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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended March 31, 2010
 OR
 o
    
    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 1-9341
 iCAD, Inc.
 (Exact name of registrant as specified in its charter)
 Delaware
    
    02-0377419(State or other jurisdiction 
of incorporation or organization)
    
    (I.R.S. Employer Identification No.)98 Spit Brook Road, Suite 100, Nashua, NH
    
    03062(Address of principal executive offices)
    
    (Zip Code)
  (Registrants telephone number, including area code)
  (Former name, former address and former fiscal year, if changed since last report)
 þ o
 o o
  Large Accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ(do not check if a smaller reporting company)
 o þ




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##### 



PAGEPART I FINANCIAL INFORMATIONItem 1 Financial StatementsBalance Sheets as of March 31, 2010
and December 31, 2009 (unaudited)
    
    
    3Statements of Operations for the
three month periods ended March 31, 2010
and March 31, 2009 (unaudited)
    
    
    4Statements of Cash Flows for the three
month periods ended March 31, 2010 and
March 31, 2009 (unaudited)
    
    
    5Notes to Financial Statements (unaudited)
    
    
    611Item 2 Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    1217Item 3 Quantitative and Qualitative Disclosures about Market Risk
    
    
    18Item 4 Controls and Procedures
    
    
    18PART II OTHER INFORMATIONItem 2 Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    19Item 6 Exhibits
    
    
    19Signatures
    
    
    20Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
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iCAD, Inc.
 
 Balance Sheets
 March 31,
    
    
    December 31,2010
    
    
    2009AssetsCurrent assets:Cash and cash equivalents
    
    $
    16,295,969
    
    
    $
    16,248,031Trade accounts receivable, net of allowance for doubtful
accounts of $50,000 in 2010 and $84,000 in 2009
    
    
    4,223,084
    
    
    
    4,692,614Inventory, net
    
    
    1,000,573
    
    
    
    1,094,115Prepaid expenses and other current assets
    
    
    457,378
    
    
    
    393,490Total current assets
    
    
    21,977,004
    
    
    
    22,428,250Property and equipment:Equipment
    
    
    2,799,475
    
    
    
    2,873,012Leasehold improvements
    
    
    72,612
    
    
    
    72,612Furniture and fixtures
    
    
    344,700
    
    
    
    344,700Marketing assets
    
    
    292,613
    
    
    
    292,6133,509,400
    
    
    
    3,582,937Less accumulated depreciation and amortization
    
    
    2,672,156
    
    
    
    2,661,083Net property and equipment
    
    
    837,244
    
    
    
    921,854Other assets:Deposits
    
    
    32,126
    
    
    
    63,194Patents, net of accumulated amortization
    
    
    98,510
    
    
    
    90,027Customer relationships, net of accumulated amortization
    
    
    192,236
    
    
    
    200,407Technology intangibles, net of accumulated amortization
    
    
    5,816,074
    
    
    
    6,093,294Tradename, net of accumulated amortization
    
    
    93,000
    
    
    
    99,200Goodwill
    
    
    43,515,285
    
    
    
    43,515,285Total other assets
    
    
    49,747,231
    
    
    
    50,061,407Total assets
    
    $
    72,561,479
    
    
    $
    73,411,511Liabilities and Stockholders EquityCurrent liabilities:Accounts payable
    
    $
    1,290,439
    
    
    $
    1,365,558Accrued salaries and other expenses
    
    
    1,974,206
    
    
    
    2,199,286Deferred revenue
    
    
    3,226,603
    
    
    
    3,139,567Total current liabilities
    
    
    6,491,248
    
    
    
    6,704,411Long-term warranty expense
    
    
    21,235
    
    
    
    23,275Long-term deferred revenue
    
    
    446,978
    
    
    
    375,183Total liabilities
    
    
    6,959,461
    
    
    
    7,102,869Commitments and contingencies (Note 5)Stockholders equity:Preferred stock, $ .01 par value: authorized 1,000,000 shares;
issues and outstanding 0 in 2010 and 2009
    
    
    
    
    
    
    Common stock, $ .01 par value: authorized 85,000,000
shares; issued 45,758,888 in 2010 and 45,746,736 in 2009;
outstanding 45,691,012 in 2010 and 45,678,860 in 2009
    
    
    457,589
    
    
    
    457,467Additional paid-in capital
    
    
    150,540,594
    
    
    
    150,062,733Accumulated deficit
    
    
    (84,445,901
    )
    
    
    (83,261,294
    )Treasury stock at cost (67,876 shares)
    
    
    (950,264
    )
    
    
    (950,264
    )Total stockholders equity
    
    
    65,602,018
    
    
    
    66,308,642Total liabilities and stockholders equity
    
    $
    72,561,479
    
    
    $
    73,411,511
 See accompanying notes to consolidated financial statements.
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iCAD, Inc.
 
 Statements of Operations
 Three Months Ended
    
    
    Three Months EndedMarch 31, 2010
    
    
    March 31, 2009RevenueProducts
    
    $
    5,211,652
    
    
    $
    6,339,620Service and supplies
    
    
    1,308,844
    
    
    
    825,378Total revenue
    
    
    6,520,496
    
    
    
    7,164,998Cost of revenueProducts
    
    
    667,480
    
    
    
    1,054,987Service and supplies
    
    
    180,105
    
    
    
    201,817Total cost of revenue
    
    
    847,585
    
    
    
    1,256,804Gross margin
    
    
    5,672,911
    
    
    
    5,908,194Operating expenses:Engineering and product development
    
    
    1,556,126
    
    
    
    2,161,215Marketing and sales
    
    
    2,833,163
    
    
    
    2,945,121General and administrative
    
    
    2,486,245
    
    
    
    1,835,311Total operating expenses
    
    
    6,875,534
    
    
    
    6,941,647Loss from operations
    
    
    (1,202,623
    )
    
    
    (1,033,453
    )Interest income  net
    
    
    18,016
    
    
    
    34,926Net loss
    
    $
    (1,184,607
    )
    
    $
    (998,527
    )Net loss per share:Basic and Diluted
    
    $
    (0.03
    )
    
    $
    (0.02
    )Weighted average number of shares used in
computing loss per share:Basic and diluted
    
    
    45,686,285
    
    
    
    45,352,954
 See accompanying notes to consolidated financial statements.
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iCAD, Inc.
 
 Statements of Cash Flows
 Three Months Ended
    
    
    Three Months EndedMarch 31, 2010
    
    
    March 31, 2009Cash flows from operating activities:Net loss
    
    $
    (1,184,607
    )
    
    $
    (998,527
    )Adjustments to reconcile net loss
to net cash provided by (used for) operating activities:Depreciation
    
    
    125,770
    
    
    
    215,871Amortization
    
    
    291,590
    
    
    
    291,480Stock based compensation
    
    
    483,162
    
    
    
    500,035Changes in operating assets and liabilities:Accounts receivable
    
    
    469,530
    
    
    
    618,236Inventory
    
    
    93,542
    
    
    
    171,135Prepaid expenses, other current assets and deposits
    
    
    (32,820
    )
    
    
    (47,655
    )Accounts payable
    
    
    (75,119
    )
    
    
    (467,290
    )Accrued salaries, warranty and other expenses
    
    
    (227,120
    )
    
    
    (736,318
    )Deferred revenue
    
    
    158,831
    
    
    
    314,623Total adjustments
    
    
    1,287,366
    
    
    
    860,117Net cash provided by (used for) operating activities
    
    
    102,759
    
    
    
    (138,410
    )Cash flows from investing activities:Additions to patents, technology and other
    
    
    (8,482
    )
    
    
    Additions to property and equipment
    
    
    (41,160
    )
    
    
    (98,368
    )Net cash used for investing activities
    
    
    (49,642
    )
    
    
    (98,368
    )Cash flows from financing activities:Taxes paid related to restricted stock issuance
    
    
    (5,179
    )
    
    
    Net cash used for financing activities
    
    
    (5,179
    )
    
    
    Increase (decrease) in cash and equivalents
    
    
    47,938
    
    
    
    (236,778
    )Cash and equivalents, beginning of period
    
    
    16,248,031
    
    
    
    13,115,715Cash and equivalents, end of period
    
    $
    16,295,969
    
    
    $
    12,878,937
 See accompanying notes to consolidated financial statements.
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iCAD, Inc.
 
 Notes to Financial Statements
(Unaudited)
 March 31, 2010
 (1)
    
    Basis of Presentation and Significant Accounting Policies
   Subsequent Events (Topic 855)  Amendments to Certain Recognition and Disclosure
Requirements.
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iCAD, Inc.
Notes to Financial Statements
(Unaudited)
March 31, 2010
 (2)
    
    Net (Loss) Income per Common Share
   Three MonthsMarch 31,2010
    
    
    2009Net loss
    
    $
    (1,184,607
    )
    
    $
    (998,527
    )Basic shares used in the calculation of net (loss) per share
    
    
    45,686,285
    
    
    
    45,352,954Effect of dilutive securities:Stock options
    
    
    
    
    
    
    Restricted stock
    
    
    
    
    
    
    Diluted shares used in the calculation of net loss per share
    
    
    45,686,285
    
    
    
    45,352,954Net loss per share  basic
    
    $
    (0.03
    )
    
    $
    (0.02
    )Net loss per share  diluted
    
    $
    (0.03
    )
    
    $
    (0.02
    )
 The following table summarizes the number of shares of common stock for securities that
were not included in the calculation of diluted net loss per share because such shares are
antidilutive:
 Three MonthsMarch 31,2010
    
    
    2009Stock options
    
    
    5,235,021
    
    
    
    5,235,398Stock warrants
    
    
    
    
    
    
    936,111Restricted stock
    
    
    1,096,243
    
    
    
    790,324Total
    
    
    6,331,264
    
    
    
    6,961,833
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iCAD, Inc.
Notes to Financial Statements
(Unaudited)
March 31, 2010
 (3)
    
    Stock-Based Compensation
 Compensation  Stock Compensation,
     8




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iCAD, Inc.
Notes to Financial Statements
(Unaudited)
March 31, 2010
 (3)
    
    Stock-Based Compensation(continued)
  (4)
    
    Fair Value Measurements
 Fair Value Measurement and Disclo
 
    
    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
    9




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iCAD, Inc.
Notes to Financial Statements
(Unaudited)
March 31, 2010
 (5)
    
    Commitments and Contingencies
  (6)
    
    Income Taxes
 Income Taxes"
 (7)
    
    Goodwill
 Intangibles  Goodwill and Other"
  10




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iCAD, Inc.
Notes to Financial Statements
(Unaudited)
March 31, 2010
 (7)
    
    Goodwill(continued)
  (8)
    
    Recent Accounting Pronouncements
 Multiple-Deliverable Revenue
Arrangementsa consensus of the FASB Emerging Issues Task Force Revenue Arrangements with Multiple Deliverables
 Business Combinations
  11




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Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of
Operations
  Results of Operations
 Overview
   12




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Ô
   13




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Critical Accounting Policies
   Quarter Ended March 31, 2010 compared to Quarter Ended March 31, 2009
 Revenue.
   14




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Three months ended March 31,2010
    
    
    2009
    
    
    Change
    
    
    % ChangeDigital & MRI revenue
    
    $
    4,165,282
    
    
    $
    4,777,121
    
    
    $
    (611,839
    )
    
    
    -12.8
    %Film based revenue
    
    
    1,046,370
    
    
    
    1,562,499
    
    
    
    (516,129
    )
    
    
    -33.0
    %Service & supply revenue
    
    
    1,308,844
    
    
    
    825,378
    
    
    
    483,466
    
    
    
    58.6
    %Total revenue
    
    $
    6,520,496
    
    
    $
    7,164,998
    
    
    $
    (644,502
    )
    
    
    -9.0
    %
 Gross Margin.
 Engineering and Product Development.
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Marketing and Sales.
 General and Administrative.
 Interest Income/Expense
 Net Loss.
 Backlog.
 Liquidity and Capital Resources
    16




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Contractual Obligations
  Payments due by periodLess than 1Total
    
    
    year
    
    
    1-3 years
    
    
    3-5 years
    
    
    5+ yearsLease Obligations*
    
    $
    686,594
    
    
    $
    394,274
    
    
    $
    292,320
    
    
    $
    
    
    
    $
    Total Contractual
Obligations
    
    $
    686,594
    
    
    $
    394,274
    
    
    $
    292,320
    
    
    $
    
    
    
    $
    
 *
    
    The Companys lease obligations is shown net of sublease amounts. Recent Accounting Pronouncements
 Multiple-Deliverable Revenue Arrangementsa
consensus of the FASB Emerging Issues Task Force Revenue Arrangements with Multiple Deliverables
  17




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Business Combinations
 
 Item 3. Quantitative and Qualitative Disclosures about Market Risk
  
 Item 4. Controls and Procedures
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PART II OTHER INFORMATION
 
 Item 2 . Unregistered Sales of Equity Securities and Use of Proceeds
  Total number of
    
    
    Maximum dollarshares purchased
    
    
    value of sharesas part of
    
    
    that may yet beTotal number
    
    
    Average
    
    
    publicly
    
    
    purchased underof shares
    
    
    price paid per
    
    
    announced plans
    
    
    the plans orMonth of purchase
    
    purchased (1)
    
    
    share
    
    
    or programs
    
    
    programsJanuary 1 - January 31, 2010
    
    
    2,506
    
    
    $
    1.45
    
    
    $
    
    
    
    $
    February 1 - February 28, 2010
    
    
    
    
    
    $
    
    
    
    $
    
    
    
    $
    March 1 - March 31, 2010
    
    
    1,088
    
    
    $
    1.42
    
    
    $
    
    
    
    $
    Total
    
    
    3,594
    
    
    $
    1.44
    
    
    $
    
    
    
    $
    
 (1)
    
    Represents shares of common stock surrendered by employees to the Company to
pay employee withholding taxes due upon the vesting of restricted stock. 
 Item 6. Exhibits
 Exhibit No.
    
    Description31.1
    
    
    Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.31.2
    
    
    Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act
of 2002.32.1
    
    
    Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.32.2
    
    
    Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.
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iCAD, Inc.
(Registrant)Date:    May 7, 2010
    By:
    /s/ Kenneth M. FerryKenneth M. FerryPresident, Chief Executive Officer,
DirectorDate:    May 7, 2010
    By:
    /s/ Darlene M. Deptula-HicksDarlene M. Deptula-HicksExecutive Vice President of Finance
and Chief Financial Officer, Treasurer  20