Delaware
|
02-0377419
|
|
(State
or other jurisdiction
|
(I.R.S.
Employer Identification No.)
|
|
of
incorporation or organization)
|
||
98
Spit Brook Road, Suite 100, Nashua, NH
|
03062
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Large
Accelerated filer o
|
Accelerated
filer x
|
Non-accelerated
filer o
|
Smaller
reporting company o
|
(do
not check if a smaller reporting company)
|
PAGE
|
|||
PART
I
|
FINANCIAL
INFORMATION
|
||
Item
1
|
Financial
Statements (unaudited)
|
||
Consolidated
Balance Sheets as of June 30, 2008 and
December 31, 2007
|
3
|
||
Consolidated
Statements of Operations for the three
and six month periods ended June 30, 2008 and
2007
|
4
|
||
Consolidated
Statements of Cash Flows for the six month
periods ended June 30, 2008 and 2007
|
5
|
||
Notes
to Consolidated Financial Statements
|
6-14
|
||
Item
2
|
Management's
Discussion and Analysis of Financial
Condition and Results of Operations
|
15-22
|
|
|
|
|
|
Item
3
|
Quantitative
and Qualitative Disclosures about Market Risk
|
23
|
|
Item
4
|
Controls
and Procedures
|
23
|
|
PART
II
|
OTHER
INFORMATION
|
||
Item
2
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
23
|
|
Item
4
|
Submission
of Matters to a Vote of Security Holder
|
24
|
|
Item
6
|
Exhibits
|
24
|
|
Signatures
|
26
|
June 30,
|
December 31,
|
||||||
|
2008
|
2007
|
|||||
Assets
(Note 2)
|
|||||||
Current
assets:
|
|||||||
Cash
and cash equivalents
|
$
|
7,120,057
|
$
|
4,348,729
|
|||
Trade
accounts receivable, net of allowance for doubtful accounts of
$50,000 in
2008 and 2007
|
6,162,126
|
6,483,618
|
|||||
Inventory,
net
|
2,122,156
|
1,798,243
|
|||||
Prepaid
and other current assets
|
645,977
|
320,169
|
|||||
Total
current assets
|
16,050,316
|
12,950,759
|
|||||
Property
and equipment:
|
|||||||
Equipment
|
3,565,479
|
3,512,557
|
|||||
Leasehold
improvements
|
71,611
|
71,611
|
|||||
Furniture
and fixtures
|
341,280
|
330,077
|
|||||
Marketing
assets
|
323,873
|
323,873
|
|||||
4,302,243
|
4,238,118
|
||||||
Less
accumulated depreciation and amortization
|
2,726,453
|
2,369,590
|
|||||
Net
property and equipment
|
1,575,790
|
1,868,528
|
|||||
Other
assets:
|
|||||||
Deposits
|
63,194
|
63,194
|
|||||
Patents,
net of accumulated amortization
|
29,207
|
68,269
|
|||||
Technology
intangibles, net of accumulated amortization
|
2,807,802
|
3,115,843
|
|||||
Tradename,
net of accumulated amortization
|
136,400
|
148,800
|
|||||
Goodwill
|
43,515,285
|
43,515,285
|
|||||
Total
other assets
|
46,551,888
|
46,911,391
|
|||||
Total
assets
|
$
|
64,177,994
|
$
|
61,730,678
|
|||
Liabilities
and Stockholders' Equity
|
|||||||
Current
liabilities:
|
|||||||
Accounts
payable
|
$
|
1,784,070
|
$
|
2,010,717
|
|||
Accrued
salaries and other expenses
|
2,547,928
|
3,461,422
|
|||||
Deferred
revenue
|
2,074,885
|
1,674,005
|
|||||
Convertible
loans payable to related parties
|
2,297,794
|
2,793,382
|
|||||
Convertible
loans payable to non-related parties
|
694,853
|
684,559
|
|||||
Total
current liabilities
|
9,399,530
|
10,624,085
|
|||||
Convertible
revolving loans payable to related party
|
-
|
2,258,906
|
|||||
Total
liabilities
|
9,399,530
|
12,882,991
|
|||||
Commitments
and contingencies
|
|||||||
Stockholders'
equity:
|
|||||||
Common
stock, $ .01 par value: authorized 85,000,000 shares; issued 41,378,854
in
2008 and 39,239,208 in 2007; outstanding 41,310,978 in 2008 and
39,171,332
in 2007
|
413,788
|
392,392
|
|||||
Additional
paid-in capital
|
139,024,054
|
135,055,418
|
|||||
Accumulated
deficit
|
(83,709,114
|
)
|
(85,649,859
|
)
|
|||
Treasury
stock at cost (67,876 shares)
|
(950,264
|
)
|
(950,264
|
)
|
|||
Total
Stockholders' equity
|
54,778,464
|
48,847,687
|
|||||
Total
liabilities and stockholders' equity
|
$ |
64,177,994
|
$
|
61,730,678
|
Three Months Ended
|
Six Months Ended
|
||||||||||||
June 30,
|
June 30,
|
||||||||||||
2008
|
2007
|
2008
|
2007
|
||||||||||
Revenue
|
|||||||||||||
Products
|
$
|
9,677,125
|
$
|
5,263,732
|
$
|
15,331,748
|
$
|
10,534,406
|
|||||
Service
and supplies
|
872,364
|
841,004
|
1,649,757
|
1,717,816
|
|||||||||
Total
revenue
|
10,549,489
|
6,104,736
|
16,981,505
|
$
|
12,252,222
|
||||||||
Cost
of revenue
|
|||||||||||||
Products
|
1,470,227
|
947,172
|
2,425,642
|
1,951,290
|
|||||||||
Service
and supplies
|
263,614
|
271,021
|
446,383
|
475,531
|
|||||||||
Total
cost of revenue
|
1,733,841
|
1,218,193
|
2,872,025
|
2,426,821
|
|||||||||
Gross
margin
|
8,815,648
|
4,886,543
|
14,109,480
|
9,825,401
|
|||||||||
Operating
expenses:
|
|||||||||||||
Engineering
and product development
|
1,503,595
|
1,133,424
|
2,912,804
|
2,198,299
|
|||||||||
Marketing
and sales
|
2,809,466
|
2,793,446
|
5,192,989
|
5,302,205
|
|||||||||
General
and administrative
|
1,935,891
|
1,689,951
|
3,784,237
|
3,503,306
|
|||||||||
Total
operating expenses
|
6,248,952
|
5,616,821
|
11,890,030
|
11,003,810
|
|||||||||
Income
(loss) from operations
|
2,566,696
|
(730,278
|
)
|
2,219,450
|
(1,178,409
|
)
|
|||||||
Interest
expense - net
|
84,098
|
109,333
|
182,705
|
215,139
|
|||||||||
Net
income (loss) before provision for income taxes
|
$
|
2,482,598
|
$
|
(839,611
|
)
|
$
|
2,036,745
|
$
|
(1,393,548
|
)
|
|||
Provision
for income taxes
|
96,000
|
-
|
96,000
|
-
|
|||||||||
Net
income (loss)
|
2,386,598
|
(839,611
|
)
|
1,940,745
|
(1,393,548
|
)
|
|||||||
Preferred
dividend
|
-
|
26,830
|
-
|
55,880
|
|||||||||
Net
income (loss) attributable to common stockholders
|
$
|
2,386,598
|
$
|
(866,441
|
)
|
$
|
1,940,745
|
$
|
(1,449,428
|
)
|
|||
Net
income (loss) per share
|
|||||||||||||
Basic
|
$
|
0.06
|
$
|
(0.02
|
)
|
$
|
0.05
|
$
|
(0.04
|
)
|
|||
Diluted
|
$
|
0.06
|
$
|
(0.02
|
)
|
$
|
0.05
|
$
|
(0.04
|
)
|
|||
Weighted
average number of shares used in computing income (loss) per
share
|
|||||||||||||
Basic
|
39,308,978
|
38,035,094
|
39,240,427
|
37,755,330
|
|||||||||
Diluted
|
44,635,496
|
38,035,094
|
44,179,709
|
37,755,330
|
Six Months Ended
|
Six Months Ended
|
||||||
June 30, 2008
|
June 30, 2007
|
||||||
Cash
flows from operating activities:
|
|||||||
Net
income (loss)
|
$
|
1,940,745
|
$
|
(1,393,548
|
)
|
||
Adjustments
to reconcile net income (loss) to net cash provided by (used for)
operating activities:
|
|||||||
Depreciation
|
458,829
|
505,284
|
|||||
Amortization
|
359,503
|
359,504
|
|||||
Loss
on disposal of assets
|
-
|
11,145
|
|||||
Stock
based compensation
|
816,643
|
492,608
|
|||||
Non-cash
interest expense associated with discount on convertible loans
payable
|
14,706
|
14,706
|
|||||
Changes
in operating assets and liabilities:
|
|||||||
Accounts
receivable
|
321,492
|
(337,524
|
)
|
||||
Inventory
|
(323,913
|
)
|
732,418
|
||||
Other
current assets
|
(325,808
|
)
|
(101,832
|
)
|
|||
Accounts
payable
|
(226,647
|
)
|
(805,127
|
)
|
|||
Accrued
interest
|
142,214
|
223,263
|
|||||
Accrued
salaries and other expenses
|
(601,534
|
)
|
(549,285
|
)
|
|||
Deferred
revenue
|
400,880
|
238,559
|
|||||
Total
adjustments
|
1,036,365
|
783,719
|
|
||||
Net
cash provided by (used for) operating activities
|
2,977,110
|
(609,829
|
)
|
||||
Cash flows from investing activities: | |||||||
Additions
to property and equipment
|
(198,348
|
)
|
(368,250
|
)
|
|||
Net
cash used for investing activities
|
(198,348
|
)
|
(368,250
|
)
|
|||
Cash
flows from financing activities:
|
|||||||
Issuance
of common stock for cash
|
251,472
|
1,146,445
|
|||||
Payment
of convertible notes payable
|
(258,906
|
)
|
-
|
||||
Payment
of note payable
|
-
|
(375,000
|
)
|
||||
Net
cash (used for) provided by financing activities
|
(7,434
|
)
|
771,445
|
||||
Increase
(decrease) in cash and equivalents
|
2,771,328
|
(206,634
|
)
|
||||
Cash
and equivalents, beginning of period
|
4,348,729
|
3,623,404
|
|||||
Cash
and equivalents, end of period
|
$
|
7,120,057
|
$
|
3,416,770
|
|||
Supplemental
disclosure of cash flow information:
|
|||||||
Interest
paid
|
$
|
55,598
|
$
|
8,743
|
|||
Non-cash
items from investing and financing activities:
|
|||||||
Conversion
of convertible notes payable into Common Stock
|
$
|
2,500,000
|
$
|
-
|
|||
Accrued
dividends on convertible preferred stock
|
$
|
-
|
$ | 55,880 |
(1) |
Basis
of Presentation and Significant Accounting
Policies
|
(2) |
Financing
Arrangements
|
(2) |
Financing
Arrangements (continued)
|
(2) |
Financing
Arrangements (continued)
|
(2) |
Financing
Arrangements (continued)
|
(3) |
Earning
per Share
|
Three Months Ended
June 30,
|
Six Months Ended
June 30,
|
||||||||||||
2008
|
2007
|
2008
|
2007
|
||||||||||
Net
income (loss)
|
$
|
2,386,598
|
$
|
(839,611
|
)
|
$
|
1,940,745
|
$
|
(1,393,548
|
)
|
|||
Less
preferred dividends
|
-
|
(26,830
|
)
|
(55,880
|
)
|
||||||||
Net
income (loss) available to common shareholders - basic
|
$
|
2,386,598
|
$
|
(866,441
|
)
|
$
|
1,940,745
|
$
|
(1,449,428
|
)
|
|||
Add
interest relating to convertible loans payable
|
79,893
|
-
|
173,570
|
-
|
|||||||||
Net
income (loss) available to common shareholders - diluted
|
$
|
2,470,696
|
$
|
(866,441
|
)
|
$
|
2,123,450
|
$
|
(1,449,428
|
)
|
|||
Basic
shares used in the calculation of earnings per share
|
39,308,978
|
38,035,094
|
39,240,427
|
37,755,330
|
|||||||||
Effect
of dilutive securities:
|
|||||||||||||
Stock
options
|
1,545,516
|
-
|
1,180,134
|
-
|
|||||||||
Restricted
stock
|
58,834
|
-
|
14,705
|
-
|
|||||||||
Convertible
loans payable
|
3,722,168
|
-
|
3,744,443
|
-
|
|||||||||
Stock
warrants
|
-
|
-
|
-
|
-
|
|||||||||
Diluted
shares used in the calculation of earnings per share
|
44,635,496
|
38,035,094
|
44,179,709
|
37,755,330
|
|||||||||
Net
income (loss) per share :
|
|||||||||||||
Basic
|
$
|
0.06
$
|
(0.02
|
)
|
$
|
0.05
$
|
(0.04
|
)
|
|||||
Diluted
|
$
|
0.06
$
|
(0.02
|
)
|
$
|
0.05
$
|
(0.04
|
)
|
Three
Months Ended
|
Six
Months Ended
|
||||||||||||
June
30,
|
June
30,
|
||||||||||||
2008
|
2007
|
2008
|
2007
|
||||||||||
Stock
options
|
1,813,655
|
5,057,362
|
1,988,844
|
5,057,362
|
|||||||||
Restricted
stock
|
-
|
-
|
855,000
|
-
|
|||||||||
Stock
warrants
|
1,003,311
|
1,003,311
|
1,003,311
|
1,003,311
|
|||||||||
Convertible
Revolving Promissory Note
|
-
|
1,441,848
|
-
|
1,441,848
|
|||||||||
Convertible
loans payable
|
-
|
2,098,039
|
-
|
2,098,039
|
|||||||||
Convertible
Series A Preferred Stock
|
-
|
460,000
|
-
|
460,000
|
|||||||||
Convertible
Series B Preferred Stock
|
-
|
527,500
|
-
|
527,500
|
|||||||||
2,816,966
|
10,588,060
|
3,847,155
|
10,588,060
|
(4) |
Stock-Based
Compensation
|
(5) |
Fair
Value Measurements
|
§
|
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
|
(5) |
Fair
Value Measurements (continued)
|
(6) |
Commitments
and Contingencies
|
(7) |
Income
Taxes
|
(7) |
Income
Taxes (continued)
|
(8) |
Subsequent
Events
|
Three
months ended June 30,
|
|||||||||||||
2008
|
2007
|
Change
|
% Change
|
||||||||||
Digital
revenue
|
$
|
7,961,945
|
$
|
3,961,880
|
$
|
4,000,065
|
101.0
|
%
|
|||||
Analog
revenue
|
1,715,180
|
1,301,852
|
413,328
|
31.7
|
%
|
||||||||
Service
& supply revenue
|
872,364
|
841,004
|
31,360
|
3.7
|
%
|
||||||||
Total
revenue
|
$
|
10,549,489
|
$
|
6,104,736
|
$
|
4,444,753
|
72.8
|
%
|
Six
months ended June 30,
|
|||||||||||||
2008
|
2007
|
Change
|
% Change
|
||||||||||
Digital
revenue
|
$
|
12,247,611
|
$
|
7,415,250
|
$
|
4,832,361
|
65.2
|
%
|
|||||
Analog
revenue
|
3,084,137
|
3,119,156
|
(35,019
|
)
|
-1.1
|
%
|
|||||||
Service
& supply revenue
|
1,649,757
|
1,717,816
|
(68,059
|
)
|
-4.0
|
%
|
|||||||
Total
revenue
|
$
|
16,981,505
|
$
|
12,252,222
|
$
|
4,729,283
|
38.6
|
%
|
Contractual
Obligations
|
Payments
due by period
|
|||||||||||||||
Less
than 1
|
||||||||||||||||
Total
|
year
|
1-3
years
|
3-5
years
|
5+
years
|
||||||||||||
Convertible
loans payable to related parties
|
$
|
2,297,794
|
$
|
2,297,794
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
Convertible
loans payable to investors
|
$
|
694,853
|
$
|
694,853
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
Lease
Obligations*
|
$
|
1,390,653
|
$
|
224,767
|
$
|
945,566
|
$
|
220,320
|
$
|
-
|
||||||
Other
Obligations
|
$
|
21,505
|
$
|
21,505
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
Interest
Obligation**
|
$
|
435,000
|
$
|
435,000
|
$
|
-
|
$
|
-
|
$
|
-
|
||||||
Total
Contractual Obligations
|
$
|
4,839,805
|
$
|
3,673,919
|
$
|
945,566
|
$
|
220,320
|
$
|
-
|
Votes
Cast
|
Votes
|
|||
Director
|
"For"
|
Withheld
|
||
Dr.
Lawrence Howard
|
36,795,018
|
168,112
|
||
Kenneth
Ferry
|
36,862,077
|
101,053
|
||
Rachel
Brem, M.D.
|
35,747,592
|
1,215,538
|
||
Steven
Rappaport
|
36,721,663
|
241,467
|
||
Maha
Sallam
|
36,862,332
|
100,798
|
||
Elliot
Sussman, M.D.
|
35,747,792
|
1,215,338
|
||
Anthony
Ecock
|
36,868,077
|
95,053
|
Exhibit No.
|
Description
|
|
2.1*
|
Asset
Purchase Agreement dated as of June 20, 2008 between the Registrant
and
3TP LLC dba CAD Sciences(1)
|
|
10.1
|
Escrow
Agreement dated as of July 18, 2008 by and among the Registrant,
3TP LLC
dba CAD Sciences and U.S. Bank National Association (1)
|
|
Loan
and Security Agreement dated as of June 30, 2008 by and between the
Registrant and RBS Citizens, N.A. (2)
|
||
10.3
|
Revolving
Note dated as of June 30, 2008 made by the Registrant in favor of
RBS
Citizens, N.A. (2)
|
|
10.4
|
Negative
Pledge Agreement dated June 30, 2008 by the Registrant as accepted
by RBS
Citizens, N.A.(2)
|
10.5
|
Employment
Agreement entered into as of June 1, 2008 between the Registrant
and Kenneth Ferry.
|
|
10.6
|
Employment
Agreement entered into as of June 1, 2008 between the Registrant
and
Darlene Deptula-Hicks.
|
|
10.7
|
Employment
Agreement entered into as of June 1, 2008 between the Registrant
and
Jeffrey Barnes.
|
|
10.8
|
Employment
Agreement entered into as of June 1, 2008 between the Registrant
and
Stacey Stevens.
|
|
10.9
|
Employment
Agreement entered into as of June 1, 2008 between the Registrant
and
Jonathan Go.
|
|
|
||
31.1
|
Certification
of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
|
31.2
|
Certification
of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002.
|
|
32.1
|
Certification
of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
|
|
32.2
|
|
Certification
of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
|
|
iCAD,
Inc.
|
|||
(Registrant)
|
||||
Date: August
8, 2008
|
By:
|
/s/
Kenneth M. Ferry
|
||
Kenneth
M. Ferry
|
||||
President,
Chief Executive Officer,
|
||||
|
Director
|
|||
Date: August 8,
2008
|
By:
|
/s/
Darlene M. Deptula-Hicks
|
||
Darlene
M. Deptula-Hicks
|
||||
Executive
Vice President of Finance
|
||||
and
Chief Financial Officer, Treasurer
|