UNITED STATES 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 June 30, 2002
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
ICAD, 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)
6405 Congress Avenue, Boca Raton, Florida 33487
(Address of principal executive offices) (Zip Code)
(561) 994-4404
(Registrant's telephone number, including area code)
HOWTEK, INC., 21 Park Avenue, Hudson, NH 03051
(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 August 9, 2002 there were 25,963,178 shares
outstanding of the issuer's Common Stock, $.01 par value.
ICAD, INC.
INDEX
PAGE
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Consolidated Balance Sheets as of June 30, 2002
(unaudited) and December 31, 2001 3
Consolidated Statements of Operations for the
three and six month periods ended June 30, 2002
and 2001 (unaudited) 4
Consolidated Statements of Cash Flows for the six
month periods ended June 30, 2002 and 2001 (unaudited) 5
Notes to Consolidated Financial Statements (unaudited) 6-7
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-11
Item 3 Quantitative and Qualitative Disclosures about Market Risk 11
PART II OTHER INFORMATION
Item 1 Legal Proceedings 11-12
Item 4 Submission of Matters to a Vote of Security Holders 12-13
Item 6 Exhibits and Reports on Form 8-K 13
Signatures 14
2
ICAD, INC.
Consolidated Balance Sheets
June 30, 2002 December 31, 2001
------------- -----------------
(unaudited) (audited)
Assets
Current assets:
Cash and equivalents $ 2,506,501 $ 495,360
Trade accounts receivable, net of allowance
for doubtful accounts of $84,640 in 2002 and
$165, 000 in 2001 913,405 691,415
Inventory 434,333 2,363,237
Prepaid and other 88,540 36,590
------------ ------------
Total current assets 3,942,779 3,586,602
------------ ------------
Property and equipment:
Equipment 827,720 1,408,347
Leasehold improvements 30,660 41,721
------------ ------------
858,380 1,450,068
Less accumulated depreciation and amortization 543,235 1,118,685
------------ ------------
Net property and equipment 315,145 331,383
------------ ------------
Other assets:
Software development costs, net -- 230,247
Patents, net -- 12,893
Technology intangible, net 3,869,586 --
Distribution agreement, net 1,565,428 --
Goodwill 17,222,917 --
------------ ------------
Total other assets 22,657,931 243,140
------------ ------------
Total assets $ 26,915,855 $ 4,161,125
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 2,052,767 $ 1,026,335
Accrued interest 219,471 203,299
Accrued expenses 1,839,573 203,064
Loans payable to related party -- 500,000
Convertible subordinated debentures 10,000 10,000
Current maurities of note payable 63,278 61,109
------------ ------------
Total current liabilities 4,185,089 2,003,807
Note payable, less current maturities 141,725 117,761
Loans payable to related party 250,000 --
------------ ------------
Total liabilities 4,576,814 2,121,568
------------ ------------
Stockholders' equity:
Convertible preferred stock, $.01 par value: authorized
1,000,000 shares; issued and outstanding
8,550 in 2002 and 9,550 in 2001, with the aggregated
liquidation value of $2,115,000 in 2002 and
$2,215,000 in 2001, plus 7% annual dividend 86 96
Common stock, $ .01 par value: authorized
50,000,000 shares; issued 26,025,054 in 2002
and 15,241,833 shares in 2001; outstanding
25,957,178 in 2002 and 15,173,957 shares in 2001 260,250 152,418
Additional paid-in capital 85,179,521 57,107,227
Accumulated deficit (62,150,552) (54,269,920)
Treasury stock, at cost (67,876 shares) (950,264) (950,264)
------------ ------------
Total stockholders' equity 22,339,041 2,039,557
------------ ------------
Total liabilities and stockholders' equity $ 26,915,855 $ 4,161,125
============ ============
See accompanying notes to consolidated financial statements.
3
ICAD, INC.
Consolidated Statements of Operations
Three Months Six Months
June 30, June 30,
------------------------------- -------------------------------
2002 2001 2002 2001
------------ ------------ ------------ ------------
(unaudited) (unaudited)
Sales $ 776,600 $ 932,160 $ 1,552,233 $ 2,445,764
Cost of Sales 3,442,347 785,533 4,037,759 1,906,996
------------ ------------ ------------ ------------
Gross Margin (2,665,747) 146,627 (2,485,526) 538,768
------------ ------------ ------------ ------------
Operating expenses:
Engineering and product development 337,139 198,888 526,895 362,864
General and administrative 4,059,232 287,828 4,284,587 594,139
Marketing and sales 287,315 427,818 554,395 965,883
------------ ------------ ------------ ------------
Total operating expenses 4,683,686 914,534 5,365,877 1,922,886
------------ ------------ ------------ ------------
Loss from operations (7,349,433) (767,907) (7,851,403) (1,384,118)
Interest expense - net 10,077 30,036 29,229 53,416
------------ ------------ ------------ ------------
Net loss (7,359,510) (797,943) (7,880,632) (1,437,534)
Preferred dividend 36,911 39,193 73,416 77,956
------------ ------------ ------------ ------------
Net loss available to common shareholders $ (7,396,421) $ (837,136) $ (7,954,048) $ (1,515,490)
============ ============ ============ ============
Net loss per share
Basic and diluted $ (0.47) $ (0.06) $ (0.51) $ (0.11)
Weighted average number of shares used
in computing loss per share
Basic and diluted 15,889,910 13,631,198 15,572,432 13,597,861
See accompanying notes to consolidated financial statements.
4
ICAD, INC.
Consolidated Statements of Cash Flows
Six Months Six Months
June 30, 2002 June 30,2001
------------ -----------
(unaudited) (unaudited)
Cash flows from operating activities:
Net loss $ (7,880,632) $(1,437,534)
------------ -----------
Adjustments to reconcile net loss to net
cash used for operating activities:
Depreciation 82,238 114,447
Amortization 64,837 124,735
Loss on disposal of assets 417,005
Compensation expense relative to issue of
stock at merger 2,800,000 --
Changes in operating assets and liabilities, net
of effects from acquisition of ISSI:
Accounts receivable 469,500 416,045
Inventory 2,163,165 (567,200)
Prepaid and other 606 57,115
Accounts payable 858,879 457,087
Accrued expenses 589,596 102,427
------------ -----------
Total adjustments 7,445,826 704,656
------------ -----------
Net cash used for operating activities (434,806) (732,878)
------------ -----------
Cash flows from investing activities:
Additions to patents, software development and other -- (82,975)
Additions to property and equipment (56,103) (55,502)
Cash acquired in the acquisition of ISSI 2,202,040 --
------------ -----------
Net cash provided by (used for) investing activities 2,145,937 (138,477)
------------ -----------
Cash flows from financing activities:
Issuance of common stock for cash 80,032 145,328
Proceeds of convertible note payable to principal
stockholders 750,000 --
Payment of demand note payable to principal
stockholders (500,000) --
Payment of note payable (30,022) --
------------ -----------
Net cash provided by financing activities 300,010 145,328
------------ -----------
Increase (decrease) in cash and equivalents 2,011,141 (726,027)
Cash and equivalents, beginning of period 495,360 1,444,771
------------ -----------
Cash and equivalents, end of period $ 2,506,501 $ 718,744
============ ===========
Supplemental disclosure of non-cash items from
investing and financing activities:
Conversion of loan to related party into
Common Stock $ 500,000 $ 510,000
============ ===========
Accrued dividends on convertible preferred stock $ 73,416 $ --
============ ===========
Fair market value of icad common stock and common
stock options issued to acquired capital stock of ISSI $ 27,673,500 $ --
============ ===========
Net tangible assets of ISSI acquired, excluding cash
acquired of $2,202,040 $ 406,433 $ --
============ ===========
Fair market value of indentifiable intangible assets
acquired from ISSI $ 5,437,000 $ --
============ ===========
See accompanying notes to consolidated financial statements.
5
ICAD, INC.
Notes to Consolidated Financial Statements
(Unaudited)
June 30, 2002
(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
consolidated financial statements. Reference should be made to Howtek,
Inc.'s Annual Report on Form 10-K for the year ended December 31, 2001 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 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%. Mr. Howard is entitled to convert outstanding advances made by him
under the Loan Agreement 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 lesser of the market price at the time each advance is made
or at the time of conversion. During the second quarter of 2002 the
Company borrowed $250,000 pursuant to the Loan Agreement.
In March 2002, Mr. Howard converted $500,000 of advances made under the
Loan Agreement into 215,517 shares of restricted common stock of the
Company. At June 30, 2002, $250,000 was outstanding under the Loan
Agreement and $2,750,000 was available for future borrowings.
The Company had Secured Demand Notes and Security Agreements (the "Notes")
owed to Mr. Robert Howard. The principal of these Notes was 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. Payment of the Notes was
secured by a security interest in certain assets of the Company. In March
2002, the Company repaid the principal balance due in the amount of
$500,000 and the Notes were discharged.
6
ICAD, INC.
Notes to Consolidated Financial Statements
(Unaudited)
June 30, 2002
(3) Litigation
A complaint was filed against the Company and 213 other defendants in the
United States District Court for the Eastern District of Texas, entitled
The Massachusetts Institute of Technology and Electronics for Imaging,
Inc. v. Abacus Software Inc. et al., Case No. 501CV344. The plaintiff
claims the Company and other defendants have infringed a United States
patent alleged to cover color reproduction system technology. With respect
to the Company, the alleged infringement involves certain of the Company
scanners and other products sold to customers in the graphic arts/prepress
and photographic markets. The case seeks unspecified damages together with
interest, injunctive relief and recovery of reasonable attorney's fees.
On June 3, 2002, ISSI was sued in United States District Court for the
District of Delaware by R2 Technology, Inc. and Shih-Ping Wang. The
lawsuit alleges that ISSI's MammoReader device infringes certain patents
owned by R2 Technology, Inc. The complaint request treble damages, but
does not specify the amount of damages sought. The complaint also seeks to
enjoin ISSI from further infringement. On July 11, 2002, subsequent to the
acquisition of ISSI by Howtek, the plaintiffs amended their complaint to
add icad, inc. (formerly, Howtek Inc.) and ISSI Acquisition Corp. as
additional parties. The Company believes the lawsuit is without merit and
intents to vigorously defend itself.
(4) Acquisition
On June 28, 2002, the Company completed the acquisition of Intelligent
Systems Software, Inc. ("ISSI") pursuant to the previously reported plan
and agreement of merger. The Company acquired all of the issued and
outstanding capital stock of ISSI, a privately held company based in Boca
Raton, Florida. In the merger, the Company issued a total of 10,400,000
shares of its common stock to the ISSI stockholders, including 2,000,000
shares of the Company's common stock which were issued to a corporation
owned by the Chairman of the Company, Mr. Robert Howard, in exchange for
shares of ISSI Common Stock purchased by the corporation immediately prior
to the merger, as approved by the Company's shareholders and in accordance
with the provisions of the merger agreement. In connection with the
2,000,000 shares issued to the corporation owned by Mr. Howard, the
Company recorded compensation expense of $2,800,000, which represents the
amount that the fair market value if ICAD common shares issued exceeded
the consideration paid for ISSI common stock. The acquisition was
accounted for as a purchase, and accordingly, the operations of ISSI are
included in the consolidated financial statements since the effective
date, the close of business on June 28, 2002. The purchase price has been
allocated to net assets acquired based on their estimated fair values. The
excess of the purchase price over net assets acquired has been allocated
to Goodwill for approximately $20,023,000. Results of operations of ISSI
for the period June 29, 2002 to June 30, 2002 were not material.
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, product market acceptance,
possible technological obsolescence of products, increased competition,
litigation and/or government regulation, changes in Medicare reimbursement
policies, the effect of costs and accounting charges related to the merger of
Howtek's and ISSI's businesses, competitive factors, the effects of a decline in
the economy in markets served by the Company and other risks detailed in the
Company's other filings with the Securities and Exchange Commission. The words
"believe", "demonstrate", "intend", "expect", "estimate", "anticipate",
"likely", and similar expressions identify forward-looking statements. Readers
are cautioned not to place undue reliance on those forward-looking statements,
which speak only as of the date the statement was made.
Results of Operations
Overview
icad, inc., formerly Howtek, Inc., ("the Company") designs, develops,
manufactures and markets Computer Aided Detection (CAD) imaging technology for
mammography applications. In January 2002, the Company received an approval from
the U.S. Food and Drug Administration (FDA) to market and sell its new CAD-based
MammoReader(TM) system in the United States. The Company's MammoReader system
promises to play a key role in the early identification of breast cancer by
assisting radiologists in detecting subtle signs of cancer. The Company is the
only vertically integrated company in its market. The Company's MammoReader(TM)
system includes proprietary software technology developed by the Company and a
radiographic film digitizer manufactured by the Company, together with standard
computer and display equipment.
Merger with ISSI
On June 28, 2002, the Company completed the acquisition of Intelligent Systems
Software, Inc. ("ISSI") pursuant to the previously reported plan and agreement
of merger. The Company acquired all of the issued and outstanding capital stock
of ISSI, a privately held company based in Boca Raton, Florida. In the merger,
the Company issued a total of 10,400,000 shares of its common stock to the ISSI
stockholders, including 2,000,000 shares of the Company's common stock which
were issued to a corporation owned by the Chairman of the Company, Mr. Robert
Howard, in exchange for shares of ISSI Common Stock purchased by that
corporation immediately prior to the merger, as approved by the Company's
shareholders and in accordance with the provisions of the merger agreement.
8
Subsequent to completion of the merger the Company amended its certificate of
incorporation to increase its authorized common stock to 50,000,000 shares,
change its name from "Howtek, Inc." to "icad, inc." and classify its Board of
Directors into three classes.
The Company's plan is to concentrate its sales efforts in the imaging and
scanning business on the computer-aided detection of breast cancer market, and
on complementary markets for its medical film digitizers, and to seek licensees
for its graphic arts and photographic product lines. The Company's
MammoReader(TM) product includes proprietary software technology developed by
the Company and a radiographic film digitizer manufactured by the Company,
together with standard computer and display equipment. This more focused shift
in business focus is largely responsible for reduced overall sales during the
first and second quarter of 2002.
Consistent with the Company's intention to concentrate its efforts in the
imaging and scanning business on higher margin medical and computer assisted
detection applications and seek licensees for its graphic arts and photographic
product lines, the Company established non-cash reserves and has taken inventory
adjustments associated with these products, which total approximately $3
million. icad's consolidated operating results for the second quarter includes
ISSI's operations for the three day period from June 28 to June 30, 2002 and do
not include ISSI sales or performance prior to that date.
Quarter Ended June 30, 2002 compared to Quarter Ended June 30, 2001 and Six
Months Ended June 30, 2002 compared to Six Months Ended June 30, 2001
Sales. Sales for the three months ended June 30, 2002 were $776,600, compared
with sales of $932,160 for the quarter ended June 30, 2001. Sales for the six
months ended June 30, 2002 were $1,552,233, compared with sales of $2,445,764
for the comparable period in 2001. As a result of the Company's shift in the
focus of its business, sales of the Company's prepress and graphic arts
products, including related maintenance and repair services, decreased by
$60,488 and $461,144, respectively, for the three and six month periods ended
June 30, 2002, from $246,997 and $827,623, respectively, in 2001 to $186,509 and
$366,479 in 2002. Sales of the Company's FotoFunnel products decreased by
$67,794 and $290,102, respectively, for the three and six month periods ending
June 30, 2002, from $172,199 and $564,271, respectively, in 2001 to $104,405 and
$274,169 in 2002.
Sales of the Company's medical imaging products decreased slightly from $512,964
in the quarter ended June 30, 2001 to $485,686 in the quarter ended June 30,
2002. Medical sales for the six month period ended June 30, 2002 were $911,585,
compared with sales of $1,053,870 for the comparable period in 2001. The
Company's medical product sales are made primarily to it's respective
"integration partners" or resellers, which add software and other components to
the Company's products to provide full medical imaging solutions to their
customers. The Company believes that there has been a softening in the
telemedicine and Picture Archiving and
9
Communications Systems (PACS) segments of the medical market place, as customer
purchases are being deferred or reconsidered as a result of what is perceived to
be an overall softness in the economy.
Gross Margins. The decrease in gross margin for the three and six month periods
ended June 30, 2002 is due primarily to the write-offs of inventory relating to
graphic arts and photographic products. The Company intends to concentrate its
efforts in the imaging and scanning business on higher margin medical and
computer assisted detection applications and seek licensees for its graphic arts
and photographic product lines. As a result of the foregoing, the Company
incurred a charge to cost of sales consisting of a charge for an inventory
reserve and a write-off of prepaid royalty in the amount of $2,837,196. Before
the write-off, gross margins for the three and six month periods ended June 30,
2002 increased to 22% and 23%, respectively, from 16% and 22%, respectively, in
the comparable periods in 2001. Exclusive of the write-off, gross margin
increased as a result of reduced production overhead and indirect production
expenses. The Company expects margins to improve as a result of increasing sales
of its MammoReader(TM) systems for the computer assisted detection of breast
cancer.
Engineering and Product Development. Engineering and product development costs
for the three and six month periods ended June 30, 2002 increased 70% and 45%,
respectively, from $198,888 and $362,864, respectively, in 2001 to $337,139 and
$526,895 in 2002. The increase in engineering and product development costs
resulted primarily from the Company's decision in the second quarter to
accelerate the development of its new medical digitizer product. The Company
expects engineering and product development costs to increase over the remainder
of 2002.
General and Administrative. General and administrative expenses in the three and
six month periods ended June 30, 2002 increased by $3,771,404 and $3,690,448,
respectively, from $287,828 and $594,139 in 2001 to $4,059,232 and $4,284,587,
respectively, in 2002. The increase in general and administrative expenses
resulted primarily from a one-time, $2,800,000 non-cash accounting charge
associated with the placement of $2,000,000 in restricted common stock by ISSI
immediately prior to the successful acquisition of ISSI by icad. Pursuant to the
acquisition agreement between the two companies, which was approved by the
Company's shareholders, this sale of securities increased working capital and
funded the promotion of the MammoReader product. Additional increases reflected
non-recurring severance benefits and other expenses associated with reductions
of staff made possible by the combination of ISSI and Howtek, a write-off of
fixed assets, including test equipment and software development costs, relating
to its graphic arts and photographic product lines, an increase in provision for
doubtful accounts, and an accrued litigation cost in connection with the
complaint filed against the Company by The Massachusetts Institute of Technology
and Electronics for Imaging, Inc. See Part II, Item1 - Legal Proceedings.
Marketing and Sales Expenses. Marketing and sales expenses for the three and six
month periods ended June 30, 2002 decreased 33% and 43%, respectively, from
$427,818 and $965,883, respectively, in 2001 to $287,315 and $554,395,
respectively, in 2002. This decrease is due primarily to a significant reduction
in expenses related to the Company's traditional graphic arts and FotoFunnel
product lines.
10
Interest Expense. Net interest expense for the three and six month periods ended
June 30, 2002 decreased to $10,077 and $29,229, respectively, from $30,036 and
$53,416, respectively, in 2001. This decrease is due primarily to a decrease in
loan balances and interest rates.
As a result of the foregoing, the Company recorded a net loss of $7,359,510 or
$0.47 per share for the three month period ended June 30, 2002 on sales of
$776,600 compared to a net loss of $797,943 or $0.06 per share from the same
period in 2001 on sales of $932,160. The loss for the six months ended June 30,
2002 was $7,880,632 or $0.51 per share on sales of $1,552,233 compared with a
net loss of $1,437,534 or $0.11 per share on sales of $2,445,764 for the six
months ended June 30, 2001.
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 the Loan Agreement with its Chairman, Mr. Robert Howard, of which
$2,750,000 was available at June 30, 2002.
At June 30, 2002 the Company had current assets of $3,942,779, current
liabilities of $4,185,089 and working capital deficit of $242,310. The ratio of
current assets to current liabilities was 0.9:1.
The Company had Secured Demand Notes and Security Agreements (the "Notes") owed
to Mr. Robert Howard. The principal of these Notes was 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. Payment of the Notes was secured by a security interest in
certain assets of the Company. In March 2002, the Company repaid the principal
balance due in the amount of $500,000 and the Notes were discharged.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
A complaint was filed against the Company and 213 other defendants in the United
States District Court for the Eastern District of Texas, entitled The
Massachusetts Institute of Technology and Electronics for Imaging, Inc. v.
Abacus Software Inc. et al., Case No. 501CV344. The plaintiff claims the Company
and other defendants have infringed a United States patent alleged to cover
color reproduction system technology. With respect to the Company, the alleged
infringement involves certain of the Company scanners and other products sold to
customers in the graphic
11
arts/prepress and photographic markets. The case seeks unspecified damages
together with interest, injunctive relief and recovery of reasonable attorney's
fees.
On June 3, 2002, ISSI was sued in United States District Court for the District
of Delaware by R2 Technology, Inc. and Shih-Ping Wang. The lawsuit alleges that
ISSI's MammoReader device infringes certain patents owned by R2 Technology, Inc.
The complaint request treble damages, but does not specify the amount of damages
sought. The complaint also seeks to enjoin ISSI from further infringement. On
July 11, 2002, subsequent to the acquisition of ISSI by Howtek, the plaintiffs
amended their complaint to add icad, inc. (formerly, Howtek Inc.) and ISSI
Acquisition Corp. as additional parties. The Company believes the lawsuit is
without merit and intents to vigorously defend itself.
Item 4. Submission of Matters to a Vote of Security Holders
On June 28, 2002, the Company held an Annual Meeting of Stockholders at which
the following matters were voted on by the security holders of Howtek, Inc.. The
results of the vote are as follows:
1. Approval and adoption of the Plan and Agreement of Merger dated February 15,
2002, as amended, among Howtek, Inc., ISSI Acquisition Corp. and Intelligent
Systems Software, Inc., 11,350,911 FOR approval, 21,100 votes AGAINST approval ,
5,800 ABSTENTIONS and 4,535,894 NOT VOTED.
2. Approval of an amendment to the Company's Certificate of Incorporation to:
(a) change its name from Howtek, Inc. to icad, inc.; (b) increase the number of
shares of Common Stock that the Company has authority to issue from 25,000,000
to 50,000,000 shares, and; (c) classify the Company's board of directors into
three classes, as follows: three Class I directors to hold offices for an
initial one-year term expiring at the 2003 annual meeting of stockholders; three
Class II directors to hold office for an initial two-year term expiring at the
2004 annual meeting of stockholders; and three Class III directors to hold
office for an initial three-year term expiring at the 2005 annual meeting of
stockholders, 11,360,661 votes FOR approval, 21,100 votes AGAINST approval,
5,800 ABSTENTIONS and 4,535,894 NOT VOTED.
3. Election of Directors.
Number of Number of Number
Names of Nominees Votes For Votes Withheld Not Voted
- ----------------- --------- -------------- ---------
Class I
Dr. Kevin S. Woods 11,111,961 265,850 4,535,894
Gregory J. Stepic 11,105,572 272,239 4,535,894
Brett Smith 11,091,961 285,850 4,535,894
12
Class II
Dr. Maha Y. Sallam 11,111,961 265,850 4,535,894
James Harlan 11,111,961 265,850 4,535,894
Dr. Elliot Sussman 11,091,961 285,850 4,535,894
Class III
W. Kip Speyer 11,040,072 273,739 4,535,894
W. Scott Parr 11,111,961 265,850 4,535,894
Robert Howard 11,098,961 278,850 4,535,894
4. Amendment to the Company's Certificate of Incorporation to indemnify the
Company's directors, officers, employees and agents to the fullest extent
provided by Delaware law, 15,882,255 votes FOR approval, 28,000 votes AGAINST
approval and 3,450 ABSTENTIONS.
5. Amendment to the Company's Line of Credit Agreement with Howtek's (and the
Company's) Chairman of the Board, Robert Howard, 15,697,381 votes FOR approval,
198,775 votes AGAINST approval and 17,550 ABSTENTIONS.
6. Approval of the Company's 2002 Stock Option Plan, 15,478,644 votes FOR
approval, 395,231 votes AGAINST approval and 39,830 ABSTENTIONS.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Amendments to the Certificate of Incorporation dated June 28,
2002.
(b) A report on Form 8-K was filed during the quarter for which this
report is filed under item 5 and 7 to report the commencement of a
lawsuit by R2 Technology Inc. and Shih-Ping Wang against ISSI.
13
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.
icad, inc.
-----------------------------------
(Company)
Date: August 14, 2002 By: /s/ W. Kip Speyer
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W. Kip Speyer
Chief Executive Officer,
Director
Date: August 14, 2002 By: /s/ Annette L. Heroux .
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Annette L. Heroux
Chief Financial Officer, Controller
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