenses like travel and in person trade shows have yet to go back to the pre
COVID-19
levels as evident by the reduction year over year.
Engineering and Product Development
. Engineering and product development costs remained relatively flat at $2.2 million for the three months ended March 31, 2020 and 2021.
. Marketing and sales expenses decreased by approximately $0.2 million, or 5.1%, from $3.6 million in the three months ended March 31, 2020 to $3.4 million in the three months ended March 31, 2021. Detection marketing and sales expenses remained relatively flat at $2.4 million in the three months ended March 31, 2020 and 2021. Therapy marketing and sales expenses decreased by approximately $0.2 million, from $1.2 million in the three months ended March 31, 2020 to $1.0 million in the three months ended March 31, 2021. The decrease in Therapy marketing and sales expenses is due primarily to decreased personnel costs, travel, and reduced trade show costs during the first quarter of 2021 as compared to the first quarter of 2020.
General and Administrative
. General and administrative expenses decreased by approximately $0.4 million, or 15.0%, from $2.5 million in the three months ended March 31, 2020 to $2.1 million for the three months ended March 31, 2021. The decrease includes lower personnel, legal, and travel costs.
Amortization and Depreciation.
Amortization and depreciation, which relates primarily to acquired intangible assets and depreciation of machinery and equipment, increased by approximately $3,000, or 5.8% from $52,000 for the three months ended March 31, 2020 to $55,000 for the three months ended March 31, 2021.
Other Income and Expense: (in thousands)
Three months ended March 31, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended March 31,
|
|
|
|
|
2021
|
|
|
2020
|
|
|
Change $
|
|
|
Change %
|
|
|
|
|
$
|
(112
|
)
|
|
$
|
(130
|
)
|
|
$
|
18
|
|
|
|
(13.8
|
)%
|
Loss on extinguishment of debt
|
|
|
—
|
|
|
|
(341
|
)
|
|
|
341
|
|
|
|
(100.0
|
)%
|
|
|
|
|
2
|
|
|
|
42
|
|
|
|
(40
|
)
|
|
|
(95.2
|
)%
|
Loss on fair value of debentures
|
|
|
—
|
|
|
|
(7,464
|
)
|
|
|
7,464
|
|
|
|
(100.0
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(110
|
)
|
|
$
|
(7,893
|
)
|
|
$
|
7,783
|
|
|
|
(98.6
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
—
|
|
|
$
|
(26
|
)
|
|
$
|
26
|
|
|
|
(100.0
|
)%
|
. Interest expense remained flat at $0.1 million, for both the three months ended March 31, 2020 and 2021.
. Other income decreased by approximately $40,000, or 95.2%, from $42,000 for the three months ended March 31, 2020 to $2,000 for the three months ended March 31, 2021.
Loss on fair value of debentures
. The Company recorded a loss of approximately $7.5 million in the three months ended March 31, 2020, which reflected an increase in the fair value of the unsecured subordinated convertible debentures issued in December 2018 from $13.7 million at December 31, 2019 to $21.2 million at 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 three-month ending March 31, 2020. As a result of the forced conversion there was no fair value adjustment for the three months ended March 31, 2021.
Loss on extinguishment of debt:
The Company recorded a loss on extinguishment of approximately $341,000 related to the repayment and retirement of the SVB Loan Agreement as of the three months ended March 31, 2020. The loss on extinguishment was composed of approximately $185,000 for the unaccrued final payment, the $114,000 termination fee, $42,000 for the unamortized and other closing costs. There were no such costs in 2021.
. Tax expense decreased by approximately $26,000, or 100%, from $26,000 for the three months ended March 31, 2020 to $0 for the three months ended March 31, 2021. The Company has approximately $13,000 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 is due to state
non-income
and franchise-based taxes.
Liquidity and Capital Resources
The Company believes that its cash and cash equivalents balance of $46.9 million as of March 31, 2021, and projected cash balances are sufficient to sustain operations through at least the next 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 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 March 31, 2021 includes proceeds from the Loan and Security Agreement entered into with Western Alliance Bank (the “Bank”) on March 31, 2020 and amended on June 22, 2020 (as amended, the “Loan Agreement”). On April 27, 2021, the Company repaid its obligations in the aggregate amount of $7,354,283 under and terminated the Loan Agreement with the Bank, and its 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 of $48.1 million at March 31, 2021. The ratio of current assets to current liabilities at March 31, 2021 and December 31, 2020 was 4.40 and 2.53 respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
For the three months ended March 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
Net cash used for operating activities
|
|
$
|
(3,563
|
)
|
|
$
|
(1,416
|
)
|
Net cash used for investing activities
|
|
|
(262
|
)
|
|
|
(156
|
)
|
Net cash provided by financing activities
|
|
|
23,546
|
|
|
|
515
|
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and equivalents
|
|
$
|
19,721
|
|
|
$
|
(1,057
|
)
|
|
|
|
|
|
|
|
|
|
|
Net cash used for operating activities for the three months ended March 31, 2021 was $3.6 million, compared to $1.4 million for the three months ended March 31, 2020. The net cash used for operating activities for the three months ended March 31, 2021 resulted primarily from our net loss and working capital changes resulting from decreases in accounts payable and accrued expenses as well as an increase in accounts receivable offset by a decrease in inventory. We expect that net cash used for or provided by operating activities may fluctuate in future periods as a result of a number of factors, including fluctuations in our operating results, the timing of when we recognize revenue, collections of accounts receivable and the timing of other payments.
Net cash used for investing activities for the three months ended March 31, 2021 was $262,000, compared to $156,000 for the three months ended March 31, 2020. The net cash used for investing activities for the three months ended March 31, 2021 and 2020 is primarily for purchases of property and equipment.
Net cash provided by financing activities for the three months ended March 31, 2021 was $23.6 million, compared to $0.5 million for the three months ended March 31, 2020. Net cash provided by financing activities for the three months ended March 31, 2021 is primarily 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. The company also received $0.3 million from the issuance of common stock pursuant the Company’s stock option plan. Net cash provided by financing activities for the three months ended March 31, 2020 is due primarily to cash from the issuance of common stock pursuant the Company’s stock option plan.
Recent Accounting Pronouncements
See Note 13 to the Condensed Consolidated Financial Statements.
|
|
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. The Company is subject to a 23% fluctuation in interest expense on for every 1% change in interest rate on its floating rate Term Loan with the Bank.
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 March 31, 2021, 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 March 31, 2021 that have materially affected or which are reasonably likely to materially affect internal control over financial reporting.
PART II OTHER INFORMATION
Please refer to the detailed discussion regarding litigation set forth in Note 7 of the Notes to Condensed Consolidated Financial Statements in this Form
10-Q.
In December 2016, the Company entered into the Asset Purchase Agreement with Invivo. In accordance with the Asset Purchase Agreement, the Company sold to Invivo all right, title and interest to certain intellectual property relating to the Company’s VersaVue Software and DynaCAD product and related assets for $3.2 million. The Company closed the transaction on January 30, 2017 less the Escrowed Amount, a holdback reserve of $350,000, for net proceeds of approximately $2.9 million.
On September 5, 2018, third-party Yeda, filed the Complaint against the Company and Invivo in the United States District Court for the Southern District of New York, captioned Yeda Research and Development Company Ltd. v. iCAD, Inc. and Invivo Corporation, Case No.
related to the Company’s sale of the VersaVue software and DynaCAD product under the Asset Purchase Agreement. Yeda alleged, among other things, that the Company infringed upon Yeda’s source code, which was originally licensed to the Company, by using it in the products that the Company sold to Invivo and that it is entitled to damages that could include, among other things, profits relating to the sales of these products. On April 13, 2021, the Company and Yeda entered into the Settlement Agreement whereby the Company furnished to Yeda a
one-time
cash payment of $85,000 and received a full,
non-conditional
release from Yeda of any and all claims related to the Complaint and the subject of the Complaint. Neither the Company nor Invivo acknowledged any wrongdoing at any point in connection with the Complaint or the subject matter thereof. The Escrowed Amount was reserved, in part, to cover any legal expenses related to the Asset Purchase Agreement and the transactions contemplated therein. The remaining balance of the Escrowed Amount following such expenses is due and payable to the Company in accord with the terms of the Asset Purchase Agreement. However, the Company is unaware of the amount Invivo may claim it is entitled to of the Escrowed Amount, if any, under the Asset Purchase Agreement.
In addition to the forgoing, the Company may be party to various legal matters that are in the process of litigation or settled in the ordinary course of business. Although the final results of all such matters and claims cannot be predicted with certainty, we believe that the ultimate resolution of all such matters and claims will not have a material adverse effect on our financial condition. However, such matters could have a material adverse effect on our operating results and cash flows for a particular period.
We operate in a changing environment that involves numerous known and unknown risks and uncertainties that could materially adversely affect our operations. In addition to the risk factor below, factors that have affected our Company are described in Part I, Item 1A of our Annual Report on Form
10-K
for the year ended December 31, 2020 as filed with the SEC on March 15, 2021 and are incorporated by reference herein.
We expect the novel coronavirus
(COVID-19)
pandemic to have a significant effect on our results of operations. In addition, it has resulted in significant financial market volatility, and its impact on the global economy appears to be significant. A worsening of the pandemic will have a material adverse impact on our business, results of operations and financial condition and on the market price of our 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, our operations have been materially affected. Significant uncertainty remains as to the impact of the
COVID-19
pandemic on our operations and on the global economy as a whole. 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 worsening of the levels of market disruption and volatility seen in the recent past will have an adverse effect on our ability to access capital, on our business, results of operations and financial condition, and on the market price of our common stock. Our results for the quarter ending March 31, 2021 reflect a negative impact from the
COVID-19
pandemic due to some healthcare facilities’ additional focus on
COVID-19.
Although we do not provide guidance to investors relating to our results of operations, our results for the quarter ending June 30, 2021, and possibly future quarters, could reflect a negative impact from the
COVID-19
pandemic for similar reasons. Depending upon the duration and severity of the pandemic, the effect on our 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.
|
|
|
|
|
|
|
|
|
|
|
|
10.1
|
|
Amendment to 2016 Stock Incentive Plan as amended December 2018 (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on February 19, 2021).
|
|
|
|
|
10.2
|
|
Consulting Agreement dated April 16, 2021, by and between iCAD, Inc. and Charles Carter (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on April 28, 2021).
|
|
|
|
|
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 March 31, 2021 and December 31, 2020, (ii) Condensed Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020, (iii) Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020, (iv) Condensed Statements of Stockholders’ Equity for the three months ended March 31, 2021 and March 31, 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).
|
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.
|
|
|
|
|
|
|
|
|
|
|
Date: May 4, 2021
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
Name:
|
|
Michael Klein
|
|
|
|
|
|
|
|
Title:
|
|
(Principal Executive Officer)
|
|
|
|
|
|
|
|
Date: May 4, 2021
|
|
|
|
|
|
By:
|
|
|
|
|
|
|
|
|
|
Name:
|
|
R. Scott Areglado
|
|
|
|
|
|
|
|
Title:
|
|
(Principal Financial Officer)
|
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