SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(Amendment No. 1)
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 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)
4 Townsend West, Suite 17, Nashua, New Hampshire 03063
------------------------------------------------ ----------
( Address of principal executive offices) ( Zip Code)
Registrant's telephone number, including area code: (603) 882-5200
--------------
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12 (g) of the Act:
Title of Class
Common Stock, $.01 par value
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 as
required to file such reports), and (2) has been subject to such filing
requirement for the past 90 days. YES X NO___.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act) YES NO X .
The aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing price for the registrant's Common Stock on
June 28, 2002 was $43,940,562.
As of March 25, 2003, the registrant had 26,350,248 shares of Common Stock
outstanding.
PART III
Item 10. Directors and Executive Officers of the Registrant.
-------- ---------------------------------------------------
Director
Name Age Position Since
---- --- -------- ------
Robert Howard# 79 Chairman of the Board, and Director 1984
W. Scott Parr# 51 President, Chief Executive Officer
and Director 1998
Annette Heroux 46 Vice President of Finance, Chief Financial
Officer -
James Harlan* 51 Director 2000
Maha Sallam* 35 Executive Vice President, Director 2002
Brett Smith+ 33 Director 2000
Elliot Sussman* 51 Director 2002
Kevin Woods+ 36 Vice President of Research and Development
Director 2002
----------------------
+ Class I Director, current term expires in 2003
* Class II Director, current term expires in 2004
# Class III Director, current term expires in 2005
The Company's Certificate of Incorporation provides that the Company's Board of
Directors is divided into three classes (Class I, Class II and Class III). At
each Annual Meeting of Stockholders, directors constituting one class are
elected for a three-year term.
Robert Howard, the founder and Chairman of the Board of Directors of the
Company, was the inventor of the first impact dot matrix printer. Mr. Howard was
Chief Executive Officer of the Company from its establishment in 1984 until
December of 1993. He was the founder, and from 1969 to April 1980 he served as
President and Chairman of the Board, of Centronics Data Computer Corp.
("Centronics"), a manufacturer of a variety of computer printers. He resigned
from Centronics' board of directors in 1983. From April 1980 until 1983, Mr.
Howard was principally engaged in the management of his investments. Commencing
in mid-1982, Mr. Howard, doing business as R.H. Research, developed the ink jet
technology upon which the Company was initially based. Mr. Howard contributed
this technology, without compensation, to the Company. Mr. Howard was Chairman
of the Board of Presstek, Inc. ("Presstek"), a public company which has
developed proprietary imaging and consumables technologies for the printing and
graphic arts industries from June 1988 to September 1998 and served as Chairman
Emeritus of the Board of Presstek from September 1998 to December 2000.
W. Scott Parr joined the Company in January 1998, as President and Chief
Executive Officer. He was appointed to the Company's Board of Directors in
February 1998. In connection with the merger of ISSI, W. Kip Speyer, the
President and Chief Executive Officer of ISSI assumed the position of Chief
Executive Officer of the Company and Mr. Parr continued in the position of
President of the Company. Upon Mr. Speyer's resignation in September 2002, Mr.
Parr was re-appointed as Chief Executive Officer of the Company. Prior to
joining iCAD, Mr. Parr served as Divisional Director and a member of the Board
2
of Directors of SABi International Ventures, Inc. in 1997, where he was
responsible for restructuring and upgrading certain US companies owned by
foreign and venture investors. From 1995 to 1997, Mr. Parr was Chief Executive
Officer, General Counsel and Director of Allied Logic Corporation, a start-up
venture specializing in proprietary molding and manufacturing technologies. From
1990 to 1995 Mr. Parr was General Counsel and a Director of LaserMaster
Technologies, Inc.
Annette Heroux joined the Company in October 1987 as Accounting Manager and was
named Controller in October 1998 and Vice President of Finance, Chief Financial
Officer in July 1999. Prior to joining the Company, Ms. Heroux worked from 1980
to 1987 for Laurier, Inc., a semiconductor equipment manufacturer, in various
financial and managerial capacities.
James Harlan has been the Executive Vice President and Chief Financial Officer
of HNG Storage Company, a natural gas storage, development and operations
company since 1998. From 1991 to 1997 Mr. Harlan served as General Manager and
Chief Financial Officer of Pacific Resources Group and planning and finance
development work with various manufacturing and distribution businesses in Asia.
He also served as operations research and planning analyst for the White House
Office of Energy Policy and Planning from 1977 to 1978, the Department of Energy
from 1978 to 1981, and U.S. Synthetic Fuels Corporation from 1981 to 1984. He
has a PhD in Public Policy with an operations research dissertation from Harvard
University and a BS in Chemical Engineering from Washington University.
Maha Sallam has been the Executive Vice President for the Company since June
2002. From 1997 until the acquisition of ISSI in June 2002, Dr. Sallam served as
Director and Vice President of Regulatory Affairs and Clinical Testing and
Secretary of ISSI. She was one of ISSI's founders and has over eleven years of
industry and research experience in image analysis including a doctoral
dissertation, conference presentations and several publications on the automated
analysis of digital mammograms. Dr. Sallam received her doctorate degree in
Computer Science and Engineering from the University of South Florida in May
1997. She also earned a Master of Science from the University of South Florida
in 1991 and a Bachelor of Science in Computer Engineering from the University of
South Florida in 1990.
Brett Smith, the son of Mrs. Kit Howard, the wife of the Company's Chairman, has
been the Chairman and CEO of ei3 Corporation, a provider of technology services
to manufacturing companies utilizing advanced frame relay and internet
technologies. Prior to joining ei3 Mr. Smith was a member of the restructuring
team for Delta V Technologies, a subsidiary of Presstek, where he served as
Director of Business Development from 1996 to 1999. From 1995 to 1996 Mr. Smith
worked for the Asia Times newspaper start-up team in Hong Kong. He began his
career as an analyst, from 1992 to 1994, at Susquehanna Investment Group. Mr.
Smith received a Bachelor of Science from Emory University.
Elliot Sussman is currently President and CEO of Lehigh Valley Hospital and
Health Network, a position he has held since 1993. Dr. Sussman is the Leonard
Parker Pool Professor of Health Systems Management, Professor of Medicine, and
Professor of Health Evaluation Sciences at Pennsylvania State University's
College of Medicine. Dr. Sussman served as a Fellow in General Medicine and a
3
Robert Wood Johnson Clinical Scholar at the University of Pennsylvania, and
trained as a resident at the Hospital of the University of Pennsylvania. Dr.
Sussman holds a Masters in Business Administration from the Wharton School,
University of Pennsylvania, a Medical Degree from Harvard University and a
Bachelor of Arts Degree from Yale University.
Kevin Woods has been the Vice President of Research and Development for the
Company since June 2002. From 1997 until the acquisition of ISSI in June 2002,
Dr. Woods served as Director and Vice President of Research and Development and
was one of ISSI's founders. Prior to joining ISSI, Dr. Woods held a
competitively awarded, post-doctoral research position funded by the U.S. Army
Medical Research and Material Command's Breast Cancer Research Program. He has
been researching the automated analysis of digital mammogram images and has been
awarded research grants totaling over $1,400,000 for this purpose. Dr. Woods
received his doctoral degree in Computer Science and Engineering from the
University of South Florida in 1991. Dr. Woods also received a Master of Science
and Bachelor of Science in Computer Engineering from the University of South
Florida in 1989.
Key Employees
-------------
Name Age Position
---- --- --------
Richard Lehman 65 Vice President of Hardware Engineering
William Langille 51 Vice President of Operations
Ernest Henrichon 60 Vice President of Software Engineering
Richard F. Lehman joined the Company in July 1990, as Director of Scanner
Engineering. In December 1993, he was named Vice President of Scanner
Engineering and in October 1996, he was named Vice President of Engineering.
Prior to joining the Company, Mr. Lehman was employed by Xerox Corporation for
23 years where he served in various engineering and managerial capacities.
William A. Langille joined the Company in March 2001 as Vice President of
Operations and has also served as President of the Company's Howtek Devices
Corporation subsidiary since July 2002. Prior to joining the Company, Mr.
Langille worked from 1999 to 2001 for Inspex, a manufacturer of test equipment
for the semiconductor industry. From 1973 to 1997, Mr. Langille worked for
Nashua Corporation, a fortune 500 multinational manufacturer and distributor of
computer products and office supplies, in various manufacturing and managerial
capacities.
Ernest Henrichon joined the Company in February 2003, as Vice President of
Software Engineering. From 1998 to 2002, Dr. Henrichon was Vice President of
Engineering at Newpoint Technologies, Inc., a provider of real-time network
management software and systems integration services to the satellite and
broadcast industries. He was Vice President of Engineering at Imaging Technology
Inc. from 1990 to 1997, where he had responsibility for the development of
software and hardware components used in OEM image processing applications.
4
Item 11. Executive Compensation.
-------- -----------------------
The following table provides information on the compensation provided by the
Company during fiscal years 2002, 2001 and 2000 to the persons serving as the
Company's Chief Executive Officer during fiscal 2002, the Company's most highly
compensated executive officers and certain key employees serving at the end of
the 2002 fiscal year ("the Named Persons"). Included in this list are only those
executive officers and key employees whose total annual salary and bonus
exceeded $100,000 during the 2002 fiscal year.
SUMMARY COMPENSATION TABLE
Securities
Underlying
Name and Principal Position Year Salary($) Option(#)
--------------------------- ---- --------- ---------
W. Kip Speyer (1)
Chief Executive Officer...................................... 2002 116,874 625,000(2)
W. Scott Parr
President, Chief Executive Officer, Director................. 2002 173,762 125,000
2001 145,669 4,000
2000 138,357 - 0 -
Richard F. Lehman
Vice President of Hardware Engineering. .................. 2002 126,178 15,372
2001 114,135 4,000
2000 116,986 5,000
William A. Langille
Vice President of Operations................................. 2002 117,479 54,500
2001 71,786 83,000
(1) Mr. Speyer served as Chief Executive Officer of iCAD from June 2002 until
his resignation in September 2002.
(2) Includes 75,000 options issued by the Company in the merger with ISSI in
June 2002, in exchange for ISSI options held by Mr. Speyer.
5
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding stock options
granted by the Company to the Named Persons in 2002.
Individual Grants Potential
---------------------------------- Realizable Value at
Number of Percent of Assumed Annual
Securities Total Options Rates of Stock
underlying Granted to Exercise of Price Appreciation
Options Employees Base Price Expiration for Option Term (3)
Name Granted(1) in Fiscal Year(2) ($/Sh) Date 5%($) 10%($)
---- ---------- ----------------- ------------ ------------ --------- ---------
W. Kip Speyer 75,000 (4) .80 05/29/2011 37,734 95,625
550,000 25% 3.49 06/28/2012 1,207,163 3,059,189
W. Scott Parr 25,000 1.75 01/16/2012 27,514 69,726
100,000 5% 2.69 11/29/2012 169,173 428,717
Richard F. Lehman 15,372 1% 1.55 11/04/2012 14,984 37,973
William A. Langille 20,000 1.75 01/16/2012 22,011 55,781
34,500 2% 1.55 11/04/2012 33,630 85,225
(1) All of the foregoing options vest in installments at various times between
January 16, 2002 and June 28, 2005.
(2) The total number of options granted in fiscal 2002 includes 500,000 options
of the Company issued in exchange for ISSI options in connection with the merger
in June 2002.
(3) The potential realizable value columns of the table illustrate values that
might be realized upon exercise of the options immediately prior to their
expiration, assuming the Company's Common Stock appreciates at the compounded
rates specified over the term of the options. These numbers do not take into
account provisions of options providing for termination of the option following
termination of employment or non transferability of the options and do not make
any provision for taxes associated with exercise. Because actual gains will
depend upon, among other things, future performance of the Common Stock, there
can be no assurance that the amounts reflected in this table will be achieved.
(4) Represents options of the Company issued in exchange for ISSI options in
connection with the merger in June 2002.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information regarding the exercise of stock
options during the Company's last completed fiscal year by each of the Named
Persons and the fiscal year-end value of unexercised options.
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the Money
Options at Options at
Shares FY-End (#) FY-End($) (1)
Acquired on Value Exercisable/ Exercisable/
Name Exercise (#) Realized Unexercisable Unexercisable
---- ------------ -------- ------------- -------------
W. Kip Speyer (2) 0 0 625,000 / -0- 128,250 / -0-
W. Scott Parr (2) 0 0 510,050 / 21,468 584,512 / 36,496
Richard F. Lehman (2) 0 0 64,628 / 15,372 73,793 / 14,757
William A. Langille (2) 0 0 73,000 / 74,500 89,880 / 95,520
------------------------
(1) Based upon the closing price of the Common Stock on December 31, 2002, of
$2.51 per share.
6
(2) Options granted pursuant to the Company's merger and 1993 and 2001 Stock
Option Plans.
The Company does not have any employment agreements with its executive officers
or key employees.
In September 2002, the Company entered into a Separation Agreement with each of
W. Kip Speyer, the former Chief Executive Officer of iCAD and Gregory J. Stepic,
the former Vice President of Finance of iCAD. The Separation Agreements
acknowledged the resignations of each of Messrs. Speyer and Stepic and provided
for severance payments to Messrs. Speyer and Stepic of $500,000 and $148,000,
respectively, in lieu of any severance payments to which they may have been
entitled to under their employment agreements. The severance payments, less any
required withholding by the Company, are payable to Mr. Speyer in equal
installments over a 30 month period and to Mr. Stepic in equal installments over
a 12 month period, in each case subject to the right to accelerate payments upon
the sale of the outstanding stock of the Company or upon a sale by the Company
of substantially all of its assets. Under the Separation Agreements, each of
Messrs. Speyer and Stepic was entitled to retain his outstanding options of the
Company which remain exercisable in accordance with their respective terms.
Also, pursuant to the Separation Agreements Messrs. Speyer and Stepic each
agreed to remain bound by the confidentiality and non-competition provisions of
their employment agreements for the periods set for in the employment
agreements.
Compensation of Directors
The Company does not pay cash compensation to members of its board of directors
for their services as board members. The Company does reimburse members of the
board for out-of-pocket expenses incurred for attendance at board and board
committee meetings.
During fiscal 2002 the Company granted the following ten year options to its
board members: an aggregate of 125,000 options exercisable at prices ranging
from $1.75 to $2.69 per share to W. Scott Parr, which options were immediately
exercisable; 75,000 options exercisable at $1.55 per share to James Harlan,
which options vest annually in three equal installments beginning on September
30, 2003; 100,000 options exercisable at $3.49 per share to Maha Sallam, which
options were immediately exercisable; 20,000 options exercisable at $1.55 per
share to Brett Smith, which options vest annually in three equal installments
beginning on September 30, 2003; 45,000 options exercisable at $1.55 per share
to Dr. Elliot Sussman, which options vest annually in three equal installments
beginning on September 30, 2003; and 155,000 options exercisable at $3.49 per
share to Kevin Woods, which options were immediately exercisable.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
There is no Compensation Committee or other committee of the Company's Board of
Directors performing similar functions. The person who performed the equivalent
function in 2002 was Robert Howard, Chairman of the Board under the direction of
the Board of Directors. W. Scott Parr, Chief Executive Officer and a director,
participated in discussions with Mr. Howard during the past completed fiscal
year in his capacity as an executive officer in connection with executive
officer compensation. During 2002 none of the executive officers of the Company
served on the Board of Directors or Compensation Committee of any other entity.
7
Item 12. Security Ownership of Certain Beneficial Owners and Management.
-------- ---------------------------------------------------------------
The following table sets forth certain information regarding the Common Stock,
Series A and Series B Convertible Preferred Stock of the Company owned on March
25, 2003, by (i) each person who is known to the Company to own beneficially
more than 5% of the outstanding shares of the Company's Common Stock (ii) each
executive officer and key employee named in the Summary Compensation Table,
(iii) each director of the Company, and (iv) all current executive officers and
directors as a group. The table also provides information regarding beneficial
owners of more than 5% of the outstanding shares of the Company's Series A and
Series B Convertible Preferred Stock. Unless otherwise indicated below, the
address of each beneficial owner is c/o iCAD, Inc. 4 Townsend West, Suit 17,
Nashua, New Hamsphire 03063.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
-------- ---------------------------------------------------------------
Number of Shares
Name and Address of Title Beneficially Percentage
Beneficial Owner of Class Owned (1) (2) of Class
---------------- -------- -------------- --------
Robert Howard Common 5,184,863 (3) 19.7%
145 East 57th Street
New York, New York 10022
Maha Sallam Common 2,346,000 (4) 8.9%
4902 Eisenhower Blvd.
Tampa, FL 33634
Donald Chapman Common 1,950,706 (5) 7.2%
8650 South Ocean Drive Preferred Series A 4,600 64.3%
Jenson Beach, FL 34957 Preferred Series B 680 48.6%
W. Kip Speyer Common 1,860,000 (6) 6.9%
10361 Parkstone Way
Boca Raton, FL 33498
Kevin Woods Common 1,557,275 (7) 5.9%
4902 Eisenhower Blvd.
Tampa, FL 33634
W. Scott Parr Common 636,179 (8) 2.4%
Preferred Series A 550 7.7%
Preferred Series B 50 3.6%
Edgar Ball Preferred Series B 200 14.3%
PO Box 560726
Rockledge, FL 32956
Dr. Lawrence Howard Preferred Series A 1,000 14.0%
660 Madison Avenue
New York, NY 10021
John McCormick Preferred Series A 1,000 14.0%
11340 SW Aventine Circus
Portland, OR 97219
Dr. Herschel Sklaroff Preferred Series B 100 7.1%
1185 Park Avenue
New York, NY 10128
John Westerfield Preferred Series B 100 7.1%
4522 SW Bimini Circle N.
Palm City, FL 34990
James Harlan Common 104,000 (9) *
Brett Smith Common 36,588 (10) *
Preferred Series B 20 1.4%
Dr. Elliot Sussman Common 3,000 *
Richard Lehman Common 65,628 (11) *
William Langille Common 79,389 (12) *
All current executive officers and Common 9,981,222 (3), (4) & 36.3%
directors as a group (8 persons) (7) through (10)
Preferred Series A 550 7.7%
Preferred Series B 70 5.0%
---------------------------------------------------------------
* Less than one percent
1) A person is deemed to be the beneficial owner of securities that can be
acquired by such person within 60 days from March 25, 2003, upon the
exercise of options, warrants or rights; through the conversion of a
security; pursuant to the power to revoke a trust, discretionary account or
similar arrangement; or pursuant to the automatic termination of a trust,
discretionary account or similar arrangement. Each beneficial owner's
percentage ownership is determined by assuming that the options or other
rights to acquire beneficial ownership as described above, that are held by
such person (but not those held by any other person) and which are
exercisable within 60 days from March 25, 2003, have been exercised.
2) Unless otherwise noted, the Company believes that the persons referred to
in the table have sole voting and investment power with respect to all
shares reflected as beneficially owned by them.
3) Includes options to purchase 10,000 shares of the Company's Common Stock at
$1.72 per share. Also, includes 40,000 shares beneficially owned by Mr.
Howard's wife.
4) Includes 183,625 shares owned by Dr. Sallam's husband. Also includes
options to purchase 56,250 shares of the Company's Common Stock at $0.80
per share and 100,000 shares at $3.49 per share.
5) Includes 28,000 shares owned by Mr. Chapman's wife, 460,000 shares of
Common Stock issuable upon conversion of 4,600 shares of Series A
Convertible Preferred Stock and 340,000 shares of Common Stock issuable
upon conversion of 680 shares of Series B Convertible Preferred Stock owned
by Mr. Chapman.
6) Includes options to purchase 75,000 shares of the Company's Common Stock at
$0.80 per share and 550,000 shares at $3.49 per share.
7) Includes options to purchase 56,250 shares of the Company's Common Stock at
$0.80 per share and 155,000 shares at $3.49 per share.
8) Includes 11,000 shares owned by Mr. Parr's wife. Also includes options to
purchase 275,268 shares of the Company's Common Stock at $1.13 per share,
103,532 shares at $0.81 per share, 2,250 shares at $1.00 per share, 4,000
shares at $0.95 per share, 25,000 shares at $1.75 per share and 100,000
shares at $2.69 per share, 55,000 shares of Common Stock issuable upon
conversion of 550 shares of Series A Convertible Preferred Stock and 25,000
shares of Common Stock issuable upon conversion of 50 shares of Series B
Convertible Preferred Stock owned by Mr. Parr.
9) Includes options to purchase 25,000 shares of the Company's Common Stock at
$1.75 per share.
10) Includes options to purchase 25,000 of the Company's Common Stock at $3.00
per share. Also, includes 10,000 shares of Common Stock issuable upon
conversion of 20 shares of Series B Convertible Preferred Stock.
9
11) Includes 1,000 shares owned by Mr. Lehman's wife. Also includes options to
purchase 26,500 of the Company's Common Stock at $1.72 per share, 16,376
shares at $1.13 per share, 7,752 shares at $1.00 per share, 5,000 shares at
$0.81 per share, 5,000 shares at $1.75 per share and 4,000 shares at $0.95
per share.
12) Includes options to purchase 30,000 shares of the Company's Common Stock at
$1.75 per share and 43,000 shares at $0.95 per share.
Equity Compensation Plan
The following table provides certain information with respect to all of the
Company's equity compensation plans in effect as of December 31, 2002.
Number of securities
remaining available for
Number of securities to be Weighted-average issuance under equity
issued upon exercise of exercise price of compensation plans (excluding
outstanding options, outstanding options, securities reflected in
warrants and rights warrants and rights column (a))
-----------------------------------------------------------------------------------
Plan Category:
Equity compensation plans
approved by security holders: 3,774,748 $2.04 771,305
--------------------------------------------------------------------------------------------------------------------
Equity compensation plans not 57,000 $2.56 -0-
approved by security holders
(1):
--------------------------------------------------------------------------------------------------------------------
Total 3,831,748 $2.05 771,305
--------------------------------------------------------------------------------------------------------------------
(1) Represents the aggregate number of shares of common stock issuable upon
exercise of individual arrangements with option and warrant holders. These
options and warrants are five years in duration, expire at various dates
between December 31, 2004 and February 28, 2005, contain anti-dilution
provisions providing for adjustments of the exercise price under certain
circumstances and have termination provisions similar to options granted
under stockholder approved plans. See Note 8 of Notes to the Consolidated
Financial Statements for a description of the Company' s Stock Option
Plans.
Item 13. Certain Relationships and Related Transactions.
-------- -----------------------------------------------
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. The Loan Agreement
expires January 4, 2004, subject to extension by the parties. 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
10
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.
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.
During the second quarter of 2002 the Company borrowed $250,000 and in November
2002 the Company repaid Mr. Howard $50,000 pursuant to the Loan Agreement. As of
December 31, 2002, $200,000 was owed by the Company and the Company had
$2,800,000 available for future borrowings under the Loan Agreement.
In connection with the merger of Howtek, Inc. and ISSI in June 2002, the Company
issued 2,000,000 shares of common stock to an entity owned by Mr. Robert Howard
in exchange for 1,600,000 shares of ISSI common stock owned by the entity.
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.
The facility formerly housing the Company's principal executive offices and
research and development laboratory was leased by the Company from Mr. Robert
Howard. Rental expense for the year ended December 31, 2002 was $78,500. The
Company relocated in January 2003 to a facility leased from an unafilliated
party.
Item 14. Controls and Procedures
-------- -----------------------
Within the 90 days prior to the filing date of this Annual Report on Form 10-K,
an evaluation was carried out (the "Controls Evaluation"), under the supervision
and with the participation of Company's management, including its Chief
Executive Officer ("CEO") and its Chief Financial Officer ("CFO"), of the
effectiveness of the Company's "disclosure controls and procedures" (as defined
in Section 13a-14 (c) and 15d-14 (c) of the Securities Exchange Act of 1934
("Disclosure Controls"). Based upon that evaluation, the CEO and CFO have
concluded that the Disclosure Controls are effective to ensure that the
information required to be disclosed by the Company in reports it files or
submits under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported as required by the rules and forms of the Securities and
Exchange Commission.
The CEO and CFO note that, since the date of the Controls Evaluation to the date
of this Annual Report on Form 10-K, there have been no significant changes in
the Company's internal controls or in other factors that could significantly
affect the internal controls, including any corrective actions with regard to
significant deficiencies and material weaknesses.
11
PART IV
Item 15. Exhibits, Financial Statement Schedules, and Reports
on Form 8-K.
a) The following documents are filed as part of this Annual
Report on Form 10-K:
i. Financial Statements - See Index on page 55.
ii. Financial Statement Schedule - See Index on page 55.
All other schedules for which provision is made in the
applicable accounting regulations of the Securities and
Exchange Commission are not required under the related
instructions or are not applicable and, therefore, have
been omitted.
iii. Exhibits - the following documents are filed as
exhibits to this Annual Report on Form 10-K:
2(a) Plan and Agreement of Merger dated February 15, 2002,
by and among the Registrant, ISSI Acquisition Corp. and
Intelligent Systems Software, Inc., Maha Sallam, Kevin
Woods and W. Kip Speyer. [incorporated by reference to
Annex A of the Company's proxy statement/prospectus
dated May 24, 2002 contained in the Registrant's
Registration Statement on Form S-4, File No. 333-86454]
3(a) Certificate of Incorporation of the Registrant filed
with the Secretary of State of the State of Delaware on
February 24, 1984 [incorporated by reference to Exhibit
3.1 to the Registrant's Registration Statement on Form
S-18 (Commission File No. 2-94097 NY), filed on October
31, 1984]
3(b) Certificate of Amendment of Certificate of
Incorporation of the Registrant, filed with the
Secretary of State of the State of Delaware on May 31,
1984 [incorporated by reference to Exhibit 3.1(a) to
the Registrant's Registration Statement on Form S-18
(Commission File No. 2-94097-NY), filed on October 31,
1984]
3(c) Certificate of Amendment of Certificate of
Incorporation of the Registrant filed with the
Secretary of State of the State of Delaware on August
22, 1984 [incorporated by reference to Exhibit 3.1(b)
to the Registrant's Registration Statement on Form S-18
(Commission File No. 2-94097-NY), filed on October 31,
1984].
12
3(d) Certificate of Amendment of Certificate of
Incorporation of the Registrant filed with the
Secretary of State of the State of Delaware on October
22, 1987 [incorporated by reference to Exhibit 3(d) to
the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1988].
3(e) Certificate of Amendment of Certificate of
Incorporation of the Registrant filed with the
Secretary of State of the State of Delaware on
September 28, 1999 [incorporated by reference to
Exhibit 3(d) to the Registrant's Annual Report on Form
10-K for the year ended December 31, 2001].
3(f) Certificate of Amendment of Certificate of
Incorporation of the Registrant filed with the
Secretary of State of the State of Delaware on June 28,
2002 [incorporated by reference to Exhibit 3.1 of the
Registrant's Quarterly report on Form 10-Q for the
quarter ended June 30, 2002].
3(g) By-laws of Registrant [incorporated by reference to
Exhibit 3.2 to the Registrant's Registration Statement
on Form S-18 (Commission File No. 2-94097-NY), filed on
October 31, 1984].
10(a)Revolving Loan and Security Agreement, and Convertible
Revolving Credit Promissory Note between Robert Howard
and Registrant dated October 26, 1987 (the "Loan
Agreement") [incorporated by reference to Exhibit 10 to
the Registrant's Report on Form 10-Q for the quarter
ended September 30, 1987].
10(b)Letter Agreement dated June 28, 2002, amending the
Revolving Loan and Security Agreement, and Convertible
Revolving Credit Promissory Note between Robert Howard
and Registrant dated October 26, 1987. #
10(c)Form of Secured Demand Notes between the Registrant
and Mr. Robert Howard. [incorporated by reference to
Exhibit 10(e) to the Registrant's Report on Form 10-K
for the year ended December 31, 1998].
10(d)Form of Security Agreements between the Registrant and
Mr. Robert Howard [incorporated by reference to Exhibit
10(f) to the Registrant's Report on Form 10-K for the
year ended December 31, 1998].
13
10(e)Certificate of Designation of 7% Series A Convertible
Preferred Stock dated December 22, 1999. [incorporated
by reference to Exhibit 10(i) to the Registrant's
Report on Form 10-K for the year ended December 31,
1999].
10(f)Certificate of Designation of 7% Series B Convertible
Preferred Stock dated October 16, 2000 [incorporated by
reference to Exhibit 10(j) to the Registrant's Report
on Form 10-K for the year ended December 31, 2000].
10(g)Separation agreement dated September 24, 2002 between
the Registrant and W. Kip Speyer [incorporated by
reference to Exhibit 10.1 to the Registrant's quarterly
report on Form 10-Q for the quarter ended September 30,
2002].*
10(h)Separation agreement dated September 30, 2002 between
the Registrant and Gregory J. Stepic [incorporated by
reference to Exhibit 10.2 to the Registrant's quarterly
report on Form 10-Q for the quarter ended September 30,
2002].*
10(i)1993 Stock Option Plan [incorporated by reference to
Exhibit A to the Registrant's proxy statement on
Schedule 14-A filed with the Securities and Exchange
Commission on August 24, 1999].*
10(j)2001 Stock Option Plan [incorporated by reference to
Annex A of the Registrant's proxy statement on Schedule
14-A filed with the Securities and Exchange Commission
on June 29, 2001].*
10(k)2002 Stock Option Plan [incorporated by reference to
Annex F to the Registrant's Registration Statement on
Form S-4 (File No. 333-86454)].*
10(l)Exclusive Distribution Agreement between Intelligent
Systems Software, Inc. and Instrumentarium Imaging,
Inc., dated August 15, 2001.**#
10(m)License Agreement between Scanis, Inc. and the
Registrant dated February 18, 2003.**#
21 Subsidiaries#
23(a) Consent of BDO Seidman, LLP.#
14
31.1 Certification of Chief Executive Officer Pursuant to
Rule 13a-14 of the Securities Exchange Act of 1934,
implementing Section 302 of the Sarbanes-Oxley Act of
2002.
31.2 Certification of Chief Financial Officer Pursuant to
Rule 13a-14 of the Securities Exchange Act of 1934,
implementing Section 302 of the Sarbanes-Oxley Act of
2002.
99.1 Certification of Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.#
99.2 Certification of Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.#
--------------------
* Denotes a management compensation plan or arrangement.
** Portions of these documents have been omitted and filed separately
with the Securities and Exchange Commission pursuant to a request for
confidential treatment of the omitted portions.
# previously filed with the Registrant's Form 10-K for the fiscal year
ended December 31, 2002.
(b) During the last quarter of the period covered by this
Annual Report on Form 10-K the Company filed no reports on
Form 8-K.
(c) Exhibits - See (a) iii above.
(d) Financial Statement Schedule - See (a) ii above.
15
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this amended report to be
signed on its behalf by the undersigned, thereunto duly authorized.
ICAD, INC.
Date: November 21, 2003
By: /s/ W. Scott Parr
----------------------------------------
W. Scott Parr
President, Chief Executive Officer
/s/ Annette Heroux
-----------------------------------------
Chief Financial Officer (Principal
Accounting Officer)
16