SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31, 1999
OR
( ) 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
HOWTEK, INC.
(Exact name of registrant as specified in its charter)
Delaware 02-0377419
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
21 Park Avenue, Hudson, New Hampshire 03051
(Address of principal executive offices) (Zip Code)
(603) 882-5200
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirement for the past 90 days. YES X NO___.
As of the close of business on May 7, 1999 there were 12,824,206 shares
outstanding of the issuer's Common Stock, $.01 par value.
HOWTEK, INC.
INDEX
PAGE
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Balance Sheets as of March 31, 1999
(unaudited) and December 31, 1998 3
Statements of Operations for the three
month periods ended March 31, 1999 and
1998 (unaudited) 4
Statement of Changes in Stockholders' Equity
for the three month period ended March 31, 1999
(unaudited) 5
Statements of Cash Flows for the three month periods
ended March 31, 1999 and 1998 (unaudited) 6
Notes to Financial Statements (unaudited) 7
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-13
Item 3 Quantitative and Qualitative Disclosures about Market Risk 13
PART II OTHER INFORMATION
Item 2 Changes in Securities 14
Item 6 Exhibits and Reports on Form 8-K 14
Signatures 15
2
HOWTEK, INC.
Balance Sheets
March 31, 1999 December 31, 1998
--------------- -----------------
Assets (unaudited)
Current assets:
Cash and equivalents $ 221,994 $ 182,724
Trade accounts receivable net of allowance
for doubtful accounts of $108,000 in 1999
and $118,000 in 1998 1,423,745 1,570,081
Inventory 2,820,333 2,927,082
Prepaid and other 103,172 118,689
------------ ------------
Total current assets 4,569,244 4,798,576
------------ ------------
Property and equipment:
Equipment 2,564,975 2,534,635
Leasehold improvements 27,765 27,765
Motor vehicles 6,050 6,050
------------ ------------
2,598,790 2,568,450
Less accumulated depreciation and amortization 1,818,164 1,717,445
------------ ------------
Net property and equipment 780,626 851,005
------------ ------------
Other assets:
Software development costs, net 585,941 626,577
Debt issuance costs, net 52,592 57,682
Patents, net 16,378 17,581
------------ ------------
Total other assets 654,911 701,840
------------ ------------
Total assets $ 6,004,781 $ 6,351,421
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 1,487,512 $ 1,086,775
Accrued interest 61,579 37,641
Accrued rent expense 98,125 78,500
Accrued vacation pay 99,875 84,875
Accrued expenses 151,554 146,204
Loans payable to related parties 700,000 765,000
------------ ------------
Total current liabilities 2,598,645 2,198,995
Loan payable to related parties 30,000 --
Loan payable to unrelated parties 250,000 --
Convertible subordinated debentures 117,000 1,881,000
------------ ------------
Total liabilities 2,995,645 4,079,995
------------ ------------
Commitments and contingencies
Stockholders' equity:
Common stock, $ .01 par value: authorized
25,000,000 shares; issued 12,892,082 in 1999
and 11,128,082 shares in 1998; outstanding
12,824,206 in 1999 and 11,060,206 shares in 1998 128,920 111,281
Additional paid-in capital 51,356,318 47,938,799
Accumulated deficit (47,525,838) (44,828,390)
Treasury stock at cost (67,876 shares) (950,264) (950,264)
------------ ------------
Stockholders' equity 3,009,136 2,271,426
------------ ------------
Total liabilities and stockholders' equity $ 6,004,781 $ 6,351,421
============ ============
See accompanying notes to financial statements.
3
HOWTEK, INC.
Statements of Operations
Three Months Three Months
March 31, 1999 March 31, 1998
-------------- ---------------
(unaudited) (unaudited)
Sales $ 1,561,133 $ 954,257
Cost of Sales 1,304,357 876,311
------------ ------------
Gross Margin 256,776 77,946
------------ ------------
Operating expenses:
Engineering and product development 250,433 255,179
General and administrative 554,306 362,420
Marketing and sales 454,891 464,193
------------ ------------
Total operating expenses 1,259,630 1,081,792
------------ ------------
Loss from operations (1,002,854) (1,003,846)
Interest expense - net 1,694,594 49,336
------------ ------------
Net loss $ (2,697,448) $ (1,053,182)
============ ============
Net loss per share
Basic and diluted $ (0.23) $ (0.12)
Weighted average number of shares used in
computing earnings per share
Basic and diluted 11,657,384 9,060,206
See accompanying notes to financial statements.
4
HOWTEK, INC.
Statement of Changes in Stockholders' Equity
Common Stock
---------------------------- Additional
Number of Paid-in Accumulated Treasury Stockholders'
Shares Issued Par Value Capital Deficit Stock Equity
------------- ------------ ------------ ------------ ------------- ----------------
Balance at December 31, 1998 11,128,082 $ 111,281 $ 47,938,799 $(44,828,390) $ (950,264) $ 2,271,426
Issuance of common stock relative
to conversion of Convertible
Subordinated Debentures 1,764,000 17,639 3,417,519 3,435,158
Net loss -- -- -- (2,697,448) -- (2,697,448)
------------ ------------ ------------ ------------ ------------- ------------
Balance at March 31, 1999 12,892,082 $ 128,920 $ 51,356,318 $(47,525,838) $ (950,264) $ 3,009,136
============ ============ ============ ============ ============= ============
See accompanying notes to financial statements.
5
HOWTEK, INC.
Statements of Cash Flows
Three Months Three Months
March 31, 1999 March 31, 1998
--------------- --------------
(unaudited) (unaudited)
Cash flows from operating activities:
Net loss $(2,697,448) $(1,053,182)
Adjustments to reconcile net income
(loss) to net cash provided by
operating activities:
Depreciation 100,719 106,204
Amortization 75,293 55,291
Interest relative to conversion of Convertible
Subordinated Debentures 1,671,158 --
(Increase) decrease:
Accounts receivable 146,336 512,183
Inventory 106,749 67,984
Other current assets 15,517 (82,776)
Increase (decrease):
Accounts payable 400,737 (2,123)
Accrued expenses 63,913 42,227
----------- -----------
Total adjustments 2,580,422 698,990
----------- -----------
Net cash provided by (used for)
operating activities (117,026) (354,192)
----------- -----------
Cash flows from investing activities:
Patents, software development and other (28,364) (44,259)
Additions to property and equipment (30,340) (8,832)
----------- -----------
Net cash used for investing activities (58,704) (53,091)
----------- -----------
Cash flows from financing activities:
Proceeds of loan payable to principal stockholders 215,000 400,000
----------- -----------
Net cash provided by financing activities 215,000 400,000
----------- -----------
Increase (decrease) in cash and equivalents 39,270 (7,283)
Cash and equivalents, beginning of period 182,724 235,326
----------- -----------
Cash and equivalents, end of period $ 221,994 $ 228,043
=========== ===========
Supplemental disclosure of cash flow information:
Interest paid $ -- $ --
=========== ===========
See accompanying notes to financial statements.
6
HOWTEK, INC.
Notes to Financial Statements
March 31, 1999
(1) Accounting Policies
In the opinion of management all adjustments and accruals (consisting only
of normal recurring adjustments) which are necessary for a fair
presentation of operating results are reflected in the accompanying
financial statements. Reference should be made to Howtek, Inc.'s Annual
Report on Form 10-K for the year ended December 31, 1998 for a summary of
significant accounting policies. Interim period amounts are not necessarily
indicative of the results of operations for the full fiscal year.
(2) Loan Payable to Related Party
The Company has a Convertible Revolving Credit Promissory Note ("the
Convertible Note") and Revolving Loan and Security Agreement (the "Loan
Agreement") with Mr. Robert Howard, Chairman of the Board of Directors of
the Company, under which Mr. Howard has agreed to advance funds, or to
provide guarantees of advances made by third parties in an amount up to
$3,000,000. Outstanding advances are collateralized by substantially all of
the assets of the Company and bear interest at prime interest rate plus 2%.
The Convertible Note entitles Mr. Howard to convert outstanding advances
into shares of the Company's common stock at any time based on the
outstanding closing market price of the Company's common stock at the time
each advance is made.
As of March 31, 1999, the Company had $3,000,000 available for future
borrowings under the Loan Agreement.
In the third quarter of 1998, the Company borrowed, (i) $565,000 from Mr.
Robert Howard, the Company's Chairman, and (ii) $200,000 from Dr. Lawrence
Howard, the son of Mr. Robert Howard, pursuant to Secured Demand Notes and
Security Agreements (the "Notes"). Principal on the Notes are due and
payable in full, together with interest accrued and any penalties provided
for, on demand. Under the terms of the Notes the Company agreed to pay
interest at the lower rate of (a) 12% per annum, compounded monthly or (b)
the maximum rate permitted by applicable law. The Notes currently bear
interest at 12%. Payment of the Notes is secured by a security interest in
certain assets of the Company. In February 1999, the Company repaid $65,000
to Mr. Robert Howard. As of March 31, 1999, the Company owed (i) $500,000
to Mr. Robert Howard, and (ii) $200,000 to Dr. Lawrence Howard.
7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995:
Certain information included in this Item 2. and elsewhere in this Form 10-Q
that are not historical facts contain forward looking statements that involve a
number of known and unknown risks, uncertainties and other factors that could
cause the actual results, performance or achievements of the Company to be
materially different from any future results, performance or achievement
expressed or implied by such forward looking statements. These risks and
uncertainties include, but are not limited to, uncertainty of future sales
levels, protection of patents and other proprietary rights, the impact of supply
and manufacturing constraints or difficulties, possible technological
obsolescence of products, competition, the failure of the Company or key third
parties with which the Company does business to achieve year 2000 compliance and
other risks detailed in the Company's Securities and Exchange Commission
filings. The words "believe", "expect", "anticipate" and "seek" and similar
expressions identify forward-looking statements. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date the statement was made.
Results of Operations
Overview
During the first quarter of 1999, the Company established reserves or took
non-recurring charges in the amount of $208,000 associated with a conversion of
product offerings to take advantage of its new exclusive agreement to distribute
flatbed graphic arts scanners manufactured by Scanview A/S into the United
States and Canadian markets. Additionally, earnings for the period were reduced
by approximately $1.7 million in non-recurring accounting charges associated
with the early conversion of $1,764,000 of the Company's outstanding convertible
debt to equity. After accounting charges, reserves and non-recurring charges,
the Company's total loss for the first quarter of 1999 was ($2,697,448), or
($0.23) per share, compared with losses of ($1,053,182), or ($0.12) per share
for the first quarter of 1998.
Quarter Ended March 31, 1999 compared to Quarter Ended March 31, 1998
Sales. Sales for the three months ended March 31, 1999 were $1,561,133, an
increase of $606,876 or 64% from the comparable period in 1998. The Company
continues to emphasize its medical business opportunities, and sales of the
Company's medical imaging products increased 70%, from $173,204 in the quarter
ended March 31, 1998 to $294,654 in the quarter ended March 31, 1999. Howtek's
medical product sales are primarily to the Company's respective "integration
partners" or resellers, who add software and other components to Howtek's
products to provide full medical imaging solutions to their customers. The
Company's sales levels are a reflection of the sales these partners achieve in
any period. During the first four months of 1999, the Company added a series of
new integration partners which have agreed to offer Howtek digitizers, including
ADAC, Advanced Imaging Concepts, DesAcc, Inc., Amicas, Image Labs and SMV, in
the United States, Loxley in Thailand, Medicor in Hungary, MISME in the United
Arab Emirates, Tech Trend in Hong Kong and Tentas in Australia. These resellers
are expected to contribute to increased sales of medical products in future
periods.
8
Sales of the Company's prepress and graphic arts products increased 61%, from
$555,915 in the first quarter of 1998 to $898,279 over the comparable period in
1999. Increased sales are attributed by management to the introduction of its
new HiResolve drum scanner product during the fourth quarter of 1998, the
introduction of its new Digital PhotoLab products in the first quarter of 1999,
and increased marketing and advertising investments. These factors offset the
adverse impact of a change in flatbed products offered during the first quarter
of 1999. With the completion of its exclusive agreement to distribute the
ScanMate line of flatbed scanners manufactured in Denmark by Scanview A/S, the
Company elected to withdraw its previously introduced HiDemand 200 and HiDemand
400 graphic arts scanner products from the market. This interrupted and delayed
sales efforts in progress with respect to the Company's previous flatbed scanner
lines.
During the first quarter of 1999 the Company also began to implement a more
extensive direct telemarketing program, focusing on geographic areas which are
not adequately served by the Company's distribution channels, and on selected
vertical market opportunities, including professional photographic markets.
Contribution to overall sales through this direct sales channel is expected to
increase in future periods.
Gross Margins. Gross margins for the three month period ended March 31, 1999
increased to 16% from 8% in the comparable period in 1998. Changes in gross
margins reflect a series of interacting factors. In general, gross margins have
improved, and are expected to improve during 1999, as a result of reduced
production overhead and indirect production expenses, associated with the
Company's continuing overhead and expense control measures and with the
Company's increased outsourcing of production and assembly services. Production
overhead and indirect production costs have declined in absolute terms, and are
expected to continue to decline over the immediate future; at the same time,
sales have increased, and are expected to continue increasing, decreasing such
production costs as a percentage of sales. Both factors contribute to improved
margins.
Offsetting these positive factors in part, the Company reduced pricing on its
older generation drum scanner products and on its ScanMaster 2500 flatbed
scanner during the first quarter of 1999, to improve the competitive position of
such products and to deplete existing component and parts inventories associated
with these older products prior to increased promotion of the Company's new
HiResolve drum scanner products. These price reductions had an adverse effect on
gross margins, which should decline as the transition to newer, higher margin
products accelerates over the next quarter. Price competition, however, is
expected to increase over time in the graphic arts market and the Company is
prepared to adjust prices as necessary to maintain competitive position.
Offsetting these factors, gross margins in the Company's graphic arts product
lines in future periods are expected to benefit from an increasing percentage of
sales and an anticipated increase in sales of higher margin products.
Engineering and Product Development. Engineering and product development costs
for the three month period ended March 31, 1999 decreased slightly from $255,179
in 1998 to $250,433 in 1999. The decrease results primarily from planned
reductions in manpower. During the first quarter of 1999, continuing reductions
in personnel expenses were offset in part by variable costs associated with
final release of the Company's HiResolve drum scanner line, including increased
regulatory and compliance testing, subcontracting services and expenses related
to engineering
9
change orders. Additionally, non-recurring prototyping expenses associated with
development of the Company's compact automated print scanner occurred during
this period. The Company expects to continue reducing costs and overhead
associated with engineering and product development, in absolute terms as a
percentage of sales, as it increases its utilization of outside and contract
engineering resources as appropriate. In general, the Company seeks to shift its
engineering and development priorities, and the allocation of its engineering
and development resources, to its medical business opportunities.
General and Administrative. General and administrative expenses in the three
month period ended March 31, 1999 were materially increased by a $186,662
returns reserve established to permit the Company to take back discontinued
HiDemand 400 graphic arts scanner products to encourage resellers and customers
to acquire new Scanview products, especially in reseller demonstration
locations, and a non-recurring expense of $21,142 associated with the write off
of tooling and inventories associated with the discontinued HiDemand 400
product. Prior to accounting for this reserve, and write down, first quarter
general and administrative expenses, decreased slightly from $362,420 in 1998 to
$346,502 in 1999. Giving effect to the HiDemand 400 reserve and write downs,
first quarter general and administrative expenses were $554,306 in 1999. During
the first quarter of 1999, reductions of $77,000 in personnel expenses were
offset by non-recurring increases in the Company's provision for doubtful
accounts and corporate communications expenses. The Company also elected to
change its accounting practices with respect to reserving for vacation pay,
reserving on a monthly basis instead of annually in December of each year. The
Company expects general and administrative expenses to go down during 1999, as a
percentage of sales and in absolute terms.
Marketing and Sales Expenses. Marketing and sales expenses in the three month
period ended March 31, 1999 decreased slightly from $464,193 in 1998 to $454,891
in 1999. During this period, the Company eliminated $75,782 in personnel
expenses previously related to marketing, while decreasing personnel expenses
related to sales from $239,940 in the first quarter of 1998 to $205,930 in the
first quarter of 1999. During the same periods, the Company increased
advertising, promotional and trade show expenses associated with new product
launches. Commissions payable to inside sales representatives increased in the
first quarter of 1999 as a result of increased sales. Effective in April of
1999, the Company has changed its sales compensation structure to provide
compensation on the basis of gross margins, rather than net sales. The Company
expects marketing and sales expenses to increase in absolute terms, while
remaining relatively constant as a percentage of sales.
Interest Expense. Net interest expense of $1,694,594 includes interest expense
of $1,671,158 relative to the conversion of Convertible Subordinated Debentures
as required by Statement of Financial Accounting Standards No. 84, "Induced
Conversions of Convertible Debt". This charge is wholly offset by a
corresponding accounting increase to additional paid-in capital by $1,671,158.
The charge and corresponding benefit relate to the conversion to equity during
the first quarter of 1999 of $1,764,000 of the Company's previously outstanding
9% Convertible Subordinated Debentures, due 2001 (the "9% Debenture"). In
December 1998, the Company provided for a temporary reduction in the conversion
price of the 9% Debenture to encourage conversion to common stock, and thereby
reduce cash interest expenses, and sinking fund payments associated with the 9%
debenture. See "Liquidity and Capital Resources".
10
As a result of the foregoing, the Company recorded a net loss of $2,697,448 or
$0.23 per share for the three month period ended March 31, 1999 on sales of
$1,561,133 compared to a net loss of $1,053,182 or $0.12 per share from the same
period in 1998.
Liquidity and Capital Resources
The Company's ability to generate cash adequate to meet its requirements depends
primarily on operating cash flow and the availability of a $3,000,000 credit
line under a Convertible Note and Revolving Loan and Security Agreement with its
Chairman, of which $3,000,000 was available at March 31, 1999.
At March 31, 1999 the Company had current assets of $4,569,244, current
liabilities of $2,598,645 and working capital of $1,970,599. The ratio of
current assets to current liabilities was 1.8:1
In the third quarter of 1998, the Company borrowed, (i) $565,000 from Mr. Robert
Howard, the Company's Chairman, and (ii) $200,000 from Dr. Lawrence Howard, the
son of Mr. Robert Howard, pursuant to Secured Demand Notes and Security
Agreements (The "Notes"). Principal on these Notes are due and payable in full,
together with interest accrued and any penalties provided for, on demand. Under
the terms of the Notes the Company agreed to pay interest at the lower rate of
(a) 12% per annum, compounded monthly or (b) the maximum rate permitted by
applicable law. The Notes currently bear interest at 12%. Payment of the Notes
is secured by a security interest in certain assets of the Company.
In February 1999, the Company repaid $65,000 to Mr. Robert Howard. As of March
31, 1999, the Company owed (i) $500,000 to Mr. Robert Howard, and (ii) $200,000
to Dr. Lawrence Howard.
The Company believes it can adequately fund its working capital and capital
equipment requirements based upon its anticipated level of sales for 1999 and
the line of credit available under the Revolving Loan Agreement with its
Chairman.
As of December 31, 1998, the Company's outstanding balance on its $8,000,000, 9%
Convertible Subordinated Debentures (the "Debentures"), which come due 2001, was
$1,881,000. The Debentures were convertible into common stock of the Company at
the conversion price of $19.00 per share, subject to adjustment in certain
events. On December 31, 1998, the Company and the Trustee of the Debentures
entered into a Second Supplemental Indenture (the "Agreement"). The purpose of
the Agreement was to reduce the conversion price for the Debentures from $19.00
per share to $1.00 per share, subject to adjustment as set forth in the
Indenture, during the period from December 31, 1998 through March 23, 1999.
Under the Agreement, Debentures owned by related parties in the principal amount
of $300,000 were converted into 300,000 shares of Common Stock, at the
conversion price of $1.00 per share on December 31, 1998. Interest expense and
corresponding credit to additional paid-in capital of $284,211 were recorded
relative to the conversion of Convertible Subordinated Debentures as required in
terms of Statement of Financial Accounting Standards No. 84, ("SFAS No. 84")
"Induced Conversions of Convertible Debt".
11
During the period from January 1, 1999 through March 23, 1999 Debentures in the
principal amount of $1,764,000 were converted into 1,764,000 shares of Common
Stock, at the conversion price of $1.00 per share. Interest expense and
corresponding credit to additional paid-in capital of $1,671,158 was recorded
relative to the conversion of Convertible Subordinated Debentures as required in
terms of SFAS No. 84. As of March 31, 1999 there was $117,000 in the principal
amount of Debentures outstanding.
In February 1999, the Company borrowed, (i) $250,000 from unrelated parties, and
(ii) $30,000 from Mr. W. Scott Parr, the Company's President, Chief Executive
Officer, pursuant to Convertible Promissory Notes (the "Promissory Notes").
Principal on these Promissory Notes are payable in equal payments based on the
borrowed amount at the end of each quarter starting March 31, 2003 through
December 31, 2006. Under the terms of the Promissory Notes the Company agreed to
pay interest at a fixed rated of 7% per annum, beginning on December 31, 1999
and each succeeding year during the terms hereof. At the Company's option it may
pay the interest in either cash or in restricted shares of the Company's common
stock, or in any combination thereof. Interest paid in shares of the Company's
common stock will be paid at the greater of $1.00 per share or the average per
share closing market price at the time each interest payment is due. The
Promissory Notes entitles the payees to convert outstanding principal due into
shares of the Company's common stock at $1.00 per share .
Subsequent Events
In April 1999, the Company borrowed an additional $410,000 from unrelated
parties and issued to these lenders an equal principal amount of Promissory
Notes.
Impact of the Year 2000
Many currently installed computer systems and software programs were designed to
use only a two-digit date field. These date code fields will need to accept four
digit entries to distinguish 21st century dates from 20th century dates. Until
the date fields are updated, the systems and programs could fail or give
erroneous results when referencing dates following December 31, 1999. Such
failure or errors could occur prior to the actual change in century. This
potential problem is referred to as the "Year 2000" or "Y2K" issue.
In 1998, the Company established a review program to address the Year 2000
issue. The effort encompasses hardware, software, networks, personal computers,
manufacturing and other facilities, and suppliers. The target date to correct
and revise its system problems is September 30, 1999. The Company is currently
assessing alternative manufacturing and financial control systems. The Company's
products are not date aware and do not present a Year 2000 problem to its
customers.
The failure to correct a material Year 2000 problem could result in an
interruption in, or a failure of, certain normal business activities or
operations. Such failures could materially and adversely affect the Company's
results of operations, liquidity and financial condition. Due to the general
uncertainty inherent in the Year 2000 problem, resulting in part from the
uncertainty of the Year
12
2000 readiness of third-party suppliers, the Company is unable to determine at
this time whether the consequences of the Year 2000 failures will have a
material impact on the Company's results of operations, liquidity or financial
condition. The Company believes that, with the completion of its review program
as scheduled and the implementation of new business systems, the possibility of
significant interruptions of normal operations should be reduced.
Costs related to the Year 2000 issue are expensed as incurred and are funded
through operating cash flows. The total cost associated with required
modifications to become Year 2000 compliant is not expected to be material to
the Company's financial position. The estimated total cost of the Year 2000
program is approximately $40,000. The Company expensed approximately $5,000
related to the cost of upgrading non-compliant hardware. Time and cost estimates
are based on currently available information and could be affected by the
ability to correct all relevant computer codes and equipment.
Item 3. Quantitative and Qualitative Disclosures about Market Risk Not
applicable.
13
PART II OTHER INFORMATION
Item 2. Changes in Securities
In February 1999, the Company entered into an agreement to borrow $280,000
pursuant to Promissory Notes. See "Liquidity and Capital Resources". These notes
were issued in a private offering pursuant to an exemption from registration
under Section 4(2) of the Securities Act of 1933.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Form of Convertible Promissory Note between unrelated investors and
the Company.
27 Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter for which this
report is filed.
14
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Howtek, Inc.
----------------------
(Company)
Date: May 14, 1999 By: /s/ W. Scott Parr
------------ ---------------------------------------
W. Scott Parr
President, Chief Executive Officer,
Director
Date: May 14, 1999 By: /s/ Robert J. Lungo
------------ ---------------------------------------
Robert J. Lungo
Vice President Finance,
Chief Financial Officer
15