iCAD(ICAD) - 2025 Q1 - Quarterly Report

PART I FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements, management's discussion, market risk, and internal controls for the period Item 1 Financial Statements This section presents the unaudited condensed consolidated financial statements of iCAD, Inc. for the three months ended March 31, 2025 and 2024, including balance sheets, statements of operations, stockholders' equity, and cash flows, along with detailed notes explaining the basis of presentation, significant accounting policies, and specific financial items Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and stockholders' equity at specific dates Condensed Consolidated Balance Sheets (In thousands): | Item | March 31, 2025 | December 31, 2024 | | :-------------------------------- | :------------- | :---------------- | | Assets | | | | Cash and cash equivalents | $20,032 | $17,206 | | Total current assets | $28,122 | $26,427 | | Total assets | $39,472 | $37,540 | | Liabilities & Stockholders' Equity | | | | Total current liabilities | $7,692 | $7,561 | | Total liabilities | $8,684 | $8,856 | | Total stockholders' equity | $30,788 | $28,684 | | Total liabilities and stockholders' equity | $39,472 | $37,540 | - Cash and cash equivalents increased by $2,826 thousand from December 31, 2024, to March 31, 2025[13] - Total assets increased by $1,932 thousand, and total stockholders' equity increased by $2,104 thousand from December 31, 2024, to March 31, 2025[13] Condensed Consolidated Statements of Operations This section outlines the company's financial performance over specific periods, presenting revenues, expenses, and net loss Condensed Consolidated Statements of Operations (In thousands, except per share data): | Item | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Products and licenses revenue | $3,244 | $3,102 | | Services revenue | $1,630 | $1,852 | | Total revenue | $4,874 | $4,954 | | Gross profit | $4,189 | $4,113 | | Loss from operations | $(1,129) | $(1,441) | | Net loss and comprehensive loss | $(833) | $(1,222) | | Net loss per share, basic and diluted | $(0.03) | $(0.05) | | Weighted average shares (basic and diluted) | 26,710 | 26,354 | - Total revenue decreased by 1.6% YoY, from $4,954 thousand in Q1 2024 to $4,874 thousand in Q1 2025[15] - Net loss improved by 31.8% YoY, from $(1,222) thousand in Q1 2024 to $(833) thousand in Q1 2025[15] - Net loss per share improved from $(0.05) in Q1 2024 to $(0.03) in Q1 2025[15] Condensed Consolidated Statements of Stockholders' Equity This section details changes in the company's equity, including common stock, additional paid-in capital, and accumulated deficit Condensed Consolidated Statements of Stockholders' Equity (In thousands, except shares): | Item | Balance at Dec 31, 2024 | Issuance of Common Stock | Stock-based Compensation | Net Loss | Balance at Mar 31, 2025 | | :-------------------------- | :---------------------- | :----------------------- | :----------------------- | :------- | :---------------------- | | Common Stock (Par Value) | $265 | $8 | — | — | $273 | | Additional Paid-in Capital | $307,133 | $2,327 | $602 | — | $310,062 | | Accumulated Deficit | $(277,299) | — | — | $(833) | $(278,132) | | Total Stockholders' Equity | $28,684 | $2,335 | $602 | $(833) | $30,788 | - Total stockholders' equity increased by $2,104 thousand from December 31, 2024, to March 31, 2025, primarily due to common stock issuance and stock-based compensation, partially offset by net loss[18] Condensed Consolidated Statements of Cash Flows This section summarizes the cash inflows and outflows from operating, investing, and financing activities over specific periods Condensed Consolidated Statements of Cash Flows (In thousands): | Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by (used for) operating activities | $60 | $(1,180) | | Net cash provided by (used for) investing activities | $431 | $(206) | | Net cash provided by financing activities | $2,335 | $0 | | Increase (decrease) in cash and cash equivalents | $2,826 | $(1,386) | | Cash and cash equivalents, end of period | $20,032 | $20,284 | - Operating activities generated $60 thousand in cash in Q1 2025, a significant improvement from using $1,180 thousand in Q1 2024[21] - Investing activities provided $431 thousand in Q1 2025, primarily from the sale of a former business, compared to using $206 thousand in Q1 2024[21][23] - Financing activities provided $2,335 thousand in Q1 2025, driven by common stock issuances[21] Notes to Condensed Consolidated Financial Statements This section offers detailed explanations and additional information supporting the condensed consolidated financial statements Note 1 – Basis of Presentation and Significant Accounting Policies This note outlines the financial statements' preparation basis, key accounting policies, and the company's operating segment - The financial statements are prepared in accordance with US GAAP and reflect all necessary adjustments for fair presentation[22] - The Company operates one reporting segment: Cancer Detection, focusing on advanced image analysis and workflow products[26] - Approximately 14% of total revenue in Q1 2025 was derived from customers outside the United States, down from 18% in Q1 2024, with global conflicts and tariffs posing potential risks[27][28] - The Company is evaluating new FASB ASUs (2023-09 and 2024-03) regarding income tax and income statement expense disclosures, effective for fiscal years beginning after December 15, 2024 and 2026, respectively[29][30] Note 2 – Fair Value Measurements This note describes the company's methodology for fair value measurements, classifying financial instruments into a three-level hierarchy - The Company measures fair value using a three-level hierarchy, with money market funds classified as Level 1[32][33] Fair Value Measurements (In thousands): | Asset | March 31, 2025 (Level 1) | December 31, 2024 (Level 1) | | :------------------ | :----------------------- | :------------------------ | | Money market accounts | $15,868 | $16,520 | | Total Assets | $15,868 | $16,520 | Note 3 - Revenue This note provides a detailed disaggregation of revenue by category and sales channel, highlighting shifts in business models Revenue Disaggregation (In thousands): | Category | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------- | :-------------------------------- | :-------------------------------- | | Products and perpetual licenses | $1,245 | $2,290 | | Subscription term licenses | $1,785 | $812 | | Cloud subscriptions | $214 | $0 | | Services and support | $1,630 | $1,852 | | Total Revenue | $4,874 | $4,954 | | Direct sales force | $3,711 | $3,572 | | OEM partners | $1,163 | $1,382 | - Subscription term licenses revenue significantly increased by 119.8% YoY, from $812 thousand in Q1 2024 to $1,785 thousand in Q1 2025, reflecting a shift towards subscription and cloud models[41][107][108] - Cloud subscriptions generated $214 thousand in Q1 2025, up from zero in Q1 2024, indicating the successful launch and adoption of ProFound Cloud[41][113] - Services and support revenue decreased by 12.0% YoY, from $1,852 thousand to $1,630 thousand, partially due to customer migration to subscription and cloud models[41][109] - The Company expects to recognize approximately $4.0 million of its remaining performance obligations as revenue over the next 12 months[51] Note 4 – Net Loss per Common Share This note presents the calculation of net loss per common share, including the impact of potentially dilutive securities Net Loss per Common Share: | Item | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net loss | $(833) | $(1,222) | | Shares used in basic and diluted EPS | 26,710 | 26,354 | | Net loss per share - basic and diluted | $(0.03) | $(0.05) | - Stock options excluded from diluted EPS calculation due to their antidilutive effect totaled 3,064,678 shares as of March 31, 2025, an increase from 3,015,924 shares in the prior year[53] Note 5 – Inventories This note provides a breakdown of inventory components, including raw materials, work in process, and finished goods Inventory Composition (In thousands): | Item | March 31, 2025 | December 31, 2024 | | :---------------- | :------------- | :---------------- | | Raw materials | $460 | $545 | | Work in process | $86 | $42 | | Finished goods | $203 | $224 | | Inventory gross | $749 | $811 | | Inventory reserve | $(55) | $(55) | | Inventory net | $694 | $756 | - Net inventory decreased by $62 thousand from December 31, 2024, to March 31, 2025, primarily due to a reduction in raw materials[54] Note 6 – Goodwill This note addresses the company's goodwill balance and the assessment for any impairment charges during the reporting periods - No impairment charges were recorded for goodwill during the three months ended March 31, 2025, or 2024, as no triggering events were identified[55] Note 7 – Long-lived Assets This note details the company's policy for assessing long-lived assets for impairment based on specific events and circumstances - The Company assesses long-lived assets for impairment based on events and circumstances, such as significant underperformance or adverse changes in market conditions[56][57][58][59] - No triggering events for impairment of long-lived assets were identified during the three months ended March 31, 2025, or 2024[61] Note 8 – Lease Commitments This note outlines the company's lease liabilities and right-of-use assets, including new lease agreements and maturity schedules - The Company recognizes lease liabilities and right-of-use assets for leases with initial terms over 12 months[63][65] - In January 2024, the Company entered into a new 36-month warehouse lease in Nashua, NH, with annual rent payments of approximately $46 thousand[68] Lease Liabilities Maturity as of March 31, 2025 (In thousands): | Year | Amount | | :--- | :----- | | 2025 | $187 | | 2026 | $131 | | 2027 | $4 | | Total lease payments | $322 | | Less: effects of discounting | $(15) | | Total lease liabilities | $307 | | Less: current portion | $234 | | Long-term lease liabilities | $73 | - The weighted-average remaining lease term for operating leases is 1.7 years, with a weighted-average discount rate of 7.8%[71] Note 9 – Stockholders' Equity This note details changes in stockholders' equity, including equity incentive plans, common stock issuances, and stock-based compensation expenses - The 2024 Omnibus Equity Incentive Plan, approved in June 2024, allows for the issuance of up to 2,000,000 shares of common stock, with 1,865,426 shares available as of March 31, 2025[72] - During Q1 2025, the Company sold 825,652 shares of common stock through an at-the-market issuance sales agreement, generating $2.3 million in cash proceeds, net of issuance costs[73] Stock-Based Compensation Expense (In thousands): | Category | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Engineering and product development | $90 | $56 | | Marketing and sales | $127 | $62 | | General and administrative | $385 | $146 | | Total Stock-Based Compensation | $602 | $265 | - Total stock-based compensation expense increased by 127.2% YoY, from $265 thousand in Q1 2024 to $602 thousand in Q1 2025, primarily due to an increase in General and administrative expenses[74] Stock Option Activity Summary: | Item | Number of Options (March 31, 2025) | Weighted Average Exercise Price (March 31, 2025) | | :-------------------------------- | :--------------------------------- | :--------------------------------------------- | | Outstanding as of Dec 31, 2024 | 3,021,298 | $4.25 | | Granted | 203,791 | $2.32 | | Cancelled | (160,411) | $8.58 | | Outstanding as of Mar 31, 2025 | 3,064,678 | $3.90 | | Options Exercisable as of Mar 31, 2025 | 2,063,823 | $4.96 | Note 10 – Income Taxes This note outlines the company's income tax expense and effective tax rates, considering valuation allowances against carryforwards - Income tax expense was zero for Q1 2025, compared to approximately $4 thousand in Q1 2024[80] - The effective tax rates for both periods were less than 1%, primarily due to valuation allowances against net operating loss and tax credit carryforwards[80] Note 11 – Commitments and Contingencies This note details the company's firm purchase obligations and ongoing legal proceedings, assessing their potential financial impact - The Company has firm purchase obligations of approximately $3.1 million to suppliers for future product and service deliverables[82] - The Company is involved in various legal proceedings but believes no current claims would have a material adverse effect on its financial condition or results of operations[83] Note 12 – Agreement to be Acquired by RadNet This note discloses the definitive merger agreement for iCAD to be acquired by RadNet, Inc. through a stock-for-stock transaction - On April 15, 2025, iCAD entered into a Merger Agreement to be acquired by RadNet, Inc. through a stock-for-stock transaction[84] - Each iCAD common stock share will be converted into the right to receive 0.0677 shares of RadNet common stock[84] - The transaction is expected to close in Q2 or Q3 2025[85] Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on iCAD's financial condition and operational results for the three months ended March 31, 2025, compared to the same period in 2024. It covers revenue trends, cost of revenue, operating expenses, other income/expense, liquidity, and capital resources, alongside discussions of the planned merger with RadNet and external factors like global conflicts and tariffs Special Note Regarding Forward Looking Statements This note cautions that the report contains forward-looking statements subject to various risks and uncertainties - The report contains forward-looking statements subject to risks and uncertainties, including those related to the RadNet merger, patent protection, supply chain, market acceptance, and economic conditions[88] Planned Merger with RadNet This section provides details on the definitive merger agreement for iCAD to become a wholly owned subsidiary of RadNet, Inc - iCAD entered into a Merger Agreement with RadNet, Inc. on April 15, 2025, where iCAD will become a wholly owned subsidiary of RadNet[89] - The merger is expected to close in Q2 or Q3 2025, with each iCAD share converting to 0.0677 shares of RadNet common stock[89][90] - Restrictions imposed by the Merger Agreement may affect iCAD's business operations and comparability of results[90] Overview This section introduces iCAD, Inc. as a leader in AI-powered cancer detection and its strategic shift to a cloud-based SaaS/DaaS model - iCAD, Inc. is a global leader in AI-powered cancer detection, offering the ProFound Breast Health Suite for breast cancer detection, density assessment, and risk evaluation[93][94] - The ProFound solutions have been used for over 40 million mammograms worldwide in the last five years and are available in over 50 countries[95] - The Company is transitioning to a platform-based SaaS/DaaS model with ProFound Cloud, aiming for increased affordability, easier adoption, and a more predictable recurring revenue stream[96] Global Conflicts Impact This section assesses the potential impact of global conflicts on the company's operations and revenue from international markets - Global conflicts (Russia-Ukraine, Hamas-Israel) create economic and political uncertainty, potentially impacting regions where iCAD operates or derives revenue[100] - Revenue from outside the U.S. decreased from 18% in Q1 2024 to 14% in Q1 2025, with potential for further impact from conflicts or sanctions[100] Tariffs Impact This section examines the potential effects of U.S. tariffs on production costs, manufacturing, and clinical trials - U.S. tariffs on products and raw materials from various countries could increase production costs and delay clinical trials or product manufacturing[101] - While the impact has been limited to date, the potential effects of tariffs on iCAD's business are unpredictable[101] Critical Accounting Estimates This section highlights the significant judgments, assumptions, and estimates involved in preparing the financial statements - The preparation of financial statements involves significant judgments, assumptions, and estimates, which are continuously evaluated[103] - No material changes to critical accounting estimates were identified, despite global armed conflicts and inflation, but actual results could differ[104][105] Results of Operations This section provides a detailed analysis of the company's financial performance, including revenue, cost of revenue, and operating expenses Revenue This section analyzes revenue trends by category, highlighting shifts in product and service revenue streams Revenue (In thousands): | Category | 2025 | 2024 | $ Change | % Change | | :--------------- | :--- | :--- | :------- | :------- | | Product revenue | $3,244 | $3,102 | $142 | 4.6% | | Services revenue | $1,630 | $1,852 | $(222) | (12.0)% | | Total revenue | $4,874 | $4,954 | $(80) | (1.6)% | - Total revenue decreased by 1.6% YoY, primarily due to lower services revenue as customers migrate to subscription and cloud models[107] - Product revenue increased by 4.6% YoY, driven by higher software license revenue and the transition to subscription/cloud models[108] Cost of Revenue and Gross Profit This section examines the cost of revenue and gross profit, detailing changes in product mix and amortization expenses Cost of Revenue and Gross Profit (In thousands): | Category | 2025 | 2024 | $ Change | % Change | | :-------------------------- | :--- | :--- | :------- | :------- | | Cost of Products | $213 | $480 | $(267) | (55.6)% | | Cost of Services | $358 | $321 | $37 | 11.5% | | Amortization and depreciation | $114 | $40 | $74 | 185.0% | | Total cost of revenue | $685 | $841 | $(156) | (18.5)% | | Gross profit | $4,189 | $4,113 | $76 | 1.8% | | Gross profit margin | 86% | 83% | | | - Gross profit increased by 1.8% YoY to $4.2 million, with gross profit margin improving from 83% to 86%[110] - Cost of products decreased by 55.6% due to changes in product mix, while amortization and depreciation increased by 185.0% due to the ProFound Cloud solution[111][113] Operating Expenses This section analyzes operating expenses, including engineering, marketing, sales, and general and administrative costs Operating Expenses (In thousands): | Category | 2025 | 2024 | $ Change | % Change | | :-------------------------------- | :--- | :--- | :------- | :------- | | Engineering and product development | $1,476 | $1,507 | $(31) | (2.1)% | | Marketing and sales | $1,533 | $2,082 | $(549) | (26.4)% | | General and administrative | $2,253 | $1,902 | $351 | 18.5% | | Amortization and depreciation | $56 | $63 | $(7) | (11.1)% | | Total operating expenses | $5,318 | $5,554 | $(236) | (4.2)% | - Total operating expenses decreased by 4.2% YoY to $5.3 million[115] - Marketing and sales expenses decreased by 26.4% due to lower personnel costs outside the US[116] - General and administrative expenses increased by 18.5%, primarily due to costs associated with the announced acquisition by RadNet[117] Other Income and Expense This section presents other non-operating income and expenses, including interest income and other net income Other Income and Expense (In thousands): | Category | 2025 | 2024 | $ Change | % Change | | :---------------- | :--- | :--- | :------- | :------- | | Interest income | $172 | $203 | $(31) | (15.3)% | | Other income, net | $124 | $20 | $104 | 520.0% | | Total | $296 | $223 | $73 | 32.7% | | Tax expense | $0 | $(4) | $4 | (100.0)% | - Other income, net, significantly increased by 520.0% YoY, from $20 thousand in Q1 2024 to $124 thousand in Q1 2025[120][121] - Interest income decreased by 15.3% due to lower invested balances and interest rates[120] Liquidity and Capital Resources This section evaluates the company's ability to meet its financial obligations, detailing cash position, working capital, and cash flow activities - iCAD believes its cash and cash equivalents of $20.0 million as of March 31, 2025, are sufficient to sustain operations for at least the next 12 months[124] - Net working capital was $20.4 million as of March 31, 2025, with a current asset to current liability ratio of 3.66[125] Cash Flow Summary (In thousands): | Activity | Three Months Ended March 31, 2025 | Three Months Ended March 31, 2024 | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Net cash provided by (used for) operating activities | $60 | $(1,180) | | Net cash provided by (used for) investing activities | $431 | $(206) | | Net cash provided by financing activities | $2,335 | $0 | | Increase (decrease) in cash and equivalents | $2,826 | $(1,386) | - Operating cash flow improved significantly, providing $60 thousand in Q1 2025 compared to using $1.2 million in Q1 2024, driven by cost savings and working capital timing[126] - Investing activities provided $431 thousand, primarily from the sale of the former Xoft business[127] - Financing activities provided $2.3 million from common stock sales[128] Recent Accounting Pronouncements This section directs readers to Note 1 for detailed information on recently issued accounting pronouncements - Refer to Note 1 for details on recently issued accounting pronouncements[129] Item 3 Quantitative and Qualitative Disclosures about Market Risk This section states that there are no applicable quantitative and qualitative disclosures about market risk for the Company - The Company has no applicable quantitative and qualitative disclosures about market risk[130] Item 4 Controls and Procedures This section details management's evaluation of the effectiveness of the Company's disclosure controls and procedures and internal controls over financial reporting - As of March 31, 2025, the Company's disclosure controls and procedures were deemed effective at a reasonable level of assurance[131] - No material changes to internal controls over financial reporting occurred during Q1 2025[133] PART II OTHER INFORMATION This section addresses risk factors, other disclosures, exhibits, and required signatures for the report Item 1A Risk Factors This section outlines various risks associated with iCAD's business, particularly focusing on those related to the pending merger with RadNet, including the fixed exchange ratio, employee retention challenges, conditions for merger completion, potential tax implications, and disruptions to business relationships - The fixed exchange ratio of 0.0677 RadNet shares per iCAD share means the value of the merger consideration is subject to fluctuations in RadNet's stock price[136][137] - The merger creates uncertainty for employees, potentially impairing iCAD's ability to attract, retain, and motivate personnel, with change-in-control provisions for executives[138] - Completion of the merger is subject to various conditions, and delays or failure to satisfy them could prevent the merger or adversely affect anticipated benefits[139][140][141][142] - If the merger fails to qualify as a 'reorganization' for tax purposes, iCAD stockholders may face substantial U.S. federal income taxes[143] - The Merger Agreement limits iCAD's ability to pursue alternative transactions and may discourage other acquisition offers[149] - Failure to complete the merger could negatively impact iCAD's stock price, business, and financial results, potentially incurring termination fees and litigation costs[151][152] Item 5 Other Information This section confirms that no directors or officers adopted, terminated, or modified Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the three months ended March 31, 2025 - No directors or officers adopted, terminated, or modified Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q1 2025[163] Item 6 Exhibits This section lists the exhibits filed as part of the Form 10-Q, including the Merger Agreement, Voting and Support Agreement, and various certifications and XBRL data files - Key exhibits include the Agreement and Plan of Merger (Exhibit 2.1) and the Form of Voting and Support Agreement (Exhibit 10.1), both incorporated by reference from an 8-K filing on April 15, 2025[164] - The filing also includes certifications from the Principal Executive Officer and Principal Financial Officer (Exhibits 31.1, 31.2, 32.1, 32.2) and Inline XBRL data (Exhibits 101, 104)[164] Signatures This section contains the required signatures from the Company's Chief Executive Officer and Chief Financial Officer, certifying the filing of the report - The report is signed by Dana Brown, Chief Executive Officer, and Eric Lonnqvist, Chief Financial Officer, on May 13, 2025[166]