iCAD issues 1-to-5 reverse split


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In the wake of a disappointing earnings release, iCAD issued a one-to-five reverse split Wednesday after trading hours to avoid being delisted from the NASDAQ exchange.

The Nashua-based medical imaging company made the expected announcement 10 days before NASDAQ would have delisted it because it could not keep its stock price above a dollar per share. iCAD's share price was hovering at half that amount before the split, jumping to more than twice that amount afterward because of it.

NASDAQ first issued the exchange's delisting warning back in September of 2011, giving iCAD half a year to get its stock price up, but the highest the company could achieve was 78 cents. Come March, iCAD held off NASDAQ by suggesting the reverse split, buying the company another six months. In April, it asked shareholders for the authority for a split ranging from 1-2 to 1-6, and the shareholders approved the proposal in May. The stock price hardly budged since, even dipping in July to as low as 38 cents.

Not helping matters much was its latest quarterly report for the second quarter ending June 30, which was released at the beginning of the month.

The company cut its losses in half compared to the previous year, but it still reported negative quarterly earnings of $2.9 million, or a nickel a share, bringing its losses for the first half to $5.2 million, or a dime a share. That's mainly due to an 11 percent decline in revenue to $5.9 million for the second quarter compared to the same quarter last year, and down 12 percent year to date to $12.3 million.

The company's revenue from its recently acquired electronic Brachytherapy systems, used to treat cancer, increased by some 41 percent, but that didn't make up for decline of the detection revenue, which slowed down as most companies completed the switch from film to iCAD's digital technology. iCAD launched its next-generation mammography computer-aided diction system in July, but that has yet to pay off.

Thanks to declining revenues, the company was down to its last $4.6 million in cash at the end of last year, which it nearly burned through during the first half of this year. iCAD did get $14.4 million cash infusion through Deerfield Management, an investment fund, but at a steep cost: The effective interest rate of the financing arrangement is an estimated 19 percent, according the company's quarterly filing with the Securities and Exchange Commission. That cost the company almost an extra $1.5 million in interest in the first half of this year alone.

The company also is facing a class-action suit against Xoft -- the company it acquired to get its profitable therapy system -- where alleged victims are claiming some $14.5 million of damages, though it did settle a patent suit in June by agreeing to pay a $25,000-per-year royalty.

The market has been largely indifferent to the reverse split, which increased the company's stock price overnight Wednesday from 52 cents to $2.60. At the end of Thursday, the stock price closed only 4 cents off at $2.56, on light trading.

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