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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2022
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from________to________
Commission file number 001-09341
iCAD, INC.
(Exact name of registrant as specified in its charter)
Delaware
02-0377419
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
98 Spit Brook Road, Suite 100,Nashua, New Hampshire
03062
(Address of principal executive offices)
(Zip Code)
Registrant’s telephone number, including area code: (603) 882-5200
Securities registered pursuant to Section 12(b) of the Act:
Title of Class
Trading
Symbol(s)
Name of each exchange
on which registered
Common Stock, $0.01 par value
ICAD
The NASDAQ Stock Market LLC
Securities registered pursuant to Section 12 (g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the
Act. Yes ☐ No ☒
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, if any, 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). Yes ☒ No ☐.
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company or an emerging growth 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.
Large Accelerated filer
☐
Accelerated filer
☐
Non-accelerated filer
☒
Smaller reporting company
☒
Emerging growth company
☐
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 has filed a report on and attestation to its management’s assessment of the effectiveness
of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered
public accounting firm that prepared or issued its audit report. ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the
registrant included in the filing reflect the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based
compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒
The aggregate market value of the voting stock held by non-affiliates of the registrant, based upon the closing price for the registrant’s
Common Stock on June 30, 2022 was $92,546,960. Shares of voting stock held by each officer and director and by each person who,
as of June 30, 2022, may be deemed to have beneficially owned more than 10% of the outstanding voting stock have been excluded.
This determination of affiliate status for purposes of this calculation is not necessarily a conclusive determination of affiliate status for
any other purpose.
As of March 22, 2023, the registrant had 25,446,407 shares of its common stock outstanding.
Documents Incorporated by Reference: Certain portions of the registrant’s definitive Proxy Statement for its 2023 Annual Meeting of
Stockholders are incorporated by reference into Items 10, 11, 12, 13 and 14 of Part III of this Annual Report on Form 10-K.
Table of Contents
Table of Contents
Page
PART I
Item 1.
Business
3
Item 1A. Risk Factors
24
Item 1B. Unresolved Staff Comments
41
Item 2.
Properties
41
Item 3.
Legal Proceedings
42
Item 4.
Mine Safety Disclosures
42
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
43
Item 6.
[Reserved]
43
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
43
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
56
Item 8.
Financial Statements and Supplementary Data
56
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
56
Item 9A. Controls and Procedures
57
Item 9B. Other Information
57
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
57
PART III
Item 10. Directors, Executive Officers and Corporate Governance
58
Item 11. Executive Compensation
58
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
58
Item 13. Certain Relationships and Related Transactions, and Director Independence
58
Item 14. Principal Accounting Fees and Services
58
PART IV
Item 15. Exhibits, Financial Statement Schedules
59
Item 16
Form 10-K Summary
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Special Note Regarding Forward Looking Statements
Certain information included in this Annual Report on Form 10-Kand the documents incorporated by reference herein, that are not
historical facts, contain “forward looking statements” within the meaning of the federal securities laws made pursuant to the “safe
harbor” provisions of the Private Securities Litigation Reform Act of 1995. These statements involve a number of known and
unknown risks, uncertainties and other factors that could cause the actual results, performance or achievements of the Company to be
materially different from any future results, performance or achievement expressed or implied by such forward looking statements.
These risks and uncertainties include, but are not limited to, the continued impact of the COVID-19 pandemic, the ability to achieve
business and strategic objectives, the risks of uncertainty of patent protection, the impact of supply and manufacturing constraints or
difficulties, uncertainty of future sales levels, protection of patents and other proprietary rights, the impact of supply and
manufacturing constraints or difficulties, product market acceptance, possible technological obsolescence of products, increased
competition, litigation and/or government regulation, changes in Medicare reimbursement policies, risks relating to our existing and
future debt obligations, competitive factors, the effects of a decline in the economy or markets served by the Company, and other risks
detailed in this report and in the Company’s other filings with the United States Securities and Exchange Commission (the “SEC”).
The words “believe”, “demonstrate”, “intend”, “expect”, “estimate”, “anticipate”, “likely”, “seek”, “would”, “could”, “may”,
“consider”, “confident” and similar expressions identify forward-looking statements. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date the statement was made. Except as required by law, we
assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available
in the future.
Unless the context otherwise requires, the terms “iCAD”, the “Company”, “we”, “our”, “registrant”, and “us” mean iCAD, Inc. and its
consolidated subsidiaries.
PART I
Item1.
Business.
General
iCAD, Inc. is a global medical technology company providing innovative cancer detection and therapy solutions. The Company
reports in two operating segments: Cancer Detection (“Detection”) and Cancer Therapy (“Therapy”). Originally incorporated in
Delaware in 1984 as Howtek, Inc., the Company changed its name to iCAD, Inc. in 2002. The Company’s headquarters are located in
Nashua, New Hampshire. Xoft, Inc., Xoft Solutions LLC and iCAD France LLC are wholly owned subsidiaries of iCAD, Inc. and are
consolidated for reporting purposes.
iCAD continues to evolve from a business focused on image analysis for the early detection of cancers to a broader participant in the
cancer therapy market. The Company’s strategy is to provide patients and clinicians with a broad portfolio of innovative clinical and
workflow solutions and technologies that address the two primary stages of the cancer care cycle, namely detection and treatment. The
Company believes that its products can enhance early cancer detection and earlier targeted intervention, which could result in better
health outcomes, overall savings to the healthcare system, and increased market demand and adoption of iCAD’s solutions.
Cancer Detection Segment
Background and Overview
According to the World Cancer Research Fund, breast cancer is the most common cancer in women worldwide, and the second most
common cancer overall, with more than two million new cases diagnosed worldwide in 2021. Approximately 40 million
mammography procedures were performed in the United States in 2022.
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Although mammography is the most effective method for early detection of breast cancer, studies have shown that an estimated 20%
or more of all breast cancers go undetected in the screening stage. The American Cancer Society estimates that, overall, screening
mammograms do not find approximately one in five breast cancers. Observational errors are responsible for more than half of cancers
missed, but products that utilize artificial intelligence (“AI”) and computer-aided detection (“CAD”) have been proven to reduce the
risk of observational errors in mammography. These cancer detection solutions can improve interpretation workflow by using
sophisticated deep learning AI algorithms designed to rapidly and accurately analyze image data and mark suspicious areas in the
image that may warrant more attention or highlight the possibility that the area may contain a subtle, but significant abnormality.
While breast cancer has been the primary focus of iCAD’s detection technology, the underlying technology has potential applications
to aid in the diagnosis of many additional types of cancer.
In the United States, digital breast tomosynthesis (“DBT”) is rapidly replacing full-field digital mammography (“FFDM”) in breast
cancer screening due to DBT’s clinical value in cancer detection and lower recall rate. According to the United States Food and Drug
Administration (the “FDA”), as of February 1, 2023, the United States alone had approximately 8,827 Mammography Quality
Standards Act (“MQSA”) certified facilities which provide mammography screening. These facilities operate approximately 13,332
MQSA accredited FFDM and 11,342 DBT units with many of these units capable of both FFDM and DBT mammography and
counted in both statistics. While many of these centers still use 2D FFDM systems, either alone or in combination with DBT systems,
the Company believes that approximately 80-85% of imaging centers in the United States use DBT based on February 2023 MQSA
data. DBT greatly increases image data compared to FFDM, which creates significant workflow challenges for radiologists who face
the additional workload and time required to accurately read all of the image data contained in DBT cases. Further, as incidence rates
of cancer continue to rise, it is becoming increasingly important to find cancer sooner, reduce unnecessary recalls resulting from false
positives, and optimize radiologist efficiency. iCAD’s technology addresses these challenges with a portfolio of AI solutions for
cancer detection, breast density assessment, and short-term risk assessment for use with both 2D and 3D mammography, as well as
colon polyp detection in Computed Tomography (“CT”) virtual colonography imaging to enhance both detection and diagnosis stages
of the cancer care cycle.
The Company launched Profound AI, a DBT cancer detection and workflow solution built on deep learning AI, in the European Union
(the “EU”) and Canada in 2016 and, after receiving FDA premarket approval in the United States in 2019. ProFound AI version 3.0,
which offers clinical and workflow improvements over prior versions, received FDA 510(k) clearance in March 2021 for commercial
use in the United States for reading DBT exams generated using compatible DBT systems.
The Company’s 2D FFDM breast density solution received FDA 510(k) clearance in December 2013. In December 2018, the
Company also developed a breast density assessment product for tomosynthesis that assesses breast density using 2D synthetic images
that are generated from 3D tomosynthesis datasets.
In July 2020, the Company received a CE mark in the European Economic Area (the “EEA”) for ProFound AI Risk, the world’s first
image-based 2-year risk assessment model that assesses short-term breast cancer risk based primarily on information found in a 2D
mammogram. In September 2020, ProFound AI Risk for 2D was introduced in the U.S. market as a decision support tool for
radiologists. In September 2021, ProFound AI Risk for DBT was launched as a clinical decision support tool that provides an accurate
short-term breast cancer risk estimation that is truly personalized for each woman, based only on a 2D or 3D mammogram.
Based on the number of DBT units relative to the total units left to be converted to DBT, and the associated large number of
installation opportunities, the Company believes that its cancer detection, breast density assessment and risk assessment solutions for
DBT may represent a significant growth opportunity in the United States. The Company believes that there is also a growth
opportunity for 2D mammography and DBT AI solutions in international markets, both from the analog to digital conversion and as
more countries adopt the practice of each exam being read by a single radiologist using AI, rather than the alternative practice of
having two radiologists read each exam. Furthermore, additional western European countries have already implemented, or are
planning to implement, mammography screening programs, which may increase the number of screening mammograms performed in
those countries.
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Breast AI Suite
The Company’s breast AI suite includes cancer detection, automated density assessment, and breast cancer risk assessment solutions
for both 2D and 3D mammography. These solutions are designed to enhance breast cancer screening by improving clinicians’ clinical
performance and efficiency.
PowerLook
PowerLook is the Company’s back-end architecture platform, which hosts AI algorithm solutions and manages the communications
between (i) imaging acquisition systems (“Gantries”), and (ii) image storage and review systems such as Picture Archive and
Communication Systems (“PACS”) and (iii) breast imaging viewing and interpretation systems. Workflow efficiency is critical in
digital imaging environments and PowerLook was designed to streamline these processes. PowerLook includes a powerful and
flexible DICOM (Digital Image and Communications in Medicine) compliant connectivity solution, which is designed to enable
universal compatibility with leading PACS and review workstations. iCAD has worked with its industry partners to ensure optimal
integration into the graphical user interface of their PACS and review workstations. The algorithms supported on the Powerlook
platform have also been optimized for, and tested with, each supported digital imaging acquisition manufacturer based upon the
characteristics of their unique components.
PowerLook v11.2 was commercially launched in late 2022. This latest version of the platform provides a scalable architecture that
allows customers to optimize computing resources across an enterprise by automatically load balancing large data image processing.
Additionally, in 2022, the Company introduced a containerized version of its PowerLook platform to integrate more easily into third
party AI platform hosting environments. Several leading AI platform providers, including Sectra AB (Linköping, Sweden) and Arterys
(Redwood Shores, CA), adopted the containerized environment and introduced integrated commercial offerings based on the
Company’s AI algorithms in 2022.
SecondLook
SecondLook is a machine learning-based cancer detection algorithm that analyzes 2D FFDM images to identify and mark suspicious
masses and calcifications. This technology provides radiologists with a “second look” that helps detect potentially actionable cancers
earlier than screening mammography alone. SecondLook uses a sophisticated, patented machine learning algorithm designed to
identify the masses and calcifications that are most likely to be malignant. The algorithm was trained using data from 2D
mammography studies, enabling the product to distinguish between characteristics of cancerous and normal tissue. This differentiation
results in earlier detection of hard-to-find cancers, improved workflow for radiologists, and higher quality patient care. SecondLook
first received FDA premarket approval in 2002 and is currently primarily offered in the United States and select countries where the
Company’s latest 2D ProFound AI solution is not yet available.
Automated Density Assessment, 2D and 3D
PowerLook Density Assessment provides automated, consistent and standardized breast density assessments based on the American
College of Radiology’s BI-RADS 5th Edition density categorization system. Currently in the United States, at least 38 states and the
District of Columbia require some level of breast density notification to patients as part of their screening mammogram. In 2022 the
European Society of Breast Imaging also announced recommendations that women should be informed about their breast density and
recommends screening breast MRI every two to four years for women with extremely dense breasts. In July 2021, the Company
introduced the latest version of the Company’s automated density solution, a deep learning breast density assessment algorithm based
on 2D synthetic images generated by DBT gantries from multiple vendors, including General Electric, Hologic and Siemens. In
addition, the product continues to support breast density assessment based on 2D FFDM images from leading manufactures.
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ProFound AI, 2D and 3D
DBT was first FDA approved in the United States in 2010 and has been demonstrated to offer multiple advantages compared to 2D
mammography, including improved tissue visualization and detection that results in lower recall rates for patients. Clinical studies
indicate that, when compared to 2D FFDM, DBT improves the ability to distinguish malignant from benign tumors and can better
detect malignant lesions hidden by overlapping tissues, each of which can reduce the number of unnecessary biopsies and false
positive recall rates. Initial studies have indicated that physicians using DBT have the ability to detect 41% more invasive cancers than
those using 2D mammography, and also can reduce false-positive reads by up to 15%.
While DBT has been shown to offer clinical benefits for screening mammography, it can also significantly increase radiologist
interpretation time compared to 2D mammography. AI-based solutions can significantly improve the efficiency and efficacy of
reading breast tomosynthesis cases by identifying and highlighting suspicious breast masses and calcifications.
In 2018, the Company received regulatory clearances in the EU, Canada, and the U.S. for its multi-vendor, DBT AI cancer detection
and workflow solution, PowerLook Tomo Detection 2.0, which was subsequently rebranded ProFound AI for DBT.
ProFound AI for DBT is iCAD’s deep-learning algorithm specifically designed to detect malignant soft-tissue densities and
calcifications in DBT exams by analyzing each DBT image, or slice. In early 2018, the Company completed a large multi-reader,
multi-case crossover design clinical reader study, which showed that ProFound AI can increase radiologist clinical performance by
improving radiologist sensitivity by an average of 8%, improve radiologist specificity by an average of 6.9% and reduce recall rates in
non-cancer cases by an average of 7.2%. The reader study also showed that the product can reduce DBT reading times by an average
of 52.7%. Results from this reader study were published in the peer-reviewed journal Radiology: Artificial Intelligence in July 2019.
In 2019, the Company launched ProFound AI for 2D, a similar AI cancer detection and workflow solution for 2D mammography.
ProFound AI for 2D is CE approved and primarily targets the European market, where 2D mammography remains the predominant
procedure for breast cancer screening. In March 2021, Version 3.0 of ProFound AI for DBT cleared FDA 510(k) review for use in
clinical reading of DBT exams from compatible DBT systems. ProFound AI for DBT Version 3.0 included algorithm changes that
improved both sensitivity and specificity in reading DBT exams compared to prior versions. In May 2021, ProFound AI received
expanded EU approval for use with Fuji and Hologic Clarity HD DBT systems. In the fall of 2021, ProFound AI 3.0 for DBT added
support for Hologic’s Clarity HD DBT in the US as well as adding support for highlighting suspicious findings in GE, Hologic, and
Siemens systems’ synthetic 2D images and in Hologic’s 3D Quorum slab images.
In 2022, ProFound AI was granted an Authorization to Operate (ATO) from the Department of Defense (DoD). The DoD’s Risk
Management Framework (RMF) requires technologies be granted an ATO in order to be approved for use at a DoD healthcare facility.
There are currently more than 500 DoD hospitals, inpatient facilities, ambulatory care and occupational health facilities worldwide.
In May 2022, real world evidence presented at the Society of Breast Imaging (SBI/ACR) Breast Imaging Symposium showed
ProFound AI improved radiologists’ screening performance, increased cancer detection rates and reduced abnormal interpretation
rates.
iCAD plans to continue its focus on (i) advancing the performance of its ProFound AI for DBT solution through algorithm
improvements and additional training on larger datasets, and (ii) building clinical support for and adoption of its products and
solutions. iCAD has presented ProFound AI for DBT data from numerous studies at various prominent industry meetings and trade
shows. The Company has Original Equipment Manufacturer (“OEM”) relationships with General Electric Company (“GE”), Siemens
AG (“Siemens”), and FUJIFILM Corporation (“Fuji”) and expects to use ProFound AI to expand its OEM partnerships with other
mammography systems, PACS providers, and cloud-hosted AI platform providers.
ProFound AI™ Risk, 2D and 3D
ProFound AI Risk is the first commercially available clinical decision support tool that provides an accurate and personalized
estimation of short-term breast cancer risk, based solely on a screening mammogram.
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The Company worked with leading researchers at the Karolinska Institute in Stockholm, Sweden, one of the world’s foremost medical
research universities, to develop and clinically validate ProFound AI Risk. Unlike existing risk models that focus on family history and
lifestyle factors to estimate longer-term risk, ProFound AI Risk focuses on a short-term risk interval. The estimation of risk of cancer
occurrence within the next one to two years provides potentially more accurate information on which to base further actions relative to
breast cancer risk. iCAD believes short-term risk models such as ProFound AI Risk will enable risk-based screening approaches rather
than the commonly used age-based approach of annual screening. The COVID-19 pandemic highlighted the benefit of risk-based
screening as at the height of the pandemic in 2020, several medical societies recommended women of average risk postpone routine
annual mammograms until the threat of COVID passed. As mammography screening begins to evolve from what has traditionally
been an age-based annual screening paradigm to a short-term risk-based paradigm in the years ahead, iCAD is on the leading edge of
this shift.
In July 2020 ProFound AI Risk for 2D FFDM received a CE Mark in Europe, and in September 2020 iCAD announced the
publication of data in the peer-reviewed journal, Radiology, that confirmed ProFound AI Risk more accurately identifies the prospect
of near-term development of breast-cancer than traditional risk models.
The October 2021 launch of the latest version of ProFound AI Risk was a significant achievement for iCAD, as this latest version
offers the flexibility to work with 2D and 3D mammography images with high accuracy, showing over 10% improvement in the Area
Under the Receiver Operating Characteristics Curve (AUC), a commonly used statistical measure of clinical accuracy, when compared
to the Gail and Tyrer-Cuzick conventional lifetime risk models. Designed for global application, the latest version of ProFound AI can
(i) provide a one, two or three-year risk estimation, (ii) factor in ethnic and racial backgrounds in the assessment of the score, and
(iii) factor in country specific screening guidelines and incident and mortality rates.
In May 2022, a study published in Science Translational Medicine found ProFound AI Risk accurately determined women who were
at a higher risk of developing breast cancer, with up to 2.4 times more accuracy than traditional lifetime risk models.
In addition to superior accuracy, the image-based ProFound AI Risk solution offers a simpler approach to breast cancer risk
assessment for providers, as there is no requirement to collect and manage patient history and lifestyle information, which can be
costly and inaccurate.
Expansion of Software Licensing Model Options for the Breast Health Solutions Suite
iCAD has historically offered solely perpetually-licensed software, primarily pre-installed on and sold with an iCAD configured, off-
the-shelf computer, capable of optimally running the software. As a result, customers using this model can only classify iCAD
software and hardware as a capital purchase for accounting purposes and making an up-front capital purchase.
In 2022, iCAD began offering its full suite of breast AI solutions in a variety of more flexible and customer accessible options. First,
iCAD uncoupled the purchase of iCAD software from the purchase of hardware, allowing customers to source their own computer
hardware or use existing IT infrastructures. Second, iCAD launched several new software licensing models designed to accommodate
both capital and operating purchasing for customers. In addition to offering perpetual licenses, the Company introduced a new
subscription pricing model that allows customers to purchase a term-based subscription based on the number of imaging gantries or
annual mammography exam volume. To make iCAD’s software more flexible, the Company’s software has been developed to run as a
self-contained software package, making it executable within a variety of infrastructure environments, including iCAD-configured
computers, alternatively sourced specification-compliant servers, virtualized environments, integrations into channel partner
infrastructure and cloud-based hosting environments. iCAD will continue to sell iCAD configured servers to customers who prefer a
single-vendor, turnkey solution with guaranteed compatibility and support.
iCAD is committed to providing solutions that will enable as many customers as possible to purchase or utilize the Company’s
products. The Company’s Therapy business and the services and hardware product portions of the Detection business are expected to
remain unchanged in the coming year. The subscription licensing model is currently being evaluated and the short-term and long-term
impacts on the Company’s results of operations are being tested, although iCAD believes subscriptions will be relatively slow to
accumulate over time and will be largely additive to the perpetual license business. Additive customers will have positive revenue
impact and while the transition of perpetual license customers to subscription customers will have negative effects in the short term,
iCAD expects this to impact a limited fraction of the overall revenue base of the Company in 2023. The Company is also currently
evaluating the future potential of providing a SaaS subscription model with the Company hosting its software from the cloud.
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Colon Cancer Screening Products
Colon cancer is the third most common cancer diagnosed globally, leading to almost one million deaths per year. CT is a well-
established and widely used imaging technology that images cross-sectional “slices” of various parts of the human body. While the
increased image quality and number of cross-sectional slices per scan offered by CT provides valuable diagnostic information, it adds
to the challenge of managing and interpreting the large volume of data generated. CT Colonography (“CTC”) is a less invasive
technique for imaging the colon when screening for cancer than a traditional colonoscopy. However, the process of reading a CTC
exam can be lengthy and tedious as the interpreting physician is often required to traverse the entire length of the colon multiple times.
CAD technology can play an important role in improving the accuracy and efficiency of reading CTC images by automatically
identifying and highlighting polyps that can progress into cancer.
VeraLook is the Company’s FDA-cleared solution designed to support detection of colonic polyps in conjunction with CTC. Field
testing of the product was initiated in 2008. Results of the Company’s multi-reader clinical study demonstrated that the use of
VeraLook improved reader sensitivity by 5.5% for patients with both small and large polyps, and slightly reduced specificity of
readers by 2.5%. VeraLook was CE marked in 2009, received FDA 510(k) clearance in 2010 and is currently distributed with
advanced visualization reading workstations and CTC applications manufactured by Canon Medical Systems and Philips Healthcare.
Potential Future Cancer Detection Products Development
The Company’s current primary focus is on image analysis and workflow solutions leveraging AI in mammography, however,
iCAD’s core technologies and product development capabilities can be applied to any imaging modality, including x-ray, CT,
ultrasound, and Magnetic Resonance Imaging (“MRI”). Additionally, the Company could develop products that can be applied to
screening and/or diagnosis of various additional cancer types such as prostate, lung, and brain cancers, as well as screening and/or
diagnosis of disease related to visually differentiated tissue abnormalities. The Company continues to evaluate the adjacent or
complementary opportunities in image analysis workflow solutions for future product development and commercialization
possibilities.
Cancer Therapy Segment
Background and Overview
Radiation therapy is the medical use of ionizing radiation, generally as part of cancer treatment to control or kill rapidly dividing
malignant cells. Radiation therapy may be curative in numerous types of cancer if the cancer cells are localized to one area of the
body. It may also be used as part of curative therapy to prevent tumor recurrence after surgical removal of a primary malignant tumor
(for example, early-stage breast cancer). The clinical goal in radiation oncology is to deliver the highest radiation dose possible
directly to the tumor to kill the cancer cells, while minimizing radiation exposure to healthy tissue surrounding the tumor to limit
complications and side effects.
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The three main types of radiation therapy are (i) external beam radiation therapy (“EBRT”), which involves a radiation source
positioned outside the body (ii) brachytherapy, in which sealed radiation sources are temporarily or permanently inserted in the body,
within the treatment area, and (iii) systemic radioisotopes, which are given by infusion or oral ingestion.
Conventional EBRT typically involves up to 40 radiation treatment sessions for a tumor. Brachytherapy offers the benefit of reduced
radiation exposure to healthy tissues further away from the radiation source. In addition, if the patient moves or if there is any tumor
movement within the body during treatment, the radiation source retains its correct position in relation to the tumor. Thus,
brachytherapy offers an advantage over EBRT in its ability to better direct high doses of radiation to the size and shape of the
cancerous area while sparing healthy tissue and organs.
Brachytherapy is commonly used as an effective treatment for endometrial, cervical, prostate, breast, and skin cancer, and can also be
used to treat tumors in many other body sites. Electronic Brachytherapy (“eBx”) is a type of radiation therapy that utilizes a
miniaturized, electronically stimulated, high dose rate X-ray source to apply radiation directly to the cancerous site. Unlike live
isotope sources used in some brachytherapy, eBx only emits radiation when desired and the radiation dosage can be accurately
controlled. eBx may also be used in Accelerated Partial Breast Irradiation (“APBI”), which concentrates the radiation therapy on a
smaller focal point than conventional EBRT, allowing higher concentrations of radiation over fewer treatment sessions.
Cancer Therapy Products
The Xoft Axxent Electronic Brachytherapy System (“Xoft System”) is iCAD’s proprietary electronic brachytherapy platform designed
to deliver isotope-free (non-radioactive) radiation treatment in virtually any clinical setting without the limitations of radionuclides.
The Xoft System utilizes a miniaturized high dose rate, low energy X-ray source to apply the radiation dose directly to the size and
shape of the cancerous area while sparing healthy tissue and organs. While delivering clinical dose rates similar to traditional
radioactive systems, the electronic nature of the Xoft System technology provides a faster dose fall-off which lowers the radiation
exposure outside of the targeted area and eliminates the need for dedicated shielded treatment environment such as that required with
traditional isotope-based radiation therapy. As the Xoft System is relatively compact, it can easily be transported for use in virtually
any clinical setting under radiation oncology supervision (including the operating room, where intraoperative radiation therapy
(“IORT”) is delivered).
The Xoft System is FDA-cleared, CE marked and licensed in an increasing number of countries for the treatment of cancer anywhere
in the body. Active customers include university research and community hospitals, cancer care clinics, veterinary facilities, and
dermatology offices with established strategic partnerships with radiation oncology service providers for supervised treatment
delivery. The Company’s commercial focus for the Xoft System has been the treatment of early-stage breast cancer, gynecological
cancers, and non-melanoma skin cancer (“NMSC”). Emerging applications include a wide and growing array of cancers, including
brain and rectal tumors. Given that the Xoft System has regulatory clearance for the treatment of cancer anywhere in the body,
treatments for emerging applications may not require additional regulatory clearance.
The Company continues to make enhancements to the Xoft System controller (the “Controller”) unit, including upgrades to the high
voltage connection, and the Streamlined Module for Advanced Radiation Therapy (“SMART”) platform which uses the Axxent Hub,
iCAD’s proprietary cloud-based oncology collaboration software solution. The SMART platform is an adaptive, patient-centric
solution designed to improve the eBX program’s workflow efficiency, flexibility, safety, and security. This comprehensive Wi-Fi
enabled platform provides all members of a care team with a collaborative environment in which to manage patient workflow and
eliminate challenges related to exchanging current, accurate patient data among providers.
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In addition to the Controller unit, the Company offers a 50kV isotope-free energy source, indication-specific applicators, a
comprehensive service warranty program, and various accessories such as the Axxent eBx Rigid Shield for internal IORT shielding.
The 50kV energy source is typically sold under an annual contract and is customized to individual customer volume and usage
requirements. The Company offers FDA-cleared applicators for the utilization of the Xoft System, including breast applicators for
IORT and APBI in the treatment of breast cancer, vaginal applicators for the treatment of endometrial cancer, cervical applicators for
the treatment of cervical cancer, and skin applicators for the treatment of NMSC. The flexible single-use breast and brain applicators
are offered in a variety of sizes and lengths based on clinical need. The endometrial, cervical, rectal, and skin applicators are reusable
and are manufactured in various sizes based on the anatomical requirements of the patient or the size of the lesion.
Cancer Therapy Indications
Background and Overview
The Xoft System can be used to treat a wide and growing array of cancers, including breast cancer, NMSC, gynecological, recurrent
glioblastoma (“GBM”) and various other forms of brain cancer, and additional IORT indications.
Approximately 300,000 women are diagnosed with breast cancer every year in the United States. Currently, many early-stage breast
cancer patients who are treated with radiation therapy follow a four-to-six-week daily protocol of traditional EBRT, while a small
portion are treated with brachytherapy. Breast cancer therapy is one of the primary indications for the Xoft system. Xoft used in IORT
aims to simplify radiation treatment for early-stage breast cancer patients by delivering a single ten to fifteen-minute precise dose of
radiation directly to the lumpectomy cavity in a single, safe and effective procedure. Xoft used in APBI may reduce the daily radiation
treatment duration from weeks to days.
There are approximately 3.5 million cases of NMSC diagnosed annually in the United States. The Xoft System is a viable alternative
treatment option for patients with lesions in cosmetically challenging locations (e.g., ear, nose, scalp, neck), locations that experience
difficulties in healing (e.g., lower legs, upper chest, fragile skin), patients on anticoagulants, and patients who are anxious about
surgery. The Xoft System has been used to treat more than 10,000 NMSC lesions. Clinical data published from 2015 to 2017
demonstrates promising local control and supports eBx as a convenient, effective, nonsurgical treatment option offering minimal
toxicity and improved cosmesis for eligible NMSC patients.
There are approximately 50,000 new cases of endometrial cancer each year in the United States and more than 800,000 new cases
worldwide. In 2017, the first-ever European analysis of eBx using the Xoft System for endometrial and cervical cancer treatment was
presented that demonstrated improved outcomes in acute toxicity in 29 endometrial or cervical cancer patients treated with the Xoft
System from September 2015 to September 2016. Additional research showed that compared to an iridium isotope, the Xoft System
delivered a lower dose of radiation to surrounding healthy organs at risk, such as the bladder and rectum.
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Approximately 297,000 cases of brain and nervous system tumors are diagnosed worldwide per year. GBM is the most common and
aggressive type of malignant primary brain tumor, with an estimated median survival of 10 to 12 months. The Company is continuing
to develop clinical support for brain IORT, primarily in the GLIOX trial, an international multi-center trial designed to compare Xoft
IORT plus Avastin® (bevacizumab) to the investigational arm of RTOG-1205 (EBRT plus bevacizumab).
Led by principal investigator and world-renowned oncologist, Santosh Kesari, MD, PhD, Chair and Professor, Department of
Translational Neurosciences at the Saint John’s Cancer Institute, Santa Monica, CA, the first patient in the GLIOX trial was treated in
December 2021. In April 2022, the Company announced multiple patients have been treated in the GLIOX trial. Doctors at Cáceres
University Hospital in Cáceres, Spain have also successfully treated multiple cases of recurrent GBM with the Xoft System, which
were performed in preparation for the GLIOX trial, as well as brain metastases, recurrent rectal, and head and neck tumors. The
Company also announced as of April 2022 clinicians at the Miguel Servet University Hospital in Zaragoza, Spain, have utilized Xoft
IORT in their cancer treatment regimen for sarcomas and brain metastases, as well as more than 700 breast cancers and 200
gynecological cancers to date.
Researchers hope the GLIOX trial will validate the intriguing initial results from a prospective two center comparative study at the
European Medical Center (the “EMC”) in Moscow, Russia. The EMC study evaluated 15 patients with recurrent GBM who were
treated with maximal safe resection and Xoft Brain IORT, and 15 patients with recurrent GBM treated with maximal safe resection
and other modalities (control group), between June 2016 and June 2019. In October 2021, data supporting Xoft Brain IORT for the
treatment of recurrent GBM were published with a subsequent erratum published in December 2021, in the peer-reviewed journal,
Surgical Neurology International. The update reported that as of March 2021, patients treated in the EMC study with Xoft Brain IORT
lived for up to 54 months after treatment without recurrence, whereas patients in the control group had a recurrence within 10 months
and lived for up to 22.5 months after treatment. Researchers also found there were fewer complications, such as radionecrosis, in the
IORT group. Radionecrosis refers to the breakdown of normal body tissue near the original tumor site after radiation therapy. One
patient from the IORT group was still alive as of January 1, 2022, whereas none of the patients in the control group survived.
Preliminary results from this study were presented in August 2021 at the American Association of Neurological Surgeons (AANS)
2021 annual scientific meeting.
Additionally, electronic brachytherapy is appropriate for use in other IORT clinical settings where surgical resection is unable to
completely eliminate all cancer cells. The Company believes that IORT for prostate, pelvic, gastrointestinal, abdominal, spinal, and
soft tissue sarcoma applications are potential markets given the minimal shielding requirements associated with this treatment
modality. In September 2019, the Company unveiled new and updated advancements for the Xoft System at the American Society for
Radiation Oncology (“ASTRO”) annual meeting. This included an advanced prototype for early-stage rectal cancers, and extended-
length balloon applicators, available in 25 cm and 50 cm lengths, which offer added versatility and the potential for additional
applications for the Xoft System in different areas of the body. Based on these additional clinical applications and the potential to
scale the Xoft System in the future to address other indications for use, the Company believes the Xoft System offers unique flexibility
and opportunities for growth.
Additional Studies
In 2016, Melinda Epstein, PhD, of Hoag Memorial Hospital Presbyterian in Newport Beach, California and co-authors published two
clinical papers on their experience with the Xoft System for the treatment of early-stage breast cancer with IORT. In June 2016, the
Annals of Surgical Oncology published data on 702 patients treated from June 2010 to January 2016, demonstrating a 1.7% recurrence
rate. Further, less than 5% of patients had significant complications, indicating that IORT allows some women who cannot (or decline
to) undergo whole breast radiation to consider breast-conserving therapy rather than mastectomy. In August 2016, The Breast Journal
published 20-month mean follow-up data on 146 patients with pure ductal carcinoma in situ treated with IORT. The data showed a
2.1% recurrence rate with relatively few complications and again concluded that x-ray based IORT has the potential to be a promising
treatment modality that may simplify the delivery of post-excision radiation therapy.
In 2017, researchers from Hoag Memorial Hospital Presbyterian published another clinical paper in the Annals of Surgical Oncology
on their experience with the Xoft System in treating 204 early-stage breast cancers in a prospective, X-ray IORT trial from June 2010
to September 2013. With a median follow-up of 50 months, results indicated there were seven ipsilateral breast tumor events, no
regional or distant recurrences, and no breast cancer-related deaths. Kaplan-Meier analysis projects that 2.9% of patients will recur
locally at 4 years. The site’s low complication and recurrence rates support the cautious use and continued study of IORT in selected
women with low-risk breast cancer. The Hoag Memorial Hospital Presbyterian IORT series is currently the largest single-facility
IORT series with the Xoft System in the United States.
Also, in 2017, the Company announced results of a landmark study that demonstrated the economic benefits of IORT compared to
EBRT in the treatment of early-stage breast cancer. The analysis demonstrated that IORT could result in direct cost savings for the
U.S. healthcare system of more than $630 million over the lifetime of patients diagnosed annually with early-stage breast cancer, as
well as could significantly benefit patient health by minimizing radiation exposure and offering a better quality of life. The results of
the study were published in November 2017 in the peer-reviewed Cost Effectiveness and Resource Allocation and the study
determined IORT to be the preferred method of treatment for early-stage breast cancer.
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As the Company continues to focus on broadening global awareness and patient access to IORT, 2017 also brought meaningful
progress in the area of international research. Physicians from Taiwan published a clinical paper in November 2017 in the peer-
reviewed PLOS One journal. The multi-center study examined patient selection and the oncologic safety of IORT with the Xoft
System for the management of early-stage breast cancer. From 2013 to 2015, 26 hospitals in Taiwan performed a total of 261 IORT
procedures. With a mean follow-up of 15.6 months, locoregional recurrence was observed in 0.8% of patients. The study concluded
that preliminary results of IORT in Taiwan showed it is well accepted by patients and clinicians.
Finally, in 2017, the Company announced that results of a matched-pair cohort study of 369 early-stage NMSC patients treated with
the Xoft System or Mohs micrographic surgery showed that rates of recurrence of cancer were virtually identical at a mean follow-up
of 3.4 years. Mohs micrographic surgery is accepted as the most effective technique for removing basal cell carcinoma and squamous
cell carcinoma. The study results were published online in the peer-reviewed Journal of Contemporary Brachytherapy.
In 2018, several additional key pieces of clinical evidence supporting IORT with the Xoft System were published. With a mean
follow-up of 55 months, outcomes published in The American Journal of Surgery showed that breast cancer recurrence rates of
patients who were treated with IORT using the Xoft System and complied with adjuvant medical therapy were comparable to those
seen in the cornerstone TARGIT-A study, which evaluated IORT but did not use the Xoft System. The study reviewed results of 184
patients with breast cancer from November 2011 to January 2016 completing Institutional Review Board (“IRB”)-approved IORT
protocol. The recurrence rate for the 184 total IORT patients was 5.4 percent at a mean follow-up of 55 months; however, the
recurrence rate was 2 percent lower for the patients who complied with adjuvant medical therapy. The difference in recurrence rates
between the group complying with versus declining adjuvant medical therapy was statistically significant. To date, this study presents
the most long-term research of IORT using the Xoft System published in a peer-reviewed journal.
Further in 2018, a long-term study of 1,000 tumors performed at Hoag Memorial Hospital Presbyterian and in the Annals of Surgical
Oncology showed that IORT is a clinically effective, faster and easier alternative to whole breast radiation therapy following breast-
conserving surgery for selected low-risk patients at a median follow-up of 36 months. To date, this study presents analysis of the
largest series of early-stage breast cancers treated with IORT using the Xoft System published in a peer-reviewed journal.
In 2019, study results from the first cervical cancer cases for eight patients treated with the Xoft System at the Hospital Universitario
Miguel Servet in Zaragoza, Spain were published in the Journal of Applied Clinical Medical Physics. Researchers found the treatment
offered promising results at 1 month follow up, with no recurrences and low toxicity. The study concluded that electronic
brachytherapy is a good alternative to treating cervical cancer in centers without access to conventional high-dose-rate interstitial
brachytherapy.
Clinical data supporting the Xoft System for the treatment of various gynecological cancers, including cervical and uterine, were also
presented in 2019 at the European Society for Radiotherapy and Oncology meeting by researchers from the Hospital Universitario
Miguel Servet and the Jewish General Hospital in Montreal, Québec, Canada. A study conducted by researchers from the Hospital
Universitario Miguel Servet concluded that electronic brachytherapy is an alternative to high dose-rate brachytherapy with a good rate
of overall survival and progression free disease. The retrospective study conducted by researchers at the Jewish General Hospital
suggested that electronic brachytherapy could replace high-dose-rate brachytherapy in uterine cancer with similar target coverage,
maximum dose to surrounding structures, and treatment times and that additional studies would be needed to evaluate efficacy.
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Preliminary results of the Company’s international, multi-center clinical trial in the Xoft System were unveiled during an oral
presentation at the 60th ASTRO annual meeting at the Henry B. Gonzalez Convention Center in San Antonio, Texas on October 23,
2018. In the presentation, A.M. Nisar Syed, MD, Principal Study Investigator, Medical Director, Radiation Oncology &
Endocurietherapy, MemorialCare Cancer Institute, Long Beach Memorial Medical Center, and Professor of Radiation Oncology, UCI
Medical Center and Harbor-UCLA School of Medicine, detailed clinical techniques and outcomes of IORT using the Xoft System at
the time of breast conserving surgery with findings based upon ASTRO suitability criteria. The trial enrolled 1,200 patients between
May 2012 and July 2018 at 28 international and U.S.-based institutions. With a median follow up of 1.6 years, less than one percent of
patients had cancer regrowth (ipsilateral recurrence) or developed new primary cancers in the other breast. Treatment was generally
well tolerated with grade 3, 4 and 5 adverse events occurring in 37 patients. Mean treatment time was 10.5 minutes.
At the ASTRO Virtual Annual Meeting in October 2020, researchers presented new data supporting the Xoft System for the treatment
of early-stage breast cancer and endometrial cancer. In a study involving 1,200 patients with early-stage breast cancer treated with the
Xoft System from May 2012 to July 2018 across 27 institutions worldwide, researchers concluded that IORT with the Xoft System is
safe, with low morbidity, low local recurrence and excellent cosmetic results. In a study of 236 patients with endometrial cancer from
September 2015 to May 2020, with a median follow up of 34 months, researchers concluded the Xoft System is a feasible alternative
to HDR brachytherapy for the treatment of endometrial cancer that offers long-term benefits for patients, staff and the overall
healthcare system.
Researchers from Miguel Servet University Hospital in Spain presented several studies supporting the Xoft System at the European
Society for Radiotherapy & Oncology (ESTRO) virtual meeting in November 2020. In a study analyzing 193 patients from 2015 to
2019, where one group was treated with the Xoft System combined with external radiation and one group was treated with the Xoft
System, researchers established electronic brachytherapy for endometrial cancer as a feasible alternative to HDR brachytherapy, equal
in effectiveness to Iridium 192, with long-term benefits for patients. Researchers concluded that the Xoft System provided the
same dosimetric coverage in the area of treatment as traditional brachytherapy with a marked reduction in dosage to organs at risk.
In another study presented at ESTRO 2020, researchers created 3D printed anatomic models that allowed them to create simulations to
measure possible radiation doses in nearby organs, such as the lung and heart, where it is not possible to place a detector to perform in
vivo dosimetry. Results calculated the maximum doses to radiochromic film representing the left lung and heart of 20 patients treated
from the left breast measured retrospectively. Researchers concluded it was possible to measure and verify doses in the lung and heart
for IORT treatments, enabling more accurate recommendations for a particular type of treatment.
A third study presented at ESTRO 2020 examined the results of 480 patients treated with IORT from May 2015 to October 2019 with
treatment verification and in vivo dose measurements to understand the in vivo dose in the skin. Researchers concluded the skin doses
were low with less than 1% of the cases exhibiting early toxicity of acute grade 3 dermatitis and no cases of higher-grade dermatitis.
Researchers presented a study supporting Xoft Breast IORT at the American Brachytherapy Society (ABS) 2021 Annual Conference.
In a study evaluating the efficacy and outcome of IORT for early-stage breast cancer, researchers found recurrence rates to be similar
to those reported in the TARGIT-A trial. Preliminary results from the ExBRT trial were presented at the ASBrS Annual Meeting in
2021. The multi-institutional study found at median 4-year follow-up, 1,200 breast cancer patients enrolled in the ExBRT trial were
successfully treated with a single fraction of IORT to the lumpectomy cavity following breast conserving surgery with a favorable
local recurrence rate. At the ESTRO meeting in 2021, researchers presented a study evaluating body mass index (BMI) in breast
cancer patients treated with Xoft Breast IORT.
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Sales and Marketing
Cancer Detection
The Company has now sold more than 1,300 ProFound AI licenses through December 31, 2022 and more than 2,000 total product
licenses including ProFound AI, upgrades, and other products. In North America, iCAD sells its AI mammography products through a
direct regional sales force and through the Company’s channel partners, which include OEMs, Radiology Picture Archiving and
Communication System (PACS) vendors, AI Platform vendors and distributors. The Company’s OEM partners include: GE
Healthcare, focused on the manufacture and distribution of diagnostic imaging equipment, Fujifilm Medical Systems, a subsidiary of
Fuji focused on the manufacture and distribution of X-rays and other imaging equipment, and Siemens Medical Systems. In Europe,
the Company sells its AI mammography products through a direct sales force and has also developed reseller relationships with
regional distributors.
iCAD continues to build-out our PACS partners, including: Change Healthcare Inc. (“Change Healthcare”), a leading independent
healthcare technology company focused on insights, innovation and accelerating the transformation of the U.S. healthcare system;
Sectra AB (“Sectra”), an international medical imaging IT solutions and cybersecurity company; as well as the GE Healthcare division
marketing GE PACS.
Additionally, the Company has expanded on partnerships with additional AI Platform solution vendors. iCAD has three AI Platform
vendor distribution agreements, including Arterys Inc. the world’s leading cloud native, vendor-neutral AI platform; Ferrum Health,
who partners with global leaders of AI applications to provide a robust catalog of AI applications on a single, secure platform serving
clinical service lines across healthcare enterprises; and Blackford Analysis, a wholly owned subsidiary of Bayer AG – a platform built
for integration with existing systems while simplifying integrations and the management of multiple disparate AI applications and
algorithms.
In March 2022, iCAD became one of the first healthcare companies to validate its AI cancer detection solution with the NVIDIA
software suite, enabling thousands of healthcare organizations worldwide to virtualize AI workloads within hospital data centers using
VMware vSphere and industry-standard servers.
In October of 2022, iCAD and Solis Mammography (Solis) announced a collaboration to develop and commercialize AI to evaluate
cardiovascular disease based on breast arterial calcifications. Multiple studies have shown a correlation between the amount of breast
arterial calcifications, which are visibly detectable on mammograms, to cardiovascular risk. iCAD and Solis are working together to
use AI to quantify the amount of breast arterial calcification in mammograms, correlated to the risk of disease, and define meaningful
clinical pathways for high-risk women.
In November of 2022, iCAD announced a strategic development and commercialization agreement with Google Health to integrate
Google’s AI into iCAD’s breast imaging portfolio. iCAD intends to use Google’s 2D AI in its commercial product offerings,
especially outside the U.S., where 2D mammography is primarily used for screening. The Company expects to release its first product
leveraging the Google AI technology in the next 1-2 years. Additionally, iCAD also announced plans to leverage the Google Health
Cloud to launch its own cloud platform for the delivery of its breast AI offerings. The company has already received its first order
from Radiology Partners, allowing hundreds of thousands of women to be screened at Radiology Partners’ owned outpatient imaging
center sites with iCAD’s Breast AI Suite.
In November of 2022, iCAD and Radiology Partners, the largest radiology practice in the US, announced their intent to join forces to
drive nationwide adoption of iCAD’s Breast AI Suite. The Company has already received its first order from Radiology Partners,
allowing hundreds of thousands of women to be screened at Radiology Partners’ owned outpatient imaging center sites with iCAD’s
Breast AI Suite. The Company has not yet entered into a definitive agreement with Radiology Partners.
These partnerships greatly expand visibility and access to the Company’s Breast AI suite – including ProFound AI Detection,
ProFound AI Risk and PowerLook Density Assessment - for more hospitals and imaging centers across North America.
Additionally, as part of its sales and marketing efforts, the Company engages in a variety of public relations and local outreach
programs with numerous customers and continues to cultivate relationships with industry leaders in breast cancer solutions, including
at trade shows where the future of medical image analysis solutions is discussed.
Cancer Treatment
iCAD markets the Xoft System in the United States and select countries worldwide through its wholly-owned subsidiary, Xoft, Inc. a
Delaware corporation (“Xoft”). In the United States, Xoft utilizes a direct sales force and selected distribution partners. Xoft has been
granted regulatory approval and has established partnerships in the United States, many European Union countries, the United
Kingdom, Australia, Taiwan, China, and numerous other countries. iCAD continues to evaluate regulatory and distribution
opportunities throughout the world.
A comprehensive medical education program is a key part to the Company’s eBx market development strategy. Xoft actively
participates in key industry scientific conferences and independent venues in the United States and Europe where the Company
provides professional education programs and product demonstrations relating to eBx. The goal of these programs and demonstrations
is to broaden physician awareness of the Xoft System and eBx technology.
Competition
The Company operates in highly competitive and rapidly changing markets with competitive products available from nationally and
internationally recognized companies. Many of these competitors have significantly greater financial, technical and human resources
than iCAD and are well-established in the healthcare market. In addition to the existing technologies or products that compete with the
Company’s products, some companies may develop technologies or products that compete with the products the Company
manufactures and distributes or that would render the Company’s products obsolete or noncompetitive. Moreover, competitors may
achieve patent protection, regulatory approval, or product commercialization before iCAD does, which would limit the Company’s
ability to compete with them. iCAD believes that efficacy, safety profile, feature differentiation, cost, and reimbursement are the
primary competitive factors that will affect the success of the Company’s products.
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Cancer Detection
The Company currently faces direct competition in its cancer detection and breast density assessment businesses from Hologic, Inc.
(Marlborough, MA), Volpara Solutions Limited (Rochester, NY), ScreenPoint Medical (Nijmegen, Netherlands), Densitas Inc.
(Halifax, Nova Scotia, Canada), Therapixel (Paris, France), and Lunit (Seoul, South Korea). The Company believes many factors,
including breadth of innovative and clinically differentiated product offerings, ongoing development of clinical support, strong
relationships with its strategic partners, and ability to provide the Company’s solutions across a number of platforms and payment
structures will provide it with a competitive advantage in breast AI.
The Company’s VeraLook product faces competition from the traditional imaging CT equipment manufacturers and emerging CAD
companies. Siemens Medical (Tarrytown, NY), GE Healthcare (Chicago, IL), and Philips Medical Systems (Andover, MA) currently
offer polyp detection products outside the United States. A significant barrier to adoption in the United States has been a lack of
reimbursement for CTC for colon cancer screening. The Company expects that CT manufacturers will offer a colonic polyp detection
solution as an advanced feature of their image management and display products typically sold with their CT equipment, but current
reimbursement policies present a significant barrier to wide-spread adoption and the Company believes that its market leadership in
mammography AI may provide it with a competitive advantage within the CTC community.
Cancer Treatment
The Company’s eBx products face competition in breast IORT primarily from Carl Zeiss Meditec Inc. (“Zeiss”) (Dublin, CA), which
has an established base of breast IORT installations in Europe. Zeiss manufactures and sells eBx products for the delivery of IORT,
for both breast and additional anatomical areas, including the spine, gastrointestinal tract, skin, and endometrial cancers. Sensus
Healthcare Inc. (Boca Raton, FL) and IntraOp Medical Corporation (Sunnyvale, CA) are other competitors in the breast IORT market.
The expansion of the Company’s gynecological product portfolio and new IORT applications beyond breast IORT have increased the
competitive dynamic of the Company’s business. Larger and more diversified radiation therapy companies offer a wide variety of
clinical solutions for HDR brachytherapy, including Varian Medical Systems (Milpitas, CA) and Elekta (Stockholm, Sweden). These
companies offer broad product portfolios, which include a full range of HDR brachytherapy after loaders and applicators, traditional
radiation therapy solutions, treatment planning solutions, and workflow management capabilities.
The Company’s NMSC products face competition from other mobile non-surgical treatment options (such as Sensus Healthcare’s
Surface Radiation Therapy system and Elekta’s Esteya system), surgical treatment options and traditional radiation therapy.
In September 2020, Centers for Medicare & Medicaid Services (“CMS”) issued a final rule establishing the Radiation Oncology
Advanced Payment Model, a bundled payment model for radiotherapy treatment that incentivizes physician selection of high quality,
lower cost treatment modalities like Xoft’s electronic brachytherapy for treatment of breast and other cancers. In the final notice, CMS
did not include IORT treatments (including CPT codes 77424 and 77425) within the new alternative payment model for radiation
oncology. As a result, whether or not a particular physician practice or hospital is subject to the new radiation oncology payment
model, IORT services covered by Medicare will continue to be subject to the existing payment systems for physician services and
hospital outpatient services. The model was supposed to begin in 2021, but Congress passed legislation to delay the start of the new
payment model until 2023. Stakeholders are encouraging CMS to make significant changes to the model before it takes effect.
Medicare has not yet posted the final version of the rule outlining the details of the program.
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Manufacturing and Professional Services
The Company manufactures and assembles its detection products. When a product sale is made to an end-customer by one of the
Company’s OEM partners, it is usually installed at the customer site by the OEM partner or the Company. When iCAD makes a
product sale directly to the end-customer, the product is generally installed by iCAD personnel at the customer site.
iCAD’s professional services staff provides comprehensive product support on a post-sale basis. Product support includes product
demonstrations, product installations, applications training, and technical support. The Company’s support center is a single point of
contact for the end-customer, and provides remote diagnostics, troubleshooting, training, and service dispatch. Service repair efforts
are generally performed at the customer site by third party service organizations or in the Company’s repair depot by the Company’s
repair technicians.
Xoft’s portable Xoft System is manufactured and assembled by contract manufacturers. Xoft’s miniaturized eBx X-ray source is
manufactured by the Company at its San Jose, CA facility. Once the product has shipped, it is typically installed by Xoft personnel at
the customer site.
Xoft’s professional services staff provides comprehensive product support, physician support, radiation therapist support and billing
support on a post-sales basis. Field service staff is involved in product installation, maintenance, training and service repair.
Government Regulation
iCAD’s operations, products and customers are subject to extensive government regulation by numerous government agencies. the
Company’s software, hardware systems and related accessories are regulated as medical devices in each of the jurisdictions where the
Company operates, and iCAD’s customers are subject to applicable provider quality standards.
Manufacturing and Sales
In the United States, numerous laws and regulations govern the processes by which iCAD’s products are brought to market. These
include the Federal Food, Drug, and Cosmetic Act (“FDCA”) and its regulations, which govern, among other things, quality standards
for product development, manufacturing, testing, labeling, storage, premarket clearance or approval, advertising and promotion, sales
and distribution, and post-market surveillance of medical devices.
For devices in the United States, FDA’s premarket clearance or approval process controls the entry of products into the market, unless
a device is exempt from premarket review. Whether a product requires clearance (510(k) premarket notification) or approval
(premarket approval, “PMA”) depends on the FDA’s risk-based classification of the device. Some of the Company’s products require
submission of a premarket notification demonstrating that the device is at least as safe and effective, that is, “substantially equivalent”,
to a legally marketed device that is not required to be approved under a PMA. Once iCAD receives an order from FDA declaring a
device to be substantially equivalent, the iCAD product is “cleared” for commercial marketing in the United States. Other iCAD
products require submission of a PMA, which requires non-clinical and clinical data supporting the safety and effectiveness of the
device. Once the Company receives FDA approval of its PMA application based on FDA’s determination that the application contains
sufficient, valid scientific evidence to assure that the device is safe and effective for its intended use(s), iCAD may market the device.
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After our products enter the market, iCAD and our products continue to be subject to FDA regulation. For example, the FDA Quality
System Regulations (“QSR”) require manufacturers to establish a quality system including extensive design, testing, control,
documentation and other quality assurance procedures designed to ensure that their products consistently meet applicable FDA
requirements and manufacturer specifications. iCAD’s third-party manufacturers are also required to comply with applicable parts of
the QSR. Manufacturers are subject to periodic inspections by the FDA to determine compliance with QSR. If at the conclusion of an
inspection, FDA has made any observations that may constitute violations of applicable requirements, it may issue an FDA Form 483
(“483”) requiring corrective action within a limited amount of time. If any observations are not addressed and/or corrective action
taken, FDA may issue a warning letter and or take other enforcement action. The Company also is subject to FDA regulations
covering labeling and adverse event reporting as well as the FDA’s general prohibition against promoting products for unapproved or
“off-label” uses. Failure to comply fully with applicable regulations could lead to delayed marketing clearance or approval or
enforcement action, including 483s, warning letters, product seizures, import/export refusal, civil or criminal penalties, injunctions,
and criminal prosecution.
Similarly, medical device regulators in other jurisdictions require various levels of clearance, approval, certification, licensure and/or
consent before regulated medical devices can be lawfully commercialized in those jurisdictions as well as ongoing compliance with
manufacturing and other regulatory requirements. These approvals, the time required for regulatory review, and the continuing
compliance requirements vary by jurisdiction. Obtaining and maintaining foreign regulatory approvals and maintaining compliance is
an expensive and time-consuming process. Increasingly, medical device manufacturers are adopting globally harmonized quality
standards as developed by the International Organization for Standardization, and risk management standards. Manufacturers of
software as a medical device are further subject to specific security standards.
Additionally, the U.S. government regulates the transfer of information, commodities, technology and software considered to be
strategically important to the United States in the interest of national security, economic and/or foreign policy concerns. A
complicated network of federal agencies and inter-related regulations in the United States that govern exports, collectively referred to
as “Export Controls.” These regulate the shipment or transfer, by whatever means, of controlled items, software, technology, or
services out of the United States. Exported medical products are also subject to the regulatory requirements of each country to which
the medical product is exported.
Healthcare Laws
The Company is also subject to a variety of federal and state regulations in the United States and regulations in other jurisdictions that
relate to iCAD’s interactions with healthcare practitioners, government officials, purchasing decision makers, and other stakeholders
across healthcare systems. These regulations, discussed in more detail below, include among others, the following:
•
anti-kickback, false claims, and physician self-referral statutes;
•
U.S. state laws and regulations regarding fee splitting and other relationships between healthcare providers and non-
professional entities, such as companies that provide management and reimbursement support services;
•
anti-bribery laws, such as the U.S. Foreign Corrupt Practices Act, the UK Anti-Bribery Act, the Canadian Corruption of
Foreign Public Officials Act, and guidance promulgated by certain multi-national groups, such as the United Nations
Convention Against Corruption and the Organization for Economic Cooperation and Development Convention on
Combatting Bribery of Foreign Public Officials in International Business Transactions;
•
laws regulating the privacy and security of health data, protected health information and personally identifiable
information. These include the U.S. Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), the Health
Information Technology for Economic and Clinical Health Act, the General Data Protection Regulation (“GDPR”) in the
EU, and the Personal Information Protection and Electronic Documents Act in Canada; and
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•
healthcare reform laws in the United States, such as the Affordable Care Act (“ACA”) and the 21st Century Cures Act,
which include new regulatory mandates and other measures designed to reduce the rate of medical inflation. These
include, among other things, stringent new reporting requirements of financial relationships between device
manufacturers and physicians and teaching hospitals.
These laws and regulations are extremely complex, open to interpretation, and, in some cases, still evolving. If iCAD’s operations are
found to violate any of the foreign, federal, state or local laws and regulations which govern its activities, iCAD may be subject to
litigation, government enforcement actions, and applicable penalties, which could include civil and criminal penalties, damages, fines,
exclusion from participation in certain payer programs or curtailment of the Company’s operations. Compliance obligations under
these various laws are often detailed and onerous, further contributing to the risk that the Company could be found to be out of
compliance with particular requirements. The risk of being found in violation of these laws and regulations is further increased by the
fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and their provisions are open to a
variety of interpretations.
The FDA, CMS, the Department of Health and Human Services, Office of Inspector General (“HHS-OIG”), the Department of
Justice, states’ attorneys general and other governmental authorities actively enforce the laws and regulations discussed above. In the
United States, medical device companies have been the target of numerous government prosecutions and investigations alleging
violations of law, including claims asserting impermissible off-label promotion of medical devices, payments intended to influence the
referral of federal or state healthcare business, and submission of false claims for government reimbursement. While iCAD makes
every effort to comply with applicable laws, it cannot rule out the possibility that the government or other third parties could interpret
these laws differently and challenge the Company’s practices under one or more of these laws. The risk of liability under certain
federal and state laws is increased by the right of individual plaintiffs, known as relators, to bring an action alleging violations of such
laws and potentially be awarded a share of any damages or penalties ultimately awarded to the applicable government body.
Violations of these laws may lead to civil and criminal penalties, damages, fines, exclusion from participation in certain payer
programs or curtailment of the Company’s operations.
iCAD is subject to numerous laws governing safe working conditions, manufacturing practices, environmental protection, fire hazard
control and disposal of hazardous or potentially hazardous substances, among others, both at the U.S. federal and state levels, and
similar laws in other jurisdictions. iCAD may be required to incur significant costs to comply with these laws and regulations in the
future, which may result in a material adverse effect upon the Company’s business, financial condition and results of operations.
Federal, state, and foreign regulations regarding the manufacture and sale of medical devices and management services and software
are subject to future change. iCAD cannot predict what impact, if any, such changes might have on the Company’s business.
Anti-Kickback Laws
The federal Anti-Kickback Statute (“AKS”) prohibits persons from knowingly or willfully soliciting, receiving, offering or paying
remuneration, directly or indirectly, in exchange for or to induce:
•
the referral of an individual for a service or product for which payment may be made by Medicare, Medicaid or other
government-sponsored healthcare program; or
•
purchasing, ordering, arranging for, or recommending the ordering of, any service or product for which payment may be
made by a government-sponsored healthcare program.
The AKS is broad and prohibits many arrangements and practices that are lawful in businesses outside of the healthcare industry. The
statutory penalties for violating the AKS include imprisonment for up to ten years and fines of up to $100,000 per violation. In
addition, through application of other laws, conduct that violates the AKS can also give rise to False Claims Act (“FCA”) lawsuits and
other penalties.
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Congress and the HHS-OIG have established a large number of statutory exceptions and regulatory safe harbors. An arrangement that
fits squarely into an exception or safe harbor is immune from prosecution under the AKS. iCAD trains and educates employees and
marketing representatives on the AKS and their obligations thereunder, and the Company endeavors to comply with the applicable
safe harbors. However, the failure to comply with the exceptions and safe harbor requirements does not always impose liability under
the AKS, as long as the arrangement does not implicate the principal policy objectives. Thus, some of iCAD’s arrangements that may
not be covered by a safe harbor, like many other common and non-abusive arrangements, nevertheless likely do not pose a material
risk of program abuse or warrant the imposition of sanctions because they do not implicate any of the AKS’s principal policy
objectives. However, iCAD cannot offer assurances that, with respect to any arrangements that do not squarely meet an exception or
safe harbor, the Company will not have to defend against alleged violations of the AKS. Allegations of violations of the AKS also
may be brought under the federal Civil Monetary Penalty Law, which requires a lower burden of proof than other fraud and abuse
laws, including the AKS.
Government officials have focused recent kickback enforcement efforts on, among other things, the sales and marketing activities of
healthcare companies, including medical device manufacturers, and have brought cases against individuals or entities with personnel
who allegedly offered unlawful inducements to potential or existing customers in an attempt to procure their business. This trend is
expected to continue. Settlements of these cases by healthcare companies have involved significant fines and/or penalties and in some
instances criminal pleas or deferred prosecution agreements.
In addition to the federal AKS, many states have their own anti-kickback laws. Often, these laws closely follow the language of the
federal law, although they do not always have the same scope, exceptions, safe harbors or sanctions. In some states, these anti-
kickback laws apply not only to payment made by a government health care program but also with respect to other payers, including
commercial insurance companies.
If iCAD is found to have violated the Anti-Kickback Statute or a similar state statute, it may be subject to civil and criminal penalties,
including exclusion from the Medicare or Medicaid programs, or may be required to enter into settlement agreements with the
government to avoid such sanctions. Typically, such settlement agreements require substantial payments to the government in
exchange for the government to release its claims and may also require the Company to enter into a Corporate Integrity Agreement.
Physician Self-Referral Laws
iCAD is subject to federal and state laws and regulations that limit the circumstances under which physicians who have a financial
relationship with entities that furnish certain specified healthcare services may refer to such entities for the provision of such services,
including clinical laboratory services, radiology and other imaging services and certain other diagnostic services. These laws and
regulations also prohibit such entities from billing for services provided in violation of the laws and regulations.
This federal ban on physician self-referrals, commonly known as the “Stark Law,” prohibits, subject to certain exceptions, physician
referrals of Medicare and Medicaid patients to an entity providing certain “designated health services” if the physician or an
immediate family member of the physician has any financial relationship with the entity. The Stark Law also prohibits the entity
receiving the referral from billing for any good or service furnished pursuant to an unlawful referral. It further obligates any person
collecting any amounts in connection with an unlawful referral to refund these amounts. A person who engages in a scheme to
circumvent the Stark Law’s referral prohibition may be fined up to $170,000 for each such arrangement or scheme. The penalties for
violating the Stark Law also include civil monetary penalties of up to $26,000 per service, and could result in denial of payment,
disgorgements of reimbursement received under a non-compliant agreement, and possible exclusion from Medicare, Medicaid or other
federal healthcare programs.
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In addition to the Stark Law, many states have their own self-referral laws. Often, these laws closely follow the language of the federal
law, although they do not always have the same scope, exceptions, safe harbors or sanctions. In some states these self-referral laws
apply not only to payment made by a government health care program but also payments made by other payers, including commercial
insurance companies. In addition, some state laws require physicians to disclose any financial interest they may have with a healthcare
provider to their patients when referring patients to that provider, even if the referral itself is not prohibited.
iCAD has financial relationships with physicians in the form of equipment leases and services arrangements. The Company’s financial
relationships with referring physicians and their immediate family members must comply with the Stark Law by meeting an applicable
exception. Unlike the AKS, failure to meet an exception under the Stark Law results in a violation of the Stark Law, even if such
violation is technical in nature. iCAD attempts to structure relevant relationships to meet a Stark Law exception, but the regulations
implementing the exceptions are detailed and complex, and underwent significant changes in 2020, and therefore, the Company
cannot provide assurance that every relationship complies fully with the Stark Law.
Violation of these laws and regulations may result in the prohibition of payment for services rendered, significant fines and penalties,
and exclusion from Medicare, Medicaid and other federal and state healthcare programs, any of which could have a material adverse
effect on iCAD’s business, financial condition and results of operations. In addition, expansion of the Company’s operations to new
jurisdictions, new interpretations of laws in iCAD’s existing jurisdictions, or new physician self-referral laws could require structural
and organizational modifications of the Company’s relationships with physicians to comply with those jurisdictions’ laws. Such
structural and organizational modifications could result in lower profitability and failure to achieve iCAD’s growth objectives.
If iCAD fails to comply with federal and state physician self-referral laws and regulations as they are currently interpreted or may be
interpreted in the future, or if other legislative restrictions are issued, the Company could incur a significant loss of revenue and be
subject to significant monetary penalties, or exclusion from participation in federal healthcare programs which could have a material
adverse effect on iCAD’s business, financial condition and results of operations.
False Claims Laws
The federal FCA prohibits any person from knowingly presenting, or causing to be presented, a false claim or knowingly making, or
causing to made, a false statement to obtain payment from the federal government. If iCAD violates the AKS or Stark Law,
improperly bills for services, retains overpayments longer than 60 days after identification, or fails to act with reasonable diligence to
investigate credible information regarding potential overpayments, the Company may be found to violate the federal FCA.
Those found in violation of the FCA can be subject to fines and penalties of three times the damages sustained by the government,
plus mandatory civil penalties of $11,803 to $23,607 per false claim or statement. The qui tam or “whistleblower” provisions of the
FCA allow a private individual to bring actions on behalf of the federal government alleging that the defendant has submitted a false
claim to the federal government, and to share in any monetary recovery. In recent years, the number of suits brought by private
individuals has increased dramatically, causing greater numbers of healthcare companies, including medical device manufacturers, to
defend false claim actions, pay damages and penalties or be excluded from Medicare, Medicaid or other federal or state healthcare
programs.
In addition, various states have enacted false claim laws analogous to the FCA, and this legislative activity is expected to increase.
Many of these state laws apply where a claim is submitted to any third-party payer and not merely a federal healthcare program.
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Increased Regulatory Scrutiny of Relationships with Healthcare Providers
Certain state governments and the federal government have enacted legislation, including the Physician Payments Sunshine Act
provisions under the ACA, aimed at increasing transparency of iCAD’s interactions with healthcare providers. As a result, the
Company is required by law to disclose payments, gifts, and other transfers of value to certain healthcare providers in certain states
and to the federal government. Any failure to comply with these legal and regulatory requirements could result in a range of fines,
penalties, and/or sanctions, and could affect iCAD’s business. The company has devoted and will continue to devote substantial time
and financial resources to develop and implement enhanced structure, policies, systems and processes to comply with these enhanced
legal and regulatory requirements, which may also impact iCAD’s business.
U.S. Coverage and Reimbursement
In the United States, the federal and state governments establish guidelines and pay reimbursements to hospitals, freestanding clinics
(independent diagnostic treatment facilities), and medical professionals for diagnostic examinations and therapeutic procedures under
the federal Medicare program and the joint federal/state Medicaid program. CMS reviews and adjusts Medicare and Medicaid
coverage policies and reimbursement levels periodically and considers various Medicare and other healthcare reform proposals that
could significantly affect private and public reimbursement for healthcare services. State governments determine Medicaid
reimbursement pursuant to state law and regulations. Many third-party payers use coverage decisions and payment amounts
determined by CMS to set their coverage and reimbursement policies.
Because iCAD expects to receive payment for its products directly from iCAD’s customers, the Company does not anticipate relying
directly on payment for any of iCAD’s products from third-party payers, such as Medicare, Medicaid, commercial health insurers and
managed care companies. However, iCAD’s business will be affected by coverage and payment policies adopted by federal and state
governmental authorities for Medicare and Medicaid, as well as private payers, which often follow the coverage policies of these
public programs. Such policies may affect which products customers purchase and the prices they are willing to pay for those products
in a particular jurisdiction. For example, iCAD’s business will be indirectly impacted by the ability of a hospital or medical facility to
obtain coverage and third-party reimbursement for procedures performed using the Company’s products. Third-party payers may deny
coverage or pay an amount for the procedure that healthcare providers deem inadequate, which could cause such providers to use a
lower-cost product from a competitor or perform a medical procedure without the Company’s device.
Reimbursement decisions by individual third-party payers depend upon each third-party payer’s evaluation of a number of factors,
including some or all of the following:
•
whether the product or service is a covered benefit under its health plan;
•
whether the product or service is appropriate and medically necessary for the specific indication;
•
cost effectiveness of the product or service;
•
whether the product is being used in a manner consistent with its FDA-approved or cleared label (i.e., “on-label”); and
•
a determination that the product or service is neither experimental nor investigational (e.g., that its use is supported by
relevant evidence in the peer reviewed literature, its use is supported by medical professional society treatment
guidelines).
In 2016, the American Medical Association (“AMA”) implemented a skin-specific Category III CPT code for electronic
brachytherapy for the treatment of NMSC. Reimbursement for the treatment delivery may be provided through the Category III CPT
code, 0394T, defined as “high dose rate electronic brachytherapy, skin surface application, per fraction, and includes basic dosimetry,
when performed”. There are additional Category I CPT codes reportable with the service as determined by physician orders, medical
necessity, and documentation.
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Coverage policies and payment values associated with CPT code 0394T are determined by the regional Medicare Administrative
Contractors (MACs) and the private payers. Coverage and payment for CPT code 0394T is individually determined by the MACs and
private payers. Many of the MACs and some private payers cover and pay for 0394T.
Category III CPT codes are temporary codes for emerging technologies, services, and procedures that do not yet meet the criteria for
Category I CPT codes. Without further action by the AMA, Category III CPT codes sunset five years after the initial publication or
renewal of the code. The AMA has accepted the retention of CPT code 0394T, renewing the code through 2025. At that time, CPT
code 0394T may be converted to a Category I CPT code. Alternatively, the AMA may determine the code should be further renewed
or archived.
The healthcare industry in the United States is increasingly focused on cost containment as government and private insurers seek to
control healthcare costs by imposing lower payment rates and negotiating reduced contract rates with third-party payers. The ACA
went into effect in 2012. While iCAD believes that elements of the program including the shift to value-based healthcare and
increased focus on patient satisfaction will benefit the Company in the future, there could be negative consequences on patient access
to new technologies. Other elements of this legislation, including comparative effectiveness research, payment system reforms (such
as shared savings pilots) and other provisions, could meaningfully change the way healthcare is delivered and paid for in the United
States, and may materially impact numerous aspects of the Company’s business, including the demand for and availability of iCAD’s
products, the reimbursement available for iCAD’s products from governmental and third-party payers, and reduced medical procedure
volumes.
On September 18, 2020, CMS finalized a rule regarding its new Radiation Oncology model (the “RO Model”), designed, according to
CMS, to improve the quality of care for cancer patients receiving radiotherapy and reduce Medicare expenditures through bundled
payments. In the final notice, CMS did not include IORT treatments (including CPT codes 77424 and 77425) within the new
alternative payment model for radiation oncology. As a result, whether or not a particular physician practice or hospital is subject to
the new radiation oncology payment model, IORT services covered by Medicare will continue to be subject to the existing payment
systems for physician services and hospital outpatient services. On December 2, 2020, an interim final rule was published by CMS, to
take effect no earlier than January 1, 2022, but was subsequently delayed until January 1, 2023 when it became effective.
iCAD is evaluating the effect that changes and proposed changes to the ACA and Biden Administration policies, and the adopted RO
Model by the CMS, may have on the company’s business. iCAD cannot predict whether the ACA will be repealed, replaced, or
modified or how such repeal, replacement or modification may be timed or structured. As a result, the Company cannot quantify or
predict the effect of such repeal, replacement, or modification might have on iCAD’s business and results of operations. However, any
changes that lower reimbursement for the Company’s products or reduce medical procedure volumes could adversely affect iCAD’s
business and results of operations.
Reimbursement in Other Jurisdictions
Typically, coverage and payment for healthcare products and services in other jurisdictions is determined through a public tender
process that takes into consideration the results of a cost-effectiveness or value analysis conducted by a federal government-level
technology assessment group, and through reference to coverage and payment policies established for the same or similar
product/service in comparable jurisdictions.
Market acceptance of iCAD’s medical products in both the United States and other countries is dependent upon the purchasing and
procurement practices of the Company’s customers, patient demand for the Company’s products and procedures, and the
reimbursement policies of patients’ medical expenses set by government healthcare programs, private insurers or other healthcare
payers.
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Intellectual Property
The Company primarily relies on a combination of patents, trade secrets and copyright law, third-party and employee confidentiality
agreements, and other protective measures to protect its intellectual property rights pertaining to its products and technologies.
The Company has certain patents to its ongoing programs that expire between 2023 and 2029. These patents help the Company
maintain a proprietary position in its markets. The Company does not believe that the patents expiring in 2023 are material to its
business. Additionally, the Company has a number of patent applications pending domestically, some of which have been also filed
internationally, and the Company plans to file additional domestic and foreign patent applications when it believes such protection
will benefit the Company. These patents and patent applications relate to current and future uses of iCAD’s cancer detection
technologies and products, including cancer detection solutions for tomosynthesis, CAD for CT colonography and lung and CAD for
MRI breast and prostate. The Company has also secured a non-exclusive patent license from the National Institute of Health which
relates broadly to CAD in colonography, a non-exclusive patent license from Cytyc/Hologic which relates to balloon applicators for
breast brachytherapy, and a non-exclusive license from Zeiss which relates to brachytherapy.
Sources and Availability of Materials
The Company depends upon a limited number of suppliers and manufacturers for its products, and certain components in its products
may be available from a sole or limited number of suppliers. The Company’s products are generally either manufactured and
assembled by a sole manufacturer or a limited number of manufacturers or assembled by it from supplies it obtains from a limited
number of suppliers. Critical components required to manufacture these products, whether by outside manufacturers or directly, may
be available from a sole or limited number of component suppliers. The Company generally does not have long-term arrangements
with any of its manufacturers or suppliers.
Engineering and Product Development
iCAD’s products have been developed by its own research and development staff or were developed by the companies iCAD
acquired. Research and development expenses are primarily attributable to personnel, consulting, subcontract, licensing and data
collection expenses relating to the Company’s new product development and clinical testing. iCAD believes its products are
competitive and that none of the current versions of the Company’s products are approaching obsolescence. iCAD has invested and
expects to continue to invest in new research and development and enhancements of the Company’s current products to maintain
iCAD’s competitive position. For the years ended December 31, 2022, 2021 and 2020, we incurred $8.7 million, $9.2 million, and
$8.1 million of research and development expense, respectively.
Human Capital Resources
As of December 31, 2022, the Company had 109 employees, 108 of whom are full time employees, with 40 involved in sales and
marketing, 20 in research and development, 34 in service, manufacturing, quality assurance, technical support and operations
functions, and 14 in administrative functions. None of the Company’s employees are represented by a labor organization. The
Company considers its relations with employees to be good. On March 20, 2023, the Company committed to a restructuring plan
intended to support its long term strategic goals and reduce operating expenses by further aligning its cost structure to focus on areas
the Company believes are more likely to generate the best long-term results, in light of current industry and macroeconomic
environments (the “RIF”). The Company plans to reduce its workforce by approximately 28%, decreasing its headcount by
approximately 23 employees, predominantly from the Company’s detection business unit. Xoft, Inc., a wholly-owned subsidiary of
the Company, will also furlough 12 of its employees, or approximately 50% of its workforce. The Company currently estimates it will
incur one-time cash pre-tax restructuring charges of an aggregate of approximately $0.3 million in the first half of 2023 as a result of
the RIF, comprised primarily of one-time severance and benefits payments, and employee-related transition costs. Estimated amounts
are subject to change until finalized and the Company may incur additional costs during the remainder of 2023.
The Company’s human capital resource objectives include, as applicable, identifying, recruiting, retaining, incentivizing and
integrating our existing and future employees, advisors and consultants. In addition to competitive base salaries, the other competitive
benefits that we provide to employees include incentive plans and paid vacation. The principal purposes of these employee benefits
are to attract, retain, reward and motivate our personnel and to provide long-term incentives that align the interests of employees with
the interests of our stockholders.
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Foreign Regulations
International sales of the Company’s products are subject to foreign government regulation, the requirements of which vary
substantially from country to country. The time required to obtain approval by a foreign country may be longer or shorter than that
required for FDA approval, and the requirements may differ. Obtaining and maintaining foreign regulatory approvals is an expensive
and time-consuming process. We cannot be certain that we will be able to obtain the necessary regulatory approvals timely or at all in
any foreign country in which we plan to market our CAD products and the Xoft System. If we fail to receive and maintain such
approvals, our ability to generate revenue may be significantly diminished.
Available Information
The Company files annual, quarterly and current reports, proxy or stockholder information statements and other information with the
SEC. The SEC maintains a website that contains reports, proxy and information statements, and certain other information that we may
file electronically with the SEC (http://www.sec.gov). We also make available for download free of charge through our website our
annual report on Form 10-K, our quarterly reports on Form 10-Q, and amendments to those reports filed or furnished pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as soon as reasonably practicable
after we have filed it electronically with, or furnished it to, the SEC. We maintain our corporate website at http://www.icadmed.com.
Our website and the information contained therein or connected thereto are not incorporated into this Annual Report on Form 10-K.
Item 1A.
Risk Factors.
The Company operates in a changing environment that involves numerous known and unknown risks and uncertainties that could
materially adversely affect its operations. The following highlights some of the factors that have affected, and/or in the future could
affect, the Company’s operations.
The following is a summary of certain important factors that may make an investment in iCAD speculative or risky. You should
carefully consider the fuller risk factor disclosure set forth in this Annual Report, in addition to the other information herein, including
the section of this report titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the
Company’s financial statements and related notes.
•
The Company has incurred significant losses from inception through 2022 and there can be no assurance that we will be
able to achieve and sustain future profitability.
•
The Company’s quarterly and annual operating and financial results and gross margins are likely to fluctuate
significantly in future periods.
•
The Company continues to be impacted by slowness in the overall economic recover related to the COVID-19
pandemic. A continuation or worsening of the pandemic will have a material adverse impact on iCAD’s business, results
of operations and financial condition and on the market price of iCAD’s common stock.
•
The markets for the Company’s products and treatments and newly introduced enhancements to iCAD’s existing
products and treatments may not develop as expected, the Company may continue to face barriers to broad market
acceptance.
•
Sales and market acceptance of Company products is dependent upon the coverage and reimbursement decisions made
by third-party payers, including carve-out radiology benefits managers. The failure of third-party payers to provide
appropriate levels of coverage and reimbursement, and/or meeting prior authorization and other requirements for
approval to use Company products and treatments facilitated by the Company’s products could harm the Company’s
business and prospects.
•
A limited number of customers account for a significant portion of the Company’s total revenue. The loss of a principal
customer could seriously hurt the Company’s business.
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•
The markets for many of the Company’s products are subject to changing technology.
•
Revenue from the Company’s new subscription license model may be difficult to predict.
•
The Company distributes its products in highly competitive markets and the Company’s sales may suffer as a result.
•
The Company relies on intellectual property and proprietary rights to maintain its competitive position and may not be
able to protect these rights.
•
The Company’s future prospects depend on its ability to retain current key employees and attract additional qualified
personnel.
•
The market price of the Company’s common stock has been, and may continue to be volatile, which could reduce the
market price of the Company’s common stock.
•
Future issuances of shares of the Company’s common stock may cause significant dilution of equity interests of existing
holders of common stock and decrease the market price of shares of the Company’s common stock.
Risks Related to Financial Position, Operating Results and Need for Additional Capital
The Company’s shift to a subscription service model is uncertain, and there has not been broad market acceptance of the
Company’s new products. The Company has further had difficulties migrating their applications to a cloud-based model.
Our success in growing revenue and market share from our subscription-based offerings will depend, to a large extent, on the
willingness of our customers and the markets we serve to accept this model for commercializing applications that they view as critical
to the success of their businesses. Many companies have invested substantial effort and financial resources to integrate traditional
enterprise software and IT staffing into their businesses and may be reluctant or unwilling to switch to a recurring fee model for our
software applications or to migrate these applications to cloud-based services. Other factors that may affect market acceptance of our
products and cloud-based applications include:
•
the security capabilities, reliability and availability of cloud-based services;
•
customer concerns with entrusting a third party to store and manage their data, especially confidential or sensitive data;
•
our ability to minimize the time and resources required to offer our software under this model;
•
customer concerns with entrusting a third party to store and manage their data, especially confidential or sensitive data;
•
our ability to maintain high levels of customer satisfaction, including with respect to maintaining uptime and system
availability standards consistent with market expectations;
•
our ability to implement upgrades and other changes to our software without disrupting our service;
•
the level of customization or configuration we offer; and
•
the price, performance and availability of competing products and services.
The market for these services may not develop further, or may develop more slowly than we expect, either of which would harm our
business. Our business model continues to evolve and we may not be able to compete effectively, generate significant revenues or
maintain profitability for our subscription-based offerings. We have and will continue to incur expenses associated with the
infrastructures and marketing of our subscription offerings in advance of our ability to recognize the revenues associated with these
offerings. Demand for our subscription, cloud-based services may unfavorably impact demand for certain of our other products and
services. With a continued shift away from the sale of perpetual software licenses to providing access to our software through
subscription agreements we may, in the near term, experience a deferral of revenues and to a lesser extent cash received from our
customers.
The Company has incurred significant losses from inception through 2022 and there can be no assurance that it will be able to
achieve and sustain future profitability.
The Company has incurred significant losses since inception. The Company incurred a net loss of approximately $14 million in 2022
and has an accumulated deficit of approximately $267 million at December 31, 2022. The Company may not be able to achieve
profitability. Substantially all of our operating losses have resulted from costs incurred in connection with research and development
efforts, including clinical studies, and from general and administrative costs associated with our operations. We expect our operating
expenses to significantly increase as we continue to invest in research and development efforts. We also continue to incur additional
costs associated with operating as a public company. As a result, we expect to continue to incur substantial and increasing operating
losses for the foreseeable future.
The Company’s quarterly and annual operating and financial results and its gross margins are likely to fluctuate significantly in
future periods.
The Company’s quarterly and annual operating and financial results are difficult to predict and may fluctuate significantly from period
to period. The Company’s revenue and results of operations may fluctuate as a result of a variety of factors that are outside of the
Company’s control including, but not limited to, general economic conditions, the timing of orders from the Company’s OEM
partners, its OEM partners’ ability to manufacture and ship their digital mammography systems, its timely receipt by the FDA for the
clearance or approval to market Company products, its ability to timely engage other OEM partners for the sale of Company products,
the timing of product enhancements and new product introductions by Company or its competitors, the pricing of Company products,
changes in customers’ budgets, changes to the economic strength of the Company’s customers, economic changes in the markets
served by the Company’s customers, competitive conditions and the possible deferral of revenue under the Company’s revenue
recognition policies.
The Company may need to raise additional capital to fund its products, including manufacturing, sales and marketing activities,
expand its investments in research and development, and commercialize new products and services.
As of December 31, 2022, the Company had cash and cash equivalents and investments in money market funds totaling $21.3 million.
The Company expects its cash and cash equivalents and investments in money market funds will be able to fund its operations for at
least the next twelve months. However, this does not reflect the possibility that the Company may not be able to access a portion of our
existing cash and cash equivalents and investments in marketable securities due to market conditions. For example, on March 10,
2023, the Federal Deposit Insurance Corporation, or the FDIC, took control and was appointed receiver of Silicon Valley Bank. If
other banks and financial institutions enter receivership or become insolvent in the future in response to financial conditions affecting
the banking system and financial markets, the Company's ability to access its cash and cash equivalents and investments in money
market funds may be threatened and could have a material adverse effect on its business and financial condition.
The Company may require additional capital to develop and commercialize its products and to develop new products. In addition, the
Company's operating plans may change as a result of many factors that may currently be unknown, and the Company may need to
seek additional funds sooner than planned.
The Company cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable, if at all. The terms
of any future financing may adversely affect the holdings or the rights of the Company's stockholders and the issuance of additional
securities, whether equity or debt, by the Company, or the possibility of such issuance, may cause the market price of the
Company's common stock to decline. The incurrence of indebtedness could result in increased fixed payment obligations, and the
Company may be required to agree to certain restrictive covenants, such as limitations on its ability to incur additional debt, limitations
on its ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact its ability
to conduct business. The Company could also be required to seek funds through arrangements with collaborative partners or otherwise
at an earlier stage than otherwise would be desirable, and we may be required to relinquish rights to some of our technologies or
products or otherwise agree to terms that are unfavorable to us, any of which may have a material adverse effect on our business,
operating results and prospects. In addition, raising additional capital through the issuance of equity or debt securities would cause
dilution to holders of the Company's equity securities and/or increased fixed payment obligations, and may affect the rights of then-
existing holders of its equity securities. Furthermore, these securities may have rights senior to those of its common stock and could
contain covenants that would restrict its operations and potentially impair its competitiveness, such as limitations on its ability to incur
additional debt, limitations on its ability to acquire, sell or license intellectual property rights and other operating restrictions that could
adversely impact its ability to conduct our business. Any of these events could significantly harm the Company's business, financial
condition and prospects. Even if the Company believes that it has sufficient funds for our current or future operating plans, the
Company may seek additional capital if market conditions are favorable or if it has specific strategic considerations.
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Risks Related to the Company and its Business
The markets for the Company’s products and treatments and newly introduced enhancements to the Company’s existing products
and treatments may not develop as expected, the Company continues to face barriers to broad market acceptance.
The successful commercialization of the Company’s newly developed products and treatments and newly introduced enhancements to
the Company’s existing products and treatments are subject to numerous risks, both known and unknown, including:
•
market acceptance of the Company’s products;
•
uncertainty of the development of a market for such product or treatment;
•
trends relating to, or the introduction or existence of, competing products, technologies or alternative treatments or
therapies that may be more effective, safer or easier to use than the Company’s products, technologies, treatments or
therapies;
•
recommendation and support for the use of the Company’s products or treatments by influential customers, such as
hospitals, radiological practices, breast surgeons and radiation oncologists and treatment centers and U.S. and
international medical professional societies;
•
the availability and extent of data demonstrating the clinical efficacy of the Company’s products or treatments;
•
competition, including the presence of competing products sold by companies with longer operating histories, more
recognizable names and more established distribution networks; and
•
other technological developments.
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Often, the development of a significant market for a product or treatment will depend upon the establishment of appropriate
reimbursement for use of the product or treatment. Moreover, even if addressed, such reimbursement levels frequently are not
established until after a product or treatment is developed and commercially introduced, which can delay the successful
commercialization of a product or treatment.
If the Company is unable to successfully commercialize and create a significant market for the Company’s newly developed products
and treatments and newly introduced enhancements to the Company’s existing products and treatments, the Company’s business and
prospects could be harmed.
The Company may be exposed to significant product liability for which the Company may not have sufficient insurance coverage
or be able to procure sufficient insurance coverage.
The Company’s product and general liability insurance coverage may be inadequate with respect to potential claims and adequate
insurance coverage may not be available in sufficient amounts or at a reasonable cost in the future. If available at all, product liability
insurance for the medical device industry generally is expensive. Future product liability claims could be costly to defend and/or
costly to resolve and could harm the Company’s reputation and business.
Sales and market acceptance of the Company’s products is dependent upon the coverage and reimbursement decisions made by
third-party payers, including carve-out radiology benefits managers. The failure of third-party payers to provide appropriate levels
of coverage and reimbursement, and/or meeting prior authorization and other requirements for approval to use the Company’s
products and treatments facilitated by the Company’s products could harm the Company’s business and prospects.
Sales and market acceptance of the Company’s medical products and the treatments facilitated by Company products in the United
States and other countries is dependent upon the coverage decisions and reimbursement policies established by government healthcare
programs and private health insurers. Market acceptance of the Company’s products and treatments has and will continue to depend
upon the Company’s customers’ ability to obtain coverage for, and appropriate reimbursement from third-party payers for, these
products and treatments. In the United States, The Centers for Medicare and Medicaid Services (“CMS”) establishes coverage and
reimbursement policies for healthcare providers treating Medicare and Medicaid beneficiaries. Under current CMS policies, varying
reimbursement levels have been established for the Company’s products and treatments. In the absence of a national coverage
determination, coverage policies for Medicare patients may vary by regional Medicare Administrative Contractors. Reimbursement
rates for treatments vary based on the geographic price index, the site of service, and other factors. Coverage and reimbursement
policies and rates applicable to patients with private insurance are dependent upon individual private payer decisions which may not
follow the policies and rates established by CMS. The use of Company products and treatments outside the United States is similarly
affected by coverage and reimbursement policies adopted by foreign governments and, to a lesser extent, private insurance carriers.
On September 29, 2020, CMS finalized a rule regarding its new RO Model, designed, according to CMS, to improve the quality of
care for cancer patients receiving radiotherapy and reduce Medicare expenditures through bundled payments. In the final notice, CMS
did not include IORT treatments (including CPT codes 77424, 77425, and 77469) within the new alternative payment model for
radiation oncology. As a result, whether or not a particular physician practice or hospital is subject to the new radiation oncology
payment model, IORT services covered by Medicare will continue to be subject to the existing payment systems for physician services
and hospital outpatient services. On December 10, 2021, the Protecting Medicare and American Farmers from Sequestration Cuts Act
delayed the RO Model implementation until no earlier than January 1, 2023, when it became effective. Management cannot provide
assurance that government or private third-party payers will continue to reimburse the Company’s products or services, nor can
management provide assurance that the payment rates will be adequate. If providers and physicians are unable to obtain adequate
reimbursement for the Company’s products or services, this could have a material adverse effect on the Company’s business and
operations. In addition, in the event that the current methodology for calculating payment for these products or services changes, this
could have a material adverse effect on the Company’s business and business operations.
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Management cannot guarantee that providers and physicians will be able to obtain adequate reimbursement for the Company’s
products or services.
The Company’s business is dependent upon future market growth of full field digital mammography systems, digital computer
aided detection products, and tomosynthesis as well as advanced image analysis and workflow solutions for use with MRI and CT
and the market growth of electronic brachytherapy. This growth may not occur or may occur too slowly to benefit us.
The Company’s future business is substantially dependent on the continued growth in the market for electronic brachytherapy, full
field digital mammography systems, digital computer aided detection products and tomosynthesis as well as advanced image analysis
and workflow solutions for use with MRI and CT. The market for these products may not continue to develop or may develop at a
slower rate than the Company anticipates due to a variety of factors, including, general economic conditions, delays in hospital
spending for capital equipment, the significant costs associated with the procurement of full field digital mammography systems and
CAD products and MRI and CT systems and the reliance on third party insurance reimbursement. If the market for the products and
technologies upon which the Company’s products are dependent does not grow or grows too slowly, this could have a material
adverse effect on the Company’s business.
A limited number of customers account for a significant portion of the Company’s total revenue. The loss of a principal customer
could seriously hurt the Company’s business.
A limited number of major customers have in the past and may continue in the future to account for a significant portion of the
Company’s revenue. The Company’s principal sales distribution channel for its digital products is through its OEM partners. In 2022,
the Company’s OEM partners accounted for 26% of its total revenue, with one major customer, GE Healthcare, accounting for 16% of
the Company’s revenue. In addition, in 2022, four customers, consisting of both OEM and direct customers, accounted for 29% of the
Company’s total revenue. The loss of the Company’s relationships with principal customers or a decline in sales to principal
customers could materially adversely affect its business and operating results.
Revenue from the Company’s new subscription license model may be difficult to predict.
The Company is devoting resources to the development of a new software license model to complement its traditional perpetual
licensing models. This model allows the Company to license Detection software through subscription licenses that may be canceled at
any time. The Company has limited operating history with subscription licensing models and may not be able to accurately predict
initial subscription enrollment or future renewal or cancellation rates. Subscription renewal rates may decline or fluctuate as a result of
a number of factors, including but not limited to customer satisfaction or dissatisfaction with Company products, the price of
Company products, the prices of similar competitive products, or customer budget sensitivity. If any of the Company’s assumptions
about revenue from the subscription licensing model are incorrect, the Company’s actual results may vary materially from those
anticipated, estimated, or projected.
If goodwill and/or other intangible assets that the Company has recorded in connection with its acquisitions become impaired, the
Company could have to take significant charges against earnings.
Under current accounting, management must assess, at least annually and potentially more frequently, whether the value of the
Company’s goodwill of $8.4 million at December 31, 2022 and its other intangible assets have been impaired. Any reduction or
impairment of the value of goodwill or other intangible assets will result in a charge against earnings which could materially adversely
affect the Company’s reported results of operations in future periods.
The Company’s effective tax rate may fluctuate, and we may incur obligations in tax jurisdictions in excess of amounts that have
been accrued.
As a global company, the Company is subject to taxation in numerous countries, states and other jurisdictions. In preparing the
Company’s financial statements, the Company records the amount of tax payable in each of the countries, states and other
jurisdictions in which the Company operates. The Company’s future effective tax rate, however, may be lower or higher than prior
years due to numerous factors, including a change in the Company’s geographic earnings mix, changes in the measurement of the
Company’s deferred taxes, and recently enacted and future tax law changes in jurisdictions in which the Company operates. The
Company is also subject to ongoing tax audits in various jurisdictions, and tax authorities may disagree with certain positions the
Company has taken and assess additional taxes. Any of these factors could cause the Company to experience an effective tax rate
significantly different from previous periods or the Company’s current expectations, which could adversely affect the Company’s
business, results of operations and cash flows.
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The Company’s ability to use its net operating loss carryovers and certain other tax attributes may be limited.
Under the Internal Revenue Code of 1986, as amended (the “Code”), a corporation is generally allowed a deduction for net operating
losses (“NOLs”) carried over from a prior taxable year. Under that provision, the Company can carryforward its NOLs to offset future
taxable income, if any, until such NOLs are fully utilized or expire. The same is true of other unused tax attributes, such as tax credits.
Under the Tax Cut and Jobs Act of 2017 (the “Tax Act”), federal net operating losses incurred in 2018 and in future years may be
carried forward indefinitely, but the deductibility of such federal net operating losses is limited. It is uncertain if and to what extent
various states will conform to the federal Tax Act.
In addition, under Section 382 of the Code, and corresponding provisions of state law, if a corporation undergoes an “ownership
change,” which is generally defined as a greater than 50 percent change, by value, in its equity ownership over a three-year period, the
corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change
income or taxes may be limited. The Company may experience ownership changes in the future as a result of subsequent shifts in the
Company’s stock ownership, some of which may be outside of the Company’s control. If an ownership change occurs and the
Company’s ability to use its net operating loss carryforwards or other tax attributes is materially limited, it would harm the Company’s
future operating results by effectively increasing the Company’s future tax obligations.
The markets for many of the Company’s products are subject to changing technology.
The Company’s business depends on its ability to adapt to evolving technologies and industry standards and introduce new technology
solutions and services accordingly. If the Company cannot adapt to changing technologies, its technology solutions and services may
become obsolete, and its business may suffer. Because the healthcare information technology market is constantly evolving, the
Company’s existing technology may become obsolete and fail to meet the requirements of current and potential customers. The
Company’s success will depend, in part, on its ability to continue to enhance its existing technology solutions and services, develop
new technology that addresses the increasingly sophisticated and varied needs of its customers, and respond to technological advances
and emerging industry standards and practices on a timely and cost-effective basis. The development of the Company’s proprietary
technology entails significant technical and business risks. The Company may not be successful in developing, using, marketing,
selling, or maintaining new technologies effectively or adapting its proprietary technology to evolving customer requirements or
emerging industry standards, and, as a result, the Company’s business and reputation could suffer. The Company may not be able to
introduce new technology solutions on schedule, or at all, or such solutions may not achieve market acceptance. Moreover,
competitors may develop competitive products that could adversely affect the Company’s results of operations. The Company’s
failure to introduce new products or to introduce these products on schedule could have an adverse effect on its business, financial
condition and results of operations.
The Company depends upon a limited number of suppliers and manufacturers for its products, and certain components in its
products may be available from a sole or limited number of suppliers.
The Company’s products are generally either manufactured and assembled for it by a sole manufacturer, by a limited number of
manufacturers or assembled by the Company from supplies it obtains from a limited number of suppliers. Critical components
required to manufacture the Company’s products, whether by outside manufacturers or directly by the Company, may be available
from a sole or limited number of component suppliers. The Company generally does not have long-term arrangements with any of its
manufacturers or suppliers. The loss of a sole or key manufacturer or supplier could materially impair the Company’s ability to deliver
products to its customers in a timely manner and would adversely affect the Company’s sales and operating results. The Company’s
business would be harmed if any of its manufacturers or suppliers could not meet its quality and performance specifications and
quantity and delivery requirements.
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Additionally, the Company’s suppliers and manufacturers are, and will continue to be, subject to extensive government regulation in
connection with the manufacture of any medical devices. The Company’s suppliers and manufacturers must ensure that they are
compliant with applicable quality systems and other regulatory requirements, as mandated by the FDA and other regulatory
authorities. If the Company’s materials suppliers or manufacturers face manufacturing or quality control problems this may lead to
delays in product production or shipment or the Company’s supplier or manufacturer no longer being able to continue operations. The
Company’s business would be harmed if any of its manufacturers or suppliers could not meet its quality and performance
specifications and quantity and delivery requirements.
The Company distributes its products in highly competitive markets and its sales may suffer as a result.
The Company operates in highly competitive and rapidly changing markets that contain competitive products available from
nationally and internationally recognized companies. Many of these competitors have significantly greater financial, technical and
human resources than the Company and are well established. In addition, some companies have developed or may develop
technologies or products that could compete with the products the Company manufactures and distributes or that would render the
Company’s products obsolete or noncompetitive. The Company’s competitors may achieve patent protection, regulatory approval, or
product commercialization that would limit the Company’s ability to compete with them. These and other competitive pressures could
have a material adverse effect the Company’s business.
Disruptions in service or damage to the Company’s third-party providers’ data centers could adversely affect the Company’s
business.
The Company relies on third parties who provide access to data centers. The Company’s information technologies and systems are
vulnerable to damage or interruption from various causes, including (i) acts of God and other natural disasters, war and acts of
terrorism and (ii) power losses, computer systems failures, internet and telecommunications or data network failures, operator error,
losses of and corruption of data and similar events. The Company conducts business continuity planning and works with its third-party
providers to protect against fires, floods, other natural disasters and general business interruptions to mitigate the adverse effects of a
disruption, relocation or change in operating environment at the data centers the Company utilizes. In addition, the occurrence of any
of these events could result in interruptions, delays or cessations in service to the Company’s customers. Any of these events could
impair or prohibit the Company’s ability to provide its services, reduce the attractiveness of its services to current or potential
customers and adversely impact its financial condition and results of operations.
In addition, despite the implementation of security measures, the Company’s infrastructure, data centers, or systems that it interfaces
with, including the Internet and related systems, may be vulnerable to physical break-ins, hackers, improper employee or contractor
access, computer viruses, programming errors, denial-of-service attacks or other attacks by third-parties seeking to disrupt operations
or misappropriate information or similar physical or electronic breaches of security. Any of these can cause system failure, including
network, software or hardware failure, which can result in service disruptions. As a result, the Company may be required to expend
significant capital and other resources to protect against security breaches and hackers or to alleviate problems caused by such
breaches.
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Instability in geographies where the Company has operations and personnel or where the Company derives revenue could have a
material adverse effect on the Company’s business, customers, operations and financial results.
Economic, civil, military and political uncertainty may arise or increase in regions where the Company operates or derives revenue.
Further, countries from which the Company derives revenue may experience military action and/or civil and political unrest. For the
fiscal year ended 2022, approximately 6.0% of the Company’s revenue was derived from customers located in Europe, and
approximately 24.0% of the Company’s export revenue was derived from customers located in Europe. In late February 2022, Russian
military forces launched significant military action against Ukraine. Sustained conflict and disruption in the region is likely. The
aggregate impact to Eastern Europe and Europe as a whole, as well as actions taken by other countries, including new and stricter
sanctions by the United States, Canada, the United Kingdom, the European Union, and other countries and organizations against
officials, individuals, regions, and industries in Russia, Belarus and Ukraine, and each country’s potential response to such sanctions,
tensions and military actions, is not knowable at this time, and could have a material adverse effect on the Company, its business and
operations. Any such material adverse effect from the conflict and enhanced sanctions activity may disrupt the Company’s sales to
customers in the region. Prolonged unfavorable economic conditions or uncertainty may have an adverse effect on the Company’s
sales and profitability
If the Company’s products fail to perform properly due to errors or similar problems, the Company’s business could suffer.
Despite testing, complex software may contain defects or errors. Addressing software errors may delay development of the
Company’s solutions, and if discovered after deployment, may require the expenditure of substantial time and resources to correct.
Errors in the Company’s software could result in:
•
harm to the Company’s reputation;
•
lost sales;
•
delays in commercial releases;
•
product liability claims;
•
delays in or loss of market acceptance of the Company’s solutions;
•
license terminations or renegotiations;
•
unexpected expenses and diversion of resources to remedy errors; and
•
privacy and security vulnerabilities.
Furthermore, the Company’s customers might use its software together with products from other companies or those that they have
developed internally. As a result, when problems occur, it might be difficult to identify the source of the problem. Even when the
Company’s software does not cause these problems, the existence of these errors might cause the Company to incur significant costs,
divert the attention of its technical personnel from the Company’s solution development efforts or impact its reputation and cause
significant customer relations problems.
Unfavorable results of legal proceedings could materially adversely affect the Company’s financial results
From time to time, the Company is a party to or otherwise involved in legal proceedings, claims and government inspections or
investigations and other legal matters, both inside and outside the United States, arising in the ordinary course of business or
otherwise. Legal proceedings are often lengthy, taking place over a period of years with interim motions or judgments subject to
multiple levels of review (such as appeals or rehearings) before the outcome is final. Litigation is subject to significant uncertainty and
may be expensive, time- consuming, and disruptive to operations. For these and other reasons, the Company may choose to settle legal
proceedings and claims, regardless of their actual merit.
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A legal proceeding finally resolved against the Company, could result in significant compensatory damages, and in certain
circumstances, punitive or trebled damages, disgorgement of revenue or profits, remedial corporate measures or injunctive relief. If
the Company’s existing insurance does not cover the amount or types of damages awarded, or if other resolutions or actions taken as a
result of the legal proceeding were to restrain the Company’s ability to market one or more of the Company’s material products or
services, the Company’s consolidated financial position, results of operations or cash flows could be materially adversely affected. In
addition, legal proceedings, and any adverse resolution thereof, can result in adverse publicity and damage to the Company’s
reputation, which could adversely impact the Company’s business.
If the Company is subject to claims that its employees, consultants or independent contractors have wrongfully used or disclosed
confidential information of third parties, the Company could incur substantial expenses.
The Company employ individuals who were previously employed at other medical device and technology companies. The Company
may be subject to claims that the Company or its employees, consultants or independent contractors have inadvertently or otherwise
used or disclosed confidential information of employees’ former employers or other third parties. The Company may also be subject to
claims that former employers or other parties have an ownership interest in patents or intellectual property. Litigation may be
necessary to defend against these claims. The Company may not be successful in defending these claims, and if the Company is
successful, litigation could result in substantial cost and be a distraction to its management and other employees.
Healthcare industry consolidation could impose pressure on the Company’s prices, reduce potential customer base and reduce
demands for the Company’s systems.
Many hospitals and imaging centers have consolidated to create larger healthcare enterprises with greater market and purchasing
power. When hospitals and imaging centers combine, they often consolidate infrastructure, and consolidation of the Company’s
customers could result in fewer overall customers. If this consolidation trend continues, it could reduce the size of the Company’s
potential customer base, reduce demand for the Company’s systems, give the resulting enterprises greater bargaining or purchasing
power, and may lead to erosion of the prices for the Company’s systems or decreased margins for its systems, all of which would
adversely affect the Company’s ability to generate revenue.
Clinical trials are very expensive, lengthy, and difficult to design and implement and have uncertain outcomes, and, as a result, the
Company may suffer delays or suspensions in current or future trials which would have a material adverse effect on the
Company’s ability to obtain regulatory approvals timely or at all, and if the Company fails to receive such approvals, on its ability
to generate revenues.
Clinical trials involve a time-consuming and expensive process with an uncertain outcome, and the results of earlier trials are not
necessarily predictive of future results. Human clinical trials are difficult to design and implement and very expensive, due in part to
being subject to rigorous regulatory requirements.
Additionally, the Company may encounter problems at any stage of the trials that cause it to abandon or repeat clinical trials. The
commencement and completion of clinical trials may be delayed by several factors, including:
•
non-approval of an investigational device exemption (IDE), which is required by the FDA for the study in humans of a
significant risk device that is not approved for the indication being studied;
•
failure to reach an agreement with contract research organizations or clinical trial sites;
•
failure of third-party contract research organizations to properly implement or monitor the clinical trial protocols;
•
failure of IRBs to approve the Company’s clinical trial protocols or suspension or termination of the Company’s clinical
trial by the IRB, DSMB, or the FDA;
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•
slower than expected rates of patient recruitment and enrollment, which may be further negatively impacted by the
COVID-19 global pandemic;
•
inability to retain patients in clinical trials, which may be further negatively impacted by the COVID-19 lobal pandemic;
•
lack of effectiveness during clinical trials;
•
unforeseen safety issues;
•
inability or unwillingness of medical clinical investigators and institutional review boards to follow the Company’s
clinical trial protocols;
•
failure of clinical investigators or sites to maintain necessary licenses or permits or comply with good clinical practices,
or GCP, or other regulatory requirements; and
•
lack of sufficient funding to finance the clinical trials.
In addition, the Company or regulatory authorities may suspend the Company’s clinical trials at any time if it appears that the
Company is exposing participants to unacceptable health risks or if the regulatory authorities find deficiencies in the Company’s
regulatory submissions or the conduct of these trials. Any suspension of clinical trials will delay possible regulatory approval, increase
costs, and adversely impact the Company’s ability to develop products and generate revenue.
The Company’s future prospects depend on its ability to retain current key employees and attract additional qualified personnel.
The Company’s success depends in large part on the continued service of its executive officers and other key employees. The
Company may not be able to retain the services of its executive officers and other key employees. The loss of executive officers or
other key personnel could have a material adverse effect on the Company. During the year ended December 31, 2022, the Company
underwent changes in management, including changes to the Company’s Chief Executive Officer, Chief Financial Officer and Chair
of the Board.
In addition, in order to support its continued growth, the Company will be required to effectively recruit, develop and retain additional
qualified personnel. If the Company is unable to attract and retain additional necessary personnel, it could delay or hinder its plans for
growth. Competition for such personnel is intense, and there can be no assurance that the Company will be able to successfully attract,
assimilate or retain sufficiently qualified personnel. The failure to retain and attract necessary personnel could have a material adverse
effect on the Company’s business, financial condition and results of operations.
The Company’s international operations expose it to various risks, any number of which could harm the Company’s business.
The Company’s revenue from sales outside of the United States represented approximately 25% of the Company’s revenue for 2022.
The Company is subject to the risks inherent in conducting business across national boundaries, any one of which could adversely
impact its business. In addition to currency fluctuations, these risks include, among other things: economic downturns; changes in or
interpretations of local law, governmental policy or regulation; changes in healthcare practice patterns; restrictions on the transfer of
funds into or out of the country; varying tax systems; and government protectionism. One or more of the foregoing factors could
impair the Company’s current or future operations and, as a result, harm the Company’s overall business.
The requirements of being a publicly traded company may strain the Company's resources and divert management’s attention.
As a publicly traded company, the Company has incurred, and will continue to incur, significant legal, accounting and other expenses
that the Company did not incur as a private company. In addition, the Sarbanes-Oxley Act, as well as rules subsequently implemented
by the SEC and Nasdaq have imposed various requirements on public companies. In July 2010, the Dodd-Frank Wall Street Reform
and Consumer Protection Act (the “Dodd-Frank Act”) was enacted. There are significant corporate governance and executive
compensation related provisions in the Dodd-Frank Act that require the SEC to adopt additional rules and regulations in these areas
such as “say on pay” and proxy access. Shareholder activism, the current political environment and the current high level of
government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to
additional compliance costs and impact the manner in which the Company operates its business in ways the Company cannot
currently anticipate. The Company’s management and other personnel devote, and will continue to devote, a substantial amount of
time to these compliance initiatives. Failure to comply with these requirements could subject the Company to enforcement actions by
the SEC, divert management’s attention, damage our reputation, and adversely affect the Company’s business, results of operations, or
financial condition. In particular, if the Company’s independent registered public accounting firm is not able to render the required
unqualified attestation, it could result in a loss of investor confidence in the accuracy, reliability, and completeness of our financial
reports.
The Company may be unable to comply with the applicable continued listing requirements of Nasdaq.
The Company’s common stock is currently listed on Nasdaq. In order to maintain this listing, the Company must satisfy minimum
financial and other continued listing requirements and standards, including a minimum closing bid price requirement for our common
stock of $1.00 per share. There can be no assurance that the Company we will be able to comply with the applicable listing standards.
For example, if the Company were to fail to meet the minimum bid price requirement for 30 consecutive business days, the Company
could become subject to delisting.
The Company expects the novel coronavirus (COVID-19) pandemic, including the emergence of new variants, to have a significant
effect on the Company’s results of operations. In addition, the pandemic has resulted in significant financial market volatility, and
its impact on the global economy appears to be significant. A continuation or worsening of the pandemic will have a material
adverse impact on the Company’s business, results of operations and financial condition and on the market price of the Company’s
common stock.
As a provider of devices and services to the health care industry, the Company’s operations have been materially affected, and may
continue to be impacted, by the COVID-19 pandemic. Beginning with the first quarter of 2020 through the year-ended December 31,
2022, the COVID-19 pandemic has presented a number of challenges and risks for the Company’s business, including, but not limited
to, decreased product demand due to reduced numbers of in-person meetings with potential clients; pandemic-related public health
impacts, including significant shifts in workforce availability and priorities, on customer, supplier, and iCAD’s business process;
supply chain interruptions; disruptions to the Company’s clinical trials; challenges operating in a virtual work environment; impacts
resulting from travel limitations and mobility restrictions; and other challenges presented by disruptions to the Company’s normal
operations in response to the pandemic, as well as uncertainties regarding the duration and severity of the pandemic on the global
economy and the Company’s operations, and the unpredictable and periodic emergence of new variants of the COVID-19 virus.
Although the Company does not provide guidance to investors relating to the Company’s results of operations, the Company’s
quarterly results for the quarter ending March 31, 2023, and possibly future quarters, could reflect a continued negative impact from
the COVID-19 pandemic for similar or additional reasons.
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.
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Risks Related to Intellectual Property
The Company relies on intellectual property and proprietary rights to maintain its competitive position and may not be able to
protect these rights.
The Company relies heavily on proprietary technology that it protects primarily through licensing arrangements, patents, trade secrets,
proprietary know-how and non-disclosure agreements. There can be no assurance that any pending or future patent applications will
be granted or that any current or future patents, regardless of whether the Company is an owner or a licensee of the patent, will not be
challenged, rendered unenforceable, invalidated, or circumvented or that the rights will provide a competitive advantage to the
Company. There can also be no assurance that the Company’s trade secrets or non-disclosure agreements will provide meaningful
protection of Company proprietary information. Further, the Company cannot assure that others will not independently develop
similar technologies or duplicate any technology developed by the Company or that its technology will not infringe upon patents or
other rights owned by others. Unauthorized third parties may infringe the Company’s intellectual property rights or copy or reverse
engineer portions of the Company’s technology. In addition, because patent applications in the United States are not generally publicly
disclosed until eighteen months after the application is filed, applications may have been filed by third parties that relate to the
Company’s technology. Moreover, there is a risk that foreign intellectual property laws will not protect the Company’s intellectual
property rights to the same extent as intellectual property laws in the United States. The rights provided by a patent are finite in time.
The Company has certain patents that expire between 2023 and 2029. In the absence of significant patent protection, the Company
may be vulnerable to competitors who attempt to copy the Company’s products, processes or technology.
In addition, in the future, the Company may be required to assert infringement claims against third parties, and there can be no
assurance that one or more parties will not assert infringement claims against the Company. Any resulting litigation or proceeding
could result in significant expense to the Company and divert the efforts of its management personnel, whether or not such litigation
or proceeding is determined in the Company’s favor. In addition, if any of the Company’s intellectual property and proprietary rights
are deemed to violate the proprietary rights of others, the Company may be prevented from using those intellectual property or
proprietary rights, which could prevent it from being able to sell its products. Litigation could also result in a judgment or monetary
damages being levied against the Company.
If the Company fails to obtain licenses to necessary intellectual property or does not comply with its obligations in license
agreements, the Company could lose important rights.
The Company may need to obtain licenses from owners of intellectual property to advance its research and products or allow
commercialization of its products, and the Company has done so from time to time. If the Company does not obtain any of these
licenses at a reasonable cost and on reasonable terms, the Company would be unable to further develop and commercialize one or
more of its products, which could harm the Company’s business.
Risks Related to Regulation of the Company’s Industry
The healthcare industry is highly regulated, and government authorities may determine that the Company has failed to comply
with applicable laws, rules or regulations. Additionally, the Company may incur substantial costs defending its interpretations of
U.S. federal and state government regulations, and if the Company loses, the government could force the Company to restructure
its operations and subject it to fines, monetary penalties and possibly exclude the Company from participation in U.S. government-
sponsored health care programs such as Medicare and Medicaid.
Both in the United States and in other jurisdictions, the healthcare industry is subject to extensive and complex federal, state and local
laws, rules and regulations, compliance with which imposes substantial costs on the Company. Such laws and regulations include
those that are directed at payment for services and the conduct of operations, preventing fraud and abuse, and prohibiting general
business corporations, such as the Company’s, from engaging in practices that may influence professional decision-making, such as
splitting fees with physicians. In addition, the Company believes that its business will continue to be subject to increasing regulation
as legislatures and governmental agencies periodically consider proposals to revise or create new requirements, particularly in
response to and following the COVID-19 pandemic, the scope and effect of which the Company cannot predict. Such proposals, if
implemented, could impact the Company’s operations, the use of its services, and its ability to market new services, and could create
unexpected liabilities for the Company.
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Many healthcare laws are complex, and their application to specific services and relationships may not be clear. The laws often have
related rules and regulations that are subject to interpretation and may not provide definitive guidance as to their application to the
Company’s operations, including its arrangements with physicians and professional corporations. Further, healthcare laws differ from
jurisdiction to jurisdiction and it is difficult to ensure the Company’s business complies with evolving laws in all jurisdictions.
Consequently, the Company’s operations, including its arrangements with healthcare providers, are subject to audits, inquiries and
investigations from government agencies from time to time. The Company believes it is in substantial compliance with these laws,
rules and regulations based upon what the Company believes are reasonable and defensible interpretations of these laws, rules and
regulations. However, U.S. federal and state laws are broadly worded and may be interpreted or applied by prosecutorial, regulatory or
judicial authorities in ways that the Company cannot predict. Accordingly, the Company may in the future become the subject of
regulatory or other investigations or proceedings, and its interpretations of applicable laws, rules and regulations may be challenged.
Any challenge to the Company’s operations or arrangements with third parties that the Company has structured based upon its
interpretation of these laws, rules and regulations could potentially disrupt business operations and lead to substantial defense costs
and a diversion of management’s time and attention, even if the Company successfully defends its interpretation. In addition, if the
government successfully challenges the Company’s interpretation of the applicability of these laws, rules and regulations as they relate
to its operations and arrangements, such successful challenge may have a material adverse effect on the Company’s business, financial
condition, results of operations, cash flows, and the trading price of the Company’s common stock.
In the event regulatory action were to limit or prohibit the Company from carrying on its business as it presently conducts it or from
expanding its operations into certain jurisdictions, the Company may need to make structural, operational and organizational
modifications to the Company or to its contractual arrangements with physicians and professional corporations. The Company’s
operating costs could increase significantly as a result. The Company could also lose contracts, or its revenues could decrease under
existing contracts. Any restructuring would also negatively impact the Company’s operations because its management’s time and
attention would be diverted from running its business in the ordinary course.
Compliance with the many laws and regulations governing the healthcare industry could restrict the Company’s sales and
marketing practices, and other relationships with healthcare professionals.
Once the Company’s products are sold, the Company must comply with various U.S. federal and state healthcare fraud and abuse
laws, rules and regulations pertaining false claims, kickbacks and physician self-referral. Violations of the fraud and abuse laws are
punishable by criminal and civil sanctions, including, in some instances, exclusion from participation in federal and state healthcare
programs, including Medicare, Medicaid, Veterans Administration health programs, workers’ compensation programs and TRICARE.
Compliance with these laws could restrict the Company’s sales and marketing practices, and any challenge to the Company’s practices
could disrupt its operations and lead to substantial defense costs and a diversion of management’s time and attention, even if the
Company successfully defends its practices. If the Company is unable to successfully defend its practices, in addition to incurring
significant expense in defending itself, the Company could be subject to a significant settlement, monetary penalties, and costs related
to implementation of changes to its practices, which could have a material adverse effect on its business.
Healthcare reform legislation in the United States may adversely affect the Company’s business and/or results of operations.
The Company is unable to predict what legislation or regulation relating to the health care industry or third-party coverage and
reimbursement may be enacted in the future or what effect such legislation or regulation would have on the Company’s business. Any
cost containment measures or other health care system reforms that are adopted could have a material and adverse effect on the
Company’s ability to commercialize its existing and future products successfully. The Company cannot predict whether any existing
or enacted legislation will be repealed, replaced, or modified or how such repeal, replacement or modification may be timed or
structured.
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As a result, the Company cannot quantify or predict the effect of such repeal, replacement, or modification might have on its business
and results of operations. However, any changes that lower reimbursement for the Company’s products or reduce medical procedure
volumes could adversely affect its business and results of operations.
The Company’s products and manufacturing facilities are subject to extensive regulation with potentially significant costs for
compliance.
In the United States, the Company’s CAD systems and Xoft Systems are medical devices subject to extensive regulation by the FDA
under the FDCA. The FDA’s regulation of the Company’s products includes its manufacturing operations, product labeling, adverse
event reporting, and the FDA’s general prohibition against promoting products for unapproved or “off-label” uses.
The Company’s failure to fully comply with applicable regulations could result in the issuance of warning letters, non-approvals,
suspensions of existing approvals, civil penalties and criminal fines, product seizures and recalls, operating restrictions, injunctions,
and criminal prosecution. Moreover, unanticipated changes in existing regulatory requirements or adoption of new requirements could
increase the Company’s operating and compliance burdens and adversely affect its business, financial condition and results of
operations.
Sales of the Company’s products in certain countries outside of the United States are also subject to extensive regulatory approvals.
Obtaining and maintaining foreign regulatory approvals is an expensive and time-consuming process. The Company cannot be certain
that it will be able to obtain the necessary regulatory approvals timely or at all in any foreign country in which the Company plans to
market its CAD products and Xoft Systems, and if the Company fails to receive such approvals, its ability to generate revenue may be
significantly diminished.
The Company may not be able to obtain regulatory approval for any of the other products that we may consider developing.
The Company has received the required premarket approvals from FDA or the equivalent foreign authority in the relevant jurisdictions
in which its currently offers its products. Before the Company is able to commercialize any new product or promote a new indicated
use of an existing product, it must obtain the required regulatory approvals. The process for satisfying these regulatory requirements is
lengthy and costly and will require the Company to comply with complex standards for research and development, clinical trials,
testing, manufacturing, quality control, labeling, and promotion of products. Additionally, even if the Company receives regulatory
approval for a new product or indicated use in one jurisdiction, its products may be subject to separate regulatory approval in each
country or jurisdiction in which the Company plans to market its products. The Company cannot be certain that it will be able to
obtain the necessary regulatory approvals timely or at all in any country or jurisdiction. Successfully obtaining regulatory approval in
one jurisdiction does not guarantee approval in another; however, a delay or failure to obtain regulatory approval in one jurisdiction
may negatively affect the regulatory process in another. If the Company is unable to obtain regulatory approval for other products or
indicated uses, its ability to generate sufficient revenue to continue its business may be significantly impacted.
The Company’s products may be recalled even after it has received FDA or other governmental approval or clearance.
If the safety or efficacy of any of the Company’s products is called into question, the Company may initiate or the FDA and similar
governmental authorities in other countries may press the Company to implement or even require a product recall, even if the
Company’s product received approval or clearance by the FDA or a similar governmental body. Such a recall would divert the focus
of the Company’s management and its financial resources and could materially and adversely affect the Company’s reputation with
customers and its financial condition and results of operations.
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The Company is subject to complex and evolving U.S. and foreign laws and regulations regarding privacy, data protection, and
other matters. The Company may be subject to criminal or civil sanctions if it fails to comply with privacy and security regulations
regarding the use and disclosure of sensitive personally identifiable information.
Numerous state and federal laws and regulations govern the collection, dissemination, use, privacy, confidentiality, security,
availability and integrity of personally identifiable information, including HIPAA. In the provision of services to the Company’s
customers, the Company and its third-party vendors may collect, use, maintain and transmit patient health information in ways that are
subject to many of these laws and regulations. The Company is also subject to laws and regulations in foreign countries covering data
privacy and other protection of health and employee information that may be more onerous than corresponding U.S. laws, including in
particular the laws of Europe.
The Company’s customers are covered entities, and the Company is a business associate of its customers under HIPAA as a result of
the Company’s contractual obligations to perform certain functions on behalf of and provide certain services to those customers. In the
ordinary course of business, the Company collects and stores sensitive data, including personally identifiable information received
from its customers. The secure processing, maintenance and transmission of this information is critical to the Company’s operations.
Despite its security measures and business controls, the Company’s information technology and infrastructure may be vulnerable to
attacks by hackers, breached due to employee error, malfeasance or other disruptions or subject to the inadvertent or intentional
unauthorized release of information. Any such occurrence could compromise the Company’s networks and the information stored
thereon could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information by the Company
or its subcontractors could (i) result in legal claims or proceedings, liability under laws that protect the privacy of personal information
and regulatory penalties, (ii) disrupt the Company’s operations and the services it provides to its customers and (iii) damage the
Company’s reputation, any of which could adversely affect the Company’s profitability, revenue and competitive position.
Federal and state consumer laws are being applied increasingly by the Federal Trade Commission and state attorneys general to
regulate the collection, use and disclosure of personal or patient health information, through web sites or otherwise, and to regulate the
presentation of web site content. Numerous other federal and state laws protect the confidentiality, privacy, availability, integrity and
security of personally identifiable information. These laws in many cases are more restrictive than, and not preempted by, HIPAA and
may be subject to varying interpretations by courts and government agencies, creating complex compliance issues for the Company
and its customers and potentially exposing the Company to additional expense, adverse publicity and liability. The Company may not
remain in compliance with the diverse privacy requirements in each of the jurisdictions in which it does business.
HIPAA and federal and state laws and regulations may require users of personally identifiable information to implement specified
security measures. Evolving laws and regulations in this area could require the Company to incur significant additional costs to re-
design its products in a timely manner to reflect these legal requirements, which could have an adverse impact on its results of
operations.
New personally identifiable information standards, whether implemented pursuant to HIPAA, congressional action or otherwise, could
have a significant effect on the manner in which the Company must handle healthcare related data, and the cost of complying with
standards could be significant. If the Company does not properly comply with existing or new laws and regulations related to patient
health information, it could be subject to criminal or civil sanctions.
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Data protection laws in the United States, Europe and around the world may restrict the Company’s activities and increase the
Company’s costs.
Various statutes and rules in the United States, Europe and around the world regulate privacy and data protection which may affect the
Company’s collection, use, storage, and transfer of information both abroad and in the United States. New laws and regulations are
being enacted, so that this area remains in a state of flux. Monitoring and complying with these laws requires substantial financial
resources. Failure to comply with these laws may result in, among other things, civil and criminal liability, negative publicity,
restrictions on further use of data, and/or liability under contractual warranties. In addition, changes in these laws (including newly
released interpretations of these laws by courts and regulatory bodies) may limit the Company’s data access, use and disclosure, and
may require increased expenditures by us.
The European Union’s General Data Protection Regulation (“GDPR”) requires the Company to meet new and more stringent
requirements regarding the handling of personal data about EU residents. Failure to meet the GDPR requirements could result in
penalties of up to 4% of worldwide revenue.
Risk Related to the Company’s Common Stock
A substantial number of shares of the Company’s common stock are eligible for future sale, and the sale of shares of common
stock into the market, or the perception that such sales may occur, may depress the Company’s stock price.
Sales of substantial additional shares of the Company’s common stock in the public market, or the perception that these sales may
occur, may significantly lower the market price of the Company’s common stock. The Company is unable to estimate the amount,
timing or nature of future sales of shares of its common stock. The Company has previously issued a substantial number of shares of
common stock, which are eligible for resale under Rule 144 of the Securities Act of 1933, as amended (the “Securities Act”), and may
become freely tradable. The Company has also registered shares that are issuable upon the exercise of options and warrants. If holders
of options, or warrants choose to exercise or convert their securities and sell shares of common stock issued upon the such exercise or
conversion in the public market or if holders of currently restricted common stock choose to sell such shares of common stock in the
public market under Rule 144 or otherwise, or attempt to publicly sell such shares all at once or in a short time period, the prevailing
market price for the Company’s common stock may decline.
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Provisions in the Company’s Certificate of Incorporation and in Delaware law could make it more difficult for a third party to
acquire the Company, discourage a takeover and adversely affect existing stockholders.
The Company’s Certificate of Incorporation authorizes the Board of Directors to issue up to 1,000,000 shares of preferred stock. The
preferred stock may be issued in one or more series, the terms of which may be determined at the time of issuance by the Company’s
Board of Directors, without further action by stockholders, and may include, among other things, voting rights (including the right to
vote as a series on particular matters), preferences as to dividends and liquidation, conversion and redemption rights, and sinking fund
provisions. Although there are currently no shares of preferred stock outstanding, future holders of preferred stock may have rights
superior to the Company’s common stock and such rights could also be used to restrict the Company’s ability to merge with or sell its
assets to a third party.
The Company is also subject to the provisions of Section 203 of the Delaware General Corporation Law, which could prevent the
Company from engaging in a “business combination” with a 15% or greater stockholder for a period of three years from the date such
person acquired that status unless appropriate board or stockholder approvals are obtained.
These provisions could deter unsolicited takeovers or delay or prevent changes in the Company’s control or management, including
transactions in which stockholders might otherwise receive a premium for their shares over the then current market price. These
provisions may also limit the ability of stockholders to approve transactions that they may deem to be in their best interests.
The market price of the Company’s common stock has been, and may continue to be volatile, which could reduce the market price
of the Company’s common stock.
The publicly traded shares of the Company’s common stock have experienced, and may experience in the future, significant price and
volume fluctuations. This market volatility could reduce the market price of the Company’s common stock without regard to its
operating performance. In addition, the trading price of the Company’s common stock could change significantly in response to actual
or anticipated variations in its quarterly operating results, announcements by the Company or its competitors, factors affecting the
medical imaging industry generally, changes in national or regional economic conditions, changes in securities analysts’ estimates for
the Company or its competitors’ or industry’s future performance or general market conditions, making it more difficult for shares of
the Company’s common stock to be sold at a favorable price or at all. The market price of the Company’s common stock could also be
reduced by general market price declines or market volatility in the future or future declines or volatility in the prices of stocks for
companies in the Company’s industry.
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General Risk Factors
Security breaches and other disruptions could compromise the Company’s information and expose the Company to liability, which
would cause its business and reputation to suffer and could subject it to substantial liabilities.
If the Company’s security measures are breached or fail and unauthorized access is obtained to a customer’s data, the Company’s
service may be perceived as insecure, the attractiveness of its services to current or potential customers may be reduced, and the
Company may incur significant liabilities.
The Company’s services involve the storage and transmission of customers’ proprietary information and patient information,
including health, financial, payment and other personal or confidential information. The Company relies on proprietary and
commercially available systems, software, tools and monitoring, as well as other processes, to provide security for processing,
transmission and storage of such information. Because of the sensitivity of this information and due to requirements under applicable
laws and regulations, the effectiveness of such security efforts is very important. However, there can be no assurance that the
Company will not be subject to cybersecurity incidents that bypass its security measures, impact the integrity, availability or privacy
of personally identifiable information or other data subject to privacy laws or disrupt the Company’s information systems, devices or
business, including its ability to deliver services to its customers. As a result, cybersecurity, physical security and the continued
development and enhancement of the Company’s controls, processes and practices designed to protect its enterprise, information
systems and data from attack, damage or unauthorized access remain a priority. As cyber threats continue to evolve, the Company
may be required to expend significant additional resources to continue to modify or enhance its protective measures or to investigate
and remediate any cybersecurity vulnerabilities. The occurrence of any of these events could result in (i) harm to customers;
(ii) business interruptions and delays; (iii) the loss, misappropriation, corruption or unauthorized access of data; (iv) litigation,
including potential class action litigation, and potential liability under privacy, security and consumer protection laws or other
applicable laws; (v) reputational damage; and (vi) federal and state governmental inquiries, any of which could have a material,
adverse effect on the Company’s financial position and results of operations and harm its business reputation.
Changes in interpretation or application of Accounting Principles Generally Accepted in the United States of America (“GAAP”)
may adversely affect the Company’s operating results.
Management prepares the Company’s consolidated financial statements to conform to GAAP. These principles are subject to
interpretation by the Financial Accounting Standards Board (“FASB”), American Institute of Certified Public Accountants, the SEC
and various other regulatory or accounting bodies. A change in interpretations of, or management’s application of, these principles can
have a significant effect on the Company’s reported results and may even affect the Company’s reporting of transactions completed
before a change is announced. In addition, when the Company is required to adopt new accounting standards, the Company’s methods
of accounting for certain items may change, which could cause the Company’s results of operations to fluctuate from period to period
and make it more difficult to compare the Company’s financial results to prior periods.
As the Company’s operations evolve over time, the Company may introduce new products or new technologies that require it to apply
different accounting principles, including ones regarding revenue recognition, than the Company has applied in past periods. The
application of different types of accounting principles and related potential changes may make it more difficult to compare the
Company’s financial results from quarter to quarter, and the trading price of the Company’s common stock could suffer or become
more volatile as a result.
The Company cannot be certain of the future effectiveness of its internal controls over financial reporting or the impact of the
same on its operations or the market price for the Company’s common stock.
Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 (“Section 404”), the Company is required to include in its Annual Report
on Form 10-K its assessment of the effectiveness of the Company’s internal controls over financial reporting. The Company has
dedicated a significant amount of time and resources to ensure compliance with this legislation for the year ended December 31, 2022
and will continue to do so for future fiscal periods. Although the Company believes that it currently has adequate internal control
procedures in place, it cannot be certain that its internal controls over financial reporting will continue to be effective. If the Company
cannot adequately maintain the effectiveness of its internal controls over financial reporting, it might be subject to sanctions or
investigation by regulatory authorities, such as the SEC. Any such action could adversely affect the Company’s financial results and
the market price of its common stock.
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Changes in credit markets or to the Company’s credit rating could impact its ability to obtain financing for business operations or
result in increased borrowing costs and interest expense.
The Company’s credit ratings reflect each credit rating agency’s opinion of its financial strength, operating performance and ability to
meet its debt obligations at the time such opinion is issued. The Company utilizes the short- and long-term debt markets to obtain
capital from time to time. Adverse changes in the Company’s credit ratings may result in increased borrowing costs for future long-
term debt or short-term borrowing facilities and may limit financing options, including access to the unsecured borrowing market.
Such changes may also breach restrictive covenants under current or future debt facilities or instruments, which could reduce the
Company’s operating flexibility. Macroeconomic conditions, such as continued or increased volatility or disruption in the credit
markets, may adversely affect the Company’s ability to refinance existing debt or obtain additional financing for working capital,
capital expenditures or fund new acquisitions.
Future issuances of shares of the Company’s common stock may cause significant dilution of equity interests of existing holders of
common stock and decrease the market price of shares of the Company’s common stock.
The Company has previously issued options that are exercisable or convertible into a significant number of shares of its common
stock. Should existing holders of options exercise their options for shares of the Company’s common stock, it may cause significant
dilution of equity interests of existing holders of the Company’s common stock and reduce the market price of shares of the
Company’s common stock.
Item 1B.
Unresolved Staff Comments.
Not applicable.
Item 2.
Properties.
The Company’s executive offices are leased pursuant to a lease originally entered into in December 2006. The lease covers
approximately 11,000 square feet of office space located at 98 Spit Brook Road, Suite 100 in Nashua, New Hampshire. In November
2022, the lease was extended through May 31, 2026 with monthly base rent payments of $16,983. Additionally, the Company is
required to pay its proportionate share of the building and real estate tax expenses and obtain insurance for the facility.
The Company leases a facility consisting of approximately 24,350 square feet of office, manufacturing and warehousing space located
at 101 Nicholson Lane, San Jose, CA. The lease commenced in September 2012 and in May 2022 was extended through March 31,
2028, with monthly base rent payments of $51,137 from April 1, 2023 until March 31, 2024, $52,598 from April 2024 until March
2025, $54,059 from April 2025 through March 2026, $55,737 from April 2026 through March 2027, and $57,468 from April 2027
through March 2028. Additionally, the Company is required to pay its proportionate share of the building and real estate tax expenses
and obtain insurance for the facility.
In addition to the foregoing leases relating to its principal properties, the Company also has a lease for an additional facility in Nashua,
New Hampshire used for product repairs, manufacturing and warehousing and office space in Lyon, France.
If the Company is required to seek additional or replacement facilities, it believes there are adequate facilities available at
commercially reasonable rates.
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Item 3.
Legal Proceedings.
From time to time, we may be involved in various legal proceedings and subject to claims that arise in the ordinary course of business.
Although the results of litigation and claims are inherently unpredictable and uncertain, we are not currently a party to any material
legal proceedings.
Item 4.
Mine Safety Disclosures.
Not applicable.
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PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities.
The Company’s common stock is traded on the NASDAQ Capital Market under the symbol “ICAD”.
As of March 13, 2023, there were 87 holders of record of the Company’s common stock.
The Company has not paid any cash dividends on its common stock to date, and the Company does not expect to pay cash dividends
in the foreseeable future. Future dividend policy will depend on the Company’s earnings, capital requirements, financial condition,
and other factors considered relevant by the Company’s Board of Directors.
Information with respect to the Company’s equity compensation plans in effect at December 31, 2022 will be included in the
Company’s 2023 Proxy Statement and is incorporated herein by reference.
Issuer’s Purchases of Equity Securities. For the majority of restricted stock units granted to employees under the applicable stock
incentive plan, the number of shares issued on the date that the restricted stock units vest is net of the minimum statutory tax
withholding requirements that we pay in cash to the appropriate tax authorities on behalf of our employees. The Company did not
have any repurchases of securities in the year ended December 31, 2022.
Item 6
Reserved.
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of the Company’s financial condition and results and operations should be read in conjunction
with the Company’s consolidated financial statements and the related notes to those statements included elsewhere in this Annual
Report on Form 10-K.
Results of Operations
Overview
iCAD, Inc. is a global medical technology company providing innovative cancer detection and therapy solutions. The Company
reports in two segments: Detection and Therapy.
In the Detection segment, the Company’s solutions include (i) advanced image analysis and workflow solutions that enable healthcare
professionals to better serve patients by identifying pathologies and pinpointing the most prevalent cancers earlier, and (ii) a
comprehensive range 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.
The Company’s headquarters are located in Nashua, New Hampshire, with a manufacturing and warehousing facility in New
Hampshire and an operations, research, development, manufacturing and warehousing facility in San Jose, California. In addition, the
Company has office space in Lyon, France.
Recent Reduction in Expenses
On March 20, 2023, the Company committed to a restructuring plan intended to support its long term strategic goals and reduce
operating expenses by further aligning its cost structure to focus on areas the Company believes are more likely to generate the best
long-term results, in light of current industry and macroeconomic environments (the “RIF”). The Company plans to reduce its
workforce by approximately 28%, decreasing its headcount by approximately 23 employees, predominantly from the Company’s
detection business unit. Xoft, Inc., a wholly-owned subsidiary of the Company, will also furlough 12 of its employees, or
approximately 50% of its workforce. The Company currently estimates it will incur one-time cash pre-tax restructuring charges of an
aggregate of approximately $0.3 million in the first half of 2023 as a result of the RIF, comprised primarily of one-time severance and
benefits payments, and employee-related transition costs. Estimated amounts are subject to change until finalized and the Company
may incur additional costs during the remainder of 2023.
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Discussion of Operating Results:
Year Ended December 31, 2022 compared to Year Ended December 31, 2021
Revenue. Revenue for the year ended December 31, 2022 was $27.9 million compared with revenue of $33.6 million for the year
ended December 31, 2021, a decrease of $5.7 million, or 16.9%. Detection revenue decreased by $2.2 million, or 10.1%, and Therapy
revenue decreased by $3.5 million, or 29.9%.
The table below presents the components of revenue for 2022 and 2021 (in thousands):
For the year ended December 31,
2022
2021
$ Change
% Change
Detection revenue
Product revenue
$
12,492 $
15,661 $
(3,169 )
(20.2 )%
Service and supplies revenue
7,310
6,358
952
15.0 %
Subtotal
19,802
22,019
(2,217 )
(10.1 )%
Therapy revenue
Product revenue
2,777
5,530
(2,753 )
(49.8 )%
Service and supplies revenue
5,365
6,089
(724 )
(11.9 )%
Subtotal
8,142
11,619
(3,477 )
(29.9 )%
$
27,944 $
33,638 $
(5,694 )
(16.9 )%
Detection revenue decreased 10.1%, or $2.2 million, to $19.8 million for the year ended December 31, 2022 from $22.0 million for
the year ended December 31, 2021.
Detection product revenue decreased by $3.0 million and Detection service revenue increased by $1.0 million. The Company has seen
an increased customer demand for subscription licenses, which currently remains a small portion of the Company’s total license
revenue. The Company believes this trend could accelerate, and has begun to shift to a subscription model. An increase in
subscription revenue would negatively impact revenue in the short term, because revenue from subscription licenses are recognized
over time, as opposed to being recognized upon delivery for perpetual licenses. The Company is not able to predict how the COVID-
19 pandemic will affect future revenue and order volume. The $1.0 million increase in Detection service revenue was due primarily to
an increase in service revenue from direct customers. The Company did not see significant impact of the COVID-19 pandemic on
Detection service revenue in 2022 as compared to 2021 but is not able to predict how the COVID-19 pandemic could affect future
Detection service revenue.
Therapy revenue decreased 29.9%, or $3.5 million, to $8.1 million for the year ended December 31, 2022 from $11.7 million in the
year ended December 31, 2021.
Therapy product revenue decreased by $2.8 million and Therapy service and supplies revenue decreased by $0.7 million. Therapy
product revenue is related to the sale of Axxent Controller systems and can vary significantly from year to year due to changes in the
number of units sold and the average selling price.
Therapy product revenue for the year ended December 31, 2021 benefitted from reimbursement and regulatory policy changes in the
dermatology market that did not repeat during the year ended December 31, 2022. In addition, for the year ended December 31, 2021,
revenue was higher in international markets for Intraoperative Radiation Therapy indications. Therapy product revenue is related to
the sale of our Xoft Systems including the Controller unit and re-usable applicators. For the year ended December 31, 2021, Therapy
service revenue was positively impacted by the additional controller placement leading to more service and source contracts and
consumables usage that did not repeat during the year ended December 31, 2022.
Gross Profit. Gross profit was $19.8 million for the year ended December 31, 2022 compared to $24.2 million for the year ended
December 31, 2021, a decrease of $4.4 million, or 18.3%. Detection gross profit decreased by $1.7 million from $18.5 million in the
year ended December 31, 2021 to $16.8 million in the year ended December 31, 2022. Detection gross profit as a percentage of
Detection revenue increased to 85% in the year ended December 31, 2022 from 84% in the year ended December 31, 2021. The
increase was due primarily to the mix of products sold across the periods. Therapy gross profit decreased by $2.7 million from
$5.7 million in the year ended December 31, 2021 to $3.0 million in the year ended December 31, 2022. Therapy gross profit as a
percentage of Therapy revenue decreased to 37% in the year ended December 31, 2022 from 49% in the year ended December 31,
2021. The decrease was due primarily to revenue mix shifting to lower margin product revenues.
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Gross profit as a percentage of revenue was 70.9% for the year ended December 31, 2022 compared to 72.1% for the year ended
December 31, 2021. Gross profit as a percentage of revenue is dependent on product and service mix within each segment and
segment mix.
The COVID-19 pandemic adversely affected revenues from both segments in the years ended December 31, 2022 and 2021, and as a
result, gross profit in both segments. The primary impact of the COVID-19 pandemic started in the second quarter of 2020 and the
Company undertook cost cutting measures to reduce operating expenses and manufacturing costs to offset some of the COVID-19
impact to gross profit. The Company lessened some of these cost control efforts, until COVID-19 negative impacts on revenues re-
emerged in the second quarter of 2021, as the typical sales cycle and ordering patterns were disrupted due to supply chain issues,
travel restrictions, and some healthcare facilities’ reprioritization of resources to provide additional focus on COVID-19. The impact
began in the second quarter and continued through the remainder of 2021, but was most acute in December. Starting in the second
quarter of 2021, the Company re-introduced cost management strategies to minimize the effect of 2021 COVID-19 impacts on gross
profit. For the year ended December 31, 2022, it appears that the worst of the disruptions have subsided, however, the Company
continues to be impacted by slowness in the overall economic recovery. The Company is not able to predict how the COVID-19
pandemic, supply chain disruptions, macro-economic conditions and other factors will affect future gross profit.
Cost of revenue and gross profit for 2022 and 2021 were as follows (in thousands):
For the year ended December 31,
2022
2021
Change
% Change
Products
$
5,852 $
5,653 $
199
3.5 %
Service and supplies
1,983
3,425
(1,442 )
(42.1 )%
Amortization and depreciation
297
317
(20 )
(6.3 )%
Total cost of revenue
8,132
9,395
(1,263 )
(13.4 )%
Gross profit
$
19,812 $
24,243 $
(4,431 )
(18.3 )%
Gross profit %
70.9 %
72.1 %
For the year ended December 31,
2022
2021
Change
% Change
Detection gross profit
$
16,824 $
18,510 $
(1,686 )
(9.1 )%
Therapy gross profit
2,988
5,733
(2,745 )
(47.9 )%
Gross profit
$
19,812 $
24,243 $
(4,431 )
(18.3 )%
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Operating Expenses:
Operating expenses for 2022 and 2021 were as follows (in thousands):
For the year ended December 31,
2022
2021
Change
% Change
Operating expenses:
Engineering and product development
$
8,593 $
9,194 $
(601 )
(6.5 )%
Marketing and sales
13,691
15,135
(1,444 )
(9.5 )%
General and administrative
11,234
10,406
828
8.0 %
Amortization and depreciation
224
240
(16 )
(6.7 )%
Total operating expenses
$
33,742 $
34,975 $
(1,233 )
(3.5 )%
Operating expenses were $33.7 million for the year ended December 31, 2022, compared to $35.0 million for the year ended
December 31, 2021, a decrease of $1.2 million or 3.5%. Operating expenses as a percentage of sales was 121.0% in the year ended
December 31, 2022, compared to 103.9% for the year ended December 31, 2021. In early 2021, the Company reduced cost-cutting
programs implemented in 2020 in response to COVID-19, returning furloughed employees and hiring a number of employees for
positions vacant in early 2021. When the impacts of COVID-19 re-emerged in the second quarter of 2021, the Company continued to
remain focused on a disciplined approach to spending. In November 2022, the Company eliminated a number of positions, resulting in
a charge of approximately $0.1 million, comprised of severance and related costs.
Engineering and Product Development. Engineering and product development costs for the year ended December 31, 2022 decreased
by $0.6 million, or 6.5%, from $9.1 million in 2021 to $8.6 million in 2022. The decrease was largely due to the timing of new
personnel joining in 2022 and a reduction in consulting fees.
Marketing and Sales. Marketing and sales expense for the year ended December 31, 2022 decreased by $1.4 million, or 9.5%, from
$15.1 million in 2021 to $13.7 million in 2022. The decrease in marketing and sales expense was due primarily due to lower
headcount and commission expense in 2022.
General and Administrative. General and administrative expenses for the year ended December 31, 2022 increased by $0.8 million, or
8.0%, from $10.4 million in 2021 to $11.2 million in 2022. The increase was due primarily to consulting costs related to use of an
interim CFO and other interim personnel.
Amortization and Depreciation. Amortization and depreciation expenses for the year ended December 31, 2022 decreased by $0.02, or
6.7%, from $0.24 million in 2021 to $0.22 million in 2022. The Company’s depreciable and amortizable assets have remained
relatively consistent between 2022 and 2021.
Other Income, Tax and Expense (in thousands):
For the year ended December 31,
2022
2021
Change
Change %
Interest expense
$
(10 ) $
(141 ) $
131
(92.9 )%
Interest income
213
15
198
1320.0 %
Loss on extinguishment of debt
—
(386 )
386
(100.0 )%
Loss on fair value of debentures
—
—
—
0.0 %
Other
(45 )
—
(45 )
(100.0 )%
Total other expense
$
158 $
(512 ) $
670
(130.9 )%
Income tax expense
$
116 $
(1 ) $
117
(11700.0 )%
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Interest Expense. The Company recorded $0.01 million of interest expense in the year ended December 31, 2022 as compared with
$0.1 million in the year ended December 31, 2021. The Western Alliance debt facility was fully paid and extinguished in April 2021.
Interest income. Interest income of $0.2 million and $0.01 million for the years ended December 31, 2022 and 2021, respectively,
reflects income earned from the Company's money market accounts. The increase year over year results from higher interest rates on
the Company's money market accounts.
Loss on Extinguishment of Debt. The Company recorded a loss on extinguishment of debt of $0.4 million for the year ended
December 31, 2021. The loss in 2021 was due to the April 27, 2021 extinguishment of the Loan and Security Agreement with Western
Alliance Bank, originally issued on March 30, 2020.
Tax expense. The Company recorded a tax benefit of $0.1 million for the year ended December 31, 2022. The amount of tax expense
or benefit varies based on geographic mix of earnings and losses.
Discussion of Operating Results:
Year Ended December 31, 2021 compared to Year Ended December 31, 2020
Revenue. Revenue for the year ended December 31, 2021 was $33.6 million compared with revenue of $29.7 million for the year
ended December 31, 2020, an increase of $3.9 million, or 13.3%. Detection revenue increased by 0.1% and Therapy revenue increased
by $3.9 million, or 50.9%.
The table below presents the components of revenue for 2021 and 2020 (in thousands):
For the year ended December 31,
2021
2020
$ Change
% Change
Detection revenue
Product revenue
$
15,661 $
16,291 $
(630 )
(3.9 )%
Service and supplies revenue
6,358
5,706
652
11.4 %
Subtotal
22,019
21,997
22
0.1 %
Therapy revenue
Product revenue
5,530
2,612
2,918
111.7 %
Service and supplies revenue
6,089
5,089
1,000
19.7 %
Subtotal
11,619
7,701
3,918
50.9 %
$
33,638 $
29,698 $
3,940
13.3 %
Detection revenues were flat as they were approximately $22.0 million for each of the years ended December 31, 2021 and 2020,
respectively.
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Detection product revenue decreased by $0.6 million and Detection service revenue increased by $0.7 million. The Company believes
that Detection product revenue was adversely affected in 2021 by the COVID-19 pandemic, as the typical sales cycle and ordering
patterns were disrupted due to supply chain issues, travel restrictions, and some healthcare facilities’ reprioritization of resources to
provide additional focus on COVID-19. The impact on 2021 began in the second quarter and continued through the remainder of 2021
but was most acute in December. The Company is not able to predict how the COVID-19 pandemic will affect future revenue and
order volume. The $0.7 million increase in Detection service revenue was due primarily to an increase in service revenue from direct
customers. The Company did not see significant impact of the COVID-19 pandemic on Detection service revenue in 2021 as
compared to 2020 but is not able to predict how the COVID-19 pandemic could affect future Detection service revenue.
Therapy revenue increased 50.9%, or $3.9 million, to $11.6 million for the year ended December 31, 2021 from $7.7 million in the
year ended December 31, 2020. Therapy product revenue increased by $2.9 million and Therapy service and supplies revenue
increased by $1.0 million. Therapy product revenue for the year ended December 31, 2021 benefitted from reimbursement and
regulatory policy changes in the dermatology market. Sales were also higher in international markets for Intraoperative Radiation
Therapy indications. Therapy product revenue is related to the sale of our Xoft Systems including the Controller unit and re-usable
applicators. Therapy service revenue was positively impacted by the additional controller placement leading to more service and
source contracts and consumables usage.
Gross Profit. Gross profit was $24.2 million for the year ended December 31, 2021 compared to $21.4 million for the year ended
December 31, 2020, an increase of $2.9 million, or 13.5%. Detection gross profit increased by $0.7 million from $17.9 million in the
year ended December 31, 2020 to $18.5 million in the year ended December 31, 2021. Detection gross profit as a percentage of
Detection revenue increased to 84% in the year ended December 31, 2021 from 81% in the year ended December 31, 2020. The
increase was due primarily to an increase in high margin licenses added to existing servers rather than the lower margin license and
server bundle. Therapy gross profit increased by $2.2 million from $3.5 million in the year ended December 31, 2020 to $5.7 million
in the year ended December 31, 2021. Therapy gross profit as a percentage of Therapy revenue increased to 49% in the year ended
December 31, 2021 from 45% in the year ended December 31, 2020. The increase was due primarily to revenue mix shifting to higher
margin product revenues relative to service revenues.
Gross profit as a percentage of revenue was 72.1% for the year ended December 31, 2021 compared to 71.9% for the year ended
December 31, 2020. Gross profit as a percentage of revenue is dependent on product and service mix within each segment and
segment mix. The lower margin Therapy segment growing as a percentage of total revenue largely offset the margin gains within each
individual segment. The COVID-19 pandemic adversely affected revenues from both segments in the years ended December 31, 2021
and 2020, and as a result, gross profit in both segments. The primary impact of the COVID-19 pandemic started in the second quarter
of 2020 and the Company undertook cost cutting measures to reduce operating expenses and manufacturing costs to offset some of
the COVID-19 impact to gross profit. The Company lessened some of these cost control efforts, until COVID-19 negative impacts on
revenues re-emerged in the second quarter of 2021, as the typical sales cycle and ordering patterns were disrupted due to supply chain
issues, travel restrictions, and some healthcare facilities’ reprioritization of resources to provide additional focus on COVID-19. The
impact began in the second quarter and continued through the remainder of 2021, but was most acute in December. Starting in the
second quarter of 2021, the company re-introduced cost management strategies to minimize the effect of 2021 COVID-19 impacts on
gross profit. The Company is not able to predict how the COVID-19 pandemic, supply chain disruptions, macro-economic conditions
and other factors will affect future gross profit.
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Table of Contents
Cost of revenue and gross profit for 2021 and 2020 were as follows (in thousands):
For the year ended December 31,
2021
2020
Change
% Change
Products
$
5,653 $
5,000 $
653
13.1 %
Service and supplies
3,425
2,965
460
15.5 %
Amortization and depreciation
317
379
(62 )
(16.4 )%
Total cost of revenue
9,395
8,344
1,051
12.6 %
Gross profit
$
24,243 $
21,354 $
2,889
13.5 %
Gross profit %
72.1 %
71.9 %
For the year ended December 31,
2021
2020
Change
% Change
Detection gross profit
$
18,510 $
17,856 $
654
3.7 %
Therapy gross profit
5,733
3,498
2,235
63.9 %
Gross profit
$
24,243 $
21,354 $
2,889
13.5 %
Operating Expenses:
Operating expenses for 2021 and 2020 were as follows (in thousands):
For the year ended December 31,
2021
2020
Change
Change %
Operating expenses:
Engineering and product development
$
9,194 $
8,114 $
1,080
13.3 %
Marketing and sales
15,135
13,312
1,823
13.7 %
General and administrative
10,406
9,117
1,289
14.1 %
Amortization and depreciation
240
199
41
20.6 %
Total operating expenses
$
34,975 $
30,742 $
4,233
13.8 %
Operating expenses were $35.0 million for the year ended December 31, 2021, compared to $30.7 million for the year ended
December 31, 2020, an increase of $4.3 million or 13.8%. Operating expenses as a percentage of sales was 104.0% in the year ended
December 31, 2021, compared to 103.5% for the year ended December 31, 2020. In early 2021, the Company reduced cost-cutting
programs implemented in 2020 in response to COVID-19, returning furloughed employees and hiring a number of employees for
positions vacant in early 2021. When the impacts of COVID-19 re-emerged in the second quarter of 2021, the Company continued to
remain focused on a disciplined approach to spending.
Engineering and Product Development. Engineering and product development costs for the year ended December 31, 2021 increased
by $1.1 million, or 13.3%, from $8.1 million in 2020 to $9.2 million in 2021. The increase was largely due to increased personnel as a
result of the resumption of hiring for prioritized positions in early 2021 and an increase in consulting fees.
Marketing and Sales. Marketing and sales expense for the year ended December 31, 2021 increased by $1.8 million, or 13.7%, from
$13.3 million in 2020 to $15.1 million in 2021. The increase in marketing and sales expense was due primarily to increased personnel
and trade show costs after resumption of sales and marketing activity after the 2020 cost-cutting measures prompted by the COVID-19
pandemic and some additional management costs being reclassified and sales and marketing.
General and Administrative. General and administrative expenses for the year ended December 31, 2021 increased by $1.3 million, or
14.1%, from $9.1 million in 2020 to $10.4 million in 2021. The increase was due primarily to an increase in consulting fees related to
corporate strategic projects and the interim consulting CFO and to insurance premium expenses as well as board of director related
expenses. Employee compensation increased, but was offset by a decrease in external service expenses as multiple functions were
brought in-house.
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Table of Contents
Amortization and Depreciation. Amortization and depreciation expenses for the year ended December 31, 2021 increased by
$0.04 million, or 20.6%, from $0.20 million in 2020 to $0.24 million in 2021. The Company’s depreciable and amortizable assets have
remained relatively consistent between 2021 and 2020.
Other Income, Tax and Expense (in thousands):
For the year ended December 31,
2021
2020
Change
Change %
Interest expense
$
(141 ) $
(476 ) $
335
(70.4 )%
Interest income
15
97
-82
(84.5 )%
Loss on extinguishment of debt
(386 )
(341 )
(45 )
13.2 %
Loss on fair value of debentures
—
(7,464 )
7,464
(100.0 )%
Total other expense
$
(512 ) $
(8,184 ) $
7,672
(93.7 )%
Income tax expense
$
116 $
(1 ) $
117
(11700.0 )%
Interest Expense. The Company recorded $0.1 million of interest expense in the year ended December 31, 2021 as compared with
$0.5 million of interest expense in the year ended December 31, 2020. The Western Alliance debt facility was fully paid and
extinguished in April 2021.
Interest income. Interest income of $0 million and $0.1 million for the years ended December 31, 2021 and 2020, respectively, reflects
income earned from our money market accounts.
Loss on fair value of debentures. The Company recorded a loss on extinguishment of debt of $0.4 million and $0.3 million for the
years ended December 31, 2021 and 2020, respectively. The loss in 2021 was due to the April 27, 2021 extinguishment of the Loan
and Security Agreement with Western Alliance Bank, originally issued on March 30, 2020. The loss in 2020 was due to the March 30,
2020, extinguishment of the amended Loan and Security Agreement with Silicon Valley Bank, entered into in August 2017.
Tax expense. The Company had tax expense of $1,000 for the year ended December 31, 2021 as compared to tax expense of $38,000
for the year ended December 31, 2020.
Segment Analysis
The Company operates in and reports results for two segments: Detection and Therapy. Segment operating income (loss) includes cost
of sales, engineering and product development, marketing and sales, and depreciation and amortization for the respective segment. A
summary of Segment revenues, segment gross profit and segment operating income (loss) for the fiscal years ended December 31,
2022, 2021 and 2020 are below (in thousands):
For the year ended December 31,
2022
2021
2020
Segment revenues:
Detection
$
19,802 $
22,019 $
21,997
Therapy
8,142
11,619
7,701
Total Revenue
$
27,944 $
33,638 $
29,698
Segment gross profit:
Detection
$
16,824 $
18,510 $
17,856
Therapy
2,988
5,733
3,498
Total gross profit
$
19,812 $
24,243 $
21,354
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For the year ended December 31,
2022
2021
2020
Segment operating income (loss):
Detection
$
902 $
1,563 $
2,719
Therapy
(3,767 )
(1,835 )
(3,028 )
Segment operating income (loss)
$
(2,865 ) $
(272 ) $
(309 )
General administrative
$
(10,852 ) $
(10,460 ) $
(9,079 )
Interest expense
(10 )
(141 )
(476 )
Loss on extinguishment of debt
—
(386 )
(341 )
Other income
(45 )
15
97
Fair value of convertible debentures
—
—
(7,464 )
Loss before income tax
$
(13,772 ) $
(11,244 ) $
(17,572 )
Detection gross profit decreased to approximately $16.8 million, or 85% of revenue, for the year ended December 31, 2022 from
$18.5 million, or 84% of revenue, for the year ended December 31, 2021. The decreased dollars related to lower revenue while the
higher percentage on those revenues was due primarily to product mix. Detection segment operating income for the year ended
December 31, 2022 decreased by $2.6 million to $0.9 million from $1.6 million for the year ended December 31, 2021. The decrease
in Detection segment operating income was due primarily to a decrease in revenues. Detection operating expenses decreased by
$1.0 million to $15.9 million for the year ended December 31, 2022 from $16.9 million for the year ended December 31, 2021.
Detection gross profit increased to approximately $18.5 million, or 84% of revenue, for the year ended December 31, 2021 from
$17.9 million, or 81% of revenue, for the year ended December 31, 2020. The increase in Detection gross profit was due primarily to
the decrease in Detection cost of goods related to changes in product mix. Detection segment operating income for the year ended
December 31, 2021 decreased by $1.1 million to $1.6 million from $2.7 million for the year ended December 31, 2020. The decrease
in Detection segment operating income was due primarily to an increase in operating expenses relative to the increase in revenues.
Detection operating expenses increased by $1.8 million to $16.9 million for the year ended December 31, 2021 from $15.1 million for
the year ended December 31, 2020.
Therapy gross profit decreased by approximately $2.7 million to $3.0 million, or 37% of revenue, for the year ended December 31,
2022 from approximately $5.7 million or 49% of revenue for the year ended December 31, 2021. The decrease in Therapy gross profit
was largely due to lower revenue. Therapy operating expenses decreased by $0.8 million to $6.8 million for the year ended December
31, 2022 from $7.6 million for the year ended December 31, 2021. Therapy segment operating loss increased to $3.8 million for the
year ended December 31, 2022 from $1.8 million for the year ended December 31, 2021. The increase in Therapy segment operating
loss was due primarily to lower revenue.
Therapy gross profit increased by approximately $2.2 million to $5.7 million, or 49% of revenue, for the year ended December 31,
2021 from approximately $3.5 million or 45% of revenue for the year ended December 31, 2020. The increase in Therapy gross profit
was largely due to the $3.9 million increase in revenue. Therapy operating expenses decreased by $1.1 million to $7.6 million for the
year ended December 31, 2021 from $6.5 million for the year ended December 31, 2020. Therapy segment operating loss decreased to
$1.8 million for the year ended December 31, 2021 from $3.0 million for the year ended December 31, 2020. The decrease in Therapy
segment operating loss was due primarily to the $2.2 million increase in gross profit partially offset by the increase in operating
expenses.
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Table of Contents
Liquidity and Capital Resources
The Company believes that its cash and cash equivalents balance of $21.3 million as of December 31, 2022 and projected cash
balances are sufficient to sustain operations through at least the next 12 months following the filing of this Form 10-K. 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. The
Company will continue to closely monitor its liquidity and the capital and credit markets.
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 $24.8 million at December 31, 2022. The ratio of current assets to current liabilities
at December 31, 2022 and 2021 was 2.84 and 3.36, respectively.
Net cash used for operating activities for the year ended December 31, 2022 was $12.8 million, compared to $9.4 million for 2021.
Net cash used for investing activities for the year ended December 31, 2022 was $0.5 million compared to $0.6 million for the year
ended December 31, 2021. The cash used for investing activities in both 2022 and 2021 was due primarily to purchases of fixed
assets.
Net cash provided by financing activities for the year ended December 31, 2022 was $0.4 million. Net cash provided by financing
activities for the year ended December 31, 2021 was $17.1 million, which was primarily related to the aforementioned public offering
resulting in net proceeds of $23.2 million partially offset by the repayment of debt repayment (see below).
The CARES Act allowed employers to defer the deposit and payment of employers share of Social Security payroll taxes that would
otherwise have been owed from the date of enactment of the legislation. The legislation requires that the deferred taxes be paid over
the two-year period, with half the amount required to be paid by December 31, 2021, and the other half by December 31, 2022. During
2022, the Company remitted $0.1 million which represented the second half of the amount due. As of December 31, 2022, the
Company has repaid all amounts previously deferred.
On March 20, 2023, the Company committed to a restructuring plan intended to support its long term strategic goals and reduce
operating expenses by further aligning its cost structure to focus on areas the Company believes are more likely to generate the best
long-term results, in light of current industry and macroeconomic environments (the “RIF”). The Company plans to reduce its
workforce by approximately 28%, decreasing its headcount by approximately 23 employees, predominantly from the Company’s
detection business unit. Xoft, Inc., a wholly-owned subsidiary of the Company, will also furlough 12 of its employees, or
approximately 50% of its workforce. The Company currently estimates it will incur one-time cash pre-tax restructuring charges of an
aggregate of approximately $0.3 million in the first half of 2023 as a result of the RIF, comprised primarily of one-time severance and
benefits payments, and employee-related transition costs. Estimated amounts are subject to change until finalized and the Company
may incur additional costs during the remainder of 2023.
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Table of Contents
Lease Obligations:
Operating Leases:
See item 2 of this annual report on Form 10-K.
Settlement Obligations:
As a result of the acquisition of Xoft, the Company recorded a royalty obligation pursuant to a settlement agreement entered into
between Xoft and Hologic, in August 2007. Xoft received a nonexclusive, irrevocable, perpetual, worldwide license, including the
right to sublicense certain Hologic patents, and a non-compete covenant as well as an agreement not to seek further damages with
respect to the alleged patent violations. In return, the Company had a remaining obligation to pay a minimum annual royalty payment
of $250,000 payable through 2016. In addition to the minimum annual royalty payments, the litigation settlement agreement with
Hologic also provided for payment of royalties based upon a specified percentage of future net sales on any products that practice the
licensed rights. The estimated fair value of the patent license and non-compete covenant is $100,000 and was amortized over the
estimated useful life of approximately four years. As of December 31, 2022, the remaining liability for minimum royalty obligations
totaling $0.4 million is recorded within accrued expenses and accounts payable.
Notes Payable:
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.
Obligations to the Bank under the Loan Agreement were 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.
On April 27, 2021, the Company repaid its obligations in the aggregate amount of $7,354,283 and terminated the Loan Agreement
with the Bank, and the Company’s collateral securing the facility was released. The Company accounted for this repayment and
retirement as an extinguishment of the Loan Agreement. The Company recorded a loss on extinguishment of approximately
$386,000 related to the repayment and retirement of the Loan Agreement. The loss on extinguishment was composed of
approximately $140,000 for a prepayment fee, $122,000 for the unaccrued final payment, $65,000 termination and other fees, and
$58,000 for the unamortized discount and other closing costs from origination of the loan.
Loan and Security Agreement – Silicon Valley Bank
On August 7, 2017, the Company entered into a Loan and Security Agreement with Silicon Valley Bank, which was subsequently
amended several times (as amended, the “SVB Loan Agreement”). The SVB Loan Agreement 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. The
Company also wrote off unamortized original closing costs as of the extinguishment date. The Company recorded a loss on
extinguishment of approximately $341,000 related to the repayment and retirement of the SVB Loan Agreement. The loss on
extinguishment was composed of approximately $185,000 for the unaccrued final payment, the $114,000 termination fee, and $42,000
of unamortized and other closing costs.
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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 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 of approximately $7.5 million 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 in 2020.
54
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Critical Accounting Estimates
The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the U.S.
requires management to make judgments, assumptions and estimates that affect the amounts reported in the consolidated financial
statements and accompanying notes.
The U.S. Securities and Exchange Commission (“SEC”) requires companies to provide additional disclosure and commentary on their
most critical accounting policies and estimates. The SEC has defined critical accounting estimates as the ones that are most important
to the portrayal of a company’s financial condition and operating results and requires management to make its most significant
estimates and judgments in the preparation of its Consolidated Financial Statements. The SEC has defined critical accounting
estimates as those estimates made in accordance with generally accepted accounting principles that involve a significant level of
estimation uncertainty and have had or are reasonably likely to have a material impact on the financial condition or results of
operations of a company.
Revenue Recognition
The Company recognizes revenue under the provisions of ASU 2014-09, Revenue from Contracts with Customers (“ASC 606”). The
core principle of ASC 606 is that an entity should recognize revenue to depict the transfer of goods or services to customers in an
amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASC 606
explains that to achieve the core principle, an entity should take the following actions:
Step 1: Identify the contract with the customer
Step 2: Identify the performance obligations in the contract
Step 3: Determine the transaction price
Step 4: Allocate the transaction price
Step 5: Recognize revenue when or as the entity satisfies a performance obligation
The Company’s contracts with customers may include promises to transfer multiple products and services to a customer. Identifying
distinct performance obligations that should be accounted for separately versus together may require significant judgment. For
arrangements with multiple performance obligations, the Company allocates revenue to each performance obligation based on its
relative standalone selling price. Judgment is required to determine the standalone selling price for each distinct performance
obligation. The Company generally determines standalone selling prices based on the prices charged to customers and uses a range of
amounts to estimate standalone selling prices when the Company sells each of the products and services separately and need to
determine whether there is a discount that needs to be allocated based on the relative standalone selling prices of the various products
and services. The Company typically has more than one range of standalone selling prices for individual products and services due to
the stratification of those products and services by customers and circumstances. In these instances, the Company may use information
such as the type of customer and geographic region in determining the range of standalone selling prices.
55
Table of Contents
Allowance for Doubtful Accounts
The allowance for doubtful accounts represents management’s estimate for potential uncollectible accounts receivable. This estimate
is developed from management’s ongoing credit evaluation of Company customers and a detailed review of its outstanding accounts
receivable balances.
Inventory
Inventory consists of finished products, work-in-process, and raw materials. The Company values its inventory at the lower of cost or
net realizable value. Cost includes materials, labor, and manufacturing overhead and is determined using the first-in, first-out (FIFO)
method. On a quarterly basis, management reviews inventory quantities on hand and analyzes the provision for excess and obsolete
inventory based primarily on product expiration dating and estimated sales forecast, which is based on sales history and anticipated
future demand.
Goodwill
Goodwill represents the amount of consideration paid in connection with business acquisitions in excess of the fair value of assets
acquired and liabilities assumed. The Company performs an annual impairment test each year on October 1 using both qualitative and
quantitative methods and assumptions. The quantitative test utilizes a combination of both the market and income approach. The most
significant estimates in the income approach relate to management’s assumptions to calculate a present value of estimated future cash
flows.
Stock Based Compensation
The Company uses the Black-Scholes option pricing model to value stock options which requires extensive use of accounting
judgment and financial estimates, including estimates of the expected term participants will retain their vested stock options before
exercising them, the estimated volatility of its common stock price over the expected term, and the number of options that will be
forfeited prior to the completion of their vesting requirements.
Other Commitments
Other Commitments include non-cancelable purchase orders with key suppliers executed in the normal course of business.
Effect of New Accounting Pronouncements
See note 3 in the Notes to Consolidated Financial Statements in this Annual Report on Form 10-K.
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk.
We believe we are not subject to material foreign currency exchange rate fluctuations, as most of our sales and expenses are domestic
and therefore are denominated in the U.S. dollar. For international sales, the majority of those customers pay in the U.S. dollar. We do
not hold derivative securities and have not entered into contracts embedded with derivative instruments, such as foreign currency and
interest rate swaps, options, forwards, futures, collars, and warrants, either to hedge existing risks or for speculative purposes.
Item 8.
Financial Statements and Supplementary Data.
See Financial Statements attached hereto.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
Not applicable.
56
Table of Contents
Item 9A.
Controls and Procedures.
(a) Evaluation of Disclosure Controls and Procedures.
The Company, under the supervision and with the participation of its management, including 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 annual report on Form10-K. Based on this evaluation, 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 Exchange Act)
were effective as of December 31, 2022.
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 procedures and controls.
(b) Management’s Annual Report on Internal Control Over Financial Reporting.
The Company, under the supervision and with the participation of its management, including its principal executive officer and
principal financial officer, is responsible for the preparation and integrity of the Company’s Consolidated Financial Statements,
establishing and maintaining adequate internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)) for the
Company and all related information appearing in this Annual Report on Form 10-K.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be
effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of
any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in
conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Management assessed the effectiveness of our internal control over financial reporting as of December 31, 2022, using the criteria set
forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control - Integrated Framework (2013).
Based on its assessment, our Chief Executive Officer and our Chief Financial Officer concluded that our internal control over financial
reporting was effective as of December 31, 2022.
(c) Changes in Internal Control Over Financial Reporting.
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 Exchange Act Rule 13a-15(f)) to determine whether any changes in internal control over
financial reporting occurred during the fourth quarter of the year ended December 31, 2022, that have materially affected, or which are
reasonably likely to materially affect internal control over financial reporting. Based on that evaluation there has been no such change
during such period.
Item 9B.
Other Information.
Not applicable.
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.
Not applicable.
57
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PART III
Item 10.
Directors, Executive Officers and Corporate Governance.
The information required by this Item 10 of Form 10-K will be included in the Company’s 2023 Proxy Statement to be filed with the
SEC in connection with the solicitation of proxies for the Company’s 2023 Annual Meeting of Stockholders (the “2023 Proxy
Statement”) and is incorporated herein by reference.
Item 11.
Executive Compensation.
The information required by this Item 11 of Form 10-K will be included in the Company’s 2023 Proxy Statement and is incorporated
herein by reference.
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
The information required by this Item 12 of Form 10-K will be included in the Company’s 2023 Proxy Statement and is incorporated
herein by reference.
Item 13.
Certain Relationships and Related Transactions, and Director Independence.
The information required by this Item 13 of Form 10-K will be included in the Company’s 2023 Proxy Statement and is incorporated
herein by reference.
Item 14.
Principal Accounting Fees and Services.
The information required by this Item 14 of Form 10-K will be included in the Company’s 2023 Proxy Statement and is incorporated
herein by reference.
58
Table of Contents
PART IV
Item 15.
Exhibits, Financial Statement Schedules.
a) The following documents are filed as part of this Annual Report on Form 10-K:
i.
Financial Statements - See Index on pageF-1
ii.
Financial Statement Schedule - See Index on page F-1. All other schedules for which provision is made in the
applicable accounting regulations of the Securities and Exchange Commission are not required under the related
instructions or are not applicable and, therefore, have been omitted.
iii.
Exhibits - the following documents are filed as exhibits to this Annual Report on Form 10-K:
3(a)
Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Quarterly Report on Form 10-Q filed with
the SEC on August 6, 2015).
3(b)
Amended and Restated By-laws (incorporated by reference to Exhibit 3(b) to the Current Report on Form 10-K filed
with the SEC on March 17, 2008.
3(c)
Amendment to Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-
K filed with the SEC on July 21, 2021).
4
Description of Registrant’s Securities
10(a)
2016 Stock Incentive Plan as Amended as of July 2021 (incorporated by reference to Appendix B to the definitive
proxy statement on Form DEF14A filed with the SEC on June 7, 2021).*
10(b)
Form of Indemnification Agreement (incorporated by reference to Exhibit 10.1 of Quarterly Report on Form 10-Q
filed with the SEC on November 15, 2014).
10(c)
Lease Agreement, dated December 6, 2006, between the Company and Gregory D. Stoyle and John J. Flatley, Trustees
of the 1993 Flatley Family Trust, of Nashua, NH (incorporated by reference to Exhibit 10(mm) to the Annual Report
on Form 10-K filed with the SEC on March 22, 2007).
10(d)
Employment Agreement, dated May 26, 2020, between the Company and Stacey Stevens (incorporated by reference to
Exhibit 10.2 to the Current Report on Form 8-K filed with the SEC on May 29, 2020).*
10(e)
Employment Agreement, dated May 26, 2020, between the Company and Jonathan Go (incorporated by reference to
Exhibit 10.4 to the Current Report on Form 8-K filed with the SEC on May 29, 2020). *
10(f)
First Amendment to Lease, dated September 19, 2016, between the Company and The Irvine Company (incorporated
by reference to Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on September 21, 2016).
10(g)
2012 Stock Incentive Plan (incorporated by reference to Appendix B to the definitive proxy statement on Form
DEF14A filed with the SEC on April 9, 2012).*
59
Table of Contents
10(h)
Amendment No. 1 to the 2012 Stock Incentive Plan (incorporated by reference to Appendix A to the definitive proxy
statement on Form DEF14A filed with the SEC on April 2, 2014).*
10(i)
2019 Employee Stock Purchase Plan (incorporated by reference to Appendix A to the definitive proxy statement on Form
DEF14A filed with the SEC on November 8, 2019).
10(j)
Loan and Security Agreement, dated as of March 30, 2020, by and between Western Alliance Bank, iCAD, Inc., Xoft, Inc.
and Xoft Solutions LLC (incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K filed with the SEC on
March 31, 2020).
10(k)
First Amendment to Loan and Security Agreement, dated June 16, 2020, between iCAD, Inc., Xoft, Inc., Xoft Solutions
LLC and Western Alliance Bank (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q filed with
the SEC on August 7, 2020).
10(l)
Employment agreement dated August 4, 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 August 6, 2021).
10(m)
Lease between The Irvine Company LLC and iCAD, Inc. dated June 29, 2012, together with First Amendment to Lease
dated September 19, 2016, Second Amendment to Lease dated August 12, 2019, and Third Amendment to Lease dated May
19, 2022 (incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q filed with the SEC on August 15,
2022).
10(n)
Lease between John J. Flatley Company and iCAD, Inc., dated December 6, 2006, together with First Amendment to Lease
dated December 21, 2011, Second Amendment to Lease dated August 8, 2016, Third Amendment to Lease dated December
16, 2019, and Fourth Amendment to Lease dated November 22, 2022 (incorporated by reference to Exhibit 10.1 to the
Current Report on Form 8-K filed with the SEC on November 28, 2022).
10(o)
Consulting Agreement dated January 18, 2023, by and between iCAD, Inc. and Daniel Shea (incorporated by reference to
Exhibit 10.1 to the Current Report on Form 8-K filed with the SEC on January 24, 2023).
10(p)
Employment agreement dated March 10, 2023, by and between iCAD, Inc. and Dana Brown
10(q)
Separation agreement dated March 10, 2023, by and between iCAD, Inc. and Stacey Stevens
21.1
Subsidiaries
23.1
Consent of BDO USA, LLP, Independent Registered Public Accounting Firm.
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 Inline XBRL (eXtensible Business Reporting Language); (i) Consolidated Balance
Sheets as of December 31, 2022 and December 31, 2021, (ii) Consolidated Statements of Operations for the years ended
December 31, 2022, 2021 and 2020, (iii) Consolidated Statements of Stockholders’ Equity for the years ended December
31, 2022, 2021 and 2020, (iv) Consolidated Statements of Cash Flows for the years ended December 31, 2022, 2021 and
2020, and (v) Notes to Consolidated Financial Statements.
104
Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101).
*
Denotes a management compensation plan or arrangement.
**
The Registrant has omitted certain schedules and exhibits pursuant to Item 601(b)(2) of Regulation S-K and shall furnish
supplementally to the SEC copies any of the omitted schedules and exhibits upon request by the SEC.
Item 16.
Form 10-K Summary.
None.
60
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
iCAD, INC.
Date: March 31, 2023
By: /s/ Dana Brown
Dana Brown
Chief Executive Officer, President and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the dates indicated.
Title
Chief Executive Officer, President, and Director
(Principal Executive Officer)
Chief Financial Officer (Interim)
(Principal Financial and Accounting Officer)
Director
Director
Director
Director
61
Table of Contents
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page
Report of Independent Registered Public Accounting Firm (BDO USA, LLP Boston, Massachusetts PCAOB #243)
F-2
Consolidated Balance Sheets As of December 31, 2022 and 2021
F-3
Consolidated Statements of Operations For the years ended December 31, 2022, 2021 and 2020
F-4
Consolidated Statements of Stockholders’ Equity For the years ended December 31, 2022, 2021 and 2020
F-5
Consolidated Statements of Cash Flows For the years ended December 31, 2022, 2021 and 2020
F-6
Notes to Consolidated Financial Statements
F-7–F-34
F-1
Table of Contents
Report of Independent Registered Public Accounting Firm
Shareholders and Board of Directors
iCAD, Inc.
Nashua, New Hampshire
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of iCAD, Inc. (the “Company”) as of December 31, 2022 and 2021,
the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the three years in the period ended
December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the
consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022
and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in
conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the
Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to
error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial
reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the
purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we
express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements,
whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test
basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the
accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the
consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements
that was communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are
material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a
whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on
the accounts or disclosures to which it relates.
Revenue recognition - Identification of distinct performance obligations in certain revenue contracts
As described in Note 2 to the consolidated financial statements, certain of the Company’s revenue contracts with customers may
include promises to transfer multiple products and services to a customer and identifying distinct performance obligations that should
be accounted for separately versus together may require significant judgment. For these revenue contracts, the Company accounts for
the individual products and services separately if they are distinct.
We identified the determination of distinct performance obligations within certain revenue contracts as a critical audit matter. The
determination of whether multiple products and services within a contract are distinct performance obligations that should be
accounted for separately requires management to exercise significant judgment and includes a high degree of subjectivity. Auditing
these elements involved especially challenging auditor judgment due to the nature and extent of effort required to address these
matters.
The primary procedures we performed to address this critical audit matter included:
valuating management’s accounting policies and practices, including the reasonableness of management’s judgments
lated to the identification of each distinct performance obligation.
esting certain revenue contracts together with their underlying documents to evaluate management’s identification of
ach distinct performance obligation.
/s/ BDO USA, LLP
We have served as the Company's auditor since 1989.
Boston, Massachusetts
March 31, 2023
F-2
Table of Contents
iCAD, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31,
December 31,
2022
2021
(in thousands except shares and per share data)
Assets
Current assets:
Cash and cash equivalents
$
21,313 $
34,282
Trade accounts receivable, net of allowance for doubtful accounts of $922 in 2022 and
$268 in 2021
8,898
8,891
Inventory, net
5,389
4,171
Prepaid expenses and other current assets
2,641
2,962
Total current assets
38,241
50,306
Property and equipment:
Equipment
3,076
7,121
Leasehold improvements
110
172
Furniture and fixtures
23
319
Marketing assets
—
376
3,209
7,988
Less accumulated depreciation and amortization
2,135
7,106
Property and equipment, net
1,074
882
Other assets:
Operating lease assets
3,361
1,059
Other assets
69
899
Intangible assets, net of accumulated amortization of $8,932 in 2022 and $8,724 in 2021
482
683
Goodwill
8,362
8,362
Deferred tax assets
116
—
Total other assets
12,390
11,003
Total assets
$
51,705 $
62,191
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
$
1,973 $
2,779
Accrued and other expenses
4,681
5,642
Lease payable, current
582
889
Deferred revenue, current
6,216
5,652
Total current liabilities
13,452
14,962
Lease payable, long-term
2,803
266
Deferred revenue, long-term
542
441
Deferred tax
6
5
Total liabilities
16,803
15,674
Commitments and contingencies (Note 15)
Stockholders’ equity:
Preferred stock, $ .01 par value: authorized 1,000,000 shares; none issued.
—
—
Common stock, $ .01 par value: authorized 60,000,000 shares; issued 25,446,407 in 2022
and 25,326,086 in 2021. Outstanding 25,260,576 in 2022 and 25,140,255 in 2021
254
253
Additional paid-in capital
302,899
300,859
Accumulated deficit
(266,836 )
(253,180 )
Treasury stock at cost, 185,831 shares in 2022 and 2021
(1,415 )
(1,415 )
Total stockholders’ equity
34,902
46,517
Total liabilities and stockholders’ equity
$
51,705 $
62,191
See accompanying notes to consolidated financial statements.
F-3
Table of Contents
iCAD, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the Years Ended December 31,
2022
2021
2020
(in thousands except per share data)
Revenue:
Products
$
15,398 $
21,191 $
18,903
Service and supplies
12,546
12,447
10,795
Total revenue
27,944
33,638
29,698
Cost of Revenue:
Products
5,852
5,653
5,000
Service and supplies
1,983
3,425
2,965
Amortization and depreciation
297
317
379
Total cost of revenue
8,132
9,395
8,344
Gross profit
19,812
24,243
21,354
Operating expenses:
Engineering and product development
8,593
9,194
8,114
Marketing and sales
13,691
15,135
13,312
General and administrative
11,234
10,406
9,117
Amortization and depreciation
224
240
199
Total operating expenses
33,742
34,975
30,742
Loss from operations
(13,930 )
(10,732 )
(9,388 )
Other income (expense)
Interest expense
(10 )
(141 )
(476 )
Interest income
213
15
97
Loss on extinguishment of debt
—
(386 )
(341 )
Loss on fair value of convertible debentures
—
—
(7,464 )
Other
(45 )
—
—
Other income (expense), net
158
(512 )
(8,184 )
Loss before income tax expense
(13,772 )
(11,244 )
(17,572 )
Benefit (provision) for income taxes
116
(1 )
(38 )
Net loss and comprehensive loss
$
(13,656 ) $
(11,245 ) $
(17,610 )
Net loss per share:
Basic
$
(0.54 ) $
(0.45 ) $
(0.80 )
Diluted
$
(0.54 ) $
(0.45 ) $
(0.80 )
Weighted average number of shares used in computing net loss per share:
Basic
25,202
24,778
22,140
Diluted
25,202
24,778
22,140
See accompanying notes to consolidated financial statements.
F-4
Table of Contents
iCAD, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity
(in thousands except shares)
Common Stock
Additional
Number of
Paid-in
Accumulated Treasury
Stockholders’
Shares
Issued
Par Value
Capital
Deficit
Stock
Equity
Balance at December 31, 2019
19,546,151 $
196 $
230,615 $
(224,325 ) $
(1,415 ) $
5,071
Issuance of common stock relative to vesting of
restricted stock, net of 20,247 shares forfeited
for tax obligations
97,830
—
(225 )
—
—
(225 )
Issuance of common stock pursuant to stock
option plans
155,149
1
728
—
—
729
Issuance of common stock, net
2,033,204
20
18,264
—
—
18,284
Issuance of common stock pursuant employee
stock purchase plan
42,606
1
267
—
—
268
Issuance of common stock upon conversion of
debentures
1,819,466
18
21,146
—
—
21,164
Stock-based compensation
—
—
2,844
—
—
2,844
Net loss
—
—
—
(17,610 )
—
(17,610 )
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, net of 5,196 shares forfeited for
tax obligations
44,706
1
(60 )
—
—
(59 )
Issuance of common stock pursuant to stock
option plans
168,450
2
1,025
—
—
1,027
Issuance of common stock, net
1,393,738
14
23,215
—
—
23,229
Issuance of common stock pursuant to employee
stock purchase plan
24,786
—
257
—
—
257
Stock-based compensation
—
—
2,783
—
—
2,783
Net loss
—
—
—
(11,245 )
—
(11,245 )
Balance at December 31, 2021
25,326,086 $
253 $
300,859 $
(253,180 ) $
(1,415 ) $
46,517
Issuance of common stock relative to vesting of
restricted stock, net of 150 shares forfeited for
tax obligations
725
—
—
—
—
—
Issuance of common stock pursuant to stock
option plans
73,500
1
206
—
—
207
Issuance of common stock pursuant to employee
stock purchase plan
46,096
—
148
—
—
148
Stock-based compensation
—
—
1,686
—
—
1,686
Net loss
—
—
—
(13,656 )
—
(13,656 )
Balance at December 31, 2022
25,446,407 $
254 $
302,899 $
(266,836 ) $
(1,415 ) $
34,902
See accompanying notes to consolidated financial statements.
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Table of Contents
iCAD, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Years Ended
December 31,
2022
2021
2020
(in thousands)
Cash flow from operating activities:
Net loss
(13,656 ) $
(11,245 ) $
(17,610 )
Adjustments to reconcile net loss to net cash used for operating
activities:
Amortization
211
230
309
Depreciation
310
327
268
Non-cash lease expense
708
778
752
Bad debt provision
732
167
94
Stock-based compensation expense
1,686
2,783
2,844
Amortization of debt discount and debt costs
—
17
78
Loss on extinguishment of debt
—
386
341
Deferred tax
(116 )
1
1
Loss on disposal of assets
—
97
—
Change in fair value of convertible debentures
—
—
7,464
Other, net
9
—
—
Changes in operating assets and liabilities, net of acquisition:
Accounts receivable
(739 )
969
(302 )
Inventory
(1,218 )
(1,027 )
(533 )
Prepaid and other assets
1,152
391
(1,390 )
Accounts payable
(806 )
(90 )
878
Accrued and other expenses
(961 )
(2,123 )
(207 )
Lease liabilities
(767 )
(778 )
(752 )
Deferred revenue
665
(291 )
780
Total adjustments
866
1,837
10,625
Net cash used for operating activities
(12,790 )
(9,408 )
(6,985 )
Cash flow used for investing activities:
Additions to patents, technology and other
(10 )
(24 )
(13 )
Additions to property and equipment
(524 )
(563 )
(461 )
Net cash used for investing activities
(534 )
(587 )
(474 )
Cash flow from financing activities:
Issuance of common stock for cash, net
—
23,229
18,285
Issuance of common stock pursuant to Employee Stock Purchase
Plan
148
257
266
Issuance of common stock pursuant to stock option plans
207
1,027
729
Taxes paid related to restricted stock issuance
—
(59 )
(225 )
Proceeds from notes payable
—
—
6957
Principal repayment of notes payable
—
(7,363 )
(4,638 )
Debt issuance costs
—
—
(42 )
Proceeds from line of credit
—
—
775
Repayment of line of credit
—
—
(2,775 )
Net cash provided by financing activities
355
17,091
19,332
Increase in cash and cash equivalents
(12,969 )
7,096
11,873
Cash and cash equivalents, beginning of year
34,282
27,186
15,313
Cash and cash equivalents, end of year
$
21,313 $
34,282 $
27,186
Supplemental disclosure of cash flow information:
Interest paid
$
9 $
172 $
272
Taxes paid
$
— $
— $
38
Right-of-use assets obtained in exchange for new operating lease
3,011
79
69
liabilities
Issuance of common stock upon conversion of debentures
$
— $
— $
21,164
See accompanying notes to consolidated financial statements.
F-6
Table of Contents
iCAD, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Note 1 – Organization and Business
iCAD, Inc. and subsidiaries (the “Company” or “iCAD”) is a global medical technology company providing innovative cancer
detection and therapy solutions.
The Company operates in two segments: Cancer Detection (“Detection”) and Cancer Therapy (“Therapy”). In the detection
segment, offered solutions include advanced artificial intelligence and image analysis workflow solutions that enable healthcare
professionals to better serve patients by identifying pathologies and pinpointing the most prevalent cancers earlier, a
comprehensive range of high-performance, upgradeable computer-aided detection systems and workflow solutions for digital
breast tomosynthesis, full-field digital mammography, magnetic resonance imaging and computed tomography. In the Therapy
segment, the Company offers the Xoft System, which is a cancer treatment platform technology incorporating a miniaturized,
isotope-free radiation source. The Company’s commercial products are cleared with the United States Food and Drug
Administration and various global regulatory agencies and use of iCAD’s products are reimbursable in the U.S. under federal
and most third-party insurance programs. The Company sells its products throughout the world through its direct sales
organization as well as through various OEM partners, distributors, technology platform partners, and resellers. See Note 14 of
these consolidated financial statements for segment, major customer and geographical information.
The Company maintains its headquarters and a separate manufacturing facility in Nashua, New Hampshire, an operations,
research, development, manufacturing and warehousing facility in San Jose, California, and an office in Lyon, France.
Note 2 – Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States of
America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities,
revenues and expenses during the reporting period and disclosure of contingent assets and liabilities at the date of the financial
statements. Actual results could differ from those estimates. It is reasonably possible that changes may occur in the near term
that would affect management’s estimates with respect to assets and liabilities.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries: Xoft, Inc., Xoft
Solutions, LLC, and iCAD France, LLC. All material inter-company transactions and balances have been eliminated in
consolidation.
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Risk and Uncertainty
On March 12, 2020, the World Health Organization declared COVID-19 to be a pandemic. In an effort to contain and mitigate
the spread of COVID-19, the United States and most countries of the world imposed some level of unprecedented restrictions
such as travel bans and business closures which caused substantial reductions in economic activity. As a provider of devices
and services to the health care industry, the Company believes its operations have been materially affected in all periods
presented. While the worst of the disruptions appear to have subsided as of December 31, 2022, the Company continues to be
impacted by slowness in the overall economic recovery. The Company’s expected results for future periods could reflect a
continuing negative impact from the COVID-19 pandemic for similar or additional reasons.
In late February 2022, Russian military forces launched significant military action against Ukraine. Sustained conflict and
disruption in the region has continued through December 31, 2022 and beyond. Economic, civil, military and political
uncertainty may arise or increase in regions where the Company operates or derives revenue. Further, countries from which the
Company derives revenue may experience military action and/or civil and political unrest; may be subject to government export
controls, economic sanctions, embargoes, or trade restrictions; and experience currency, inflation, and interest rate
uncertainties. While the impact to the Company has been limited to date, it is not possible to predict the potential outcome
should the conflict expand and/or additional sanctions be imposed. For the fiscal year ended 2022, approximately 25% of the
Company’s total revenue and approximately 24% of the Company’s export revenue was derived from customers located in
Europe.
Cash and cash equivalents
The Company defines cash and cash equivalents as all bank accounts, money market funds, deposits and other money market
instruments with original maturities of 90 days or less and which are unrestricted as to timing or method of withdrawal. Cash
and cash equivalents are maintained at financial institutions and, at times, balances may exceed federally insured limits of
$250,000 per depositor. The money market investment account as described in Note 4 is not exposed to the federally insured
limit as it is not a deposit account. As of December 31, 2022, the Company held cash at financial institutions in excess of the
federally insured limit. Historically, the Company has not experienced any losses related to these balances.
Financial instruments
Financial instruments consist of cash and cash equivalents, trade accounts receivable, contract assets, accounts payable, accrued
and other expenses and notes payable. Due to their short-term nature and market rates of interest, the carrying amounts of the
financial instruments approximated fair value as of December 31, 2022 and 2021.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are customer obligations due under normal trade terms. Credit limits are initially established through a
process of reviewing the financial history and stability of each customer and the Company performs continuing credit
evaluations of its customers’ financial condition and generally does not require collateral. Included in accounts receivable at
December 31, 2022 are unbilled receivables of approximately $0.2 million which are scheduled to be invoiced in 2023.
The Company’s policy is to maintain allowances for potential losses resulting from the inability of a portion of its customers to
make required payments. The Company’s senior management reviews accounts receivable on a periodic basis to determine if
any receivables may potentially be uncollectible. The Company includes any accounts receivable balances that it determines
may likely be uncollectible, along with a general reserve for estimated probable losses based on historical experience, in its
allowance for doubtful accounts. An amount is written off against the allowance after all attempts to collect the receivable have
failed. Based on the information available, the Company believes the allowance for doubtful accounts as of December 31, 2022
and 2021 is adequate.
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Table of Contents
Inventory
The Company uses the first-in, first-out method to track inventory, which is valued at the lower of cost or net realizable value.
The Company regularly reviews inventory quantities on hand and records an inventory reserve for excess and/or obsolete
inventory primarily based upon the estimated usage of its inventory, as well as other factors.
Property and Equipment
Property and equipment are stated at cost and depreciated using the straight-line method over the estimated useful lives of the
assets, which is generally three to five years, except for leasehold improvements, which are depreciated over the shorter of the
term of the lease, or useful life of the asset.
Goodwill
In accordance with FASB Accounting Standards Codification (“ASC”) Topic 350-20, “Intangibles—Goodwill and Other”
(“ASC 350-20”), the Company tests goodwill for impairment on an annual basis and between annual tests if events or
circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.
Factors the Company considers important, which could trigger an impairment of Goodwill, include the following:
•
significant and sustained underperformance relative to historical or projected future operating results;
•
significant changes in the manner or use of the Company’s assets in the strategy for the Company’s overall business;
•
significant negative industry or economic trends;
•
significant and sustained decline in the Company’s stock price; and
•
a decline in the Company’s market capitalization below net book value.
The two reporting units within iCAD are its segments, Detection and Therapy.
The Company records an impairment charge if such an assessment were to indicate that the fair value of a reporting unit was
less than the carrying value. When the Company evaluates potential impairments outside of its annual measurement date,
judgment is required in determining whether an event has occurred that may impair the value of goodwill or intangible assets.
Fair values for the reporting units are based on 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 our most recent views of the long-term forecast for each segment. Accordingly, actual
results can differ from those assumed in our forecasts. Discount rates are derived from a capital asset pricing model and by
analyzing published rates for industries relevant to our 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 and in our
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 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 ours, 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 our business.
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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 value. The blend of the income approach and market
approach is more closely aligned to our business profile, 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. Equally important, 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 assesses 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 performed the annual impairment assessment at October 1, 2022 and compared the fair value of each reporting
unit to its carrying value as of this date. The fair value of the Detection reporting unit exceeded the carrying value. Accordingly,
no impairment of goodwill was recorded. The carrying values of the reporting units were determined based on an allocation of
our assets and liabilities through specific allocation of certain assets and liabilities, to the reporting units and an apportionment
of the remaining net assets based on the relative size of the reporting units’ revenues and operating expenses compared to the
Company as a whole. The determination of reporting units also requires management judgment.
Long Lived Assets
In accordance with FASB ASC Topic 360, “Property, Plant and Equipment” (“ASC 360”), 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 the carrying value of the asset group.
ASC 360-10-35 uses “events and circumstances” criteria to determine when, if at all, an asset (or asset group) is evaluated for
recoverability. Thus, there is no set interval or frequency for recoverability evaluation. In accordance with ASC 360-10-35-21
the following factors are examples of events or changes in circumstances that indicate the carrying amount of an asset (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 (asset group);
•
A significant adverse change in the extent or manner in which a long-lived asset (asset group) is being used or in its
physical condition;
•
A significant adverse change in legal factors or in the business climate that could affect the value of a long-lived asset
(asset group), including an adverse action or assessment by a regulator;
•
An accumulation of costs significantly in excess of the amount originally expected for the acquisition or construction
of a long-lived asset (asset group);
•
A current period operating or cash flow loss combined with a history of operating or cash flow losses or a projection or
forecast that demonstrates continuing losses associated with the use of a long-lived asset (asset group);
•
significant and sustained decline in the Company’s stock price.
In accordance with ASC 360-10-35-17, if the carrying amount of an asset or asset group (in use or under development) is
evaluated and found not to be fully recoverable (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 assets (or asset group’s) fair value.
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Table of Contents
The Company did not record any impairment charges on its long-lived assets for the years ended December 31, 2022 or
December 31, 2021.
Intangible assets subject to amortization consist primarily of patents, technology intangibles, trade names, customer
relationships and distribution agreements purchased in the Company’s previous acquisitions. These assets are amortized on a
straight-line basis or the pattern of economic benefit over their estimated useful lives of 5 to 10 years.
Leases
In accordance with FASB ASC Topic 842, "Leases" ("ASC 842"), the Company determines if an arrangement contains a lease
at inception. A lease is an operating or financing contract, or part of a contract, that conveys the right to control the use of an
identified tangible asset for a period of time in exchange for consideration.
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. In determining the
present value of the lease payments, the Company uses its incremental borrowing rate, determined by estimating the
Company’s applicable, fully collateralized borrowing rate, with adjustment as appropriate for 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 extension option if the Company is reasonably certain to exercise that
option.
Right-of-use assets and obligations for leases with an initial term of 12 months or less are considered short term and are a) not
recognized in the consolidated balance sheet and b) recognized as an expense on a straight-line basis over the lease term. The
Company does not sublease any of its leased assets to third parties and 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, but the Company is accounting for the complete agreement under FASB ASC Topic 606, "Revenue from
Contracts with Customers", ("ASC 606"), after determining that the non-lease component is the predominant component of
these agreements.
ASC 842 includes a number of reassessment and re-measurement requirements for lessees based on certain triggering events or
conditions. There were no impairment indicators identified during the year ended December 31, 2022 that would require
impairment testing of the Company’s right-of-use assets.
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 separate the accounting for lease components and non-lease components for real estate and
equipment leases.
Stock-Based Compensation
The Company maintains stock-based incentive plans, under which it provides stock incentives to employees, directors and
contractors. The Company grants to employees, directors and contractors, options to purchase common stock at an exercise
price equal to the market value of the stock at the date of grant. The Company may grant restricted stock to employees and
directors. The underlying shares of the restricted stock grant are not issued until the shares vest, and compensation expense is
based on the stock price of the shares at the time of grant. The Company follows ASC 718, “Compensation – Stock
Compensation”, (“ASC 718”), for all stock-based compensation. The Company has granted performance based restricted stock
based on achievement of certain revenue targets. Compensation cost for performance based restricted stock requires significant
judgment regarding probability of the performance objectives and compensation cost is re-measured at every reporting period.
As a result, compensation cost could vary significantly during the performance measurement period.
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Table of Contents
The Company uses the Black-Scholes option pricing model to value stock options which requires extensive use of accounting
judgment and financial estimates, including estimates of the expected term participants will retain their vested stock options
before exercising them, the estimated volatility of its common stock price over the expected term, and the number of options
that will be forfeited prior to the completion of their vesting requirements. The Company estimates forfeitures based on
historical experience with pre-vested forfeitures. To the extent actual forfeitures differ from the estimate, the difference is
recorded to compensation expense in the period of the forfeiture. Fair value of restricted stock is determined based on the stock
price of the underlying option on the date of the grant. Application of alternative assumptions could produce significantly
different estimates of the fair value of stock-based compensation and consequently, the related amounts recognized in the
Consolidated Statements of Operations.
Revenue Recognition
In accordance with ASC 606, revenue is recognized when a customer obtains control of promised goods or services and the
amount of revenue recognized reflects the consideration to 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. The Company applies the following five steps to guide revenue recognition:
1)
Identify the contract(s) with a customer—A contract with a customer exists when (i) the Company enters into an
enforceable contract with a customer that defines each party’s rights regarding the goods or services to be transferred and
identifies the payment terms related to those goods or services, (ii) the contract has commercial substance and (iii) the
Company determines that collection of substantially all consideration for goods or services that are transferred is
probable based on the customer’s intent and ability to pay the promised consideration. The Company’s contracts are
typically in the form of a purchase order. For certain large customers, the Company may also enter into master service
agreements that define general terms but are not customer commitments to purchase until coupled with a purchase order.
The Company applies judgment in determining the customer’s ability and intention to pay, which is based on a variety of
factors including the customer’s historical payment experience or published credit and financial information pertaining to
the customer.
2)
Identify the performance obligations in the contract—Performance obligations promised in a contract are identified
based on the goods or services that will be transferred. A good or service is distinct if both a) the customer can benefit
from the good or service either on its own or together with other resources that are readily available from third parties or
from the Company, and b) is separately identifiable from other promises in the contract. To the extent a contract includes
multiple promised goods or services, the Company must apply judgment to determine whether the goods or services
meet the criteria to be distinct. If these criteria are not met the promised goods or services are accounted for as a
combined performance obligation. While the Company does not typically sell options to purchase goods or services at a
predetermined price, doing so would represent a material right and require analysis to determine if the material right is a
distinct performance obligation. The Company has sold one contract with a material right that is a distinct performance
obligation.
3)
Determine the transaction price—The transaction price is determined based on the consideration to which the
Company will be entitled in exchange for transferring goods or services to the customer. To the extent the transaction
price includes variable consideration, the Company estimates the amount of variable consideration that should be
included in the transaction price utilizing either the expected value method or the most likely amount method depending
on the nature of the variable consideration. Variable consideration is included in the transaction price if, in the
Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not
occur.
4)
Allocate the transaction price to the performance obligations in the contract—If the contract contains a single
performance obligation, the entire transaction price is allocated to the single performance obligation. Contracts that
contain multiple performance obligations require an allocation of the transaction price to each performance obligation on
a relative Stand-alone Sales Price (“SSP”) basis unless the transaction price is variable and meets the criteria to be
allocated entirely to a performance obligation or to a distinct good or service that forms part of a performance obligation.
The Company determines SSP based on the price at which the performance obligation is sold separately. If the SSP is
not observable through past transactions, the Company estimates the SSP taking into account available information such
as market conditions and internally approved pricing guidelines related to the performance obligations.
F-12
Table of Contents
5)
Recognize revenue when (or as) the Company satisfies a performance obligation—The Company satisfies
performance obligations either over time or at a point in time as discussed in further detail below. Revenue is recognized
at the time the related performance obligation is satisfied by transferring a promised good or service to a customer.
The Company recognizes revenue from its contracts with customers primarily from the sale of products and from the sale
of services and supplies. Revenue is recognized when control of the promised goods or services is transferred to a
customer, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those goods
or services. For iCAD’s typical product revenue, control typically transfers upon shipment as title and risk of loss have
passed to the customer. Services and supplies are considered to be transferred as the services are performed or over the
term of the service or supply agreement. The Company enters into contracts that can include various combinations of
products and services, which are generally capable of being distinct and accounted for as separate performance
obligations. Perpetual software licenses are accounted for as a single performance obligation and revenue is recognized
at the point in time when ownership is transferred to the customer. Taxes assessed by a governmental authority that are
both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a
customer, are excluded from revenue. Shipping and handling costs associated with outbound freight after control of a
product has transferred to a customer are accounted for as fulfillment costs and are included in cost of revenue. The
Company continues to provide for estimated warranty costs on original product warranties at the time of sale.
Goods and Services Classifications
Products. Product revenue consists of sales of cancer detection perpetual licenses, cancer therapy systems, cancer therapy
applicators, cancer therapy 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.
Service Contracts. The Company sells service contracts in which the Company provides professional services including product
installations, maintenance, training and service repairs, and in certain cases leases equipment to hospitals, imaging centers,
radiological practices and radiation oncologists and treatment centers. 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 agreement.
Professional Services. Revenue from fixed fee service contracts is recognized on a straight-line basis over the term of the
agreement. Revenue from professional service contracts entered into with customers on a time and materials basis is recognized
over the term of the agreement in proportion to the costs incurred in satisfying the obligations under the contract.
Other. Other revenue consists primarily of miscellaneous products and services. The Company transfers control and recognizes
a sale when the installation services are performed or when the Company ships the product from the Company’s manufacturing
or warehouse facility to the customer.
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Table of Contents
Significant Judgments
The Company’s contracts with customers may include promises to transfer multiple products and services to a customer and
identifying distinct performance obligations that should be accounted for separately versus together may require significant
judgment. For arrangements with multiple performance obligations, the Company allocates revenue to each performance
obligation based on its relative standalone selling price. Judgment is required to determine the standalone selling price for each
distinct performance obligation. The Company generally determines standalone selling prices based on the prices charged to
customers and uses a range of amounts to estimate standalone selling prices when the Company sells each of the products and
services separately and needs to determine whether there is a discount that needs to be allocated based on the relative
standalone selling prices of the various products and services. The Company typically has more than one range of standalone
selling prices for individual products and services due to the stratification of those products and services by customers and
circumstances. In these instances, the Company may use information such as the type of customer and geographic region in
determining the range of standalone selling prices.
The Company may provide credits or incentives to customers, which are accounted for as variable consideration when
estimating the transaction price of the contract and amounts of revenue to recognize. The amount of variable consideration to
include in the transaction price is estimated at contract inception using either the estimated value method or the most likely
amount method based on the nature of the variable consideration. These estimates are updated at the end of each reporting
period as additional information becomes available and revenue is recognized only to the extent that it is probable that a
significant reversal of any amounts of variable consideration included in the transaction price will not occur. The Company
provides for estimated warranty costs on original product warranties at the time of sale.
Assets Recognized from the Costs to Obtain a Contract with a Customer
The Company recognizes incremental costs of obtaining a contract with a customer as an asset if the Company expects the
benefit of those costs to be longer than one year and as an expense when incurred if the amortization period of the asset that the
Company otherwise would have recognized is one year or less.
Right to Invoice
Where applicable, the Company recognizes revenue from a contract with a customer in an amount that corresponds directly
with the value to the customer of the Company’s performance completed to date and the amount to which the Company has a
right to invoice.
Sales and Other Similar Taxes
The Company excludes sales taxes and similar taxes from the measurement of transaction price and ensures compliance with
the disclosure requirements of ASC 235.
Significant Financing Component
The Company does not adjust the promised amount of consideration for the effects of a significant financing component if the
Company expects, at contract inception, that the period between when the entity transfers a promised good or service to a
customer and when the customer pays for that good or service will be one year or less.
Promised Goods or Services that are Immaterial in the Context of a Contract
The Company assesses materiality of promised goods or services as performance obligations in the context of a contract and the
Company does not aggregate and assess immaterial items at the entity level. When determining whether a good or service is
immaterial in the context of a contract, the assessment will be made based on the application of ASC 606 at the contract level.
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Table of Contents
The Company does not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected
length of one year or less and (ii) contracts for which it recognizes revenue at the amount to which it has the right to invoice for
services performed.
Cost of Revenue
Cost of revenue consists of the costs of products purchased for resale, cost relating to service including costs of service
contracts to maintain equipment after the warranty period, inbound freight and duty, manufacturing, warehousing, material
movement, inspection, scrap, rework, depreciation and in-house product warranty repairs, amortization of acquired technology
and any applicable medical device tax.
Warranty Costs
The Company provides for the estimated cost of standard product warranty against defects in material and workmanship based
on historical warranty trends, including the cost of product returns during the warranty period. Warranty costs have not
historically been material to the Company’s consolidated financial statements.
Engineering and Product Development Costs
Engineering and product development costs relate to research and development efforts including Company sponsored clinical
trials are expensed as incurred.
Advertising Costs
The Company expenses advertising costs as incurred. Advertising expense for the years ended December 31, 2022, 2021 and
2020 was approximately $659,000, $689,000, and $274,000, respectively.
Income Taxes
The Company follows the liability method under ASC Topic 740 “Income Taxes”, (“ASC 740”). The primary objectives of
accounting for taxes under ASC 740 are to (a) recognize the amount of tax payable for the current year and (b) recognize the
amount of deferred tax liability or asset for the future tax consequences of events that have been reflected in the Company’s
financial statements or tax returns. As of December 31, 2022 and December 31, 2021, the Company has provided a valuation
allowance for its U.S. federal and state net operating loss carryforwards due to the uncertainty of the Company’s ability to
generate sufficient taxable income in future years to obtain the benefit from the utilization of the net operating loss
carryforwards. As of December 31, 2022, the Company has not provided a valuation allowance for its foreign net operating
loss carryforward. As of December 31, 2021, the Company had provided a valuation allowance for its foreign net operation
loss carryforward. Any subsequent changes in the valuation allowance will be recorded through operations in the provision
(benefit) for income taxes. See note 13 of these consolidated financial statements for detailed information.
Note 3 – Recently Issued Accounting Standards
In June 2016, the Financial Accounting Standards Board (the “FASB”) issued ASU 2016-13, “Financial Instruments—Credit
Losses (Topic 326)” (“ASU 2016-13”), which requires the measurement and recognition of expected credit losses for financial
assets held at amortized cost. ASU 2016-13 replaces the existing incurred loss impairment model with an expected loss model
which requires the use of forward-looking information to calculate credit loss estimates. These changes will result in earlier
recognition of credit losses. In November 2019, the FASB elected to defer the adoption date of ASU 2016-13 for public
business entities that meet the definition of a smaller reporting company to fiscal years beginning after December 15, 2022.
Early adoption of the guidance in ASU 2016-13 is permitted. The Company adopted ASU 2016-13 effective January 1, 2023.
Adoption caused the Company to modify its approach to estimating its allowance for potentially uncollectable accounts
receivable. Specifically, the Company began applying an expected credit loss model that uses historical loss rates of its
accounts receivable for the previous twelve months as well as expectations about the future where the Company has been able
to develop forecasts to support its estimates. Adoption of ASU 2016-13 did not have a material impact on the Company's
consolidated financial statements.
F-15
Table of Contents
In December 2019, 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 loss,
equity or cash flows.
Note 4 – Fair Value Measurements
The Company follows the provisions of FASB ASC Topic 820, “Fair Value Measurement and Disclosures” (“ASC 820”),
which defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles and
enhances disclosures about fair value measurements. Fair value is defined as the exchange price that would be received for an
asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an
orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must
maximize the use of observable inputs and minimize the use of unobservable inputs. The Company applies the fair value
hierarchy based on three levels of inputs, of which the first two are considered observable and the last unobservable, which are
the following:
•
Level 1 - Quoted prices in active markets for identical assets or liabilities.
•
Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for
similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can
be corroborated by observable market data for substantially the full term of the assets or liabilities.
•
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair
value
The assigned level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value
measurement.
Money market funds included in cash and cash equivalents in the accompanying balance sheet are considered a Level 1
measurement as they are valued at quoted market prices in active markets.
The following table sets forth the Company’s assets which are measured at fair value on a recurring basis by level within the
fair value hierarchy (in thousand):
Fair Value Measurements (in thousands) as of December 31, 2022
Level 1
Level 2
Level 3
Total
Assets
Money market accounts
$
15,067 $
— $
— $
15,067
Total Assets
$
15,067 $
— $
— $
15,067
Fair Value Measurements (in thousands) as of December 31, 2021
Level 1
Level 2
Level 3
Total
Assets
Money market accounts
$
30,573 $
— $
— $
30,573
Total Assets
$
30,573 $
— $
— $
30,573
F-16
Table of Contents
There were no Level 3 instruments measured at fair value at December 31, 2022 or December 31, 2021.
Items Measured at Fair Value on a Nonrecurring Basis
Certain assets, including long-lived assets and goodwill, are measured at fair value on a nonrecurring basis. These assets are
recognized at fair value when they are deemed to be impaired. There were no items measured at fair value on a nonrecurring
basis as of or during the years ended December 31, 2022 and 2021.
Note 5 – Revenue
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).
Year ended December 31, 2022
Reportable Segments
Detection
Therapy
Total
Major Goods/Service Lines
Products
$
12,492 $
2,777 $
15,269
Service contracts
7,310
1,540
8,850
Supply and source usage agreements
—
1,643
1,643
Disposable applicators
—
1,776
1,776
Professional services and other
—
406
406
$
19,802 $
8,142 $
27,944
Timing of Revenue Recognition
Goods transferred at a point in time
$
12,545 $
4,969 $
17,514
Services transferred over time
7,257
3,173
10,430
$
19,802 $
8,142 $
27,944
Sales Channels
Direct sales force
$
12,468 $
3,543 $
16,011
OEM partners
7,334
—
7,334
Channel partners
—
4,599
4,599
$
19,802 $
8,142 $
27,944
F-17
Table of Contents
Year ended December 31, 2021
Reportable Segments
Detection
Therapy
Total
Major Goods/Service Lines
Products
$
15,661 $
5,530 $
21,191
Service contracts
6,358
1,608
7,966
Supply and source usage agreements
—
2,340
2,340
Disposable applicators
—
1,810
1,810
Professional services and other
—
331
331
$
22,019 $
11,619 $
33,638
Timing of Revenue Recognition
Goods transferred at a point in time
$
15,584 $
8,012 $
23,596
Services transferred over time
6,435
3,607
10,042
$
22,019 $
11,619 $
33,638
Sales Channels
Direct sales force
$
14,713 $
4,421 $
19,134
OEM partners
7,306
—
7,306
Channel partners
—
7,198
7,198
$
22,019 $
11,619 $
33,638
Year ended December 31, 2020
Reportable Segments
Detection
Therapy
Total
Major Goods/Service Lines
Products
$
16,291 $
4,535 $
20,826
Service contracts
5,661
1,333
6,994
Supply and source usage agreements
—
1,804
1,804
Professional services
—
29
29
Other
45
—
45
$
21,997 $
7,701 $
29,698
Timing of Revenue Recognition
Goods transferred at a point in time
$
16,332 $
4,624 $
20,956
Services transferred over time
5,665
3,077
8,742
$
21,997 $
7,701 $
29,698
Sales Channels
Direct sales
$
13,809 $
3,773 $
17,582
OEM partners
8,188
—
8,188
Channel partners
—
3,928
3,928
$
21,997 $
7,701 $
29,698
F-18
Table of Contents
Contract Balances
Contract liabilities are a component of deferred revenue, current contract assets are a component of prepaid and other assets and
non-current contract assets are a component of other assets. The following table provides information about receivables, current
and non-current contract assets, and contract liabilities from contracts with customers (in thousands).
Balance at
December 31,
2022
Balance at
December 31,
2021
Receivables, which are included in ‘Trade accounts receivable’
$
8,898 $
8,891
Current contract assets, which are included in “Prepaid and other assets”
$
759 $
1,895
Non-current contract assets, which are included in “other assets”
$
15 $
844
Contract liabilities, which are included in “Deferred revenue”
$
6,758 $
6,093
The Company records a receivable when revenue is recognized prior to receipt of cash payments and the Company has the
unconditional right to such consideration, or deferred revenue when cash payments are received or due in advance of
performance. For multi-year agreements, the Company generally invoices customers annually at the beginning of each annual
service period.
The Company records net contract assets or contract liabilities on a contract-by-contract basis. The Company records a contract
asset for unbilled revenue when the Company’s performance exceeds amounts billed or billable. The Company classifies the
net contract asset as either 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 two customers 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.
Changes in deferred revenue from contracts with customers were as follows (in thousands):
Year Ended
December 31,
2022
Year Ended
December 31,
2021
Balance at beginning of period
$
6,093 $
6,384
Deferral of revenue
12,129
12,315
Recognition of deferred revenue
(11,464 )
(12,606 )
Balance at end of period
$
6,758 $
6,093
The Company expects to recognize estimated revenues related to performance obligations that are unsatisfied (or partially
satisfied) in the amounts of approximately $4.0 million in 2023, $1.6 million in 2024, and $1.2 million in 2025.
F-19
Table of Contents
Assets Recognized from the Costs to Obtain a Contract with a Customer
The Company recognizes an asset for the incremental costs of obtaining a contract with a customer if it expects the benefit of
those costs to be longer than one year. Certain commission programs implemented by the Company require costs to be
capitalized. The Company has classified the capitalized costs to obtain a contract as a component of prepaid expenses and other
current assets as of December 31, 2022 and 2021, respectively.
Changes in the balance of capitalized costs to obtain a contract were as follows (in thousands):
Years Ended December 31,
2022
2021
Balance at beginning of period
$
302 $
406
Deferral of costs to obtain a contract
120
249
Recognition of costs to obtain a contract
(181 )
(353 )
Balance at end of period
$
241 $
302
Note 6 – Net Loss per Common Share
The Company follows FASB ASC 260-10, “Earnings per Share”, which requires the presentation of both basic and diluted
earnings per share on the face of the statements of operations. 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 and, if there are dilutive
securities, diluted income per share is computed by including common stock equivalents which includes shares issuable upon
the exercise of stock options, net of shares assumed to have been purchased with the proceeds, using the treasury stock method.
A summary of the Company’s calculation of net loss per share is as follows (in thousands, except per share amounts):
2022
2021
2020
Net loss
$
(13,656 ) $
(11,245 ) $
(17,610 )
Basic shares used in the calculation of earnings per share
25,202
24,778
22,140
Effect of dilutive securities:
Stock options
—
—
—
Restricted stock
—
—
—
Diluted shares used in the calculation of earnings per share
25,202
24,778
22,140
Net loss per share:
Basic
$
(0.54 ) $
(0.45 ) $
(0.80 )
Diluted
$
(0.54 ) $
(0.45 ) $
(0.80 )
The following table summarizes the number of shares of common stock for convertible securities, warrants and restricted stock
that were not included in the calculation of diluted net loss per share because such shares are antidilutive:
Year Ended December 31,
2022
2021
2020
Common stock options
2,610,659
2,486,511
1,869,507
Restricted Stock
—
875
29,166
2,610,659
2,487,386
1,898,673
Restricted common stock can be issued to directors, executives or employees of the Company and are subject to time-based
vesting. These potential shares were excluded from the computation of basic loss per share as these shares are not considered
outstanding until vested.
F-20
Table of Contents
Note 7 – Allowance for Doubtful Accounts
The rollforward of the Company’s allowance for doubtful accounts for the years ended December 31 is as follows (in
thousands):
2022
2021
2020
Balance at beginning of period
$
268 $
111 $
136
Additions charged to costs and expenses
732
167
94
Reductions
(78 )
(10 )
(119 )
Balance at end of period
$
922 $
268 $
111
Note 8 – Inventories
Inventory balances at December 31, 2022 and 2021 were as follows (in thousands):
December 31,
2022
December 31,
2021
Raw materials
$
2,658 $
2,962
Work in process
101
173
Finished Goods
2,892
1,279
Inventory Gross
5,651
4,414
Inventory Reserve
(262 )
(243 )
Inventory Net
$
5,389 $
4,171
Note 9 – Goodwill and Intangible assets
At December 31, 2022 and 2021, all of the Company’s goodwill of $8,362,000 is allocated to its Detection reporting. There
were no additions, impairments or other changes to the Company’s goodwill balance for either of the years ended December 31,
2022 or 2021.
Amortization expense related to intangible assets was approximately $211,000, $230,000 and $309,000 for the years ended
December 31, 2022, 2021 and 2020, respectively.
Weighted
average
useful life
2022
2021
2020
(in years)
Gross Carrying Amount
Patents and licenses
$
626 $
619 $
595
5
Technology
8,257
8,257
8,257
10
Customer relationships
272
272
272
7
Tradename
259
259
259
10
Total amortizable intangible assets
9,414
9,407
9,383
Accumulated Amortization
Patents and licenses
$
537 $
534 $
529
Technology
7,947
7,769
7,571
Customer relationships
189
162
135
Tradename
259
259
259
Total accumulated amortization
8,932
8,724
8,494
Total amortizable intangible assets, net
$
482 $
683 $
889
F-21
Table of Contents
Estimated remaining amortization of the Company’s intangible assets is as follows (in thousands):
Estimated
For the years ended
amortization
December 31:
expense
2023
206
2024
121
2025
119
2026
18
2027
18
$
482
Note 10 – Accrued and Other expenses
Accrued and other expenses consist of the following at December 31 (in thousands):
2022
2021
Accrued salary and related expenses
$
1,248 $
2,016
Accrued accounts payable
2,913
2,838
Accrued professional fees
400
497
Other accrued expenses
120
291
$
4,681 $
5,642
Note 11 – Leases
The Company has leases for office space and office equipment. The leases expire at various dates through 2028. In May 2022,
the Company extended the term of its California facility lease, resulting in an increase of approximately $2.4 million to its right
of use asset and related liability. In November 2022, the Company extended the term of its Nashua, NH office lease, resulting
in an increase of approximately $0.6 million to its right of use asset and related liability. In October 2021, the Company
extended the term of its Nashua warehouse until 2024, resulting in an increase of approximately $79,000 to its right of use asset
and related lease liability.
Year Ended December 31,
Lease Cost
Classification
2022
2021
Operating lease cost - Right of Use
Operating expenses
$
859 $
862
Operating lease cost - Variable Costs
Operating expenses
277
186
Total
$
1,136 $
1,048
Year Ended December 31,
2022
2021
Cash paid for operating cash flows from operating leases
$
931 $
919
As of December 31,
2022
2021
Weighted-average remaining lease term of operating leases (in years)
3.77
1.33
Weighted-average discount rate for operating leases
6.98 %
5.50 %
F-22
Table of Contents
Maturities of the Company’s lease liabilities as of December 31, 2022 were as follows (in thousands):
Year Ended December 31:
Total
2023
781
2024
846
2025
848
2026
749
2027
685
Thereafter
172
Total lease payments
4,081
Less: effects of discounting
(696 )
Total lease liabilities
3,385
Less: current portion of lease liabilities
(582 )
Long-term lease liabilities
$
2,803
Note 12 – Stockholders’ Equity
(a) Financing Activity
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 an at-the-market offering program with
JMP Securities (the “ATM”) to provide for additional potential liquidity. The Company’s 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. The gross proceeds were approximately $6.6 million, and the Company received net proceeds of
approximately $6.1 million which is net of brokerage fees and offering costs to open the ATM. On March 2, 2021, the
Company terminated the ATM offering program with JMP Securities
On March 2, 2021, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Guggenheim
Securities, LLC, as representative of the several underwriters (the “Underwriters”), in connection with an underwritten public
offering of 1,393,738 shares of the Company’s common stock, at a public offering price of $18.00 per share (the “Offering”).
The Underwriting Agreement contained customary representations, warranties and covenants by the Company, indemnification
obligations of the Company and the Underwriters, including for certain liabilities other obligations of the parties and
termination provisions. In exchange for the Underwriters’ services, the Company agreed to sell the shares to the Underwriters at
a purchase price of $16.92 per share and to reimburse the representative of the Underwriters for up to $125,000 of its expenses
in connection with the Offering. The Offering closed March 5, 2021. The net proceeds to the Company from the Offering were
approximately $23.2 million, after deducting underwriting discounts and commissions and estimated offering expenses payable
by the Company.
(b) Stock Options
The Company's 2016 Stock Incentive Plan (the “2016 Plan”) provides for the grant of any or all of the following types of
awards: (a) stock options, (b) restricted stock, (c) deferred stock and (d) other stock-based awards. Awards may be granted
singly, in combination, or in tandem. All awards granted under the 2016 Plan are required to be granted at not less than 100%
of the fair market value of the related award on the respective grant date. Awards under the 2016 Plan may be granted to
employees, directors and advisors to the Company and its subsidiaries.
At the Company’s 2021 annual meeting, the 2016 Plan was amended to increase the number of shares of common stock
available thereunder from 2,600,000 to 4,700,000. At December 31, 2022, there were 1,448,471 shares available for issuance
under the 2016 Plan.
F-23
Table of Contents
Weighted
Average
Remaining
Number of
Weighted
Average
Contractual Term
Shares
Exercise Price
(in years)
Outstanding, December 31, 2020
1,869,507 $
5.91
Granted
865,938 $
16.33
Exercised
(168,450 ) $
6.10
Forfeited
(80,484 ) $
13.74
Outstanding, December 31, 2021
2,486,511 $
9.27
5.42
Granted
836,500 $
4.92
Exercised
(73,500 ) $
2.45
Forfeited
(638,519 ) $
11.45
Outstanding, December 31, 2022
2,610,992 $
7.54
3.76
Exercisable at December 31, 2020
1,540,287 $
5.55
Exercisable at December 31, 2021
1,619,855 $
6.47
Exercisable at December 31, 2022
1,906,189 $
7.59
The Company’s stock-based compensation expense, including options and restricted stock by category is as follows (amounts
in thousands):
Year Ended December 31,
2022
2021
2020
Cost of revenue
$
3 $
15 $
30
Engineering and product development
220
356
376
Marketing and sales
518
785
657
General and administrative expense
945
1,627
1,781
$
1,686 $
2,783 $
2,844
As of December 31, 2022, there was approximately $1.7 million of total unrecognized compensation costs related to unvested
options. That cost is expected to be recognized over a weighted average period of 1.9 years.
Options granted under the stock incentive plans were valued utilizing the Black-Scholes model using the following assumptions
and had the following fair values:
Year Ended December 31,
2022
2021
2020
Average risk-free interest rate
2.29 %
0.42 %
0.65 %
Expected dividend yield
None
None
None
Expected life (in years)
3.5
3.5
3.5
Expected volatility
66.30 - 72.04 %
65.57 - 67.42 %
50.17 - 66.04 %
Weighted average fair value
$
2.33 $
7.22 $
4.37
The Company’s 2022, 2021 and 2020 average expected volatility and average expected life is based on the Company’s
historical information. The risk-free rate is based on the rate of U.S. Treasury zero-coupon issues with a term most closely
approximating the expected life of option grants. The Company has paid no dividends on its common stock in the past and does
not anticipate paying any dividends in the future.
F-24
Table of Contents
Intrinsic values of options (in thousands) and the closing market price used to determine the intrinsic values are as follows:
Intrinsic value of stock options
Year Ended December 31,
2022
2021
2020
Outstanding
$
— $
3,820 $
13,626
Exercisable
$
— $
3,730 $
11,786
Exercised
$
— $
1,453 $
1,037
Company’s stock price at December 31
$
1.83 $
7.20 $
13.20
As of December 31, 2022, the exercise price of all outstanding stock options was higher than the Company's closing stock
price. Accordingly, the intrinsic value is zero in the table above.
(c) Restricted Stock
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 grant date. All of the Company’s restricted stock grants in 2021 and 2020 had time-based
vesting requirements. The grant date fair value for restricted stock awards is based on the quoted market value of Company
stock on the grant date.
A summary of unvested restricted stock activity for the Stock Plans is follows:
Year Ended December 31,
2022
2021
2020
Beginning outstanding balance
875
29,166
150,909
Granted
—
22,488
—
Vested
(875 )
(50,779 )
(118,077 )
Forfeited
—
—
(3,666 )
Ending outstanding balance
—
875
29,166
(d) Employee Stock Purchase Program:
In December 2019, the Company’s Board of Directors adopted, and the stockholders approved the 2019 Employee Stock
Purchase Plan (“ESPP”), effective January 1, 2020. The ESPP provides for the issuance of up 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 of Directors 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 ineligible to participate in the ESPP.
Any eligible employee can enroll in the Plan 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 46,096 and 24,786 shares of common stock under the ESPP for the years ended December 31, 2022 and
2021, respectively. There are 836,824 shares of Company common stock reserved for issuance under the ESPP as of December
31, 2022. In October 2022, the Company suspended the ESPP such that the accumulation period from October 1, 2022 through
December 31, 2022 and beyond will not occur.
F-25
Table of Contents
Note 13 – Income Taxes
Income Taxes
The components of income tax expense for the years ended December 31 are as follows (in thousands):
2022
2021
2020
Current provision:
Federal
$
— $
— $
—
State
—
—
37
Foreign
—
—
—
$
— $
— $
37
Deferred provision:
Federal
$
— $
1 $
1
State
—
—
—
Foreign
(116 )
—
—
$
(116 ) $
1 $
1
Total
$
(116 ) $
1 $
38
The Company adopted ASU 2019-12 as of January 1, 2021. In accordance with this standard non-income 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 the year ended
December 31, 2020 represents non-income and state franchise tax, however, the expense was not reclassified to operating
expenses in accordance with ASU 2019-12 as it was immaterial.
A summary of the differences between the Company’s effective income tax rate and the Federal statutory income tax rate for
the years ended December 31 is as follows:
2022
2021
2020
Federal statutory rate
21.0 %
21.0 %
21.0 %
State income taxes, net of federal benefit
2.5 %
5.2 %
2.4 %
Net state impact of deferred rate change
(1.0 )%
0.8 %
(0.7 )%
Stock compensation expense
(0.7 )%
1.3 %
0.9 %
Other permanent differences
(0.4 )%
(0.1 )%
(0.1 )%
Change in valuation allowance
(13.7 )%
(24.4 )%
(13.4 )%
Tax credits
2.0 %
3.1 %
1.4 %
Accrual to tax return
0.0 %
(1.4 )%
0.0 %
FV Mark to market on convertible notes
0.0 %
0.0 %
(9.0 )%
Foreign Rate Differential
0.0 %
0.0 %
0.0 %
True Ups - NOL Expiration/162(m) limits
(8.9 )%
(5.4 )%
(2.8 )%
Effective income tax
0.8 %
0.1 %
(0.3 )%
Deferred tax assets and liabilities are recognized for the expected future tax consequences of net operating loss carryforwards,
tax credit carryforwards and temporary differences between the financial statement carrying amounts and the income tax basis
of assets and liabilities. A valuation allowance is applied against any net deferred tax asset if, based on the available evidence, it
is more likely than not that the deferred tax assets will not be realized.
F-26
Table of Contents
Deferred income taxes reflect the impact of “temporary differences” between the amount of assets and liabilities for financial
reporting purposes and such amounts as measured by tax laws and regulations. The Company has fully reserved the U.S. net
deferred tax assets, as it is more likely than not that the deferred tax assets will not be utilized. The Company has not reserved
the foreign net deferred tax assets, as it is more likely than not that the deferred tax assets will be utilized. Deferred tax assets
(liabilities) are composed of the following at December 31, 2022 and 2021 (in thousands):
2022
2021
Inventory (Section 263A)
$
311 $
276
Inventory reserves
61
61
Bad debt reserves
215
67
Other accruals
813
854
Deferred revenue
129
107
Accumulated depreciation/amortization
17
8
Stock options
1,108
795
Developed technology
976
1,242
Tax credits
4,427
4,176
NOL carryforward
38,234
38,383
Lease Liability
792
—
Section 174 R&D
1,749
290
Deferred tax assets
48,832
46,259
Valuation allowance
(47,930 )
(45,994 )
Right of Use Asset
(786 )
(265 )
Goodwill tax amortization
(6 )
(5 )
Net deferred tax asset (liability)
$
110 $
(5 )
The increase in the net deferred tax assets and corresponding valuation allowance during the year ended December 31, 2022 is
primarily attributable to section 174 R&D capitalization. The movement in the valuation allowance during the year ended
December 31, 2021 is primarily due to net operating losses and research and development credits.
As of December 31, 2022, the Company has federal net operating loss carryforwards totaling approximately $158.4 million.
Federal net operating loss carryforwards totaling $116.3 million will expire at various dates from 2023 and 2037. The remaining
$42.1 million of the federal net operating losses generated since December 31, 2017 can be carried forward indefinitely. As of
December 31, 2022, the Company has provided a valuation allowance for its federal and state net operating loss carryforwards
due to the uncertainty of the Company’s ability to generate sufficient taxable income in future years to obtain the benefit from
the utilization of the net operating loss carryforwards. As of December 31, 2022, the Company has foreign net operating loss
carryforwards totaling approximately $0.5 million. As of December 31, 2022, the Company has not provided a valuation
allowance for its foreign net operating loss carryforward. In the event of a deemed change in control, an annual limitation
imposed on the utilization of the net operating losses may result in the expiration of all or a portion of the net operating loss
carryforwards.
The Company currently has approximately $4.6 million in net operating losses that are subject to limitations related to Xoft.
Approximately $656,000 can be used annually through 2029. The Company has available tax credit carryforwards (adjusted to
reflect provisions of the Tax Reform Act of 1986) to offset future income tax liabilities totaling approximately $4.4 million. The
credits expire in various years through 2042. The Company has additional tax credits of $1.5 million related to Xoft which have
been fully reserved for and as a result no deferred tax asset has been recorded. These credits expire in various years through
2030.
ASC 740-10 prescribes a recognition threshold and measurement attribute for the financial statement recognition and
measurement of a tax position taken or expected to be taken in a tax return and also provides guidance on de-recognition,
classification, interest and penalties, accounting in interim periods, disclosure, and transition.
F-27
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As of December 31, 2022 and 2021, the Company had no unrecognized tax benefits and no adjustments to liabilities or
operations were required under ASC 740-10. The Company’s practice is to recognize interest and penalty expenses related to
uncertain tax positions in income tax expense, which was zero for the years ended December 31, 2022, 2021 and 2020. The
Company files United States federal and various state income tax returns. The Company also files tax returns in France.
Generally, the Company’s three preceding tax years remain subject to examination by federal and state taxing authorities. The
Company is not under examination by any other federal or state jurisdiction for any tax year.
The Company does not anticipate that it is reasonably possible that unrecognized tax benefits as of December 31, 2022 will
significantly change within the next 12 months.
Note 14 – Segment Reporting
(a) Segment Reporting
Operating segments are the components of our business for which separate financial information is available that is evaluated
regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Our chief
operating decision maker is our chief executive officer. Our operating segments are generally organized by the type of product
or service offered and by geography. 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, and related services. The primary factors used by the Company’s CODM
to allocate resources are based on revenues, gross profit, operating income or loss, 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 its assets by operating segment and the 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
GAAP loss before income tax is as follows (in thousands):
Year Ended December 31,
2022
2021
2020
Segment revenues:
Detection
$
19,802 $
22,019 $
21,997
Therapy
8,142
11,619
7,701
Total Revenue
$
27,944 $
33,638 $
29,698
Segment gross profit:
Detection
$
16,824 $
18,510 $
17,856
Therapy
2,988
5,733
3,498
Total gross profit
$
19,812 $
24,243 $
21,354
Segment operating income (loss):
Detection
$
902 $
1,563 $
2,719
Therapy
(3,767 )
(1,835 )
(3,028 )
Segment operating income (loss)
$
(2,865 ) $
(272 ) $
(309 )
General administrative
$
(10,852 ) $
(10,460 ) $
(9,079 )
Interest expense
(10 )
(141 )
(476 )
Loss on extinguishment of debt
—
(386 )
(341 )
Other income
(45 )
15
97
Fair value of convertible debentures
—
—
(7,464 )
Loss before income tax
$
(10,907 ) $
(10,972 ) $
(17,263 )
F-28
Table of Contents
Segment depreciation and amortization included in segment operating income (loss) is as follows (in thousands):
Year Ended December 31,
2022
2021
2020
Detection depreciation and amortization
Depreciation
$
109 $
123 $
115
Amortization
$
134 $
158
164
Therapy depreciation and amortization
Depreciation
$
129 $
129 $
124
Amortization
$
73 $
73
128
(b) Geographic Information
The Company’s sales are made to customers, distributors and dealers of mammography, electronic brachytherapy equipment
and other medical equipment, and to foreign distributors of mammography and electronic brachytherapy equipment. Export
revenue to a single country did not exceed 10% of total revenue in any year. Total export revenues were approximately
$7.0 million or 25% of total revenue in 2022, $7.5 million or 22% of total revenue in 2021, and $6.1 million or 20% of total
revenue in 2020.
As of December 31, 2022 and 2021, the Company had outstanding receivables of $4.0 million and $3.1 million, respectively,
from distributors and customers of its products who are located outside of the U.S.
Percent of Export sales
Region
2022
2021
2020
Europe
24 %
39 %
45 %
Taiwan
14 %
12 %
13 %
Israel
13 %
0 %
0 %
Bangladesh
8 %
0 %
0 %
Malaysia
4 %
0 %
0 %
Canada
1 %
3 %
5 %
China
18 %
35 %
22 %
Australia
3 %
0 %
0 %
Other
15 %
11 %
15 %
Total
100 %
100 %
100 %
Total Export Revenue
$
6,976 $
7,527 $
6,081
Significant export sales in Europe are as follows:
Percent of Export sales
Region
2022
2021
2020
France
45 %
47 %
41 %
Italy
11 %
5 %
8 %
Spain
10 %
17 %
17 %
Germany
9 %
4 %
12 %
Belgium
8 %
0 %
0 %
Switzerland
6 %
8 %
0 %
Sweden
4 %
0 %
0 %
United Kingdom
1 %
4 %
6 %
Russia
0 %
8 %
0 %
%
%
%
%
%
%
F-29
Table of Contents
(c) Major Customers
The Company had one major OEM customer, GE Healthcare, with revenues of approximately $4.4 million in 2022,
$4.8 million in 2021 and $5.0 million in 2020 or 16%, 14% and 17% of total revenue, respectively. Cancer detection products
are also sold through OEM partners, including GE Healthcare, Fujifilm Medical Systems, Siemens Medical, and Vital Images.
For the year ended December 31, 2022, these four OEM partners composed approximately 29% of Detection revenues and 21%
of total revenue. Detection OEM partners in total composed approximately 37% of Detection revenue and 26% of total revenue
for the year ended December 31, 2022, 40% of Detection revenue and 26% of total revenue for the year ended December 31,
2021 and 37% of Detection revenue and 28% of total revenue for the year ended December 31, 2020. The Company also had
one major direct customer with revenues of approximately $.8 million, or 2% of total revenue for year ended December 31,
2022.
OEM partners represented $2.0 million or 22% of outstanding receivables as of December 31, 2022, with GE Healthcare
accounting for $1.0 million or 11% of this amount. The four largest Therapy customers composed $2.1 million or 24% of
outstanding receivables as of December 31, 2022. The largest Detection direct customer represents $1.5 million or 17% of
outstanding receivables as of December 31, 2022. These customers in total represented $3.6 million or 40%of outstanding
receivables as of December 31, 2022.
Note 15 – Commitments and Contingencies
(a) Purchase Commitments
The Company has non-cancelable purchase orders with key suppliers executed in the normal course of business that total
approximately $4.6 million.
(b) Employment Agreements
The Company has entered into employment agreements with certain executives and key employees. The employment
agreements provide for minimum severance payments and performance-based annual bonus compensation, as defined in their
respective agreements, in the event that their employment is terminated without cause.
(c) Royalty Obligations
In connection with prior litigation, the Company received a nonexclusive, irrevocable, perpetual, worldwide license, including
the right to sublicense certain Hologic patents, and a non-compete covenant as well as an agreement not to seek further
damages with respect to the alleged patent violations. In return, the Company had a remaining obligation to pay a minimum
annual royalty payment of $250,000 payable through 2016. In addition to the minimum annual royalty payments, the litigation
settlement agreement with Hologic also provides for payment of royalties if such royalties exceed the minimum payment based
upon a specified percentage of future net sales on any products that practice the licensed rights. The estimated fair value of the
patent license and non-compete covenant is $100,000 and was amortized over the useful life of approximately four years. In
addition, a liability has been recorded within accrued expenses and accounts payable for future payment and for minimum
royalty obligations totaling $0.2 million.
(d) Legal Matters
In December 2016, the Company entered into an Asset Purchase Agreement with Invivo Corporation (the “Asset Purchase
Agreement”). 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 for net proceeds of
approximately $2.9 million.
F-30
Table of Contents
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.
The Company and Invivo agreed that Invivo would pay $50,000 of the Escrowed Amount and the Company expensed
approximately $93,000 in the second quarter of 2021.
In addition to the foregoing, 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, other than as set forth above. 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 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 16 – Notes Payable
(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.
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. The Company accounted for this repayment and
retirement as an extinguishment of the Loan Agreement. The Company recorded a loss on extinguishment of approximately
$386,000 related to the repayment and retirement of the Loan Agreement. The loss on extinguishment was composed of
approximately $140,000 for a prepayment fee, $122,000 for the unaccrued final payment, $65,000 termination and other fees,
and $58,000 for the unamortized and other closing costs from origination of the loan.
(b) Loan and Security Agreement – Silicon Valley Bank
On August 7, 2017, the Company entered into a Loan and Security Agreement, (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.
F-31
Table of Contents
On March 30, 2020, the Company elected to repay all outstanding obligations (including accrued interest) and retire the SVB
Loan Agreement. The Company accounted for this repayment and retirement as an extinguishment of the SVB Loan
Agreement. In addition to the outstanding principal and accrued interest, the Company was required to pay the $510,000 final
payment, a termination fee of $114,000 and other costs totaling $10,000. The Company also wrote off unamortized original
closing costs as of the extinguishment date. In March 2020 the Company recorded a loss on extinguishment of approximately
$341,000 related to the repayment and retirement of the SVB Loan Agreement. The loss on extinguishment was composed of
approximately $185,000 for the unaccrued final payment, $114,000 termination fee, and $42,000 of unamortized and other
closing costs.
(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. The Company utilized a Monte Carlo simulation model to estimate the fair value of the Convertible Debentures.
The Company 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.
F-32
Table of Contents
The Company notes that the key inputs to the simulation model that were utilized to estimate the fair value of the Convertible
Debentures at each valuation date included:
Input
December 31,
2019
February 21,
2020
Company’s stock price
$
7.77 $
11.64
Conversion price
4.00
4.00
Remaining term (years)
1.97
—
Equity volatility
49.00 %
N/A
Risk free rate
1.57 %
N/A
Probability of default event1
0.45 %
N/A
Utilization of Forced Conversion (if available)1
100.00 %
100.00 %
Exercise of Default Redemption (if available)1
100.00 %
N/A
Effective discount rate1
18.52 %
N/A
1 Represents a Level 3 unobservable input, as defined in Note 4 - Fair Value Measurements, below.
The Company’s stock price is based on the closing stock price on the valuation date. The conversion price is 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.
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
comparable guideline 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 one 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 is 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 and February 21, 2020 valuation dates was solved for utilizing the
simulation model based on the principal value of the Convertible Debentures, as the transaction was determined to represent an
‘arm’s length’ transaction. The effective discount was corroborated against market yield data which implied the Company’s
credit rating, and this implied credit rating will be utilized to determine the changes in the effective discount rate at future
valuation dates. 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):
Convertible Debentures
December 31,
2019
February 21,
2020
Fair value, in accordance with fair value option
$
13,642 $
21,164
Principal value outstanding
$
6,970 $
6,970
F-33
Table of Contents
The Company recorded a loss from the change in fair value of the Convertible Debentures of approximately $7.5 million for the
year ending December 31, 2020. 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.
Note 17 – Employee Benefit Plan
The Company has a 401(k) retirement plan (the “401(k) Plan”) for the benefit of eligible employees, as defined. Each
participant may elect to contribute up to 90% of his or her compensation to the 401(k) Plan each year, subject to certain Internal
Revenue Service limitations. The Company makes a safe harbor matching contribution of 100% of every dollar contributed, not
to exceed 3% of participants’ eligible wages. The Company contributed approximately $0.6 million and $0.5 million during the
years ended December 31, 2022 and 2021, respectively.
Note 18 – Subsequent Events
On March 20, 2023, the Company committed to a restructuring plan intended to support its long term strategic goals and reduce
operating expenses by further aligning its cost structure to focus on areas it believes are more likely to generate the best long-
term results, in light of current industry and macroeconomic environments (the “RIF”). The Company plans to reduce its
workforce by approximately 28%, decreasing its headcount by approximately 23 employees, predominantly from the
Company’s detection business unit. Xoft, Inc., a wholly-owned subsidiary of the Company, or its Therapy business unit, will
also furlough 12 of its employees, or approximately 50% of its workforce. The Company currently estimates it will incur one-
time cash pre-tax restructuring charges of an aggregate of approximately $0.3 million in the first half of 2023 as a result of the
RIF, comprised primarily of one-time severance and benefits payments, and employee-related transition costs. Estimated
amounts are subject to change until finalized and the Company may incur additional costs during the remainder of 2023.
The Company has evaluated all other events and transactions subsequent to the balance sheet date to the date of filing and is not
aware of any events or transactions that occurred subsequent to the balance sheet date that would require recognition or
disclosure in the consolidated financial statements.
F-34
Exhibit 4
DESCRIPTION OF SECURITIES
REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934
As of December 31, 2022, iCAD, Inc. (the “Company,” “we,” “us” or “our”) has one class of securities registered under
Section 12 of the Securities Exchange Act of 1934, as amended: our common stock, par value $0.01 per share (“Common
Stock).
General
The following description of our capital stock and certain provisions of our certificate of incorporation, as amended (our “Certificate
of Incorporation”) and by-laws, as amended (our “Bylaws”), are summaries, and are qualified in their entirety by reference to our
Certificate of Incorporation and Bylaws. Copies of these documents can be accessed through hyperlinks to those documents in the list
of exhibits in our Annual Report on Form 10-K for the fiscal year ending December 31, 2022 (our “Annual Report”). Capitalized
terms used and not defined herein have the meanings ascribed to such terms in the Annual Report.2
Our authorized capital stock consists of 60,000,000 shares of Common Stock, and 1,000,000 shares of “blank check” preferred stock.
Common Stock
The rights, preferences and privileges of the holders of Common Stock are subject to, and may be adversely affected by, the rights of
the holders of shares of any then outstanding preferred stock.
Voting Rights
Each share of Common Stock is entitled to one vote on all matters to be voted on by stockholders. There are no cumulative voting
rights in the election of directors, minority stockholders will not be able to elect directors on the basis of their votes alone.
Dividend Rights
The holders of Common Stock are entitled to receive dividends when, as and if declared by our Board of Directors out of funds legally
available therefor.
No Preemptive or Similar Rights
Holders of shares of Common Stock have no conversion, preemptive or other subscription rights, and there are no redemption
provisions applicable to the Common Stock. All outstanding shares of Common Stock are fully paid and nonassessable.
Right to Liquidation Distributions
In the event of liquidation, dissolution or winding up of our Company, the holders of Common Stock are entitled to share in all assets
remaining, if any, which are available for distribution to them after payment of liabilities and after provision has been made for each
class of stock, if any, having preference over the Common Stock.
Limitations on Liability and Indemnification of Officers and Directors
Section 102 of the DGCL allows a corporation to eliminate the personal liability of directors of a corporation to the corporation or its
stockholders for monetary damages for a breach of fiduciary duty as a director, except where the director breached his duty of loyalty,
failed to act in good faith, engaged in intentional misconduct or knowingly violated a law, authorized the payment of a dividend or
approved a stock repurchase in violation of Delaware law or obtained an improper personal benefit.
Section 145 of the DGCL provides, among other things, that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed action, suit or proceeding (other than an action by or in the
right of the corporation) by reason of the fact that the person is or was a director, officer, agent or employee of the corporation or is or
was serving at the corporation’s request as a director, officer, agent, or employee of another corporation, partnership, joint venture,
trust or other enterprise, against expenses, including attorneys’ fees, judgment, fines and amounts paid in settlement actually and
reasonably incurred by the person in connection with such action, suit or proceeding. The power to indemnify applies (a) if such
person is successful on the merits or otherwise in defense of any action, suit or proceeding or (b) if such person acted in good faith and
in a manner he reasonably believed to be in the best interest, or not opposed to the best interest, of the corporation, and with respect to
any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The power to indemnify applies to
actions brought by or in the right of the corporation as well, but only to the extent of defense expenses (including attorneys’ fees but
excluding amounts paid in settlement) actually and reasonably incurred and not to any satisfaction of judgment or settlement of the
claim itself, and with the further limitation that in such actions no indemnification shall be made in the event of any adjudication of
negligence or misconduct in the performance of duties to the corporation, unless the court believes that in light of all the
circumstances indemnification should apply.
We have entered into indemnification agreements with each of our directors and officers. Generally, these agreements attempt to
provide the maximum protection permitted by Delaware law with respect of indemnification. The indemnification agreements
provided that we will pay certain amounts incurred in connection with any action, suit, investigation or proceeding arising out of or
relating to the performance of services by the director or officer, or by acting as a director, officer or employee.
Liability Insurance.
We have obtained directors’ and officers’ liability insurance which covers certain liabilities, including liabilities to us and our
stockholders.
Certificate of Incorporation
The Certificate of Incorporation eliminates, to the fullest extent permitted by the DGCL, a director’s personal liability to the Company
or its stockholders for monetary damages for breach of fiduciary duty as a director.
Bylaws
The Bylaws provide that the Company will indemnify its officers and directors to the full extent permitted by the laws of the State of
Delaware and the employment agreements with the Company’s executive officers and indemnification agreements between the
Company and its directors and certain of its officers provide that the Company will indemnify them to the full extent provided by the
DGCL.
Anti-Takeover Provisions
Our Certificate of Incorporation authorizes the Board of Directors to issue up to 1,000,000 shares of preferred stock. The preferred
stock may be issued in one or more series, the terms of which may be determined at the time of issuance by our Board of Directors,
without further action by stockholders, and may include, among other things, voting rights (including the right to vote as a series on
particular matters), preferences as to dividends and liquidation, conversion and redemption rights, and sinking fund provisions.
Although there are currently no shares of preferred stock outstanding, future holders of preferred stock may have rights superior to our
Common Stock and such rights could also be used to restrict our ability to merge with, or sell our assets to a third party.
Section 203 of the DGCL
We are also subject to the provisions of Section 203 of the DGCL, which could prevent us from engaging in a “business combination”
with a 15% or greater stockholder” for a period of three years from the date such person acquired that status unless appropriate board
or stockholder approvals are obtained. These provisions could deter unsolicited takeovers or delay or prevent changes in our control or
management, including transactions in which stockholders might otherwise receive a premium for their shares over the then current
market price. These provisions may also limit the ability of stockholders to approve transactions that they may deem to be in their best
interests.
The existence of the foregoing provisions of our certificate of incorporation and bylaws and the DGCL may have an anti-takeover
effect and could delay, defer or prevent a tender offer or takeover attempt that a stockholder might consider in its best interest,
including those attempts that might result in a premium over the market price for the shares of our Common Stock held by
stockholders.
Transfer Agent
The transfer agent and registrar for the Common Stock is Continental Stock Transfer & Trust Company.
Listing
Our Common Stock is listed on The Nasdaq Stock Market under the symbol “ICAD.”
Exhibit 10.p
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into as of the th day of March, 2023
(the “Effective Date”), between iCAD, Inc., a corporation with a principal place of business at 98 Spit Brook Road Suite 100,
Nashua, NH 03062 (which hereinafter includes any parent, subsidiary and affiliate, and is collectively referred to as the
“Company”), and Dana Brown (hereinafter referred to as “Executive” or “you”). In consideration of the promises and the mutual
covenants herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto mutually agree as follows:
1. Eligibility For Employment. The Immigration Reform and Control Act requires all employees of
U.S. companies to have evidence of identity and authorization to work in the U.S. Executive represents and warrants that
Executive has such authorization and will provide the Company with evidence thereof on or before the Effective Date of this
Agreement. Executive further acknowledges that the Company may perform a background check on Executive for purposes
relating to Executive’s Company employment, after providing written notice to and obtaining written consent from Executive. At
all times Company shall comply with the Fair Credit Reporting Act and any other applicable laws regarding background checks,
and Executive agrees that if the results of said background check are unsatisfactory to the Company, the Company may terminate
this Agreement immediately upon written notice, and Executive shall have no further rights or obligations hereunder.
2. Employment Period. Executive’s employment hereunder shall be effective on the Effective Date and shall continue until
terminated by either party in accordance with Section 7. The period during which Executive is employed under this Agreement
shall be referred to herein as the “Employment Period.” The date on which this Agreement terminates pursuant to Section 7 shall
be referred to herein as the “Termination Date.”
3. Employment Period Duties. During the Employment Period, the Executive shall be employed by and serve as Chief
Executive Officer and President of the Company on a full-time basis reporting directly to the Company’s Board of Directors
(“Board”). As CEO and President, and subject to Board approval and election by the shareholders of Company, Executive will
also serve as a member of the Board. The Executive shall perform such duties as are normally associated with the position of
Chief Executive Officer and President of the Company and Chief Executive Officer and President of a public company and such
duties as are assigned to Executive from time to time and are consistent with those performed by the position of Chief Executive
Officer and President of a public company. Executive hereby agrees and understands that the primary place of work is the
Company office in Nashua, NH, and that Executive may also be required to travel, including travel overseas, in furtherance of the
duties of the position.
4. Exclusive Service. Executive hereby agrees to devote all of his/her reasonable efforts and business time, attention, and
energies to the performance of his/her duties under this Agreement and to the Company; provided that Executive may serve on the
board of directors of purely philanthropic or civic organizations or on the board of directors of one other company that is not
competitive with the business of the Company (“Corporate Boards”), in each case only to the extent that such service or
participation does not interfere with
Executive’s employment with the Company or duties under this Agreement. Executive may serve on the board of directors of
additional companies that are not competitive with the business of the Company to the extent that such service or participation
does not interfere with Executive’s employment with the Company or duties under this Agreement and Executive has advised the
Company prior to commencing, and the Company has consented (which consent shall not be unreasonably withheld) to, such
additional Corporate Board service.
5. Restrictive Covenants. Executive understands and acknowledges that Executive will have direct and indirect responsibility
for managing and overseeing analysis throughout the Company, working directly with the executive team, and overseeing special
projects. Executive understands and agrees that her duties extend to all geographic regions in which the Company operates and all
other jurisdictions where the Company conducts business during the Employment Period in furtherance of the Company’s
business and relationships. Executive further understands and agrees that Executive will have and be given access to, solely for the
purpose of furthering the Company’s business, all of the Company’s trade secrets, and proprietary and confidential information,
Executive will become familiar with such trade secrets and information, and Executive’s services will be special, unique and
extraordinary to the Company in this regard. Consequently, the Executive agrees as follows:
5.1 During the Employment Period and during the one (1) year period following the Termination Date (the “Covenant
Period”), Executive will not, directly or indirectly, individually or jointly, own any interest in, operate, join, control, promote,
participate, engage or have any other interest (whether Executive is acting as owner, partner, stockholder, employee, broker, agent,
principal, trustee, board member, corporate officer, director, advisor, consultant or in any other capacity), or enter into the
employment of or perform any other services for any person or entity (other than the Company) that engages in any business
activities that are competitive with the business in which the Company is engaged during the Employment Period, anywhere in the
United States (the “Covenant Area”). Executive agrees and understands that the provisions described in this Section 5.1 are
necessary to protect the good will and the confidential, proprietary and trade secret information belonging to the Company.
Notwithstanding anything herein to the contrary, this Agreement will not prevent Executive from holding for investment up to 5%,
or any amount provided by law, whichever is greater, of any class of stock or other securities of a publicly held company, if such
stock is publicly traded and listed on any national or regional stock exchange.
5.2 Executive understands that the Company has spent considerable time, effort and expense developing proprietary
information and has taken reasonable measures to protect its secrecy. Therefore, as a condition of employment with the Company,
Executive shall execute the Non-Solicitation, Non- Disclosure and Inventions Assignment Agreement (the “NDA”), which is
attached hereto as Exhibit A and incorporated by reference herein. The NDA is intended to survive and does survive the
termination or expiration of this Agreement. The obligations, duties and liabilities of the Executive pursuant to this Section 5 and
Exhibit A of this Agreement are continuing, absolute and unconditional, and shall remain in full force and effect, despite any
termination of this Agreement for any reason whatsoever, with or without Cause.
6. Compensation and Benefits. As compensation for the services to be performed by the Executive under this Agreement, the
Company agrees to pay the Executive, and the Executive agrees to accept the following:
6.1 Salary. The Company shall pay to the Executive an annual base salary of Four Hundred Thousand US Dollars
($400,000) (the “Base Salary”) commencing on the Effective Date of this Agreement, which shall be payable in equal
installments, not less frequently than bi-weekly, in accordance with the Company’s payroll practices; shall be subject to customary
and required deductions and withholdings; and shall be reviewed by the Company in its sole discretion based upon the Executive’s
and the Company’s performance and may be increased (but not decreased).
6.2 Discretionary Bonus. Executive will be eligible to participate in Company’s annual discretionary bonus plan for
executives (“Bonus Plan”), subject to its terms and conditions, with the potential to earn a cash and/or equity-based bonus up to
thirty (30) percent of Executive’s Base Salary, based upon achievement of corporate and individual goals under the Bonus Plan
(“Discretionary Bonus”) for the given calendar year to which such Discretionary Bonus relates (“Bonus Year”). Any Discretionary
Bonus shall be paid in full in a single lump sum cash payment during the calendar year following the Bonus Year for which it is
earned and vested (“Payment Calendar Year”) and no later than the earlier of (i) December 31 of the Payment Calendar Year or
(ii) fifteen (15) calendar days following the date on which the Company publicly announces its results of operations for such
Bonus Year. No annual Discretionary Bonus is guaranteed, and its payment rests in the sole discretion of the Company.
6.3 Benefits. The Executive shall be entitled to participate in the Company’s benefit plans, including but not limited to,
medical, dental, vision, life and disability insurance plans, and 401k plan for its employees, subject to the eligibility and
contribution requirements, enrollment criteria and the other terms and conditions of such plans. The Company reserves the right to
modify, amend and eliminate any such plans, in its sole and absolute discretion.
6.4 Paid Time Off. Executive shall be entitled to paid time off (“PTO”) and holidays pursuant to the terms of the
Company’s paid time off policy as may exist and be amended from time to time. Initially, Executive shall accrue up to eight
weeks of PTO per calendar year.
6.5 Expense Reimbursement. The Company shall reimburse the Executive for any reasonable out-of-pocket business
expense, including for travel, marketing, entertaining or other similar business expenses incurred by the Executive during the
Employment Period in the discharge of the position duties under this Agreement (“Expense”); provided that for each Expense,
such Expense was incurred and the related reimbursement request was made, in compliance with the Company’s expense
reimbursement policy in effect and supported by relevant documentation.
6.6 Stock Options. Subject to approval by the Company’s Board of Directors, you will be granted 250,000 iCAD
incentive stock options, subject to a 3-year vesting schedule and a 10-year expiration period. The exercise price is determined by
the fair market value of the Company’s stock on the grant date. In addition, you will be eligible to receive an additional grant of
stock options or other form of equity on each anniversary of the Effective Date.
7. Termination. Notwithstanding any other provision of this Agreement, the employment relationship between the Company
and Executive shall be an at-will employment relationship. Either party may terminate Executive’s employment under this
Agreement at any time for any reason. For purposes of this Agreement, the “Termination Date” shall mean (a) if Executive’s
employment is terminated by death, the date of death;
(b) if Executive’s employment is terminated by Disability, the fifteenth (15th) day after Notice is given; and
(c) If Executive’s employment is terminated with Cause, without Cause, or for Good Reason (as defined below), the later of the
date specified in the Notice or after expiration of any applicable cure periods, if any. No matter the reason for termination, on or
prior to the Termination Date, Executive shall return to the Company any and all Proprietary Information (as defined Exhibit A) in
the Executive’s possession, together with any and all other property of the Company.
7.1 Notice of Termination. In the event this Agreement is terminated by Executive for any reason other than for Good
Reason (as defined below), Executive shall provide the Company with a written notice (“Notice”) of Executive’s intent to
terminate this Agreement at least thirty (30) days prior to the Termination Date. In the event that the Agreement is terminated by
the Executive for Good Reason, Executive must satisfy the Good Reason Process and Good Reason Cure Period as defined below.
In the event that this Agreement is terminated by the Company without Cause (as defined below), the Company shall provide the
Executive with Notice of its intent to terminate this Agreement at least thirty (30) days prior to the Termination Date. For purposes
of this Agreement, Notice shall mean a notice which shall indicate the specific termination provision in this Agreement relied
upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination under the
provision so indicated. For the purpose of this Section 7, “Cause” shall mean Executive: (i) fails or refuses to substantially
perform Executive’s obligations under this Agreement or to the Company (other than such failure directly resulting from a legally
protected illness, condition or disability); provided, however, that the Company shall have provided Executive with written notice
that such actions are occurring and the Executive has been afforded at least thirty (30) days to cure same; (ii) engaging in illegal
conduct, gross negligence or willful misconduct (including but not limited to, theft, fraud, embezzlement and securities law
violations) that is, or is reasonably likely to be, injurious to the Company or its affiliates; (iii) violating a federal or state law or
regulation applicable to the Company’s business which violation is, or is reasonably likely to be, injurious to the Company; (iv)
breaching the terms of any restrictive covenant agreement, confidentiality agreement or invention assignment agreement between
Executive and the Company; (v) being convicted of, or entering a plea of nolo contendere to, a felony, or committing any act of
moral turpitude, dishonesty or fraud, or the misappropriation of property belonging to the Company or its affiliates; (vi) engaging
in any act that constitutes misconduct, theft, fraud, misrepresentation, conflict of interest, or breach of fiduciary obligations or
duty of loyalty to the Company;
(vii) possessing or use of illegal drugs, a prohibited substance and/or alcohol, to such extent that it impairs Executive’s ability to
perform the duties or responsibilities or compromises the safety of Executive or others, subject to applicable law; or (viii)
violating or failing to comply with any securities law, rule or regulation, or stock exchange regulation or rule relating to or
affecting the Company, including, but not limited to, Executive’s failure or refusal to honestly provide a certificate in support of
the Company or officer or employee of the Company as required under and in compliance with the Sarbanes-Oxley Act of 2002.
In the event that Executive terminates this Agreement for any reason other than Good Reason, or the Company terminates this
Agreement for Cause (as defined herein), the Agreement shall automatically terminate on the Termination Date and Executive
shall only receive payment of any accrued but unpaid Base Salary through the Termination Date, reimbursement for any unpaid
and approved expenses incurred pursuant to Section 6.6 through the Termination Date, and any accrued but unpaid vacation
(collectively, the “Accrued Amounts”). “Good Reason” means that Executive has complied with the “Good Reason Process” (as
defined below) following the occurrence of any of the following events: (a) the Company changing the Executive’s position such
that she is no longer the Chief Executive Officer and President of the Company, or materially diminishing
the Executive’s authority, duties and/or responsibilities such that his/her authority, duties and/or responsibilities are no longer
commensurate with those customarily associated with the title of Chief Executive Officer and President; (b) the Company
reducing the Executive’s compensation below the Base Salary; (c) the Company requiring the Executive, without his/her consent,
to relocate more than fifty (50) miles from the Company’s principal office to which she reports as of the Effective Date; or (d) any
material breach by the Company of any of its obligations under this Agreement; or (e) the Company demonstrably demanding that
Executive perform her duties in a manner that violates any applicable laws, the Company Code of Business Conduct and Ethics, or
any Company policies. “Good Reason Process” means that (a) the Executive reasonably determines in good faith that a Good
Reason condition has occurred; (b) the Executive notifies the Company in writing of the occurrence of the Good Reason condition
within forty-five (45) days of the occurrence of such condition; (c) the Executive cooperates in good faith with the Company’s
efforts, for a period not less than thirty (30) days following such notice (the “Good Reason Cure Period”), to remedy the
condition; (d) notwithstanding such efforts, the Good Reason condition continues to exist; and (e) the Executive terminates his/her
employment within thirty (30) days after the end of the Good Reason Cure Period.
7.2 Termination Upon Death or Disability. In the event of Executive’s death or the Executive’s incapacity due to
Disability (as defined herein) during the Employment Period (as defined herein), the Agreement shall automatically terminate on
the Termination Date and Executive shall only receive payment of the Accrued Amounts. In the event of Executive’s death, those
payments will be made to the estate, legal representative or beneficiary, as applicable, of Executive and any death benefits payable
and due to the death of Executive under Company benefit plans or programs will also be paid. For the purpose of this Section 7.2,
Disability shall be defined as the Executive being absent and unable to perform the essential functions of her position under this
Agreement, with or without a reasonable accommodation, for either ninety (90) consecutive days or a total of 90 days out of any
period of one hundred and eighty consecutive days, all as determined in good faith by the Company.
7.3 Severance Upon Termination of Employment Without Cause or for Good Reason. In the event that the
Company terminates this Agreement or Executive’s employment without Cause (as defined in Section 7.1), or Executive
terminates this Agreement for Good Reason (as defined in Section 7.1 and subject to the satisfaction of the Good Reason Process
and Good Reason Cure Period), then subject to the conditions set forth in this Section 7.3, the Executive shall receive the Accrued
Amounts, as well as an amount equal to the pro rata share of the Discretionary Bonus for the employment year in which the
Termination Date occurs, payable at such time the Discretionary Bonus, if any, would otherwise have been payable in accordance
with Section 6.3 hereof. Additionally, the Company shall pay its share of the COBRA premiums necessary to continue
Executive’s health insurance coverage in effect for Executive and Executive’s eligible dependents (as of the Termination Date) for
twelve (12) months beyond the Termination Date, provided that Executive timely elects continued coverage under COBRA
following the Termination Date. Executive’s receipt of payments and benefits in this Section 7.3 is conditioned on and subject to
(i) Executive signing and not rescinding this Agreement and the NDA attached hereto as Exhibit A (and incorporated herein), and
(ii) Executive signing and not rescinding an effective, general release of all claims in favor of the Company and in a form
acceptable to the Company within no greater than 60 days following Executive’s Termination Date.
7.4 Termination Following Change in Control. Anything contained herein to the contrary notwithstanding, in the
event the Executive’s employment hereunder is terminated within nine (9) months
following a Change in Control (as defined below) by the Company without Cause or by the Executive for Good Reason, then the
Company shall pay to the Executive in complete satisfaction of its obligations under this Agreement, the Accrued Amounts, as
well as an amount equal to (i) (a) her Base Salary as then in effect for a period of six months (6) months from the Termination
Date, payable in equal installments on the Company’s normal payroll dates for the six-month (6) month period following the
Termination Date; and (b) an amount equal to the Discretionary Bonus which would otherwise been payable in accordance with
Section
6.3 hereof for the employment year in which the Termination Date occurs, payable at such time the Discretionary Bonus, if any,
would otherwise have been payable in accordance with Section 6.3 hereof; and
(c) the Company shall pay its share of the COBRA premiums necessary to continue Executive’s health insurance coverage in
effect for Executive and Executive’s eligible dependents (as of the Termination Date) for eighteen (18) months beyond the
Termination Date, provided that Executive timely elects continued coverage under COBRA following the Termination Date.; or
(ii) except with regard to the payment of any amount that is a Section 409A Amount, the Company, in its sole discretion, may
elect to make a lump sum cash payment equal to the present value of the payments otherwise due under clause (i); provided that if
any severance payment payable after a “Change in Control” as defined in Section 280G of the Internal Revenue Code of 1986 (the
“Code”), either alone or together with other payments or benefits, either cash or non-cash, that the Executive has the right to
receive from the Company, including, but not limited to, accelerated vesting or payment of any deferred compensation, options,
stock appreciation rights or any benefits payable to the Executive under any plan for the benefit of employees, which would
constitute an “excess parachute payment” (as defined in Code Section 280G), then such severance payment or other benefit shall
be reduced to the largest amount that will not result in receipt by the Executive of a parachute payment. The determination of the
amount of the payment described in this subsection shall be made by the Company’s independent auditors at the sole expense of
the Company. For purposes of clarification the value of any options described above will be determined by the Company’s
independent auditors using a Black-Scholes valuation methodology.
For purposes of this Agreement, a “Change in Control” shall be deemed to occur (i) when any “person” as defined in Section
3(a)(9) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and as used in Section 13(d) and 14(d) thereof,
including a “group” as defined in Section 13(d) of the Exchange Act, but excluding the Executive, the Company or any subsidiary
or any affiliate of the Company or any employee benefit plan sponsored or maintained by the Company or any subsidiary of the
Company (including any trustee of such plan acting as trustee), becomes the “beneficial owner” (as defined in Rule 13(d)(3) under
the Exchange Act) of securities of the Company representing 50% or more of the combined voting power of the Company’s then
outstanding securities; or (ii) the sale of all or substantially all of the assets of the Company, or (iii) the occurrence of a transaction
requiring stockholder approval for the acquisition of the Company by an entity other than the Company or a subsidiary or an
affiliated company of the Company through purchase of assets, or by merger, or otherwise.
If within nine (9) months after the occurrence of a Change in Control, the Company shall terminate the Executive’s employment
without Cause or Executive shall resign for Good Reason, then notwithstanding the vesting and exercisability schedule in any
stock option or other equity award agreement between the Company and the Executive, all unvested stock options and other equity
awards granted by the Company to the Executive pursuant to such agreement shall immediately vest and become exercisable and
shall remain exercisable for not less than one year thereafter.
8. Injunctive Relief. Executive and the Company: (i) intend that the provisions of Section 5 and Exhibit A be and become valid
and enforceable; (ii) acknowledge and agree that the provisions of Section 5 and Exhibit A are reasonably necessary to protect the
legitimate interests of the Company; and (iii) that any violation of Section 5 or Exhibit A will result in immediate and irreparable
injury to the business and good will of the Company for which there exists no adequate remedy at law. Accordingly, Executive
agrees that if she violates any of the provisions of Section 5 or Exhibit A then, in addition to any other remedy available at law or
in equity, the Company shall be entitled to specific performance or injunctive relief without posting a bond, or other security, and
without notice to Executive or the necessity of proving actual damages.
9. Warranties and Covenants. As an inducement to the Company to enter into this Agreement, Executive represents and
warrants as follows: (i) there exist no impediments or restraints, contractual or otherwise on Executive’s power, right or ability to
enter into this Agreement and to perform her duties and obligations hereunder; and (ii) the performance of her obligations under
this Agreement do not and will not violate or conflict with any agreement relating to confidentiality, non-competition or exclusive
employment to which Executive is or was subject.
10. Indemnification. In the event that Executive is made a party or threatened to be made a party to any action, suit, or
proceeding, whether civil, criminal, administrative or investigative, (collectively, a “Proceeding”) by reason of the fact that
Executive is or was an employee, officer or director of the Company, or is or was serving at the request of the Company as a
director, officer, member, employee or agent of another corporation or a partnership, joint venture, trust or other enterprise,
Executive shall be indemnified and held harmless by the Company to the fullest extent permitted by, and except as prohibited
under, applicable law from and against any liabilities, costs, claims and expenses, including all costs and expenses incurred in
defense of any Proceeding (including attorneys’ fees). Costs and expenses incurred by Executive in defense of such Proceeding
(including attorneys’ fees) shall be paid by the Company in advance of the final disposition of such litigation upon receipt by the
Company of: (i) a written request for payment; (ii) appropriate documentation evidencing the incurrence, amount and nature of the
costs and expenses for which payment is being sought; and (iii) an undertaking adequate under applicable law made by or on
Executive’s behalf to repay the amounts so paid if it shall ultimately be determined by a court of competent jurisdiction that
Executive is not entitled to be indemnified by the Company under this Agreement. This indemnification provision shall not apply
to any Proceeding initiated by Executive or the Company relating to a dispute between Executive and the Company with respect to
this Agreement or Executive’s employment under this Agreement.
11. Directors’ and Officers’ Insurance. The Company represents that it will maintain directors’ and officers’ liability
insurance during the term of Executive’s employment providing coverage to Executive on terms that are no less favorable than the
coverage provided to the directors and senior most executives of the Company, subject to the terms and exclusions of the
applicable policy.
12. Withholding. All sums payable to Executive shall be reduced by all federal, state, local and other withholding and similar
taxes and payments required by applicable law.
13. Code Section 409A; Six Month Holdback. It is intended that all of the payments and benefits payable under this
Agreement satisfy, to the greatest extent possible, the exemptions from 409A, and all provisions of this Agreement shall be
construed in a manner consistent with the requirements for avoiding taxes or penalties
under Section 409A of the Code. To the extent (i) any payments to which Executive becomes entitled under this agreement, or any
agreement or plan referenced herein, in connection with Executive’s separation of service from the Company constitute deferred
compensation subject to Section 409A of the Code and (ii) Executive is deemed by the Company at the time of such separation of
service to be a “specified employee” under Section 409A of the Code, as determined by Company, by which determination
Executive agrees to be bound, then such payment shall not be made or commence until the earliest of (i) the expiration of the six
(6)- month period measured from the date of Executive’s “separation from service” (as such term is defined below); (ii) the date
Executive becomes “disabled” (as defined in Section 409A of the Code); or (iii) the date of Executive’s death following such
separation from service; provided, however, that such deferral shall only be effected to the extent required to avoid adverse tax
treatment to Executive, including (without limitation) the additional twenty percent (20%) tax for which Executive would
otherwise be liable under Section 409A(a)( 1 )(B) of the Code in the absence of such deferral. Upon the expiration of the
applicable deferral period, any payments which would have otherwise been made during that period (whether in a single sum or in
installments) in the absence of this paragraph shall be paid to Executive in one lump sum. With respect to any determination that
the payments or benefits provided for in this Agreement are subject to Section 409A, then each payment or installment is a
separate and distinct payment and, to the extent any payment under this Agreement may be classified as a “short-term deferral”
within the meaning of Section 409A, such payment shall be deemed a short- term deferral, even if it may also qualify for an
exemption from Section 409A under another provision of Section 409A. Each other payment that is not a “short-term deferral” is
intended to be a payment upon an involuntary termination from service and payable pursuant to Treasury Regulation Section
1.409A- 1(b)(9)(iii), et. seq., to the maximum extent permitted by that regulation. With regard to any provision herein that
provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Code Section 409A, (i) the right to
reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit, (ii) the amount of expenses eligible
for reimbursement, or in-kind benefits, provided during any taxable year shall not affect the expenses eligible for reimbursement,
or in-kind benefits to be provided, in any other taxable year, provided that the foregoing clause (ii) shall not be violated with
regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Code solely because such expenses are
subject to a limit related to the period the arrangement is in effect and (iii) such payments shall be made on or before the last day
of the Executive’s taxable year following the taxable year in which the expense was incurred. For purposes of this Agreement,
separation or termination of Executive’s employment with the Company shall mean “separation from service” within the meaning
of Section 409A of the Code and Section 1.409A-l(h) of the regulations promulgated under the Code or any successor regulations.
In any event, Company makes no representations or warranty and shall have no liability to Executive or any other person if any
benefits or payments under this Agreement are determined to be deferred compensation subject to Code Section 409A and/or to
not to satisfy the conditions of that section. No interest shall be due on amounts deferred.
14. Notices. Any notice or other communication required or permitted under this Agreement shall be in writing and shall be
deemed to have been given: (i) when hand-delivered if delivered by personal delivery or by Federal Express or similar courier
service; (ii) on the date of receipt, refusal or non-delivery indicated on the return receipt if deposited in the United States mail,
registered or certified, return receipt requested and with proper postage prepaid; or (iii) when received, if sent by facsimile with a
copy sent via regular U.S. mail. All notices shall be addressed to the Company or Executive at their respective addresses set forth
below, or
to such other address as either party may designate for itself or himself/herself by written notice to the other given from time to
time in accordance with the provisions of this Agreement:
To Executive: Dana Brown
98 Spit Brook Road, Suite 100
Nashua, NH 03062
To Company: iCAD, Inc.
98 Spit Brook Road- Suite 100
Nashua, NH 03062
Attn: Chairman of the Board
15. Executive’s Cooperation. During the Employment Period and thereafter, the Executive shall cooperate with the Company
in any internal investigation or administrative, regulatory or judicial proceeding as reasonably requested by the Company
(including, without limitation, the Executive being available to the Company upon reasonable notice for interviews and factual
investigations, appearing at the Company’s request to give testimony without requiring service of a subpoena or other legal
process, volunteering to the Company all pertinent information and turning over to the Company all relevant documents which are
or may come into the Executive’s possession, all at times and on schedules that are reasonably consistent with the Executive’s
other permitted activities and commitments). In the event the Company requires the Executive’s cooperation in accordance with
this section after the termination of the term of this Agreement, the Company shall reimburse the Executive for all of her
reasonable costs and expenses incurred, in connection therewith, plus pay the Executive a reasonable amount per day for her time
spent.
16. General Provisions.
16.1 Amendment. The provisions of this Agreement may be amended, modified, supplemented, or otherwise altered
only if the Company’s Chairman of the Board (or Compensation Committee Chairman) and the Executive have each duly
executed and delivered to the other party a written instrument which states that it constitutes an amendment or modification (as
applicable) to this Agreement and specifies the provision(s) that are being modified or amended (as applicable).
16.2 Representation by Counsel and Mutual Negotiation. Each party has had the opportunity to be represented by
counsel of her or its choice in negotiating this Agreement. This Agreement shall therefore be deemed to have been negotiated,
drafted and prepared at the joint request and direction of the parties, at arm’s length, with the advice and participation of counsel,
and shall be interpreted in accordance with its terms and without favor to any party.
16.3. Binding Effect and Assignment. The provisions of this Agreement shall be binding upon and shall inure to the
benefit of the Executive, his/her heirs, executors, and administrators, and the Company, its successors and assigns, except that the
Executive may not assign any of his/her rights or duties hereunder without the prior written consent of the Company, which
consent may be withheld by the Company in its sole discretion. Company may assign its rights, together with its obligations
hereunder, to any parent, subsidiary or successor, or in connection with any sale, transfer or other disposition of all or substantially
all
of its business and assets; provided, however, that any such assignee assumes Company’s obligations hereunder.
16.4. Waivers. The failure by either party at any time to require performance or compliance by the other of any of its
obligations or agreements shall in no way affect the right to require such performance or compliance at any time thereafter. The
waiver by either party of a breach of any provision hereof shall not be taken or held to be a waiver of any preceding or succeeding
breach of such provision or as a waiver of the provision itself. No waiver of any kind shall be effective or binding, unless it is in
writing and is signed by the party against whom such waiver is sought to be enforced.
16.5. Entire Agreement. This Agreement, the documents referenced herein, and its Exhibit sets forth the entire
Agreement between the Company and the Executive relating to its subject matter and supersedes all such prior agreements and
understandings, both written and oral, between the parties with respect to the subject matter of this Agreement including but not
limited to the Change of Control and Bonus Agreement entered into by the Company and the Executive in October 2015, which is
terminated hereby.
16.6. Headings and Interchangeability. The headings of sections and subsections in this Agreement are merely for
convenience of reference and shall not affect the interpretation of any of the provisions of this Agreement. Whenever appropriate,
the singular form of a word shall be interpreted in the plural and vice versa. All words and phrases shall be construed as
masculine, feminine or neuter gender, according to the context.
16.7. Further Assurances. Each party agrees to cooperate with the other, and to execute and deliver, or cause to be
executed and delivered, all such other instruments and documents, and to take all such other actions as may be reasonably
requested of him or it from time to time, in order to effectuate the provisions and purposes of this Agreement.
16.8. Severability. Whenever possible, each provision of this Agreement shall be construed and interpreted in such a
manner as to be effective and valid under applicable law, but if any provision of this Agreement or the application thereof to any
party or circumstance shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of
such prohibition without invalidating the remainder of such provision or any other provision of this Agreement or the application
of such provision to other parties or circumstances. Without limitation of the foregoing, the parties agree and acknowledge that the
duration, scope and geographic area of the covenants described in Sections 5 and Exhibit A hereof are fair, reasonable and
necessary in order to protect the goodwill and other legitimate interests of the Company, that adequate consideration has been
received by the Executive for such obligations, and these obligations do not and will not prevent the Executive from earning a
livelihood. If, however, for any reason any court of competent jurisdiction determines that such restrictions are not reasonable, that
consideration is inadequate or that the Executive has been prevented unlawfully from earning a livelihood, such restrictions shall
be interpreted, modified or rewritten to include as much of the duration, scope and geographic area identified in such provisions as
will render such restrictions valid and enforceable.
16.9. Governing Law. This Agreement, the performance of the parties hereunder and any dispute arising out of or in
connection with this Agreement shall be governed by the internal laws (and not the law of conflicts) of the State of Delaware. Any
claim or controversy arising out of or in connection with this
Agreement, or the breach thereof, shall be adjudicated exclusively by the state courts for the State of New Hampshire, or by a
federal court sitting in New Hampshire. The parties hereto agree to the personal jurisdiction of such courts and agree to accept
process by regular mail in connection with any such dispute.
17. Enforcement. In the event that any proceedings are brought to enforce this Agreement or remedy any breach hereof, then in
addition to any and all damages resulting from any breach hereof, the prevailing party shall be entitled to recover its or his costs
and expenses, including reasonable attorneys’ fees, incurred in the proceedings relating to the terms and conditions of this
Agreement.
18. Counterparts. This Agreement may be executed in any one or more counterparts, each of which shall constitute an original,
no other counterpart needing to be produced, and all of which, when taken together, shall constitute but one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first written above.
EXECUTIVE: COMPANY:
[Embedded Table, Chart, Shape or Object can not be converted, please insert manually]
Dana R. Brown
By: Dana R. Brown (Mar 9, 2023 12:50 MST) By:
EXHIBIT A
iCAD, Inc.
Confidentiality, Invention Assignment and Non-Solicitation Agreement
In consideration of employment of the undersigned (“Employee”) by or on behalf of iCAD, Inc. or its subsidiary (the
“Company”), Employee covenants and agrees:
1. ACKNOWLEDGEMENTS AND EMPLOYEE ACCESS TO CONFIDENTIAL INFORMATION.Employee
acknowledges that: (a) Company is in a highly competitive industry; (b) from the outset of and during the course of
Employee’s employment with Company Employee will have access to Confidential Information (as such term is defined
below) of Company and/or its client relationships and goodwill, which, are highly valuable to Company and if disclosed
in an unauthorized manner, could be highly prejudicial to Company and/or its clients; (c) Company would be irreparably
harmed by Employee’s subsequent work for a competitor due to the possibility that there would be inadvertent or other
disclosures of Company’s to Confidential Information (as such term is defined below) or that there would be improper
interference with its valuable client relationships and goodwill; (d) Employee was given adequate consideration for this
Agreement, and that as additional consideration for signing this Agreement and the restrictions contained herein,
Employee acknowledges that Employee was given access to Confidential Information (as such term is defined below),
proprietary and trade secret information; and (e) the restrictions in this Agreement are reasonable and necessary to protect
the Company’s legitimate business interests.
2. VALUE OF COMPANY BUSINESS, CLIENTS, AND CONFIDENTIAL INFORMATION.Employee
acknowledges that Company has created and developed Confidential Information (as such term is defined below).
Additionally, Employee acknowledges that Company has entered into agreements with third parties whereby these third
parties produce confidential, proprietary, and/or trade secret information for Company. Such information has independent
actual or potential economic value from not being generally known to the public or to other persons who can obtain
economic value from its disclosure or use, and is not readily available through any source other than Company.
Maintenance of confidentiality regarding such information and special knowledge is essential to preserving the
competitive position and value of Company. Further, the specialized services provided by Company to its clients are such
that potential clients might not be aware of the availability of such services from Company. This specialized business
requires Company to develop confidential relationships with its clients, whereby Company and each client work together
closely to develop customized services for each client. Therefore, information concerning both the nature and the fact that
Company's client relationships has independent actual or potential economic value from not being generally known to the
public or to other persons who can obtain economic value from its disclosure or use.
3. CONFIDENTIAL INFORMATION DEFINED. “Confidential Information” of Company includes, but is not limited
to, proprietary and trade secret information; the identity of Company clients; client information, including without
limitation, personal, financial, social, or business information, client lists, client addresses or phone numbers, client
contracts, particular needs and preferences of each client, and the manner in which business is conducted with each
client; business methods; devices; processes; compilation of information; computer software developed by or for
Company; computer-aided cancer detection methods; records; sales techniques and figures; marketing strategies; pricing
and pricing strategies; methods of data processing; codes; surveys; designs; questionnaires; reports; industry norms;
models; forecasts; formulae; equations; studies or data developed in connection with any project or activity of Company,
and Company financial information.
a.
Confidential Information shall not include: (a) information now and hereafter voluntarily disseminated by
Company to the public or which otherwise becomes part of the public domain through lawful means; and
(b) information already known to Employee as documented by written records which predate Employee's
employment with Company.
4. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION. The Employee shall not, during or after Employee's
employment with Company, use, publish, communicate, reproduce, disclose, remove from Company premises, or
disseminate in any manner whatsoever any Confidential Information, either directly or indirectly, except as
required in the course of employment with Company, as expressly authorized in writing by an officer or manager of
Company, or as is disclosed as part of a voluntary communication with the United States Securities and Exchange
Commission or any other governmental agency about a good-faith belief that a securities law violation may have
occurred. Nothing in this Agreement shall waive or release any rights or claims that Employee may have under the Dodd-
Frank Wall Street Reform and Consumer Protection Act. Nothing in this Agreement prohibits Employee from discussing
terms and conditions of employment or engaging in other concerted activity protected by law. Further, nothing in this
Agreement prohibits Employee from cooperating with governmental investigations or reporting possible violations of
laws or regulations to any governmental agency or entity, as required by law.
5. DUTY TO PREVENT DISCLOSURE. Employee agrees to take all precautions reasonably necessary to prevent the
unauthorized handling, use, access, disclosure, or dissemination of Confidential Information either during employment
with Company or following termination of employment with Company for any reason whatsoever and Employee shall
follow all applicable policies and procedures of the Company regarding maintenance and protection of Confidential
Information.
6. CLIENT INFORMATION. Employee agrees not to use, publish, communicate, reproduce, disclose, remove from
Company premises, or disseminate in any manner whatsoever, for compensation or otherwise, any information, actions,
events, behavior, or other conduct that Employee observes or hears from Company’s clients, either directly or indirectly,
either during employment with Company or following termination of employment, except as required in the course of
employment with Company.
7. REQUIRED DISCLOSURE. Notwithstanding Sections 4, 5 and 6 above, in the event that Employee is requested or
required (by oral questions, interrogatories, requests for information or documents, subpoena, civil investigative demand
or other similar process in legal proceedings) to disclose any of the Confidential Information, Employee shall provide
Company with prompt written notice of any such request or requirement so that Company may seek a protective order or
other appropriate remedy, or waive compliance with the provisions of this Agreement.
8. RETURN OF MATERIALS UPON TERMINATION OF EMPLOYMENT. Employee agrees that upon termination
of Employee's employment with Company, for any reason whatsoever, Employee will immediately turn over to
Company all Confidential Information, including but not limited to, any client lists, client contracts, or other client
information in Employee's possession. Employee also agrees that upon Employee’s termination of employment with
Company, for any reason whatsoever, to return all other Company property or equipment, including but not limited to
documents, computer software, and/or other materials related to the business, professional or personal affairs of
Company or any of Company’s clients. Further, Employee will not retain any copies of any of the above materials in
hardcopy, electronic or other form.
9. INVENTIONS.
a.
Employee has attached hereto, as Exhibit A, a list describing all inventions, original works of authorship,
developments, improvements, and trade secrets which were made by him/her prior to his/her employment with
the Company (collectively referred to as “Prior Inventions”), which belong to him/her, which relate to the
Company’s proposed business, products or research and development, and which are not assigned to the
Company hereunder; or, if no such list is attached, Employee represents that there are no such Prior Inventions.
If in the course of Employee’s employment with the Company, Employee incorporates into a Company product,
process or service a Prior Invention owned by him/her or in which Employee has an interest, Employee hereby
grants to the Company a nonexclusive, royalty- free, fully paid-up, irrevocable, perpetual, worldwide license to
make, have made, modify, use and sell such Prior Invention as part of or in connection with such product,
process or service, and to practice any method related thereto.
b. Employee will promptly disclose to the Company, or any persons designated by it, all improvements, inventions,
original works of authorship, developments, concepts, designs, discoveries, ideas, trademarks, trade secrets,
formulae, processes, techniques, know-how and data, whether or not
patentable or copyrightable, made or conceived or reduced to practice or learned by Employee, either alone or
jointly with others, during the period of Employee's employment hereunder, which are related to or useful in the
business of the Company, or result from tasks assigned Employee by the Company, or result from use of
premises owned, leased or contracted for by the Company collectively referred to herein as "Inventions"), except
as provided in section 8.f below.
c.
Employee agrees that all Inventions shall be the sole property of the Company and its assigns, and the Company
and its assigns shall be the sole owner of all patents and other rights in connection therewith. Employee hereby
assigns to the Company any rights Employee may have or acquire in all Inventions. Employee further agrees, as
to all Inventions, to assist the Company in every proper way (but at the Company's expense) to obtain and from
time to time enforce patents and copyrights on and trade secrets relating to Inventions in any and all countries,
and to that end Employee will execute all documents for use in applying for and obtaining such patents and
copyrights thereon and enforcing same, as the Company may desire, together with any assignments thereof to
the Company or persons designated by it.
d. Employee's obligation to assist the Company in obtaining and enforcing patents and copyrights for and trade
secrets relating to Inventions in any and all countries shall continue beyond the termination of Employee's
employment, but the Company shall compensate Employee at a reasonable rate after such termination for time
actually spent by Employee at the Company's request on such assistance.
e.
Employee agrees to keep and maintain adequate and current written records of all Inventions made by him/her
(solely or jointly with others) during the term of his/her employment with the Company. The records will be in
the form of notes, sketches, drawings, and any other format that may be specified by the Company. The records
will be available to and remain the sole property of the Company at all times.
10. THIRD PARTY INFORMATION. Employee acknowledges and agrees that Employee will not utilize any confidential,
proprietary or trade secret information of any other party in Employee's work for the Company, will not knowingly
infringe on the patent, copyright or trademark of any other party in Employee's work for the Company, and is not bound
or restricted in Employee's work for the company as a result of any non-competition or other agreement or agreements to
which Employee is bound.
11. PROHIBITION ON USE OF TRADE SECRET INFORMATION TO SOLICIT CLIENTS. Employee agrees that
during his/her employment with Company and following termination of Employee's employment with Company, for any
reason whatsoever, Employee shall not use any Company trade secrets to contact or solicit any clients or prospective
clients of Company whom he/she served or whose names became known to him/her while in the employ of Company
either on the Employee's behalf or on behalf of any other party engaged in a business which is competitive with
Company.
12. NON-SOLICITATION OF COMPANY EMPLOYEES. Employee agrees that during his/her employment with
Company and for a period of one year following termination of his/her employment with Company, Employee shall
refrain from interfering with Company's employees and shall not directly or indirectly, recruit or attempt to recruit, solicit
or attempt to solicit, induce or attempt to induce, persuade or attempt to persuade any Company employee to leave the
service of Company, whether or not the solicited employee would commit any breach of his or her own employment
terms by so leaving.
13. NO COMPETITION DURING EMPLOYMENT. Employee agrees that during his/her employment with Company,
Employee will not engage in any other employment or activity that might interfere with or be in competition with the
interests of Company.
14. NON-COMPETE AFTER EMPLOYMENT. Employee agrees that for a period one year following the termination of
his/her employment with Company (“Restrictive Period”), he/she will not, directly or indirectly work for a business
directly competitive with the Company within the United States of America. This means
Employee will not engage in any activities involving computer-aided detection or diagnosis or treatment of cancer or
other conditions as an employee, owner, investor, independent contractor, or consultant during the Restrictive Period.
15. REMEDIES. In the event Employee breaches any of the covenants contained herein, Employee acknowledges that the
Company’s remedy at law for damages will be inadequate and that a breach may cause irreparable injury to Company
that could not be compensated by money damages. Therefore Company may enforce this Agreement by seeking
injunctive relief, obtain a court order prohibiting Employee from breaching the Agreement and seek to recover any and
all costs and expenses incurred in enforcing this Agreement, in addition to any other relief provided by applicable law.
The limitations in this Agreement, which apply for a period one year after termination, shall be enforced by a court from
the date of the last breach or violation of the applicable restriction(s) up to twenty-four months after termination of
employment.
16. TRADE SECRETS. The Parties further recognize and acknowledge that neither the above provisions nor Company's
exercise of any rights thereunder shall limit the rights of Company under applicable statutes and common law rules
regarding trade secrets or limit the rights of Company to seek damages relief.
17. TERMINATION OF EMPLOYEE. Violation by Employee of any of these provisions shall, in addition to any other
remedy available to Company, be sufficient basis for immediate termination of Employee as an employee of the
Company.
18. SEVERABILITY AND REFORMATION. The parties agree that in the event a court of competent jurisdiction finds
any provision of this Agreement to be invalid or otherwise unenforceable, the remaining portions of this Agreement will
retain their full force and effect. If a court decides that any provision of this Agreement is too broad, then the court may
limit and/or reform that provision and enforce it as limited and/or reformed.
19. ENTIRE AND SOLE AGREEMENT. The parties agree that this Agreement contains their entire agreement and
supersedes all other agreements and understandings, whether written or oral, covering the subject matter hereof. The
parties warrant that there were no representations, agreements, arrangements or understandings, whether written or oral,
between them relating to the subject matter contained in this Agreement which are not fully expressed herein. No
modification, amendment or waiver of any of the provisions contained in this Agreement, or any future representations,
promise, or condition in connection with the subject matter of this Agreement, shall be binding upon any party to this
Agreement unless made in writing and signed by such party or by a duly authorized officer, partner, or agent of such
party.
20. CHOICE OF LAW AND FORUM. The parties agree that the laws of the State of New Hampshire shall govern the
interpretation and enforcement of this Agreement, without giving effect to that state's choice of law rules and shall
exclusively be enforced by any state or federal court of the State of New Hampshire, and the parties to this Agreement
consent to the jurisdiction and venue of New Hampshire.
21. INDEPENDENT REVIEW AND ADVICE. By signing his/her name below, Employee expressly acknowledges that
he/she has read this Agreement, has had the opportunity to ask Company representatives questions about it, has had the
opportunity to consult with an attorney of his/her choice (at his/her own expense) before signing it, and understands the
contents of this Agreement. Employee further agrees that signing this Agreement is a condition of his/her employment
with Company and payment therefore, which he/she understood before accepting employment with Company.
22. COSTS AND ATTORNEYS FEES. In the event of any dispute, controversy, or other proceedings (including litigation
or arbitration) arising out of or related to this Agreement, the prevailing party shall be entitled to reimbursement of all of
its costs, including without limitation attorney and expert witness fees and costs.
23. SUCCESSORS AND ASSIGNS. All covenants, representations, warranties and agreements of the parties contained
herein shall be binding upon and inure to the benefit of their respective successors and permitted assigns.
Dana R. Brown
EMPLOYEE SIGNATURE:Dana R. Brown (Mar 9, 2023 12:50 MST)
YOUR NAME PRINTED: Dana R. Brown
DATE: Mar 9, 2023
_
Exhibit-10.q
TRANSITION AND SEPARATION AGREEMENT
This Transition and Separation Agreement and General Release (the “Separation Agreement”) is entered into
by and between Stacey Stevens (“Employee”), an individual residing in the State of Massachusetts, and iCAD, Inc., a
Delaware corporation (the “Company”). The Employee and the Company shall herein be referred to as the “Parties.”
WHEREAS, Employee has been employed by the Company pursuant to an Employment Agreement dated
March 1, 2022 (the “Employment Agreement”);
WHEREAS, Employee’s employment with the Company is ending as of the Separation Date, set forth below;
and
WHEREAS, Employee and the Company wish to memorialize in writing the terms upon which the employment
relationship is ending;
THEREFORE, in consideration of the mutual promises herein and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, Employee and the Company agree as follows:
1. Separation From Employment.
(a) Transition of Role. As of March 9, 2023 (the “Transition Date”), Employee shall no longer be
Chief Executive Officer and President of the Company and hereby resigns her position as a member of the Board of
Directors of the Company (the “Board”). A press release and Q&A relating to Employee’s separation is attached hereto
as Exhibit A. The Parties agree that any future press release or public communication concerning Employee’s transition,
resignation, separation or by Employee, with respect to the business, operations or management of the Company, shall
be substantially in the same form as Exhibit A and consistent with the Parties’ obligations in Section 5. Employee shall
serve in the role of Senior Advisor from the Transition Date until the Separation Date, and in such role Employee shall
consult with the Board and with the new Chief Executive Officer on business matters as requested from time to time.
During the transition period, Employee shall work remotely, except as mutually agreed.
(b) Separation Date. Employee’s employment with the Company and all affiliated companies shall
end on the earlier of (i) April 30, 2023 or (ii) the effective date of any resignation of employment by Employee (such
earlier date being the “Separation Date”). Except as otherwise provided in this Separation Agreement, Employee’s active
duties with the Company will cease on the Separation Date.
2. Compensation and Benefits.
(a) Base Compensation. Employee shall continue to receive Employee’s current base salary through
the Separation Date, in accordance with the Company’s normal payroll practices.
(b) Accrued Paid Time Off. On or before the next regular payroll date following the Separation Date,
Employee shall receive payment for five weeks of paid time off (PTO), less any PTO actually taken between January 1,
2023 and the Separation Date.
(c) Severance Payments. If Employee signs (and does not revoke) this Separation Agreement and the
Supplemental Release, in accordance with the procedural requirements stated herein, Employee shall receive severance
payments in the total amount of
$433,333.33, equivalent to 13 months of Employee’s current base salary, payable in the form of salary continuation over
the 13 month period following the Separation Date in accordance with the Company’s normal payroll practices.
Severance payments shall begin on the next regular payroll date following the Supplemental Release Effective Date
(defined in Exhibit B hereto).
(d) Bonus. Employee acknowledges that she will not receive any further bonus
payments.
(e) Equity. The post separation exercise period for all outstanding options to
acquire Common Stock held by Employee, listed on Exhibit C hereto, shall be extended to a date that is 24 months from
the Separation Date.
(f) Employee Benefits.
(i) Group Health Insurance Coverage. Employee’s group health insurance shall continue
through the Separation Date. After such date, the Employee may elect to continue group health insurance at Employee’s
own expense to the extent permitted by applicable law and in accordance with the group health insurance plan.
Additional information about continuation coverage will be provided separately by the plan administrator.
(ii) Other benefits. Except as otherwise expressly stated herein or as otherwise required by
law, as of the Separation Date, Employee shall cease to participate in all employee benefits, plans, policies and practices
provided by the Company.
(g) Legal Fee Reimbursement. The Company shall reimburse Employee up to
$7,500 for the legal fees incurred by her in connection with the review, negotiation and execution of this Agreement
upon receipt of an invoice from Employee’s legal representative.
3. Cessation of Authority and Continuing Duties.
(a) Cessation of Authority. Except as provided in any such agreement between the parties, Employee
understands and agrees that as of the Separation Date, Employee is no longer authorized to incur any expenses,
obligations or liabilities, or to make any commitments on behalf of the Company.
(b) Transition. During the period of thirteen months following the Separation Date, Employee agrees
to cooperate reasonably and at mutually convenient times and locations with the Company regarding any transitional
assistance that may be requested by the Company, including (i) answering questions about matters relating to the
business of the Company or its affiliates as to which Employee has knowledge; and (ii) forwarding to the appropriate
person any
email, voicemail message or other communication received by Employee after the Separation Date that relates to the
business of the Company or its affiliates.
(c) Cooperation. Section 15 of the Employment Agreement is expressly incorporated herein by
reference.
4. Return of Company Materials and Property. Employee understands and agrees that, no later than the
Separation Date, Employee shall return any and all Company-owned computer equipment, including laptops and other
computer accessories, cell phones, security cards, keys, credit cards, marketing materials; any Company customer files,
and all documents, data, records, notes, passwords, drawings, manuals, and all other tangible information in whatever
form which pertains to the Company or any of the Company’s customers; and the Employee will not retain any such
information or any reproduction or excerpt thereof, unless otherwise permitted by a consulting agreement or other
agreed relationship between the parties.
5. Nondisparagement and Messaging. For a period from the Effective Date until five years after the
Separation Date, Employee will not make any statements that are derogatory or disparaging toward the Company or the
Company Parties, as defined below, or the Company’s management, products or services. For a period from the
Effective Date until five years after the Separation Date, the Company agrees that the members of Company’s Board and
senior management team will not make any statements that are derogatory or disparaging toward Employee. Nothing in
this paragraph shall prohibit any person from making any truthful statement in accordance with a subpoena, a court
order, a government agency investigation, or as otherwise required by law. The Company and Employee agree that
Employee’s separation shall be messaged in all settings (both internally and externally) as follows: “Stacey has elected
to resign from employment for personal reasons.” The Company agrees that no member of the Board or senior
management team will deviate from this agreed-upon messaging with respect to any communication (written or verbal)
with any person or entity regarding Employee’s separation from employment. Furthermore, during the period in which
Employee is receiving severance payments, Employee will not make, effect, initiate, cause or assist in any “solicitation”
of “proxies” (as those terms are used in the proxy rules of the Securities and Exchange Commission) or consents with
respect to any securities of the Company.
6. Restrictive Covenants. The restrictive covenants contained in Section 5.1 of the Employment Agreement
are incorporated herein by reference and shall continue in full force and effect in accordance with their terms. The Non-
Solicitation, Non-Disclosure and Inventions Assignment Agreement (the “NDA”), described in Section 5.2 of the
Employment Agreement, shall also remain in full force and effect in accordance with its terms.
7. Indemnification. Section 10 of the Employment Agreement is expressly preserved and incorporated by
reference herein.
8. General Release by Employee.
(a) Release. Except as provided in Section 8(d), Employee, on behalf of himself/herself and
Employee’s spouse, heirs, executors, administrators, assigns, insurers, attorneys and other persons or entities, acting or
purporting to act on Employee’s behalf
(collectively, the “Employee Parties”), does hereby irrevocably and unconditionally release, acquit and forever discharge
the Company, and each of its officers, directors, employees, agents, representatives, predecessors, successors, assigns,
insurers, and attorneys (collectively, the “Company Parties”), from any and all actions, causes of action, suits, claims,
obligations, liabilities, debts, demands, contentions, damages, judgments, levies and executions of any kind, whether in
law or in equity, known or unknown, including but not limited to claims which the Employee Parties have or have had
against the Company Parties by reason of, arising out of, related to, or resulting from Employee’s employment with the
Company or the termination thereof, existing as of the Effective Date (defined in Section 20 below).
(b) Specific Types of Claims Included in Release. The claims released herein specifically include,
but are not limited to, the following types of claims:
(i) Claims for compensation or employee benefits, such as wages, salary, bonuses, commissions,
incentive payments, overtime pay, vacation pay, holiday pay or reimbursement of expenses, or claims arising
under applicable wage payment laws.
(ii) Claims relating to employment discrimination or harassment, such as discrimination or
harassment based on race, sex, age, religion, national origin, handicap, disability, marital status, sexual
orientation, gender identity, military service, veteran status or other characteristics protected by law. This
includes claims arising under Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the civil
rights statute codified at 42 U.S.C. § 1981, the Age Discrimination in Employment Act, the Americans with
Disabilities Act, the Equal Pay Act, the Older Workers Benefit Protection Act, the Lilly Ledbetter Fair Pay Act,
the Genetic Information Nondiscrimination Act, and any other federal, state or local law of similar purpose or
effect.
(iii) Claims relating to employee leave, such as the Family and Medical Leave Act and the
Uniformed Services Employment and Reemployment Rights Act, or any other federal, state or local leave law.
(iv) Claims relating to retaliation or whistleblowing, such as the anti-retaliation provisions of the
Sarbanes-Oxley Act or the Dodd-Frank Wall Street Reform and Consumer Protection Act; the anti-retaliation
provisions of the federal employment discrimination statutes or the Fair Labor Standards Act; or any other
federal or state law regarding whistleblower retaliation.
(v) Claims for wrongful discharge or based on laws otherwise restricting an employer’s ability to
terminate employees; claims arising in tort or based on personal injury, defamation, invasion of privacy, fraud,
misrepresentation or infliction of emotional distress; claims based on breach of contract or breach of a covenant
of good faith and fair dealing; or any other federal, state or local law governing the employer-employee
relationship, such as the Employee Retirement Income Security Act; the Employee Polygraph Protection Act;
the Worker Adjustment and Retraining Notification Act, or the Fair Credit Reporting Act.
(c) Release of Unknown Claims. Employee understands and acknowledges that the foregoing release
may include claims that Employee may not know about. It is Employee’s knowing and voluntary intent to release all
such known and unknown claims, even though Employee recognizes that someday Employee might learn that facts
Employee currently believes to be true are untrue and even though Employee might then regret having signed this
Separation Agreement. Nevertheless, Employee is assuming that risk and Employee agrees that this Separation
Agreement will remain effective in all respects in any such case. Employee expressly waives all rights Employee might
have under any law that is intended to protect Employee from waiving unknown claims. Employee understands the
significance of doing so.
(d) Exceptions to Release. The foregoing release does not release or impair:
(i) the Company’s promises and obligations under this Separation Agreement; (ii) any rights Employee has under
applicable workers compensation laws; (iii) any vested rights under a qualified retirement plan; (iv) any other claims that
cannot lawfully be released; (v) Employee’s ability to communicate with the Equal Employment Opportunity
Commission or any other governmental agency, as long as Employee does not seek any personal relief for any claims
released herein; or (vi) any claims arising after the date of Employee’s execution of this Separation Agreement.
9. Release by the Company.
(a) Release. Except as provided in Section 9(b), the Company and the Company Parties do hereby
irrevocably and unconditionally release, acquit and forever discharge Employee and the Employee Parties, from any and
all actions, causes of action, suits, claims, obligations, liabilities, debts, demands, contentions, damages, judgments,
levies and executions of any kind, whether in law or in equity, known or unknown, including but not limited to claims
which the Company has or has had against the Employee Parties by reason of, arising out of, related to, or resulting from
Employee’s employment with the Company or the termination thereof, existing as of the Effective Date.
(b) Exceptions to Release. The foregoing release does not release or impair:
(i) Employee’s promises and obligations under this Separation Agreement; (ii) any claims by the Company or its
shareholders based on fraud, embezzlement or breach of fiduciary duty; (iii) any claims that cannot lawfully be released;
(iv) any required clawback of incentive compensation in accordance with applicable securities regulations; or (v) any
claims arising after the date of Employee’s execution of this Separation Agreement. As of the date of the Company’s
execution of this Separation Agreement, the Company represents and warrants that it is not aware of any facts or
circumstances supporting claims against Employee for fraud, embezzlement, breach of fiduciary duty or violation of her
obligations under the Employment Agreement.
10. Employee Representations. Employee hereby acknowledges and agrees as follows:
(a) No litigation or other proceeding has been filed or is pending by the Employee Parties against the
Company Parties; no person or entity other than Employee has or has had any interest in the matters released herein;
Employee has the sole right, capacity, and exclusive authority to execute this Separation Agreement; and Employee has
not sold, assigned,
transferred, conveyed or otherwise disposed of any of the claims, demands, obligations, or causes of action released
herein.
(b) The release given by Employee in Section 8 of this Separation Agreement is given solely in
exchange for the consideration set forth in Section 2 of this Separation Agreement, which is an express condition of
receipt of severance under the Employment Agreement.
(c) By entering into this Separation Agreement, Employee does not waive rights or claims that may
arise after the date this Separation Agreement is executed.
(d) Employee has been advised to consult an attorney prior to entering into this Separation
Agreement, and has had the opportunity to do so.
(e) Employee has been given a period of at least twenty-one (21) days within which to consider the
terms of this Separation Agreement, and if Employee chooses to sign and return this Separation Agreement in less than
21 days, Employee does so of Employee’s own free will and volition.
(f) Employee may revoke this Separation Agreement by providing written notice of revocation to the
Company’s General Counsel, Patricia Padurean, within seven (7) days after the date on which Employee signs this
Separation Agreement. In the event Employee revokes this Separation Agreement during the seven day revocation
period, this Separation Agreement shall be entirely void and Employee shall not be entitled to any of the consideration
provided in Paragraph 2 of this Separation Agreement.
11. [Section intentionally left blank]
12. No Other Representations. Employee represents and acknowledges that in executing this Separation
Agreement Employee does not rely, and has not relied, upon any representation or statement not set forth herein made
by any of the Company Parties or by any of the Company Parties’ agents, representatives, or attorneys with regard to the
subject matter, basis, or effect of this Separation Agreement or otherwise.
13. No Admission of Liability. This Separation Agreement shall not be construed as an admission of liability
by the Company or the Employee or an admission that the Company or Employee has acted in any way wrongfully
towards the other. The parties specifically deny and disclaim any such liability or wrongful conduct.
14. Taxation and Withholding. Employee acknowledges that payments and benefits hereunder may be taxable
and that the Company makes no representation or warranty regarding the income tax effects of any payment or benefit
provided hereunder. Employee shall be solely responsible for Employee’s liability with respect to all payments and
benefits provided under this Separation Agreement. Company may withhold from any amounts payable under this
Separation Agreement such federal, state or local taxes as shall be required to be withheld pursuant to any applicable law
or regulation.
15. Knowledgeable Decision By Employee. Employee represents and warrants that Employee has read all the
terms of this Separation Agreement. Employee understands the terms of this Separation Agreement and understands that
this Separation Agreement releases forever the Company Parties from any legal action arising from Employee’s
employment relationship with the Company, and the termination of that relationship between Employee and the
Company. Employee is voluntarily signing and delivering this Separation Agreement of Employee’s own free will in
exchange for the parties’ mutual agreement to execute this Separation Agreement, which Employee acknowledges and
agrees is adequate and satisfactory.
16. Severability. In the event any portion or clause of this Separation Agreement is deemed invalid or
unenforceable in a court of law, the remainder of the Separation Agreement shall be severed from the invalid or
unenforceable portion.
17. Entire Agreement. This Separation Agreement expresses the entire agreement of the parties with respect
to its subject matter. Any prior agreement (whether written or oral) between the parties with respect to the subject matter
of this Separation Agreement is null and void, except that the NDA, documents pertaining to Employee’s equity
ownership, and certain provisions of the Employment Agreement shall survive as further described in this Separation
Agreement. This Separation Agreement may only be modified in a writing signed by both parties.
18. Assignment. This Separation Agreement shall accrue to the benefit of, and be binding upon, the Company
and its successors and assigns, and shall be freely assignable to any entity with which the Company may merge or
otherwise combine, or to which the Company may sell all or substantially all of its assets. No assignment of this
Agreement by the Company shall be effective unless the successor or assign acknowledges its obligations to honor all of
the Company’s promises and obligations under this Separation Agreement, including (without limitation) the obligation
to provide the compensation and benefits described in Section 2. This Separation Agreement is personal to the Employee
and may not be assigned by Employee.
19. Governing Law. This Separation Agreement shall be construed in accordance with, and governed by, the
laws of the State of Delaware.
20. Effective Date. For purposes of this Separation Agreement, the “Effective Date” of this Separation
Agreement shall be the date on which this Separation Agreement becomes effective, which shall be the date which is
exactly eight (8) days following the Execution Date, unless this Separation Agreement has been revoked by Employee
prior to such date in accordance with the provisions of this Separation Agreement. The “Execution Date” shall mean that
date on which this Separation Agreement is signed by Employee.
21. Offer Period. The signed original of this Separation Agreement must be returned to the Chief Legal
Officer of the Company no later than March 9, 2023 or this offer will be considered withdrawn.
NOTICE: THIS SEPARATION AGREEMENT CONTAINS A WAIVER OF LEGAL RIGHTS. YOU
SHOULD READ IT CAREFULLY AND CONSIDER SEEKING THE ADVICE OF AN ATTORNEY (AT
YOUR OWN EXPENSE) BEFORE SIGNING IT.
IN WITNESS WHEREOF, the parties have executed this Separation Agreement, which shall be deemed
effective as of the “Effective Date,” as defined in Section 20 above.
iCAD, Inc.
By:
Printed Name:
Dana Brown
Title: Executive Chairman
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Stacey Stevens
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Date of Signature
EXHIBIT A
PRESS RELEASE AND Q&A
March 10, 2023
iCAD Announces Leadership Transition
Stacey Stevens Resigns as President and CEO and as a Member of the Board
Dana Brown Named President and CEO and Chairman of the Board
NASHUA, N.H. – March 10, 2023 - iCAD, Inc. (NASDAQ: ICAD), a global medical technology leader providing
innovative cancer detection and therapy solutions, today announced the Board of Directors has accepted the resignation,
for personal reasons, of Stacey Stevens as President and CEO and named Dana Brown as President and Chief Executive
Officer, effective immediately. Ms. Brown will also retain her position as Chairman of the Board.
The Board congratulates Ms. Stevens on her outstanding leadership and thanks her for her dedicated service of over 16
years that has led to numerous successes for the organization. Ms. Stevens joined iCAD as its Senior Vice President
Marketing and Strategy in 2006. Since then, she helped to build important strategic partnerships, improve and stabilize
shareholder and customer relationships, usher in the transition from a perpetual license business model to a subscription
approach among many other accomplishments. Her marketing and strategy, sales and partnership building skills have
created a foundational structure that will serve iCAD for years to come and are a true testament to Ms. Stevens’ skillset
as a leader. “We cannot thank Ms. Stevens enough for the commitment, passion, creativity, and enthusiasm she has
given iCAD during her tenure,” said Dr. Susan Wood, member of iCAD’s Board of Directors and Chairman of the
Compensation Committee.
"Dana takes the reins of this great company at a time of transformation, and the Board has every confidence that she is
the best leader to set the vision and drive the plans for the Company's continued success and growth. She has the right
mix of skills and experience to lead us forward having run large, complex technology organizations, delivered strong
financial and operational results in the face of turnarounds, and overseen strategy and innovation for the world’s leading
breast cancer organization," said Dr. Rakesh Patel, member of iCAD’s Board of Directors and Chairman of the
Nominating and Corporate Governance committee.
Ms. Brown said, "I'm thrilled to be leading this incredible company. Working alongside our talented team, our Board,
our clients and partners, I am committed to upholding our vision to be the world’s most pervasive and personalized suite
of AI cancer detection solutions for our shareholders and stakeholders. Breast cancer is the most common cancer in
women worldwide and the second leading cause of cancer death among women in the U.S. With iCAD’s early detection
technology, we have the ability to detect cancers early thereby giving individuals the opportunity for more positive
outcomes and more lives saved. I am energized by this challenge and look forward to guiding iCAD’s continued
success."
iCAD expects to file its Annual Report on Form 10-K for the period ending December 31, 2023 by Tuesday, March 28,
2023.
About iCAD, Inc.
Headquartered in Nashua, NH, iCAD® is a global medical technology leader providing innovative cancer detection and
therapy solutions. For more information, visit www.icadmed.com.
Forward-Looking Statements
Certain statements contained in this News Release constitute “forward-looking statements” within the meaning of the
Private Securities Litigation Reform Act of 1995, including statements about the expansion of access to the Company’s
products, improvement of performance, acceleration of adoption, expected benefits of ProFound AI®, the benefits of the
Company’s products, and future prospects for the Company’s technology platforms and products. Such forward-looking
statements involve a number of known and unknown risks, uncertainties and other factors which may cause the actual
results, performance, or achievements of the Company to be materially different from any future results, performance, or
achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited, to the
Company’s ability to achieve business and strategic objectives, the willingness of patients to undergo mammography
screening in light of risks of potential exposure to Covid-19, whether mammography screening will be treated as an
essential procedure, whether ProFound AI will improve reading efficiency, improve specificity and sensitivity, reduce
false positives and otherwise prove to be more beneficial for patients and clinicians, the impact of supply and
manufacturing constraints or difficulties on our ability to fulfill our orders, uncertainty of future sales levels, to defend
itself in litigation matters, protection of patents and other proprietary rights, product market acceptance, possible
technological obsolescence of products, increased competition, government regulation, changes in Medicare or other
reimbursement policies, risks relating to our existing and future debt obligations, competitive factors, the effects of a
decline in the economy or markets served by the Company; and other risks detailed in the Company’s filings with the
Securities and Exchange Commission. The words “believe,” “demonstrate,” “intend,” “expect,” “estimate,” “will,”
“continue,” “anticipate,” “likely,” “seek,” and similar expressions identify forward-looking statements. Readers are
cautioned not to place undue reliance on those forward-looking statements, which speak only as of the date the statement
was made. The Company is under no obligation to provide any updates to any information contained in this release. For
additional disclosure regarding these and other risks faced by iCAD, please see the disclosure contained in our public
filings with the Securities and Exchange Commission, available on the Investors section of our website at
http://www.icadmed.com and on the SEC’s website at http://www.sec.gov.
Contact:
Media Inquiries: Jessica Burns, iCAD
+1-201-423-4492
jburns@icadmed.com
Investor Inquiries: iCAD Investor Relations ir@icadmed.com
Stacey’s Resignation Q&A Was Stacey terminated or asked to resign?
No, Stacey made the decision to resign from her position for a variety of personal reasons. These reasons do not relate to
her confidence in the business and future strategy and outlook for the company. She believes strongly in the direction of
the company and the transformation of the AI business into a long- term recurring revenue model. The Board and the
employees are very appreciative of Stacey’s leadership and long-term contribution towards building a company that is
making such a positive impact in the lives of so many women.
Was this all planned back in January when Dana became Executive Chair? No, Stacey’s resignation is unrelated to that
change.
Is Stacey leaving for another position? No, she is leaving for personal reasons.
How long will Stacey continue to work at iCAD/transition the role to Dana?
Stacey will continue to work as a senior advisor to the company through the end of April. After that, she will always be
available to Dana or any employee for consultations or support as needed.
How will Stacey’s relationships with customers, investors, analysts be transitioned?
Stacey has identified a comprehensive list of all key relationships and will work proactively with Dana to ensure a
smooth transition.
Why did Tim Irish resign and are these resignations related?
Tim’s reasons are documented in his resignation letter filed in the 8K. The decisions were made separately.
With respect to any public or private inquiry directed to Stacey relating to the Company’s management, products or
services
I am not in a position to discuss with you any matter relating to the Company’s management or business.
EXHIBIT B SUPPLEMENTAL RELEASE
(to be executed by Employee no earlier than April 30, 2023 and no later than May 15, 2023)
WHEREAS, Stacey Stevens (“Employee”) has been an employee of iCAD, Inc. (“the Company”); and
WHEREAS, as a condition of receiving the severance payments and other consideration described in Section 2
of the Transition and Separation Agreement dated March , 2023 (the “Separation Agreement”), Employee must execute
this supplemental full release of claims;
THEREFORE, in consideration of the receipt of the payments outlined in Section 2 of the Separation
Agreement, Employee agrees as follows:
1. General Release by the Employee.
(a) Release. Employee, on behalf of himself/herself and Employee’s spouse, heirs, executors,
administrators, assigns, insurers, attorneys and other persons or entities, acting or purporting to act on Employee’s behalf
(collectively, the “Employee Parties”), does hereby irrevocably and unconditionally release, acquit and forever discharge
the Company, and its officers, directors, members, employees, agents, representatives, predecessors, successors, assigns,
insurers, and attorneys (collectively, the “the Company Parties”), from any and all actions, causes of action, suits,
claims, obligations, liabilities, debts, demands, contentions, damages, judgments, levies and executions of any kind,
whether in law or in equity, known or unknown, including but not limited to claims which the Employee Parties have or
have had against the Company Parties by reason of, arising out of, related to, or resulting from Employee’s employment
with the Company or the termination thereof, existing as of the Supplemental Release Effective Date (defined in Section
6 below).
(b) Specific Types of Claims Included in Release. The claims released herein specifically include,
but are not limited to, the following types of claims:
(i) Claims for compensation or employee benefits, such as wages, salary, bonuses,
commissions, incentive payments, overtime pay, vacation pay, holiday pay or reimbursement of expenses, or claims
arising under applicable wage payment laws.
(ii) Claims relating to employment discrimination or harassment, such as discrimination or
harassment based on race, sex, age, religion, national origin, handicap, disability, marital status, sexual orientation,
gender identity, military service, veteran status or other characteristics protected by law. This includes claims arising
under Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991, the civil rights statute codified at 42 U.S.C.
§ 1981, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Equal Pay Act, the Older
Workers Benefit Protection Act, the Lilly Ledbetter Fair Pay Act, the Genetic Information Nondiscrimination Act, and
any other federal, state or local law of similar purpose or effect.
(iii) Claims relating to employee leave, such as the Family and Medical Leave Act and the
Uniformed Services Employment and Reemployment Rights Act, or any other federal, state or local leave law.
(iv) Claims relating to retaliation or whistleblowing, such as the anti- retaliation provisions
of the Sarbanes-Oxley Act or the Dodd-Frank Wall Street Reform and Consumer Protection Act; the anti-retaliation
provisions of the federal employment discrimination statutes or the Fair Labor Standards Act; or any other federal or
state law regarding whistleblower retaliation.
(v) Claims for wrongful discharge or based on laws otherwise restricting an employer’s
ability to terminate employees; claims arising in tort or based on personal injury, defamation, invasion of privacy, fraud,
misrepresentation or infliction of emotional distress; claims based on breach of contract or breach of a covenant of good
faith and fair dealing; or any other federal, state or local law governing the employer-employee relationship, such as the
Employee Retirement Income Security Act; the Employee Polygraph Protection Act; the Worker Adjustment and
Retraining Notification Act, or the Fair Credit Reporting Act.
(c) Release of Unknown Claims. Employee understands and acknowledges that the foregoing release
may include claims that Employee may not know about. It is Employee’s knowing and voluntary intent to release all
such known and unknown claims, even though Employee recognizes that someday Employee might learn that facts
Employee currently believes to be true are untrue and even though Employee might then regret having signed this
Supplemental Release. Nevertheless, Employee is assuming that risk and Employee agrees that this Supplemental
Release will remain effective in all respects in any such case. Employee expressly waives all rights Employee might
have under any law that is intended to protect Employee from waiving unknown claims. Employee understands the
significance of doing so.
(d) Exceptions to Release. The foregoing release does not release or impair:
(i) the Company’s promises and obligations under the Separation Agreement, including but not limited to the
Company’s obligation to pay severance payments and other consideration to Employee under Section 2 of the Separation
Agreement; (ii) any rights Employee has under applicable workers compensation laws; (iii) any vested rights under a
qualified retirement plan;
(iv) any other claims that cannot lawfully be released; (v) Employee’s ability to communicate with the Equal
Employment Opportunity Commission or any other governmental agency, as long as Employee does not seek any
personal relief for any claims released herein; or (vi) any claims arising after the date of Employee’s execution of this
Supplemental Release.
2. Representations by Employee.Employee hereby acknowledges and agrees as follows:
(a) Employee has read this Supplemental Release and fully understands the effect hereof, Employee
executes this Supplemental Release of Employee’s own free will and accord for the consideration set forth herein, and
Employee is not relying on any representations whatsoever of the Company, other than those set forth herein, as an
inducement to enter into this Supplemental Release.
(b) No litigation or other proceeding has been filed or is pending by the Employee Parties against the
Company Parties; no person or entity other than Employee has or has had any interest in the matters released herein;
Employee has the sole right, capacity, and exclusive authority to execute this Supplemental Release; and Employee has
not sold, assigned, transferred, conveyed or otherwise disposed of any of the claims, demands, obligations, or causes of
action released herein.
(c) The release given by Employee in this Supplemental Release is given solely in exchange for the
consideration set forth in Section 2 of the Separation Agreement, which is an express condition of receipt of severance
under the Employment Agreement.
(d) By entering into this Supplemental Release, Employee does not waive rights or claims that may
arise after the date this Supplemental Release is executed.
(e) Employee has been advised to consult an attorney prior to entering into this Supplemental
Release, and has had the opportunity to do so.
(f) Employee covenants and agrees that Employee has been given at least twenty-one (21) days to
contemplate the terms of this Supplemental Release before executing it, and that if Employee chooses to execute it in
fewer than 21 days, Employee does so voluntarily and of Employee’s own free will and volition.
(g) Employee may revoke this Supplemental Release by providing written notice of revocation to the
Company’s Chief Legal Officer within seven (7) days after the date on which Employee signs this Supplemental
Release. In the event Employee revokes this Supplemental Release during the seven day revocation period, this
Supplemental Release shall be entirely void and Employee shall not be entitled to the consideration provided in Section
2(c) of the Separation Agreement. This Supplemental Release shall not become effective or enforceable until the
Supplemental Release Effective Date (defined in Section 6 below).
3. No Admission of Liability. The Parties acknowledge that this Supplemental Release shall not be construed
as an admission of liability by the Company or Employee or an admission that the Company or Employee has acted in
any way wrongfully towards the other.
4. Governing Law. This Release shall be construed in accordance with, and governed by, the laws of the State
of Delaware.
5. Effective Date. For purposes of this Release, the “Supplemental Release Effective Date” of this Release
shall be the date on which this Release becomes effective, which shall be the date which is exactly eight (8) days
following the date on which this Release is signed by Employee, unless this Supplemental Release has been revoked by
Employee prior to such date in accordance with the provisions of Section 2(g) of this Supplemental Release.
THIS SUPPLEMENTAL RELEASE SHOULD BE SIGNED NO EARLIER THAN APRIL 30, 2023 AND
NO LATER THAN MAY 15, 2023.
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Stacey Stevens
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Date of signature
EXHIBIT C
STOCK OPTION PLAN OPTION
TYPE
GRANT
DATE/VESTING
START DATE
SHARE
BALANCE
VESTED
BALANCE
GRANT
PRICE
2012 Stock Inventive
Plan
ISO
2/5/2015
20,658
20,658
$9.00
2012 Stock Inventive
Plan
NQSO
2/5/2015
4,342
4,342
$9.00
2012 Stock Inventive
Plan
ISO
3/25/2019
16,667
16,667
$4.38
2016 Stock Inventive
Plan
NQSO
5/7/2020
18,231
18,231
$12.84
2016 Stock Inventive
Plan
ISO
5/7/2020
4,945
4,945
$12.84
2016 Stock Inventive
Plan
NQSO
2/15/2021
4,481
4,481
$18.00
2016 Stock Inventive
Plan
NQSO
2/15/2021
29,500
19,667
$18.00
2016 Stock Inventive
Plan
NQSO
2/15/2021
25,500
17,000
$18.00
2016 Stock Incentive
Plan
NQSO
3/28/2022
200,000
66,667*
$4.15
EXHIBIT 21.1
Subsidiaries of iCAD, Inc.
Name
Jurisdiction of Incorporation/Organization
Xoft, Inc.
Delaware
Xoft Solutions, LLC
Delaware
iCad France, LLC
Delaware
iCad Italy, LLC
Delaware
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
iCAD, Inc.
Nashua, New Hampshire
We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (No. 333-228514, 333-229452 and
333-235887) and Form S-8 (No. 333-201874, 333-187660, 333-99973, 333-119509, 333-139023, 333-144671, 333-161959, 333-
211656, 333-229453 and 333-235580) and Form S-3MEF (No. 333-253808) of iCAD, Inc. and subsidiaries of our report dated March
31, 2023, relating to the consolidated financial statements which appear in this Annual Report on Form 10-K.
/s/ BDO USA, LLP
Boston, Massachusetts
March 31, 2023
EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
I, Dana Brown, certify that:
1. I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 31, 2022 of iCAD, Inc.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based
on such evaluation; and;
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the
equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: March 31, 2023
/s/ Dana Brown
Dana Brown
Chief Executive Officer
(Principal Executive Officer)
EXHIBIT 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
I, Daniel J. Shea, certify that:
1. I have reviewed this Annual Report on Form 10-K for the fiscal year ended December 31, 2022 of iCAD, Inc.
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with
respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all
material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in
this report;
4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in
Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made
known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based
on such evaluation; and;
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially
affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over
financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the
equivalent functions):
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial
information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the
registrant’s internal control over financial reporting.
Date: March 31, 2023
/s/ Daniel J. Shea
Daniel J. Shea
Chief Financial Officer (Interim)
(Principal Financial Officer)
EXHIBIT 32.1
iCAD, Inc.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of iCAD, Inc. (the “Company”) on Form 10-K for the fiscal year ended December 31, 2022 (the
“Report”), I, Dana Brown, the Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
/s/ Dana Brown
Dana Brown
Chief Executive Officer
(Principal Executive Officer)
Date: March 31, 2023
EXHIBIT 32.2
iCAD, Inc.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Annual Report of iCAD, Inc. (the “Company”) on Form 10-K for the fiscal year ended December 31, 2022 (the
“Report”), I, Daniel J. Shea, the Interim Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
(1)
The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as
amended; and
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of
operations of the Company.
/s/ Daniel J. Shea
Daniel J. Shea
Chief Financial Officer (Interim)
(Principal Financial Officer)
Date: March 31, 2023