levels. The

COVID-19

pandemic has resulted in significant financial market volatility and uncertainty. A continuation or worsening of the levels of market disruption and volatility seen in the recent past could have an adverse effect on our ability to access capital, on our business, results of operations and financial condition, and on the market price of our common stock.

The potential impact of the

COVID-19

pandemic on the Company’s future revenue could affect our ability to access capital in future quarters due to the covenants contained in the Company’s loan agreement with Western Alliance Bank (the “Bank”), as described in Note 4(b). Effective June 16, 2020 the loan agreement requires the Company to satisfy the minimum revenue covenant or maintain a ratio of (x) unrestricted cash at the Bank to (y) the aggregate total of indebtedness owed to the Bank, equal to or greater

than

1.25

1.00

. If at any point the Company is not in compliance with at least one of these and certain other covenants and is unable to obtain an amendment or waiver, such noncompliance may result in an event of default under the Loan and Security Agreement, which could result in acceleration of the outstanding indebtedness and require the Company to repay such indebtedness before the scheduled due date.

How

ever

he Company believes that even if an event of default were to occur, the Company’s current liquidity and capital resources are sufficient to sustain operations through at least the next 12 months, primarily due to cash on hand of $

24.2

million and anticipated revenue and cash collections

Our results for the quarter ending June 30, 2020 reflect a negative impact from the

COVID-19

pandemic as the typical sales cycle and ordering patterns were still disrupted due to healthcare facilities’ additional focus on

COVID-19.

Although we do not provide guidance to investors relating to our future results of operations, our results for the quarter ending September 30, 2020, and possibly future quarters, could reflect a negative impact from the

COVID-19

pandemic for similar reasons. Depending upon the duration and severity of the pandemic, the continuing effect on our results over the long term is uncertain.

Although the Company did not see any material impact to trade accounts receivable losses in the quarter ended June 30, 2020, the Company’s exposure may increase if its customers are adversely affected by changes in healthcare laws, coverage, and reimbursement, economic pressures or uncertainty associated with local or global economic recessions, disruption associated with the current

COVID-19

pandemic, or other customer-specific factors. Although the Company has historically not experienced significant trade account receivable losses, it is possible that there could be a material adverse impact from potential adjustments of the carrying amount of trade account receivables as hospitals’ cash flows are impacted by their response to the

COVID-19

pandemic.

The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted on March 27, 2020. The Company is continuing to analyze the impact of the CARES Act on its business. For the three months ended June 30, 2020, the Company recorded a benefit of $0.3 million from the Employee Retention Credit, a component of the CARES Act. This was reflected in the Company’s statement of operations.

Recently Adopted Accounting Pronouncements

There are no significant recently adopted accounting pronouncements. For a full list of the Company’s response to all recent accounting pronouncements please refer to Note 13 below.

Revenue Recognition

Revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration which the Company expects to be entitled to receive in exchange for these goods or services and excludes any sales incentives or taxes collected from customers which are subsequently remitted to government authorities.

Disaggregation of Revenue

The following tables presents our revenues disaggregated by major good or service line, timing of revenue recognition, and sales channel, reconciled to our reportable segments (in thousands).


	Three months ended June 30, 2020
	Reportable Segments
	Detection		Therapy		Total
Major Goods/Service Lines
Products	$	2,702	$	575	$	3,277
Service contracts		1,403		385		1,788
Supply and source usage agreements		—		490		490
Other		12		—		12

	$	4,117	$	1,450	$	5,567

Timing of Revenue Recognition
Goods transferred at a point in time	$	2,714	$	605	$	3,319
Services transferred over time		1,403		845		2,248

	$	4,117	$	1,450	$	5,567

Sales Channels
Direct sales force	$	2,709	$	805	$	3,514
OEM partners		1,408		—		1,408
Channel partners		—		645		645

	$	4,117	$	1,450	$	5,567


	Six months ended June 30, 2020
	Reportable Segments
	Detection		Therapy		Total
Major Goods/Service Lines
Products	$	5,802	$	1,921	$	7,723
Service contracts		2,750		732		3,482
Supply and source usage agreements		—		861		861
Professional services		—		11		11
Other		41		—		41

	$	8,593	$	3,525	$	12,118

Timing of Revenue Recognition
Goods transferred at a point in time	$	5,843	$	1,988	$	7,831
Services transferred over time		2,750		1,537		4,287

	$	8,593	$	3,525	$	12,118

Sales Channels
Direct sales force	$	4,881	$	2,274	$	7,155
OEM partners		3,712		—		3,712
Channel partners		—		1,251		1,251

	$	8,593	$	3,525	$	12,118


	Three months ended June 30, 2019
	Reportable Segments
	Detection		Therapy		Total
Major Goods/Service Lines
Products	$	3,808	$	1,050	$	4,858
Service contracts		1,354		475		1,829
Supply and source usage agreements		—		526		526
Professional services		—		8		8
Other		47		61		108

	$	5,209	$	2,120	$	7,329

Timing of Revenue Recognition
Goods transferred at a point in time	$	3,808	$	1,144	$	4,952
Services transferred over time		1,401		976		2,377

	$	5,209	$	2,120	$	7,329

Sales Channels
Direct sales force	$	2,863	$	1,701	$	4,564
OEM partners		2,346		—		2,346
Channel partners		—		419		419

	$	5,209	$	2,120	$	7,329


	Six months ended June 30, 2019
	Reportable Segments
	Detection		Therapy		Total
Major Goods/Service Lines
Products	$	6,598	$	2,569	$	9,167
Service contracts		2,676		991		3,667
Supply and source usage agreements		—		1,063		1,063
Professional services		—		41		41
Other		103		61		164

	$	9,377	$	4,725	$	14,102

Timing of Revenue Recognition
Goods transferred at a point in time	$	6,598	$	2,776	$	9,374
Services transferred over time		2,779		1,949		4,728

	$	9,377	$	4,725	$	14,102

Sales Channels
Direct sales force	$	4,974	$	3,513	$	8,487
OEM partners		4,403		—		4,403
Channel partners		—		1,212		1,212

	$	9,377	$	4,725	$	14,102

Products.

Product revenue consists of sales of cancer detection products, cancer therapy systems, cancer therapy applicators (including disposable applicators) and other accessories that are typically shipped with a cancer therapy system. The Company transfers control and recognizes a sale when the product is shipped from the manufacturing or warehousing facility to the customer.

Service Contracts.

The Company sells service contracts in which it provides professional services including product installations, maintenance, training, and service repairs, and in certain cases leases equipment, to hospitals, imaging centers, radiology practices, radiation oncologists and treatment centers. These represent separate performance obligations to the Company. The Company allocates revenue to each performance obligation based on the Standalone Selling Price (“SSP”). Revenue for lease and

non-lease

components, or the entire arrangement when accounted for under ASC 606, is recognized on a straight-line basis over the term of the agreement. The service contracts range from 12 months to 48 months. The Company typically receives payment at the inception of the contract and recognizes revenue on a straight-line basis over the term of the agreement.

Supply and Source Usage Agreements.

Revenue from supply and source usage agreements is recognized on a straight-line basis over the term of the supply or source usage agreement. These agreements represent a separate performance obligation to the Company. The Company allocates revenue to each performance obligation based on the SSP.

Professional Services.

Revenue from fixed fee service contracts is recognized on a straight-line basis over the term of the agreement. Revenue from professional service contracts entered into with customers on a time and materials basis is recognized over the term of the agreement in proportion to the costs incurred in satisfying the obligations under the contract.

Other.

Other revenue consists primarily of miscellaneous products and services. The Company transfers control and recognizes a sale when the installation services are performed or when the product is shipped from the manufacturing or warehousing facility to the customer.

Contract Balances

Contract liabilities are a component of deferred revenue, and contract assets are a component of prepaid and other current assets. The following table provides information about receivables, contract assets, and contract liabilities from contracts with customers (in thousands).

Contract balances


	Balance at June 30, 2020
Receivables, which are included in ‘Trade accounts receivable’	$	6,658
Contract assets, which are included in “Prepaid and other current assets”		21
Contract liabilities, which are included in “Deferred revenue”		5,664

Timing of revenue recognition may differ from timing of invoicing to customers. The Company records a receivable when revenue is recognized prior to receipt of cash payment and the Company has the unconditional right to such consideration, or unearned revenue when cash payments are received or due in advance of performance. For multi-year agreements, the Company generally invoices customers annually at the beginning of each annual service period.

The Company’s accounts receivable from contracts with customers, net of allowance for doubtful accounts, was $6.7 million and $9.8 million as of June 30, 2020 and December 31, 2019, respectively.

The Company will record a contract asset for unbilled revenue when the Company’s performance is in excess of amounts billed or billable. The Company has classified the contract asset balance as a component of prepaid expenses and other current assets as of June 30, 2020 and December 31, 2019. The contract asset balance was $21,000 as of June 30, 2020 and $14,000 as of December 31, 2019.

Deferred revenue from contracts with customers, which is included in deferred revenue in the consolidated balance sheet, is primarily composed of fees related to service arrangements, which are generally billed in advance. Deferred revenue also includes payments for installation and training that has not yet been completed and other offerings for which we have been paid in advance and earn the revenue when we transfer control of the product or service.

The balance of deferred revenue at June30, 2020 and December 31, 2019 is as follows (in thousands):


Contract liabilities	June 30, 2020		December 31, 2019
Short term	$	5,466	$	5,248
Long term		198		356

Total	$	5,664	$	5,604

Changes in deferred revenue from contracts with customers were as follows (in thousands):


	Six Months Ended
	June 30, 2020
Balance at beginning of period	$	5,604
Deferral of revenue		5,078
Recognition of deferred revenue		(5,018	)

Balance at end of period	$	5,664

We expect to recognize approximately $4.5 million of the deferred amount in 2020, $1.0 million in 2021, and $0.2 million thereafter.