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8-K/A - FORM 8-K/A - ICAD INC | c14319e8vkza.htm |
EX-23.1 - EXHIBIT 23.1 - ICAD INC | c14319exv23w1.htm |
EX-99.1 - EXHIBIT 99.1 - ICAD INC | c14319exv99w1.htm |
Exhibit 99.2
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
Introduction
On December 30, 2010 (the Closing Date), iCAD, Inc. (the Company) completed its
acquisition of Xoft, Inc. (Xoft), a privately held company based in California. Xoft designs,
develops, manufactures, markets and sells electronic brachytherapy (eBx) products for the treatment
of breast and other cancers, used in a broad range of clinical settings. The acquisition was made
pursuant to an Agreement and Plan of Merger dated December 15, 2010, by and between the Company,
XAC, Inc., a wholly-owned subsidiary of the Company (Merger Sub), Xoft and Jeffrey Bird as the
representative of the stockholders of Xoft (Merger Agreement). Upon the terms of the Merger
Agreement, Xoft was merged with and into the Merger Sub with the Merger Sub surviving the merger
(the Merger).
The Company acquired 100% of the outstanding stock of Xoft in exchange for approximately 8.35
million shares of the Companys common stock and approximately $1.2 million in cash, for a total
consideration at closing of approximately $12.9 million based on a per share value of $1.40, the
closing price of the Companys common stock on the closing date. The Company also paid certain
transaction expenses of Xoft totaling approximately $1.0 million which is included in the Company
statement of operations. Xoft stockholders now own approximately 15.4% of the Companys common
stock.
Under the Merger Agreement, there is an additional earn-out potential for the sellers that is
tied to cumulative net revenue of Xoft products over the next three years, payable at the end of
that period. The threshold for earn-out consideration begins at $50 million of cumulative revenue
of Xoft Products (as defined in the Merger Agreement) over the three year period immediately
following the closing. The targeted earn-out consideration of $20 million will occur at $76
million of cumulative revenue of Xoft Products and the maximum earn-out consideration of $40
million would be achieved at $104 million of cumulative revenue of Xoft Products over the three
year period. The Company recorded a contingent consideration liability of $5,000,000.
At closing, 10% of the cash amount and 10% of the amount of the Companys common stock
comprising the merger consideration was placed in escrow. It will remain in escrow for a period of
15 months following the closing of the Merger to secure post-closing indemnification obligations of
Xoft stockholders.
The following unaudited pro forma combined condensed financial information gives effect to the
merger of the Company and Xoft using the purchase method of accounting, as required by Accounting
Standards Codification (ASC) 805, Business Combinations. Under this method of accounting, the
Company allocated the purchase price to the fair value of assets acquired, including identified
intangible assets and goodwill. The purchase price allocation is subject to revision when the
Company obtains additional information regarding its purchased asset valuation. The unaudited pro
forma combined condensed balance sheet assumes the Merger took place on September 30, 2010. The
unaudited pro forma combined condensed statements of operations assume that the Merger took place
as of January 1, 2009.
The financial information presented in the unaudited pro forma combined condensed financial
statements is based on amounts and adjustments that the Companys management believes to be
factually supportable. The Company has made no attempt to included forward looking assumptions in
such information.
Certain reclassifications have been made to Xofts historical presentation to conform to the
Companys presentation. These reclassifications do not materially impact the unaudited pro forma
condensed consolidated results of operations for the periods presented.
The unaudited pro forma adjustments, which are based upon available information and upon
certain assumptions that the Company believes are reasonable, are described in the accompanying
notes. The Company is providing the unaudited pro forma condensed consolidated financial
information for informational purposes only. The companies may have performed differently had they
been combined during the periods presented. You should not rely on the unaudited pro forma combined
condensed financial information as being indicative of the historical results that would have been
achieved had the companies actually been combined during the periods presented or the future
results that the combined companies will experience. The unaudited pro forma combined condensed
statements of operations do not give effect to any cost savings or operating synergies expected to
result from the acquisitions or the costs to achieve such cost savings or operating synergies.
Unaudited Pro Forma Combined Condensed Balance Sheet
As of September 30, 2010
(Unaudited)
As of September 30, 2010
(Unaudited)
Proforma | ||||||||||||||||
Historical | Proforma | Combined | ||||||||||||||
iCAD | Xoft | Adjustments | Total | |||||||||||||
Assets |
||||||||||||||||
Current assets: |
||||||||||||||||
Cash and equivalents |
$ | 18,115,731 | $ | 87,603 | (1,183,162 | ) (a) | $ | 17,020,172 | ||||||||
Trade accounts receivable, net of allowance |
3,118,398 | 1,116,467 | | 4,234,865 | ||||||||||||
Inventory |
701,507 | 2,918,776 | (181,148 | ) (c) | 3,439,135 | |||||||||||
Prepaid and other |
503,270 | 1,054,200 | (677,619 | ) (d) | 879,851 | |||||||||||
Total current assets |
22,438,906 | 5,177,046 | (2,041,929 | ) | 25,574,023 | |||||||||||
Property and equipment: |
||||||||||||||||
Equipment |
2,848,598 | 4,931,475 | (474,255 | ) (e) | 7,305,818 | |||||||||||
Leasehold improvements |
74,107 | 931,403 | | 1,005,510 | ||||||||||||
Furniture and fixtures |
344,700 | 111,439 | | 456,139 | ||||||||||||
Marketing assets |
292,613 | 32,119 | | 324,732 | ||||||||||||
3,560,018 | 6,006,436 | (474,255 | ) | 9,092,199 | ||||||||||||
Less accumulated depreciation and amortization |
2,773,640 | 3,453,870 | | 6,227,510 | ||||||||||||
Net property and equipment |
786,378 | 2,552,566 | (474,255 | ) | 2,864,689 | |||||||||||
Other assets: |
||||||||||||||||
Deposits |
32,126 | 731,826 | 763,952 | |||||||||||||
Patents, net |
118,536 | 1,680,938 | | 1,799,474 | ||||||||||||
Tradename, net |
80,600 | | | 80,600 | ||||||||||||
Technology intangible, net |
5,261,636 | | 14,200,000 | (b) | 19,461,636 | |||||||||||
Customer relations, net |
175,894 | | | 175,894 | ||||||||||||
Goodwill |
43,515,285 | | 1,304,857 | (b) | 44,820,142 | |||||||||||
Total other assets |
49,184,077 | 2,412,764 | 15,504,857 | 67,101,698 | ||||||||||||
Total assets |
$ | 72,409,361 | $ | 10,142,376 | 12,988,673 | $ | 95,540,410 | |||||||||
Liabilities, Redeemable Convertible Preferred Stock and
Stockholders Equity |
||||||||||||||||
Current liabilities: |
||||||||||||||||
Accounts payable |
$ | 1,109,758 | $ | 1,229,196 | | $ | 2,338,954 | |||||||||
Accrued interest payable |
| 2,074,962 | (2,074,962 | ) (f) | | |||||||||||
Accrued salaries and other expenses |
2,704,726 | 979,628 | | 3,684,354 | ||||||||||||
Deferred revenue |
3,912,418 | 2,959,575 | (1,711,524 | ) (g) | 5,160,469 | |||||||||||
Deferred rent |
110,736 | 233,462 | (h) | 344,198 | ||||||||||||
Settlement costs |
463,080 | | 463,080 | |||||||||||||
Borrowings, net |
| 17,963,918 | (17,963,918 | ) (f) | | |||||||||||
Total current liabilities |
7,726,902 | 25,781,095 | (21,516,942 | ) | 11,991,055 | |||||||||||
Contingent consideration liability |
| | 5,000,000 | (a) | 5,000,000 | |||||||||||
Long term deferred revenue |
479,035 | 877,256 | (218,468 | ) (g) | 1,137,823 | |||||||||||
Long term deferred rent |
184,526 | 217,040 | (h) | 401,566 | ||||||||||||
Long term warranty costs |
17,088 | | | 17,088 | ||||||||||||
Long term settlement costs and other long term liabilities |
| 1,147,042 | (36,750 | ) (i) | 1,110,292 | |||||||||||
Total liabilities |
8,223,025 | 27,989,919 | (16,555,120 | ) | 19,657,824 | |||||||||||
Redeemable convertible preferred stock: |
| |||||||||||||||
Preferred stock |
| 99,619,698 | 2,074,962 | (f) | ||||||||||||
17,963,918 | (f) | |||||||||||||||
(119,658,578 | ) (j) | | ||||||||||||||
Stockholders equity (deficit): |
||||||||||||||||
Common stock |
460,125 | 8,264 | (8,264 | ) (j) | ||||||||||||
83,485 | (a) | 543,610 | ||||||||||||||
Additional paid-in capital |
151,251,081 | 23,555,348 | (23,555,348 | ) (j) | ||||||||||||
11,612,765 | (a) | 162,863,846 | ||||||||||||||
Accumulated deficit |
(86,574,606 | ) | (141,030,853 | ) | 141,030,853 | (j) | (86,574,606 | ) | ||||||||
Treasury stock at cost (67,876 shares) |
(950,264 | ) | | | (950,264 | ) | ||||||||||
Stockholders equity (deficit) |
64,186,336 | (117,467,241 | ) | 129,163,491 | 75,882,586 | |||||||||||
Total liabilities, redeemable convertible preferred stock
and stockholders equity |
$ | 72,409,361 | $ | 10,142,376 | 12,988,673 | $ | 95,540,410 | |||||||||
See
accompanying introduction and notes to unaudited pro forma combined
condensed financial statements.
PF1
Unaudited Pro Forma Combined Condensed Statement of Operations
For the nine months ended September 30, 2010
(Unaudited)
For the nine months ended September 30, 2010
(Unaudited)
Proforma | ||||||||||||||||
Historical | Proforma | Combined | ||||||||||||||
iCAD | Xoft | Adjustments | Total | |||||||||||||
Total revenue |
$ | 18,204,165 | $ | 4,243,260 | $ | 22,447,425 | ||||||||||
Total cost of revenue |
2,282,176 | 5,108,063 | (1,657,122 | )(l) | 5,733,117 | |||||||||||
Gross margin |
15,921,989 | (864,803 | ) | 1,657,122 | 16,714,308 | |||||||||||
Operating expenses: |
||||||||||||||||
Engineering and product development |
4,795,946 | 2,195,470 | 1,065,000 | (k) | ||||||||||||
1,408,958 | (l) | 9,465,374 | ||||||||||||||
Sales, general and administrative |
14,772,472 | 5,796,272 | 248,164 | (l) | ||||||||||||
(435,608 | )(m) | 20,381,300 | ||||||||||||||
Total operating expenses |
19,568,418 | 7,991,742 | 2,286,514 | 29,846,674 | ||||||||||||
Loss from operations |
(3,646,429 | ) | (8,856,545 | ) | (629,392 | ) | (13,132,366 | ) | ||||||||
Interest and other income (expense), net |
333,117 | (1,632,494 | ) | 1,235,141 | (f) | (64,236 | ) | |||||||||
Net loss available to common stockholders |
$ | (3,313,312 | ) | $ | (10,489,039 | ) | $ | 605,749 | $ | (13,196,602 | ) | |||||
Net loss per share: |
||||||||||||||||
Basic and diluted |
(0.07 | ) | $ | (0.24 | ) | |||||||||||
Weighted average number of shares used in
computing loss per share: |
||||||||||||||||
Basic and diluted |
45,782,449 | 8,348,501 | (n) | 54,130,950 |
See accompanying introduction and notes to unaudited pro forma combined condensed financial
statements.
PF2
Unaudited Pro Forma Combined Condensed Statement of Operations
For the year ended December 31, 2009
(Unaudited)
For the year ended December 31, 2009
(Unaudited)
Proforma | ||||||||||||||||
Historical | Proforma | Combined | ||||||||||||||
iCAD | Xoft | Adjustments | Total | |||||||||||||
Total revenue |
$ | 28,109,265 | $ | 5,906,541 | $ | 34,015,806 | ||||||||||
Total cost of revenue |
4,621,784 | 9,099,486 | (2,660,653 | )(l) | 11,060,617 | |||||||||||
Gross margin |
23,487,481 | (3,192,945 | ) | 2,660,653 | 22,955,189 | |||||||||||
Operating expenses: |
||||||||||||||||
Engineering and product development |
7,217,146 | 4,203,628 | 1,420,000 | (k) | ||||||||||||
2,329,768 | (l) | 15,170,542 | ||||||||||||||
Sales, general and administrative |
18,391,301 | 11,275,189 | 330,885 | (l) | 29,997,375 | |||||||||||
Total operating expenses |
25,608,447 | 15,478,817 | 4,080,653 | 45,167,917 | ||||||||||||
Loss from operations |
(2,120,966 | ) | (18,671,762 | ) | (1,420,000 | ) | (22,212,728 | ) | ||||||||
Interest and other income (expense), net |
109,772 | (1,722,538 | ) | 839,821 | (f) | (772,945 | ) | |||||||||
Loss before provision (benefit) for income
taxes |
(2,011,194 | ) | (20,394,300 | ) | (580,179 | ) | (22,985,673 | ) | ||||||||
Provision (benefit) for income taxes |
(43,570 | ) | | | (43,570 | ) | ||||||||||
Net loss |
$ | (1,967,624 | ) | $ | (20,394,300 | ) | $ | (580,179 | ) | $ | (22,942,103 | ) | ||||
Net loss per share: |
||||||||||||||||
Basic and diluted |
$ | (0.04 | ) | $ | (0.43 | ) | ||||||||||
Weighted average number of shares used in
computing loss per share: |
||||||||||||||||
Basic and diluted |
45,511,883 | 8,348,501 | (n) | 53,860,384 |
See accompanying introduction and notes to unaudited pro forma combined condensed financial
statements.
PF3
Notes to Unaudited Pro Forma Combined Condensed Financial Information
1. Basis of Pro Forma Presentation
The unaudited pro forma condensed consolidated financial information has been prepared based
on the Companys historical financial information and the historical financial information of Xoft
giving effect to the acquisition and related adjustments described in these notes. Certain note
disclosures normally included in the financial statements prepared in accordance with generally
accepted accounting principles in the United States have been condensed or omitted as permitted by
the SEC rules and regulations.
This unaudited pro forma condensed consolidated financial information is not necessarily
indicative of the results of operations that would have been achieved had the acquisition actually
taken place at the dates indicated and do not purport to be indicative of future position or
operating results.
The unaudited pro forma combined condensed financial information has been prepared on the
basis of assumptions relating to the allocation of consideration paid for the acquired assets and
liabilities of Xoft based on managements best preliminary estimates. The actual allocation of the
amount of the consideration may differ from that reflected in this unaudited pro forma combined
condensed financial information after a third party valuation and other procedures have been
completed.
Below are tables of the preliminary estimated purchase price allocation for Xoft:
Fair value of the Companys common stock issued |
$ | 11,696,250 | ||
Cash consideration |
1,183,162 | |||
Contingent consideration liability |
5,000,000 | |||
Total purchase price |
$ | 17,879,412 | ||
Net tangible assets acquired |
$ | 2,374,555 | ||
Estimated fair value of identifiable intangible assets |
14,200,000 | |||
Goodwill |
1,304,857 | |||
Total Acquisition Cost |
$ | 17,879,412 | ||
2. Pro Forma Adjustments
(a) Adjustments reflect the components of the purchase consideration and related transaction
costs which consist of cash consideration of $1,183,162, the Companys common stock with a market
value of $11,696,250 and contingent consideration liability of $5,000,000. The value of the
Companys common stock was based upon a per share value of $1.40, the closing price of the
Companys common stock on the closing date.
(b) Represents adjustments to increase the carrying values of identifiable intangible assets
and record goodwill acquired.
(c) Represents certain adjustments to record inventory at fair value.
(d) Reflects the elimination of uncollectible employee advances and deferred cost of
goods sold relating to deferred revenue that was eliminated.
PF4
(e) Represents adjustments to reduce construction in progress associated with building
construction and software development that was discontinued.
(f) Reflects the elimination of borrowings by Xoft converted to equity prior to closing and
the associated interest expense.
(g) Represents adjustment to deferred revenue to reflect future performance obligation.
(h) Represents adjustment to deferred rent to reflect current market value of lease
obligation.
(i) Reflects the elimination of Xofts preferred stock warrant liability.
(j) Reflects the elimination of existing stockholders deficit of Xoft.
(k) Represents amortization of increase in value of acquired identifiable intangible assets of
Xoft based upon average estimated useful lives of ten years (14,200,000/10 years = $1,420,000 per
year).
(l) Represents the reclassification of expenses recorded in cost of sales to operating
expenses.
(m) Reflects the elimination of legal and professional fees associated with the
acquisition.
(n) Reflects the increase in weighted average basic and diluted shares outstanding for
the Companys common stock issued in connection with the Merger. Pro forma basic and diluted loss
per share was calculated assuming that the 8,348,501 shares of the Companys common stock issued in
connection with the Merger were issued at the beginning of the period presented.
PF5