Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2020 | May 01, 2020 | |
Document and Entity Information | ||
Entity Registrant Name | Semler Scientific, Inc. | |
Entity Central Index Key | 0001554859 | |
Trading Symbol | smlr | |
Current Fiscal Year End Date | --12-31 | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 6,534,076 | |
Document Type | 10-Q | |
Document Period End Date | Mar. 31, 2020 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2020 | |
Document Fiscal Period Focus | Q1 | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Current Reporting Status | Yes |
Condensed Statements of Income
Condensed Statements of Income - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Condensed Statements of Income | ||
Revenues | $ 9,430 | $ 6,761 |
Operating expenses: | ||
Cost of revenues | 850 | 896 |
Engineering and product development | 842 | 569 |
Sales and marketing | 2,695 | 2,070 |
General and administrative | 1,591 | 1,372 |
Total operating expenses | 5,978 | 4,907 |
Income from operations | 3,452 | 1,854 |
Interest income | 2 | |
Other expense | (4) | |
Other expense | (2) | |
Pre-tax net income | 3,450 | 1,854 |
Income tax provision | 777 | |
Net income | $ 2,673 | $ 1,854 |
Net income per share, basic | $ 0.41 | $ 0.29 |
Weighted average number of shares used in computing basic income per share | 6,533,369 | 6,326,149 |
Net income per share, diluted | $ 0.33 | $ 0.23 |
Weighted average number of shares used in computing diluted income per share | 8,065,813 | 8,170,287 |
Condensed Balance Sheets
Condensed Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Current Assets: | ||
Cash | $ 11,214 | $ 7,741 |
Trade accounts receivable, net of allowance for doubtful accounts of $56 and $52, respectively | 1,581 | 3,486 |
Prepaid expenses and other current assets | 688 | 216 |
Total current assets | 13,483 | 11,443 |
Assets for lease, net | 2,065 | 2,079 |
Property and equipment, net | 310 | 249 |
Long-term deposits | 15 | |
Long-term deferred tax assets | 3,778 | 4,501 |
Total assets | 19,636 | 18,287 |
Current liabilities: | ||
Accounts payable | 377 | 338 |
Accrued expenses | 2,448 | 3,914 |
Deferred revenues | 989 | 955 |
Other short-term liabilities | 6 | |
Total current liabilities | 3,820 | 5,207 |
Long-term liabilities: | ||
Other long-term liabilities | 7 | |
Total long-term liabilities | 7 | |
Stockholders' equity: | ||
Common stock, $0.001 par value; 50,000,000 shares authorized; 6,559,076 and 6,556,221 shares issued, and 6,534,076 and 6,531,221 outstanding (treasury shares of 25,000 and 25,000), respectively | 7 | 7 |
Additional paid-in capital | 19,470 | 19,400 |
Accumulated deficit | (3,661) | (6,334) |
Total stockholders' equity | 15,816 | 13,073 |
Total liabilities and stockholders' equity | $ 19,636 | $ 18,287 |
Condensed Balance Sheets (Paren
Condensed Balance Sheets (Parentheticals) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Condensed Balance Sheets | ||
Allowance for doubtful accounts on trade accounts receivable (in dollars) | $ 56 | $ 52 |
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 50,000,000 | 50,000,000 |
Common stock, shares issued | 6,559,076 | 6,556,221 |
Common stock, shares outstanding | 6,534,076 | 6,531,221 |
Treasury stock, shares | 25,000 | 25,000 |
Statements of Stockholders' Equ
Statements of Stockholders' Equity - USD ($) $ in Thousands | Common Stock | Treasury Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Balance at Dec. 31, 2018 | $ 6 | $ 25,608 | $ (21,418) | $ 4,196 | |
Balance (in shares) at Dec. 31, 2018 | 6,349,985 | (25,000) | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Stock Option Exercises | 13 | 13 | |||
Stock Option Exercises (in shares) | 6,162 | ||||
Stock Compensation Expense | 98 | 98 | |||
Net income | 1,854 | 1,854 | |||
Balance at Mar. 31, 2019 | $ 6 | 25,719 | (19,564) | 6,161 | |
Balance (in shares) at Mar. 31, 2019 | 6,356,147 | (25,000) | |||
Balance at Dec. 31, 2019 | $ 7 | 19,400 | (6,334) | 13,073 | |
Balance (in shares) at Dec. 31, 2019 | 6,556,221 | (25,000) | |||
Increase (Decrease) in Stockholders' Equity [Roll Forward] | |||||
Stock Option Exercises | 3 | $ 3 | |||
Stock Option Exercises (in shares) | 2,855 | 3,000 | |||
Stock Compensation Expense | 67 | $ 67 | |||
Net income | 2,673 | 2,673 | |||
Balance at Mar. 31, 2020 | $ 7 | $ 19,470 | $ (3,661) | $ 15,816 | |
Balance (in shares) at Mar. 31, 2020 | 6,559,076 | (25,000) |
Condensed Statements of Cash Fl
Condensed Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net income | $ 2,673 | $ 1,854 |
Reconciliation of Net Income to Net Cash Provided by Operating Activities: | ||
Depreciation | 159 | 143 |
Deferred tax expense | 721 | |
Loss on disposal of assets for lease | 66 | 34 |
Bad debt expense | 31 | 6 |
Stock-based compensation expense | 67 | 98 |
Changes in Operating Assets and Liabilities: | ||
Trade accounts receivable | 1,875 | 268 |
Prepaid expenses and other current assets | (457) | (72) |
Accounts payable | 39 | (23) |
Accrued expenses | (1,466) | (991) |
Deferred revenues | 34 | 386 |
Net Cash Provided by Operating Activities | 3,742 | 1,703 |
CASH FLOWS FROM INVESTING ACTIVITIES: | ||
Additions to property and equipment | (91) | (31) |
Purchase of assets for lease | (181) | (425) |
Net Cash Used in Investing Activities | (272) | (456) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Exercise of stock options | 3 | 13 |
Net Cash Provided by Financing Activities | 3 | 13 |
INCREASE IN CASH | 3,473 | 1,260 |
CASH, BEGINNING OF PERIOD | 7,741 | 3,284 |
CASH, END OF PERIOD | $ 11,214 | $ 4,544 |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Mar. 31, 2020 | |
Basis of Presentation | |
Basis of Presentation | 1. Basis of Presentation Semler Scientific, Inc., a Delaware corporation (“Semler” or “the Company”), prepared the unaudited interim financial statements included in this report in accordance with United States generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this quarterly report on Form 10‑Q should be read in conjunction with the audited financial statements and notes thereto included in the Company’s annual report on Form 10‑K for the year ended December 31, 2019 filed with the SEC on March 9, 2020 (the “Annual Report”). In the opinion of management, these financial statements include all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the financial position, results of operations and cash flows for the periods presented. The results of operations for the interim periods shown in this report are not necessarily indicative of the results that may be expected for any future period, including the full year. Recently Issued Accounting Pronouncements Accounting Pronouncements Recently Adopted In November 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-08 – Compensation – Stock Compensation (Topic 718) and Revenue from Contracts with Customer (Topic 606). The amendments on this update require that an entity measure and classify share-based payment awards granted to a customer by applying the guidance in Topic 718. The amount recorded as a reduction in the transaction price should be based on the grant-date fair value of the share-based payment award. This standard is effective for the Company’s annual periods beginning after December 15, 2019 , including interim periods within those fiscal years. The Company adopted the new standard on January 1, 2020 and determined that the adoption of this new accounting guidance did not have an impact on its financial statements. In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. This ASU expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of costs. The ASU specifies that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. This standard is effective for the Company’s annual periods beginning after December 15, 2019, including interim periods within those fiscal years. The Company adopted the new standard on January 1, 2020 and determined that the adoption of this this new accounting guidance did not have an impact on its financial statements. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this ASU modify the disclosure requirements on fair value measurements removing the requirements to disclosure amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation processes for Level 3 fair value measurements. In addition, it modified certain disclosures related to Level 3 fair value measurements and added additional disclosures regarding the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period. This update is effective for the Company’s annual periods beginning after December 15, 2019, including interim periods within those fiscal years. The Company adopted the new standard on January 1, 2020 and determined that the adoption of this this new accounting guidance did not have an impact on its financial statements. Accounting Pronouncements Not Yet Adopted In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“Topic 326”). This ASU requires timelier recording of credit losses on loans and other financial instruments held. Instead of reserves based on a current probability analysis, Topic 326 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. All organizations will now use forward-looking information to better inform their credit loss estimates. Topic 326 requires enhanced disclosures regarding significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. These disclosures include qualitative and quantitative requirements that provide information about the amounts recorded in the financial statements. In addition, Topic 326 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. In April 2019, the FASB issued ASU2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, to introduce amendments that will affect the recognition and measurement of financial instruments, including derivatives and hedging. In May 2019, the FASB issued ASU 2019-05, Financial Instruments – Credit Losses (Topic 326); Targeted Transition Relief. The amendments in this ASU provide entities that have certain instruments within the scope of Subtopic 326-20 with an option to irrevocably elect the fair value option in Subtopic 825-10, applied on an instrument-by-instrument basis for eligible instruments upon adoption of Topic 326. This standard and related amendments are effective for the Company’s fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company will adopt the new standard in the first quarter of fiscal year 2023. The Company is evaluating the effect of adopting this new accounting guidance. In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principles for income taxes. This update is effective for the Company’s annual periods beginning after December 15, 2020, including interim periods within those fiscal years. The Company will adopt the new standard in the first quarter of fiscal year 2021. The Company does not anticipate this update to have a material impact on its financial statements. In January 2020, the FASB issued ASU 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815). The amendments in this ASU clarify the interaction between the accounting for investments in equity securities, investment in equity method and certain derivatives instruments. The ASU is expected to reduce diversity in practice and increase comparability of the accounting for these interactions. This ASU is effective for fiscal years beginning after December 15, 2021. The adoption of this ASU is not expected to have any impact on the Company’s results of operations, cash flows or financial position. In March 2020, FASB issued ASU No. 2020-03, Codification Improvements to Financial Instruments. This ASU improves and clarifies various financial instruments topics, including the current expected credit losses standard issued in 2016 (ASU 2016-13). The ASU includes seven different issues that describe the areas of improvement and the related amendments to GAAP, intended to make the standards easier to understand and apply by eliminating inconsistencies and providing clarifications. The amendments have different effective dates. The Company is evaluating the effect of adopting this new accounting guidance, but does not expect adoption will have a material impact on the Company’s financial statements. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides optional expedient and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. In response to the concerns about structural risks of interbank offered rates and, particularly, the risk of cessation of the London Interbank Offered Rate, regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction based and less susceptible to manipulation. The ASU provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. The ASU can be adopted no later than December 1, 2022, with early adoption permitted. The Company is evaluating the effect of adopting this new accounting guidance. Variably-priced Revenue Topic 606 affects revenue recognition for the Company’s variably-priced (i.e., fee per test) license fee contracts and sales of hardware equipment and accessories. Total variably-priced license fees represent approximately $2,703 and $1,255 of revenues for the three months ended March 31, 2020 and 2019, respectively. Total sales of hardware and equipment accessories represent approximately $270 and $246 of revenues for the three months ended March 31, 2020 and 2019, respectively. Essentially all of the variably-priced license fee contracts are with large healthcare organizations. The remainder of the revenue is earned from leasing the Company's testing product for a fixed monthly fee, which is not subject to Topic 606. |
Assets for Lease, net
Assets for Lease, net | 3 Months Ended |
Mar. 31, 2020 | |
Assets for Lease, net | |
Assets for Lease, net | 2. Assets for Lease, net Assets for lease consist of the following: March 31, December 31, 2020 2019 Assets for lease $ 3,424 $ 3,374 Less: accumulated depreciation (1,359) (1,295) Assets for lease, net $ 2,065 $ 2,079 Depreciation expense amounted to $128 and $109 for the three months ended March 31, 2020 and 2019 , respectively. Reduction to accumulated depreciation for returned items was $65 and $35 for the three months ended March 31, 2020 and 2019 , respectively. The Company recognized a loss on disposal of assets for lease in the amount of $66 and $34 for the three months ended March 31, 2020 and 2019, respectively. |
Property and Equipment, net
Property and Equipment, net | 3 Months Ended |
Mar. 31, 2020 | |
Property and Equipment, net | |
Property and Equipment, net | 3. Property and Equipment, net Capital assets consist of the following: March 31, December 31, 2020 2019 Capital assets $ 728 $ 636 Less: accumulated depreciation (418) (387) Capital assets, net $ 310 $ 249 Depreciation expense amounted to $31 and $34 for the three months ended March 31, 2020 and 2019, respectively. |
Accrued Expenses
Accrued Expenses | 3 Months Ended |
Mar. 31, 2020 | |
Accrued Expenses | |
Accrued Expenses | 4. Accrued Expenses Accrued expenses consist of the following: March 31, December 31, 2020 2019 Compensation $ 1,608 $ 2,803 Accrued taxes 418 378 Miscellaneous accruals 422 733 Total accrued expenses $ 2,448 $ 3,914 |
Concentration of Credit Risk
Concentration of Credit Risk | 3 Months Ended |
Mar. 31, 2020 | |
Concentration of Credit Risk | |
Concentration of Credit Risk | 5. Concentration of Credit Risk Credit risk is the risk of loss from amounts owed by the financial counterparties. Credit risk can occur at multiple levels; as a result of broad economic conditions, challenges within specific sectors of the economy, or from issues affecting individual companies. Financial instruments that potentially subject the Company to credit risk consist of cash and accounts receivable. The Company maintains cash with major financial institutions. The Company’s cash consists of bank deposits held with banks that, at times, exceed federally insured limits. The Company limits its credit risk by dealing with counterparties that are considered to be of high credit quality and by performing periodic evaluations of the relative credit standing of these financial institutions. Management periodically monitors the creditworthiness of its customers and believes that it has adequately provided for any exposure to potential credit loss. For the three months ended March 31, 2019, two customers accounted for 41.8% and 22.3% of the Company’s revenues, respectively. For the three months ended March 31, 2020, two customers accounted for 46.1% and 21.4% of the Company’s revenues, respectively. As of December 31, 2019, three customers accounted for 55.9%, 17.6% and 12.0% of the Company’s accounts receivable, respectively. As of March 31, 2020, three customers accounted for 28.5%,20.6% and 13.8% of the Company’s accounts receivable, respectively. The Company’s largest customer in terms of both revenues and accounts receivable in the three months ended March 31, 2020 is a U.S. diversified healthcare company and its affiliated plans. As of December 31, 2019, three vendors accounted for 23.3%, 20.3% and 11.1% of the Company’s accounts payable, respectively. As of March 31, 2020, three vendors accounted for 17.9%, 12.7%, and 12.0% of the Company’s accounts payable, respectively. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2020 | |
Commitments and Contingencies. | |
Commitments and Contingencies | 6. Commitments and Contingencies Facilities Leases The Company recognized facilities lease expenses of $17 and $17 for the three months ended March 31 , 2020 and 2019, respectively. Indemnification Obligations The Company enters into agreements with customers, partners, lenders, consultants, lessors, contractors, sales representatives and parties to certain transactions in the ordinary course of the Company’s business. These agreements may require the Company to indemnify the other party against third party claims alleging that its product infringes a patent or copyright. Certain of these agreements require the Company to indemnify the other party against losses arising from: a breach of representations or covenants, claims relating to property damage, personal injury or acts or omissions of the Company, its employees, agents or representatives. The Company has also agreed to indemnify the directors and certain of the officers and employees in accordance with the by-laws of the Company. These indemnification provisions will vary based upon the nature and terms of the agreements. In many cases, these indemnification provisions do not contain limits on the Company’s liability, and the occurrence of contingent events that will trigger payment under these indemnities is difficult to predict. As a result, the Company cannot estimate its potential liability under these indemnities. The Company believes that the likelihood of conditions arising that would trigger these indemnities is remote and, historically, the Company had not made any significant payment under such indemnification provisions. Accordingly, the Company has not recorded any liabilities relating to these agreements. In certain cases, the Company has recourse against third parties with respect to the aforesaid indemnities, and the Company believes it maintains adequate levels of insurance coverage to protect the Company with respect to potential claims arising from such agreements. |
Stock Option Plan
Stock Option Plan | 3 Months Ended |
Mar. 31, 2020 | |
Stock Option Plan | |
Stock Option Plan | 7 . Stock Option Plan The Company’s stock-based compensation program is designed to attract and retain employees while also aligning employees’ interests with the interests of its stockholders. Stock options have been granted to employees under the stockholder-approved 2007 Key Person Stock Option Plan (“2007 Plan”) or the stockholder-approved 2014 Stock Incentive Plan (“2014 Plan”). Stockholder approval of the 2014 Plan became effective in September 2014. The 2014 Plan originally provided that the aggregate number of shares of common stock that may be issued pursuant to awards granted under the 2014 Plan may not exceed 450,000 shares (the “Share Reserve”), however in October 2015, the stockholders approved a 1,500,000 increase to the Share Reserve. In addition, the Share Reserve automatically increases on January 1st of each year, for a period of not more than 10 years, beginning on January 1st of the year following the year in which the 2014 Plan became effective and ending on (and including) January 1, 2024, in an amount equal to 4% of the total number of shares of common stock outstanding on December 31st of the preceding calendar year. The Company’s Board of Directors may act prior to January 1st of a given year to provide that there will be no January 1st increase in the Share Reserve for such year or that the increase in the Share Reserve for such year will be a lesser number of shares of common stock than would otherwise occur. On January 1, 2015, the Share Reserve increased by 188,640 shares due to the automatic 4% increase. On January 1, 2016, the Share Reserve increased by 204,943 shares due to the automatic 4% increase. On January 1, 2017, the Share Reserve increased by 204,943 shares due to the automatic 4% increase. On January 1, 2019, the Share Reserve increased by 235,090 shares due to the automatic 4% increase. The Share Reserve is currently 2,783,616 shares as of March 31, 2020. In light of stockholder approval of the 2014 Plan, the Company no longer grants equity awards under the 2007 Plan. As of March 31, 2020, 0 shares of an aggregate total of 407,500 shares were available for future stock-based compensation grants under the 2007 Plan and 1,258,557 shares of an aggregate total of 2,783,616 shares were available for future stock-based compensation grants under the 2014 Plan. Aggregate intrinsic value represents the difference between the closing market value as of March 31, 2020 of the underlying common stock and the exercise price of outstanding, in-the-money options. A summary of the Company’s stock option activity and related information for the three months ended March 31, 2020 is as follows: Options Outstanding Weighted Average Number of Weighted Remaining Aggregate Stock Options Average Contractual Intrinsic Value Outstanding Exercise Price Term (In Years) (in thousands) Balance, January 1, 2020 1,581,582 $ 3.23 5.86 $ 70,827 Options exercised (3,000) 3.44 Balance, March 31, 2020 1,578,582 $ 3.23 5.61 $ 57,891 Exercisable as of March 31, 2020 1,494,145 $ 3.08 5.51 $ 55,015 The total compensation cost related to unvested stock option awards not yet recognized was $369 as of March 31,2020. The weighted average period over which the total unrecognized compensation cost related to these unvested stock awards will be recognized is 0.83 years. There were no options granted during the three months ended March 31, 2020 or 2019. The Company has recorded an expense of $67 and $98 as it relates to stock-based compensation for the three months ended March 31, 2020 and 2019, respectively: Three months ended March 31, 2020 2019 Cost of revenues $ — $ 1 Engineering and product development — 7 Sales and marketing — 15 General and administrative 67 75 Total $ 67 $ 98 |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2020 | |
Income Taxes | |
Income Taxes | 8. Income Taxes The Company’s income tax provision for the three months ended March 31, 2020 and March 31, 2019 reflects its estimate of the effective tax rates expected to be applicable for the full year, adjusted for any discrete events that are recorded in the period in which they occur. The estimates are re-evaluated each quarter based on the estimated tax expense for the full year. The effective tax rate for the three months ended March 31, 2020 was 22.52%, compared to no provision for income taxes in the same period of the prior year. The increase in the effective tax rate for the three months ended March 31, 2020 is primarily related to the release of the entire valuation allowance against the deferred tax assets for federal and state net operating loss (“NOL”) carryforwards and other deferred tax assets in the three months ended September 30, 2019. The effective tax rate for the three month ended March 31, 2020 differed from the U.S. federal statutory rate of 21% primarily due to state income taxes (net of federal benefit) partially offset by tax benefits associated with employee equity plans and federal and state research and development credit. The difference between the U.S. Federal statutory rate of 21% and the Company’s effective tax rate of 0% for the three months ended March 31, 2019 was primarily due to NOL carryforwards that offset potential current taxes for which a full valuation allowance had been previously provided. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act was signed into law. The Company has evaluated the impact of the new regulations and determined that there is no material impact to its financial statements. |
Net Income Per Share, Basic and
Net Income Per Share, Basic and Diluted | 3 Months Ended |
Mar. 31, 2020 | |
Net Income Per Share, Basic and Diluted | |
Net Income Per Share, Basic and Diluted | 9. Net Income Per Share, Basic and Diluted Basic earnings per share (“EPS”) represent net income attributable to common stockholders divided by the weighted average number of common shares outstanding during the measurement period. Diluted EPS represents net income attributable to common stockholders divided by the weighted average number of common shares outstanding during the measurement period while also giving effect to all potentially dilutive common shares that were outstanding during the period using the treasury stock method. Basic and diluted net EPS is calculated as follows: Three months ended March 31, 2020 2019 Shares Net Income EPS Shares Net Income EPS Basic EPS 6,533,369 $ 2,673 $ 0.41 6,326,149 $ 1,854 $ 0.29 Common stock warrants 69,715 — 246,843 — Common stock options 1,462,729 — 1,597,295 — Diluted EPS 8,065,813 $ 2,673 $ 0.33 8,170,287 $ 1,854 $ 0.23 The were no weighted average shares outstanding of common stock equivalents excluded from the computation of diluted net loss per share for the three months ended March 31, 2020 and 2019. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2020 | |
Subsequent Events | |
Subsequent Events | 10. Subsequent Events None |
Basis of Presentation (Policies
Basis of Presentation (Policies) | 3 Months Ended |
Mar. 31, 2020 | |
Basis of Presentation | |
Basis of Presentation | Basis of Presentation Semler Scientific, Inc., a Delaware corporation (“Semler” or “the Company”), prepared the unaudited interim financial statements included in this report in accordance with United States generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. As such, the information included in this quarterly report on Form 10‑Q should be read in conjunction with the audited financial statements and notes thereto included in the Company’s annual report on Form 10‑K for the year ended December 31, 2019 filed with the SEC on March 9, 2020 (the “Annual Report”). In the opinion of management, these financial statements include all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the financial position, results of operations and cash flows for the periods presented. The results of operations for the interim periods shown in this report are not necessarily indicative of the results that may be expected for any future period, including the full year. |
Recently Issued Accounting Pronouncements | Recently Issued Accounting Pronouncements Accounting Pronouncements Recently Adopted In November 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2019-08 – Compensation – Stock Compensation (Topic 718) and Revenue from Contracts with Customer (Topic 606). The amendments on this update require that an entity measure and classify share-based payment awards granted to a customer by applying the guidance in Topic 718. The amount recorded as a reduction in the transaction price should be based on the grant-date fair value of the share-based payment award. This standard is effective for the Company’s annual periods beginning after December 15, 2019 , including interim periods within those fiscal years. The Company adopted the new standard on January 1, 2020 and determined that the adoption of this new accounting guidance did not have an impact on its financial statements. In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. This ASU expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. An entity should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the attribution of costs. The ASU specifies that Topic 718 applies to all share-based payment transactions in which a grantor acquires goods or services to be used or consumed in a grantor’s own operations by issuing share-based payment awards. This standard is effective for the Company’s annual periods beginning after December 15, 2019, including interim periods within those fiscal years. The Company adopted the new standard on January 1, 2020 and determined that the adoption of this this new accounting guidance did not have an impact on its financial statements. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. The amendments in this ASU modify the disclosure requirements on fair value measurements removing the requirements to disclosure amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels, and the valuation processes for Level 3 fair value measurements. In addition, it modified certain disclosures related to Level 3 fair value measurements and added additional disclosures regarding the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period. This update is effective for the Company’s annual periods beginning after December 15, 2019, including interim periods within those fiscal years. The Company adopted the new standard on January 1, 2020 and determined that the adoption of this this new accounting guidance did not have an impact on its financial statements. Accounting Pronouncements Not Yet Adopted In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“Topic 326”). This ASU requires timelier recording of credit losses on loans and other financial instruments held. Instead of reserves based on a current probability analysis, Topic 326 requires the measurement of all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. All organizations will now use forward-looking information to better inform their credit loss estimates. Topic 326 requires enhanced disclosures regarding significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an organization’s portfolio. These disclosures include qualitative and quantitative requirements that provide information about the amounts recorded in the financial statements. In addition, Topic 326 amends the accounting for credit losses on available-for-sale debt securities and purchased financial assets with credit deterioration. In April 2019, the FASB issued ASU2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, to introduce amendments that will affect the recognition and measurement of financial instruments, including derivatives and hedging. In May 2019, the FASB issued ASU 2019-05, Financial Instruments – Credit Losses (Topic 326); Targeted Transition Relief. The amendments in this ASU provide entities that have certain instruments within the scope of Subtopic 326-20 with an option to irrevocably elect the fair value option in Subtopic 825-10, applied on an instrument-by-instrument basis for eligible instruments upon adoption of Topic 326. This standard and related amendments are effective for the Company’s fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company will adopt the new standard in the first quarter of fiscal year 2023. The Company is evaluating the effect of adopting this new accounting guidance. In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principles for income taxes. This update is effective for the Company’s annual periods beginning after December 15, 2020, including interim periods within those fiscal years. The Company will adopt the new standard in the first quarter of fiscal year 2021. The Company does not anticipate this update to have a material impact on its financial statements. In January 2020, the FASB issued ASU 2020-01, Investments—Equity Securities (Topic 321), Investments—Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815). The amendments in this ASU clarify the interaction between the accounting for investments in equity securities, investment in equity method and certain derivatives instruments. The ASU is expected to reduce diversity in practice and increase comparability of the accounting for these interactions. This ASU is effective for fiscal years beginning after December 15, 2021. The adoption of this ASU is not expected to have any impact on the Company’s results of operations, cash flows or financial position. In March 2020, FASB issued ASU No. 2020-03, Codification Improvements to Financial Instruments. This ASU improves and clarifies various financial instruments topics, including the current expected credit losses standard issued in 2016 (ASU 2016-13). The ASU includes seven different issues that describe the areas of improvement and the related amendments to GAAP, intended to make the standards easier to understand and apply by eliminating inconsistencies and providing clarifications. The amendments have different effective dates. The Company is evaluating the effect of adopting this new accounting guidance, but does not expect adoption will have a material impact on the Company’s financial statements. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides optional expedient and exceptions for applying generally accepted accounting principles to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. In response to the concerns about structural risks of interbank offered rates and, particularly, the risk of cessation of the London Interbank Offered Rate, regulators in several jurisdictions around the world have undertaken reference rate reform initiatives to identify alternative reference rates that are more observable or transaction based and less susceptible to manipulation. The ASU provides companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. The ASU can be adopted no later than December 1, 2022, with early adoption permitted. The Company is evaluating the effect of adopting this new accounting guidance. |
Variably-priced Revenue | Variably-priced Revenue Topic 606 affects revenue recognition for the Company’s variably-priced (i.e., fee per test) license fee contracts and sales of hardware equipment and accessories. Total variably-priced license fees represent approximately $2,703 and $1,255 of revenues for the three months ended March 31, 2020 and 2019, respectively. Total sales of hardware and equipment accessories represent approximately $270 and $246 of revenues for the three months ended March 31, 2020 and 2019, respectively. Essentially all of the variably-priced license fee contracts are with large healthcare organizations. The remainder of the revenue is earned from leasing the Company's testing product for a fixed monthly fee, which is not subject to Topic 606. |
Assets for Lease, net (Tables)
Assets for Lease, net (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Assets for Lease, net | |
Schedule of assets for lease | March 31, December 31, 2020 2019 Assets for lease $ 3,424 $ 3,374 Less: accumulated depreciation (1,359) (1,295) Assets for lease, net $ 2,065 $ 2,079 |
Property and Equipment, net (Ta
Property and Equipment, net (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Property and Equipment, net | |
Schedule of capital assets | March 31, December 31, 2020 2019 Capital assets $ 728 $ 636 Less: accumulated depreciation (418) (387) Capital assets, net $ 310 $ 249 |
Accrued Expenses (Tables)
Accrued Expenses (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Accrued Expenses | |
Schedule of accrued expenses | March 31, December 31, 2020 2019 Compensation $ 1,608 $ 2,803 Accrued taxes 418 378 Miscellaneous accruals 422 733 Total accrued expenses $ 2,448 $ 3,914 |
Stock Option Plan (Tables)
Stock Option Plan (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Stock Option Plan | |
Schedule of stock option activity | Options Outstanding Weighted Average Number of Weighted Remaining Aggregate Stock Options Average Contractual Intrinsic Value Outstanding Exercise Price Term (In Years) (in thousands) Balance, January 1, 2020 1,581,582 $ 3.23 5.86 $ 70,827 Options exercised (3,000) 3.44 Balance, March 31, 2020 1,578,582 $ 3.23 5.61 $ 57,891 Exercisable as of March 31, 2020 1,494,145 $ 3.08 5.51 $ 55,015 |
Schedule of stock-based compensation | Three months ended March 31, 2020 2019 Cost of revenues $ — $ 1 Engineering and product development — 7 Sales and marketing — 15 General and administrative 67 75 Total $ 67 $ 98 |
Net Income Per Share, Basic a_2
Net Income Per Share, Basic and Diluted (Tables) | 3 Months Ended |
Mar. 31, 2020 | |
Net Income Per Share, Basic and Diluted | |
Schedule of basic and diluted net EPS | Three months ended March 31, 2020 2019 Shares Net Income EPS Shares Net Income EPS Basic EPS 6,533,369 $ 2,673 $ 0.41 6,326,149 $ 1,854 $ 0.29 Common stock warrants 69,715 — 246,843 — Common stock options 1,462,729 — 1,597,295 — Diluted EPS 8,065,813 $ 2,673 $ 0.33 8,170,287 $ 1,854 $ 0.23 |
Basis of Presentation (Details)
Basis of Presentation (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Basis of Presentation | ||
Revenue from variably-priced license fees | $ 2,703 | $ 1,255 |
Revenue from sales of hardware and equipment accessories | $ 270 | $ 246 |
Assets for Lease, net (Details)
Assets for Lease, net (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Assets for Lease, net | ||
Assets for lease | $ 3,424 | $ 3,374 |
Less: accumulated depreciation | (1,359) | (1,295) |
Assets for lease, net | $ 2,065 | $ 2,079 |
Assets for Lease, net - Additio
Assets for Lease, net - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Assets for Lease, net | ||
Depreciation expense | $ 128 | $ 109 |
Reduction to accumulated depreciation for returned items | 65 | 35 |
Loss on disposal of assets for lease | $ (66) | $ (34) |
Property and Equipment, net (De
Property and Equipment, net (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Property and Equipment, net | ||
Capital assets | $ 728 | $ 636 |
Less: accumulated depreciation | (418) | (387) |
Capital assets, net | $ 310 | $ 249 |
Property and Equipment, net - A
Property and Equipment, net - Additional Information (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Property and Equipment, net | ||
Depreciation expense | $ 31 | $ 34 |
Accrued Expenses (Details)
Accrued Expenses (Details) - USD ($) $ in Thousands | Mar. 31, 2020 | Dec. 31, 2019 |
Accrued Expenses | ||
Compensation | $ 1,608 | $ 2,803 |
Accrued Taxes | 418 | 378 |
Miscellaneous accruals | 422 | 733 |
Total accrued expenses | $ 2,448 | $ 3,914 |
Concentration of Credit Risk (D
Concentration of Credit Risk (Details) | 3 Months Ended | 12 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | Dec. 31, 2019 | |
Customer concentration risk | Revenue | |||
Concentration of Credit Risk | |||
Number of customers | 2 | 2 | |
Customer concentration risk | Revenue | Customer one | |||
Concentration of Credit Risk | |||
Concentration risk percentage | 46.10% | 41.80% | |
Customer concentration risk | Revenue | Customer two | |||
Concentration of Credit Risk | |||
Concentration risk percentage | 21.40% | 22.30% | |
Customer concentration risk | Accounts receivable | |||
Concentration of Credit Risk | |||
Number of customers | 3 | 3 | |
Customer concentration risk | Accounts receivable | Customer one | |||
Concentration of Credit Risk | |||
Concentration risk percentage | 28.50% | 55.90% | |
Customer concentration risk | Accounts receivable | Customer two | |||
Concentration of Credit Risk | |||
Concentration risk percentage | 20.60% | 17.60% | |
Customer concentration risk | Accounts receivable | Customer three | |||
Concentration of Credit Risk | |||
Concentration risk percentage | 13.80% | 12.00% | |
Vendor concentration risk | Accounts payable | |||
Concentration of Credit Risk | |||
Number of vendors | 3 | 3 | |
Vendor concentration risk | Accounts payable | Vendor one | |||
Concentration of Credit Risk | |||
Concentration risk percentage | 17.90% | 23.30% | |
Vendor concentration risk | Accounts payable | Vendor two | |||
Concentration of Credit Risk | |||
Concentration risk percentage | 12.70% | 20.30% | |
Vendor concentration risk | Accounts payable | Vendor three | |||
Concentration of Credit Risk | |||
Concentration risk percentage | 12.00% | 11.10% |
Commitments and Contingencies (
Commitments and Contingencies (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Commitments and Contingencies. | ||
Facilities lease expense | $ 17 | $ 17 |
Stock Option Plan (Details)
Stock Option Plan (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2020 | Dec. 31, 2019 | |
Number of Stock Options Outstanding | ||
Balance, Beginning | 1,581,582 | |
Options exercised | (3,000) | |
Balance, Ending | 1,578,582 | 1,581,582 |
Exercisable, Ending | 1,494,145 | |
Weighted Average Exercise Price | ||
Balance, Beginning | $ 3.23 | |
Options exercised | 3.44 | |
Balance, Ending | 3.23 | $ 3.23 |
Exercisable, Ending | $ 3.08 | |
Weighted Average Remaining Contractual Term, Options Outstanding (in years) | 5 years 7 months 10 days | 5 years 10 months 10 days |
Weighted Average Remaining Contractual Term, Options Exercisable (in years) | 5 years 6 months 4 days | |
Aggregate Intrinsic Value, Options Outstanding | $ 57,891 | $ 70,827 |
Aggregate Intrinsic Value, Options Exercisable | $ 55,015 |
Stock Option Plan - Stock-based
Stock Option Plan - Stock-based compensation - Expenses (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Stock-based compensation expense | $ 67 | $ 98 |
Cost of Revenue | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Stock-based compensation expense | 1 | |
Engineering and Product Development | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Stock-based compensation expense | 7 | |
Sales and Marketing | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Stock-based compensation expense | 15 | |
General and Administrative | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Stock-based compensation expense | $ 67 | $ 75 |
Stock Option Plan - Additional
Stock Option Plan - Additional information (Details) - USD ($) $ in Thousands | 1 Months Ended | 3 Months Ended | ||||||
Jan. 31, 2019 | Jan. 31, 2017 | Jan. 31, 2016 | Oct. 31, 2015 | Jan. 31, 2015 | Mar. 31, 2020 | Mar. 31, 2019 | Sep. 30, 2014 | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Total unrecognized compensation cost related to non-vested stock options | $ 369 | |||||||
Weighted average period of unvested stock awards | 9 months 29 days | |||||||
Stock-based compensation expense | $ 67 | $ 98 | ||||||
2007 Key Person Stock Option Plan | Options | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Number of shares available for future stock-based compensation grants | 0 | |||||||
Maximum number of shares issued pursuant to awards granted under plan | 407,500 | |||||||
2014 Stock Incentive Plan | Options | ||||||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||||||
Number of shares available for future stock-based compensation grants | 1,258,557 | |||||||
Maximum number of shares issued pursuant to awards granted under plan | 2,783,616 | 450,000 | ||||||
Maximum term of stock option grants | 10 years | |||||||
Number of share reserve increased | 235,090 | 204,943 | 204,943 | 1,500,000 | 188,640 | |||
Percentage of shares reserve increased | 4.00% | 4.00% | 4.00% | 4.00% | 4.00% |
Income Taxes (Details)
Income Taxes (Details) | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Income Taxes | ||
Federal statutory rate | 21.00% | 21.00% |
Effective income tax rate | 22.52% | 0.00% |
Net Income Per Share, Basic a_3
Net Income Per Share, Basic and Diluted (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Net Income Per Share, Basic and Diluted | ||
Basic EPS (in shares) | 6,533,369 | 6,326,149 |
Common stock warrants (in shares) | 69,715 | 246,843 |
Common stock options (in shares) | 1,462,729 | 1,597,295 |
Diluted EPS (in shares) | 8,065,813 | 8,170,287 |
Net Income - Basic EPS | $ 2,673 | $ 1,854 |
Net Income - Common stock warrants | 0 | 0 |
Net Income - Common stock options | 0 | 0 |
Net Income - Diluted EPS | $ 2,673 | $ 1,854 |
Basic EPS (in dollars per share) | $ 0.41 | $ 0.29 |
Diluted EPS (in dollars per share) | $ 0.33 | $ 0.23 |
Net Income Per Share, Basic a_4
Net Income Per Share, Basic and Diluted - Additional Information (Details) - shares | 3 Months Ended | |
Mar. 31, 2020 | Mar. 31, 2019 | |
Net Income Per Share, Basic and Diluted | ||
Weighted average shares outstanding | 0 | 0 |