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
OR
(_) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 1-9341
Delaware 02-0377419
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
4 Townsend West, Suite 17, Nashua, NH 03063
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(Address of principal executive offices) (Zip Code)
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(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___.
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act) YES NO X .
As of the close of business on November 5, 2004 there were 34,220,851 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 September 30, 2004
(unaudited) and December 31, 2003 3
Consolidated Statements of Operations for the
three and nine month periods ended September 30, 2004
and 2003 (unaudited) 4
Consolidated Statements of Cash Flows for the nine
month periods ended September 30, 2004 and 2003 (unaudited) 5
Notes to Consolidated Financial Statements (unaudited) 6-7
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-12
Item 3 Quantitative and Qualitative Disclosures about Market Risk 12
Item 4 Controls and Procedures 12-13
PART II OTHER INFORMATION
Item 6 Exhibits 13
Signatures 14
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ICAD, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31,
2004 2003
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Assets (unaudited)
Current assets:
Cash and equivalents $ 2,435,385 $ 5,101,051
Trade accounts receivable, net of allowance for doubtful
accounts of $434,000 in 2004 and $105,000 in 2003 4,680,989 3,343,296
Inventory 1,001,493 2,123,642
Prepaid and other current assets 481,262 547,014
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Total current assets 8,599,129 11,115,003
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Property and equipment:
Equipment 1,959,265 1,825,147
Leasehold improvements 37,904 26,489
Furniture and fixtures 135,544 133,562
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2,132,713 1,985,198
Less accumulated depreciation and amortization 904,972 717,635
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Net property and equipment 1,227,741 1,267,563
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Other assets:
Patents, net of accumulated amortization 343,843 379,178
Technology intangibles, net of accumulated amortization 5,118,110 5,580,172
Tradename, Distribution agreements and other,
net of accumulated amortization 846,400 1,115,000
Goodwill 43,372,549 43,205,220
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Total other assets 49,680,902 50,279,570
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Total assets $ 59,507,772 $ 62,662,136
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Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 2,182,933 $ 3,979,488
Accrued interest 608,668 333,652
Accrued expenses 1,553,590 1,988,476
Deferred revenue 404,204 216,500
Convertible subordinated debentures 10,000 10,000
Current maturities of notes payable 1,500,000 1,233,390
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Total current liabilities 6,259,395 7,761,506
Loans payable to related party 3,630,000 3,630,000
Notes payable, less current maturities 2,250,000 3,375,000
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Total liabilities 12,139,395 14,766,506
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Commitments and contingencies
Stockholders' equity:
Convertible preferred stock, $ .01 par value: authorized
1,000,000 shares; issued and outstanding
7,435 in 2004 and 2003, with the aggregate
liquidation value of $1,257,500 in 2004 and 2003, plus
7% annual dividend 74 74
Common stock, $ .01 par value: authorized
50,000,000 shares; issued 34,253,727 in 2004
and 33,704,809 shares in 2003; outstanding
34,185,851 in 2004 and 33,636,933 shares in 2003 342,537 337,048
Additional paid-in capital 121,349,542 120,395,390
Accumulated deficit (73,373,512) (71,886,618)
Treasury stock at cost (67,876 shares) (950,264) (950,264)
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Total Stockholders' equity 47,368,377 47,895,630
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Total liabilities and stockholders' equity $ 59,507,772 $ 62,662,136
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See accompanying notes to consolidated financial statements.
ICAD, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
THREE MONTHS NINE MONTHS
SEPTEMBER 30, SEPTEMBER 30,
------------------------------- --------------------------------
2004 2003 2004 2003
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Sales $ 5,977,048 $ 1,387,100 $ 17,040,515 $ 4,938,629
Cost of sales 1,617,788 731,607 5,108,481 2,233,775
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Gross margin 4,359,260 655,493 11,932,034 2,704,854
------------ ------------ ------------ ------------
Operating expenses:
Engineering and product development 1,072,636 619,762 3,869,033 1,813,560
General and administrative 1,252,077 4,870,119 3,796,245 6,370,414
Marketing and sales 1,529,995 530,485 5,302,534 1,077,189
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Total operating expenses 3,854,708 6,020,366 12,967,812 9,261,163
------------ ------------ ------------ ------------
Income (loss) from operations 504,552 (5,364,873) (1,035,778) (6,556,309)
Interest expense - net 138,503 30,494 451,116 47,644
------------ ------------ ------------ ------------
Net income (loss) 366,049 (5,395,367) (1,486,894) (6,603,953)
Preferred dividend 30,697 37,316 100,858 110,733
------------ ------------ ------------ ------------
Net income (loss) available to common shareholders $ 335,352 $ (5,432,683) $ (1,587,752) $ (6,714,686)
============ ============ ============ ============
Net income (loss) per share
Basic $ 0.01 $ (0.20) $ (0.05) $ (0.25)
Diluted $ 0.01 $ (0.20) $ (0.05) $ (0.25)
Weighted average number of shares used
in computing income (loss) per share
Basic 34,056,589 26,858,963 33,879,913 26,531,177
Diluted 37,992,937 26,858,963 33,879,913 26,531,177
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See accompanying notes to consolidated financial statements.
ICAD, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS NINE MONTHS
SEPTEMBER 30, 2004 SEPTEMBER 30, 2003
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Cash flows from operating activities:
Net loss $(1,486,894) $(6,603,953)
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Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation 202,770 87,038
Amortization 767,443 428,385
Loss on disposal of assets 21,110 1,443,628
Legal expense relative to issue of stock -- 23,377
Issuance of common stock for payment of legal settlement -- 750,000
Changes in operating assets and liabilities:
Accounts receivable (1,419,789) 522,901
Inventory 1,122,149 (141,053)
Other current assets 28,498 (92,593)
Accounts payable (1,796,555) 933,106
Accrued expenses (260,728) (543,980)
Deferred revenue 187,704 --
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Total adjustments (1,147,398) 3,410,809
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Net cash used for operating activities (2,634,292) (3,193,144)
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Cash flows from investing activities:
Additions to patents, software development and other (1,446) (100,000)
Additions to property and equipment (184,058) (139,809)
Additional acquisition costs of CADx (47,979) --
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Net cash used for investing activities (233,483) (239,809)
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Cash flows from financing activities:
Issuance of common stock for cash 1,060,499 248,516
Proceeds of convertible note payable to principal
stockholders -- 2,730,000
Payments of notes payable (858,390) (48,713)
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Net cash provided by financing activities 202,109 2,929,803
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Decrease in cash and equivalents (2,665,666) (503,150)
Cash and equivalents, beginning of period 5,101,051 1,091,029
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Cash and equivalents, end of period $ 2,435,385 $ 587,879
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Non-cash items from investing and financing activities:
Accrued dividends on convertible preferred stock $ 100,858 $ 110,733
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Issuance of common stock for settlement of liability $ -- $ 1,400,000
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See accompanying notes to consolidated financial statements.
ICAD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2004
(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 iCAD, Inc.'s ("iCAD" or "Company") Annual Report on Form 10-K for the year ended December 31, 2003 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 $5,000,000. Outstanding advances are collateralized by substantially all of the assets of the Company and bear interest at prime interest rate plus 2% with a minimum of 8%. 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 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. At September 30, 2004, $3,630,000 was outstanding under the Loan Agreement and $1,370,000 was available for future borrowings.
(3) ACQUISITION OF QUALIA COMPUTING, INC.
On December 31, 2003, the Company completed the acquisition of Qualia Computing, Inc., a privately held company based in Beavercreek, Ohio, and its subsidiaries, including CADx Systems, Inc. (together "CADx"), bringing together two of the three companies approved by the US Food and Drug Administration (FDA) to market computer aided detection of breast cancer solutions in the United States. To complete the acquisition, iCAD issued 4,300,000 shares of its common stock, representing approximately 13% of the outstanding shares of iCAD common stock after the merger. Additionally, iCAD paid $1,550,000 in cash and executed a 36-month secured promissory note in the amount of $4,500,000 to purchase Qualia shares that were owned by two institutional investors. The purchase price of approximately $31,000,000 has been allocated to net assets acquired based upon an appraisal of their fair values, but the allocation is subject to further adjustment.
ICAD, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
SEPTEMBER 30, 2004
(4) STOCK-BASED COMPENSATION
The Company accounts for its stock based compensation plans in accordance with the provisions of APB Opinion 25, "Accounting for Stock Issued to Employees," and complies with the disclosure provisions of SFAS No. 123, "Accounting for Stock-Based Compensation," and SFAS No. 148, "Accounting for Stock-Based Compensation - Transition and Disclosure". Under APB Opinion 25, when the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of grant, no compensation cost is recognized.
The Company estimates the fair value of each granting of options at the grant date using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in 2004: no dividends paid; expected volatility of 78.8%; risk-free interest rate of 3.03%, 3.10%, 3.72%, 3.26% and 2.89% and expected lives of 3 and 4 years. The weighted-average assumptions used for grants in 2003 were: no dividends paid; expected volatility of 79.4%; risk-free interest rate of 2.91%, 2.34% and 2.63% and expected life of 5 years.
Had compensation cost for the Company's option plans been determined using the fair value method at the grant dates, the effect on the Company's net income (loss) and net income (loss) per share for the three and nine month periods ended September 30, 2004 and 2003 would have been as follows:
Three Months Nine Months
September 30, September 30,
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2004 2003 2004 2003
Net income (loss) available to
common stockholders as reported $ 335,352 $ (5,432,683) $ (1,587,752) $ (6,714,686)
Deduct: Total stock-based
employee compensation
determined under fair value
method for all awards, net
of related tax effects (146,360) (34,084) (331,133) ( 196,487)
Pro forma net income (loss)
available to common stockholders $ 188,992 $ (5,466,767) $ (1,918,885) $ (6,911,173)
Basic and diluted loss per share
As reported $ .01 $ (.20) $ (.05) $ (.25)
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Pro forma basic $ .01 $ (.20) $ (.06) $ (.26)
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Pro forma diluted $ .00 $ (.20) $ (.06) $ (.26)
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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, 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", "seek", "should" 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 develops, engineers, manufactures and markets computer aided detection (CAD) products for the early detection of breast cancer and other health-care related applications. Early detection of breast cancer can save lives and often permits less costly, less invasive and less disfiguring cancer treatment options than when the cancer is detected at a later stage.
On December 31, 2003, iCAD merged with and acquired CADx. This merger brought together two of the three companies with approval from the FDA to market computer aided systems for the earlier detection of breast cancer. This acquisition gives iCAD, what it believes to be, the broadest line of CAD systems for detection of breast cancer, including the leading CAD solution for the growing digital mammography market. In addition, the acquisition expanded the Company's distribution channels, which contributed to immediate growth in sales, and expanded the Company's new product development group, which the Company believes will accelerate its entry into additional markets.
Following the acquisition of CADx, iCAD consolidated and positioned its current products, and reorganized and greatly expanded its sales channels. Over the balance of 2004, the Company's objective is to build on its achievements in the first nine months of 2004 by aggressively marketing and promoting its new, lower-cost Second Look 200(TM) solutions for the early detection of breast cancer, and its ClickCAD(TM) fee-per-procedure programs that seek to make CAD technology affordable and accessible to smaller volume mammography clinics and all women at risk of breast cancer.
As a result of the Company's acquisition of CADx, the Company entered the first quarter of 2004 with the overhead of two companies, and expense and cost structure are reflected in first quarter losses. The Company reduced operating expenses from $5.3 million in the first quarter of 2004 to approximately $3.8 million in each of the second and third quarters of 2004, in part through a reduction in personnel from 110 at the beginning of the first quarter of 2004 to approximately 70 at the beginning of the second quarter of 2004. The Company's headquarters are located in southern New Hampshire, with contract manufacturing facilities in New Hampshire and Connecticut.
iCAD is the only independent, integrated digitizer hardware and CAD software company offering computer aided detection solutions for the detection of breast cancer and other health-care related applications. As such, the Company is able to reduce costs at each step in the CAD product design, production and assembly process. The Company believes that its vertical integration of CAD and hardware development results in better integration of software and film digitizer components, lower production costs and reduced administrative overhead. These factors have allowed iCAD to enhance its CAD product line, while reducing the costs of the Company's CAD products to many customers and allowing more women to realize the benefits inherent in the early detection of breast cancer.
The Company's CAD systems include proprietary software technology together with standard computer and display equipment. CAD systems for the film-based mammography market also include a radiographic film digitizer manufactured by the Company. iCAD also manufactures medical film digitizers for a variety of medical imaging and other applications. The Company believes that iCAD's experience in providing film digitizers and software for medical picture archiving and communications and telemedicine applications contributes to the successful integration of the Company's CAD products into networked and digital mammography environments.
QUARTER ENDED SEPTEMBER 30, 2004 COMPARED TO QUARTER ENDED SEPTEMBER 30, 2003 AND NINE MONTHS ENDED SEPTEMBER 30, 2004 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2003
Sales. Sales of the Company's CAD and medical imaging products for the three and nine month periods ended September 30, 2004 increased to $5,977,048 and $17,040,515, respectively, compared with sales of CAD and medical imaging products for the three and nine month periods ended September 30, 2003 of $1,387,100 and $4,938,629. The sales increase during 2004 was due in large part to contributions from acquired CADx products and sales channels, which are not included in 2003 results. During the first nine months of 2004 iCAD concentrated its distribution development efforts on SourceOne Healthcare, Inc. (CADx' national distributor prior to iCAD's acquisition of CADx), and on selected complementary independent resellers.
iCAD has identified the following factors as potentially contributing to increased sales in future periods: (1) sales of early cancer detection products for film-based mammography by and through additional resellers; (2) sales of additional products, especially the Company's lower price Second Look 200 CAD breast cancer detection system; (3) contribution from a fee per service program, which the Company calls ClickCAD(TM), which the Company expects to begin actively promoting in the fourth quarter of 2004, and (4) sales of cancer detection products for digital mammography by and through additional OEM channels previously announced by the Company.
Gross Margins. Gross margin increased in the three and nine month periods ended September 30, 2004 to 73% and 70%, respectively, compared to 47% and 55% in the comparable periods in 2003. The increase in gross margin is due primarily to increases in sales of higher margin products for digital mammography. Although there can be no assurance of its future gross margin rate, the Company expects that continued sales of its higher margin CAD products and increasing production economies and economies of scale resulting from the merger with CADx will support gross margins at comparable levels to those experienced during the three and nine month periods of 2004. The Company further believes that increasing sales of products for digital mammography can contribute to increasing gross margins over time because these products are primarily software in nature and therefore, have lower cost than certain of the Company's prior products which had higher cost hardware components.
Engineering and Product Development. Engineering and product development costs for the three and nine month periods ended September 30, 2004 increased from $619,762 and $1,813,560, respectively, in 2003 to $1,072,636 and $3,869,033 in 2004. The increase in engineering and product development costs results primarily from the Company's addition, as a result of its acquisition of CADx, of a software technology development group to support its CAD products and new product development. The Company also redirected a portion of its research and engineering resources to accelerate the delivery of new iCAD products, such as applying iCAD's core CAD and clinical decision support technologies to additional medical applications. Additionally, during the first quarter of 2004 the Company took action following its merger with CADx to reduce its workforce and close its office and software development group located in Tampa, Florida. In connection with these measures, the Company incurred approximately $280,000 in non-recurring engineering severance benefits and office closure expenses. Over the remainder of 2004, the Company expects engineering and product development costs to decline as a percentage of sales, as sales are expected to increase at a greater rate than product development costs.
General and Administrative. General and administrative expenses in the three and nine month periods ended September 30, 2004 decreased from $4,870,119 and $6,370,414, respectively, in 2003 to $1,252,077 and 3,796,245 in 2004. The decrease results primarily from one-time charges and non-recurring expenses recorded in 2003. During the third quarter of 2003 the Company recorded a one-time write off in the amount of $1,443,628 attributable to its distribution agreement with Instrumentarium Imaging, Inc., ("Instrumentarium"), which it assumed as part of the Company's acquisition of Intelligent Systems Software, Inc. in June 2002. This write-off came after assessing the performance of Instrumentarium and in light of the Company's implementation of alternative distribution channels, thereby eliminating the distribution agreement as a depreciating asset. Additionally, during the third quarter of 2003, the Company accounted for over $2,702,000 in non-recurring expenses related to the settlement of R2 Technology patent infringement litigation and legal expenses.
Excluding the 2003 write offs and non-recurring expenses, general and administrative expenses increased in 2004 due to increases in salaries, administrative costs and approximately $767,000 in amortization of intangible assets, resulting from the Company's acquisition of CADx. Additional increases in general and administrative expenses in the first quarter of 2004, reflects approximately $50,000 in non-recurring severance benefits and other expenses associated with reductions of staff made possible by the combination of CADx and iCAD and a write-off of fixed assets relating to the closure of the iCAD office in Tampa, Florida. The Company anticipates that general and administrative costs will increase for the remainder of 2004, due to the increase in consulting cost associated with the Company's compliance with Section 404 of the Sarbanes-Oxley Act of 2002. The Company expects that overall general and administrative expenses will decline as a percentage of sales, as sales are expected to increase at a greater rate than general and administrative expenses.
Marketing and Sales Expenses. Marketing and sales expenses for the three and nine month periods ended September 30, 2004 increased from $530,485 and $1,077,189, respectively, in 2003 to $1,529,995 and $5,302,534 in 2004. The increase in marketing and sales expenses results primarily from the Company's addition, as a result of its acquisition of CADx, of sales, marketing and service organizations to support its CAD products and distribution channels. The Company took action following the merger to reduce its workforce, close its office in San Rafael, California, and eliminate duplication in marketing and other activities. The Company incurred approximately $200,000 in non-recurring marketing and sales severance benefits and office closure expenses in the first quarter of 2004. During the fourth quarter of 2004 the Company will incur increased marketing and advertising expenses associated with trade show participation and increased advertising of new and existing products. In general, the Company expects marketing and sales expenses to decline as a percentage of sales, as sales increase and as an increasing portion of its sales represent products for digital mammography and for detection of lung and colon cancer, are made through OEM channels. Such OEM sales do not require the level of marketing, sales and support expenditures associated with sale of film based mammography products through resellers and distributors.
Interest Expense. Net interest expense for the three and nine month periods ended September 30, 2004 increased from $30,494 and $47,644, respectively, in 2003 to $138,503 and $451,116 in 2004. This increase is due primarily to the addition, as a result of iCAD's acquisition of CADx, of a 36-month secured promissory note in the amount of $4,500,000 to purchase CADx shares that were owned by two institutional investors.
Net Income (Loss). As a result of the foregoing, the Company recorded net income of $366,049 or $0.01 per share for the three month period ended September 30, 2004 on sales of $5,977,048 compared to a net loss of ($5,395,367) or ($0.20) per share from the same period in 2003 on sales of $1,387,100. The net loss for the nine months ended September 30, 2004 was ($1,486,894) or ($0.05) per share on sales of $17,040,515 compared with a net loss of ($6,603,953) or ($0.25) per share on sales of $4,938,629 for the nine months ended September 30, 2003. The acquisition of CADx was accounted for as a purchase on December 31, 2003, and accordingly, the operations of CADx are not included in the consolidated financial statements for the three and nine month periods of 2003.
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 $5,000,000 credit line under the Loan Agreement with its Chairman, Mr. Robert Howard, of which $1,370,000 was available at September 30, 2004. The Company's current operating and financial projections and plans indicate that current liquidity and capital resources are adequate to support current operations. If sales or cash collections are reduced from current expectations, or if expenses and cash requirements are increased, the Company may require additional financing. Historically, the Company has secured additional cash through additional extensions of credit by its Chairman.
At September 30, 2004 the Company had current assets of $8,599,129, current liabilities of $6,259,395 and working capital of $2,339,734. The ratio of current assets to current liabilities was 1.4:1
Net cash used for operating activities for the nine months ended September 30, 2004 was $2,634,292 compared to $3,193,144 for the same period in 2003. The cash was used primarily to fund the net loss of $1,486,894 and changes in accounts receivable, inventory and accounts payable. The net cash used in investing activities for the nine months ended September 30, 2004 was $233,483 compared to $236,809 for the same period in 2003. The cash used in investing activities included the addition of $184,058 for tooling, computer equipment, and leasehold improvements. Net cash provided by financing activities in the nine months ended September 30, 2004 was $202,109 compared to $2,929,803 for the same period in 2003. The cash provided by financing activities in 2004 was due to the net proceed of approximately $425,000 from the sale of 90,000 shares of the Company's common stock for $5.00 per share upon the exercise of certain investment rights that were granted to institutional investors in November 2003 in connection with the Company's private placement described below. Additionally, approximately $635,000 was due to the issuance of common stock relating to exercise of stock options, offset by $858,000 in payments of notes payable.
In the fourth quarter of 2003, the Company sold 1,260,000 shares of its common stock for $5.00 per share in a private placement to institutional investors. The Company also issued to such investors' additional investment rights to purchase up to an additional 315,000 shares of its common stock at $5.00 per share. The net proceeds to the Company for the 1,260,000 shares sold were approximately $5,919,000. A total of 90,000 shares of the Company's common stock were issued in connection with the exercise of certain additional investment rights in the first quarter of 2004. The remaining investment rights expired unexercised. The net proceeds to the Company for the 90,000 shares sold were approximately $425,000. Ladenburg Thalmann & Co. Inc. served as placement agent for these transactions for which it received compensation in the amount of approximately $404,000 and a five year warrant to purchase 67,200 shares of the Company's common stock at $5.00 per share.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
The Company, under the supervision and with the participation of its management, including its principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of its disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation, the principal executive officer and principal financial officer concluded that the Company's disclosure controls and procedures are effective in reaching a reasonable level of assurance that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time period specified in the Securities and Exchange Commission's rules and forms.
The principal executive officer and principal financial officer also conducted an evaluation of internal control over financial reporting ("Internal Control") to determine whether any changes in Internal Control occurred during the quarter ended September 30, 2004 that have materially affected or which are reasonably likely to materially affect Internal Control. Based on that evaluation, there have been no such changes during the quarter ended September 30, 2004.
PART II OTHER INFORMATION
ITEM 6. EXHIBITS
Exhibit No. Description
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10.1 Form of Option Agreement under the Company's 2001 Stock
Option Plan
10.2 Form of Option Agreement under the Company's 2002 Stock
Option Plan
10.3 Form of Option Agreement under the Company's 2004 Stock
Incentive Plan
31.1 Certification of Chief Executive Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
31.2 Certification of Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
32.2 Certification of Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.
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Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
iCAD, Inc.
------------
(Registrant)
Date: November 15, 2004 By: /s/ W. Scott Parr
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W. Scott Parr
President, Chief Executive Officer,
Director
Date: November 15, 2004 By: /s/ Annette L. Heroux
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Annette L. Heroux
Vice President of Finance,
Chief Financial Officer
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EXHIBIT 10.1
ICAD, INC.
STOCK OPTION AGREEMENT
AGREEMENT, entered into ___________ 20__ (the "Date of Grant"), by and between iCAD, Inc. (the "Company") and __________ ("Optionee").
WHEREAS, the Company has adopted the 2001 Stock Option Plan (the "Plan") which authorizes the Board of Directors of the Company (the "Board") to select a committee of disinterested persons (the "Committee"), which Committee may grant options to certain board members, officers and key employees of the Company under the Plan;
WHEREAS, the Company desires to give the Optionee an inducement to acquire a proprietary interest in the Company and an added incentive to advance the interests of the Company by granting to the Optionee an option to purchase shares of common stock of the Company.
THEREFORE, in consideration of the promises set forth below, the parties agree as follows:
1. GRANT OF OPTION
The Company hereby grants to the Optionee the right, privilege, and option (the "Option") to purchase _____ shares (the "Option Shares") of the Company's common stock (the "Common Stock" or "Stock"), according to the terms and subject to the conditions set forth below and in the plan.
2. OPTION EXERCISE PRICE
The per share price to be paid by Optionee in the event of an exercise of the Option shall be $____.
3. WHEN OPTIONS ARE EXERCISABLE
The Options become exercisable in the amounts and on the dates set forth on Exhibit 1 hereto.
The right to exercise the Options shall be cumulative. However, in no event shall this Option be exercisable after 5:00 p.m. (Nashua, New Hampshire USA time) on the tenth anniversary of the Date of Grant. At that time this Option Agreement expires and becomes void.
4. TERMINATION OF RELATIONSHIP
4.1. Generally: Regardless of what Paragraph 3 says, if Optionee's relationship with the Company should be terminated other than by Death or Disability (as defined below), then Optionee only has ninety (90) days after the date of termination to exercise those Options which were exercisable on the date of termination. The exercise of an Option under this Paragraph 4.1 shall be deemed to have occurred one (1) day prior to the date of termination.
4.2. Death or Disability: In the event of the Death or Disability of Optionee prior to the expiration of this Option, the following provisions shall apply:
4.2.1 If Optionee, at the time of Death or Disability, is a member
of the Company's Board of Directors (as determined by the
Committee in its sole discretion) since the Date of Grant,
then the Option may be exercised; (i) by Optionee within one
(1) year following the date Disability commenced, but only to
the extent Optionee is entitled to exercise such Option on the
date his or her Disability commenced; or (ii) by Optionee's
estate, or by a person who acquired the right to exercise the
Option because of Optionee's will or the laws of descent or
distribution, within one (1) year from the date of Optionee's
Death, but only to the extent of which Optionee is entitled to
exercise the Option at the date of Death. For the purpose of
this Agreement, the term "Disability" shall have the meaning
given to it in section 22(e)(3) of the Code. Whether Optionee
suffers a Disability shall be determined by the Committee in
its sole discretion.
4.2.2 If Optionee dies within thirty (30) days after the date of termination from the Board of Directors, the Option may be exercised at any time within one (1) year following the date of Death, by Optionee's estate or by a person who acquired the right to exercise the Option because of Optionee's will or the laws of descent or distribution, but only to the extent Optionee is entitled to exercise the Option at the date of termination.
4.3 Cancellation of Options: By giving written notice to the Optionee, the Committee in its sole discretion may cancel this Option, in whole or in part, in either of the following circumstances: (i) where Optionee's employment has been terminated for cause; (ii) where Optionee enters into competition with the Company; or (iii) upon failure of Optionee to achieve performance related goals and objectives agreed in advance by Optionee and the Company.
5. MANNER OF OPTION EXERCISE
5.1 Notice: Optionee may exercise this Option, in whole or in part from time to time, subject to the conditions contained in the Plan and this Agreement, by giving written notice of exercise to the Company at its principal exective office. That notice must specify the number of Option Shares with respect to which the Option is being exercised. Optionee must also pay in full the total purchase price for the Option Shares purchased. Subject to Paragraph 5.3 below, as soon as practical after receipt of notice and payment, Optionee shall be recorded on the books of the Company as the owner of the Option Shares and the Company shall deliver to Optionee one or more duly issued stock certificates evidencing such ownership. Until certificates for the Option Shares are issued to Optionee, Optionee shall not have any rights as a shareholder.
5.2 Payment: Optionee can pay the total purchase price of the Option Shares to be purchased solely in cash or may ask the Committee for permission to be allowed to pay either by transfer to the Company of previously acquired shares of Common Stock of the Company with a then current aggregate Fair Market Value equal to such total purchase price, or by a combination of cash and previously acquired shares of Common Stock. For purposes of the Agreement; (i) "Previously Acquired Shares" shall mean only shares of Common Stock of the Company that are already owned by the Optionee at the time of exercise and (ii) "Fair Market Value" shall be determined as set forth in the Plan.
5.3 Limitation on Obligation to Issue: The Company shall not be required to sell or issue any shares under this Option if, in the sole opinion of the Committee; (i) the issuance of such shares would constitute a violation by Optionee or the Company of any applicable law or regulation including, without limitation, federal and state securities law, or (ii) the consent or approval of any governmental body is necessary or desirable in connection with the issuance of such shares.
6. LEGENDS
Each certificate representing any shares of Stock issued to Optionee hereunder may have endorsed thereon a legend in a form as may be determined by the Company to be necessary, in its sole discretion, reflecting any limitations on resale.
7. CHANGES IN CAPITAL STRUCTURE
7.1 If the Company declares a stock dividend or a stock split is authorized, the number of Option Shares still outstanding under this Option shall be increased proportionately and the exercise price per share proportionately decreases. In the event the Company declares or authorizes a reverse stock split or combination of shares, the number of Option Shares shall be proportionately reduced and the exercise price per share shall be proportionately increased.
7.2 If the Company's Common Stock shall be changed into a different class of shares or if, because of reorganization, recapitalization, merger or consolidation it is necessary to exchange the Option Shares for shares of another company, then the appropriate substitution or exchange shall be made in the shares subject to this Option. The Committee may make such adjustments in the number, kind, exercise date of the Option Shares as is necessary. However, none of these changes shall give the Optionee additional benefits or increase the differential between the exercise price and the Fair Market Value.
7.3 If the Company is dissolved or liquidated, or if the Company is not the surviving or resulting corporation in connection with a merger or consolidation, the Committee (in its sole discretion) may allow Optionee the right to exercise this Option prior to the occurrence of the event which would otherwise terminate this Option.
8. DISPOSITION OF STOCK
Prior to making a disposition (as defined in Section 425(c) of the Code) of any shares of Stock acquired pursuant to the exercise of this Option before the expiration of two years after the Date of Grant or before the expiration of one year after the date on which such shares of Stock were transferred to the Optionee pursuant to exercise of this Option, the Optionee shall send written notice to the Company of the proposed date of such disposition, the number of shares to be disposed of, the amount of proceeds to be received from such disposition and any other information relating to such disposition that the Company may reasonably request.
9. NON-TRANSFERABILITY
This Option shall not be transferable by Optionee, either voluntarily or involuntarily, except by will or the laws of descent and distribution, and then only to the extent provided in Paragraph 4.2. Any attempt to transfer this Option other than as permitted shall void the Option. The Option shall be exercisable during Optionee's lifetime only by Optionee.
10. LIMITATION ON LIABILITY
Nothing in this agreement shall be construed to: (i) limit in any way the right of the Company to terminate the relationship of Optionee at any time, or (ii) be evidence of any agreement or understanding, express or implied, that the Company will employ Optionee in any particular position, at any particular rate of compensation or for any particular period of time.
11. BINDING EFFECT
This agreement shall be binding upon the heirs, executors, administrators and successors of the parties hereto.
12. GOVERNING LAW
This Agreement and all rights and obligations in it shall be construed in accordance with the Plan and governed by the laws of the State of New Hampshire. The parties hereto agree to submit to the personal jurisdiction of courts sitting in the State of New Hampshire for the purpose of resolving any dispute under this Agreement.
13. INTEGRATION
This Agreement supersedes any prior agreement, discussions or understandings between the parties on the subject matter covered by this Agreement.
14. SEVERABILITY
Should any provision of the Agreement be deemed by a court of competent jurisdiction to be unenforceable, the remaining provisions shall continue to be in full force and effect.
15. AMENDMENT
This Agreement may only be amended by written agreement signed by both parties, by amendment of the Plan or as provided for in the Plan document.
IN WITNESS WHEREOF, the parties have executed this Agreement effective on the Grant Date.
ICAD, INC.
ITS: Chief Executive Officer
OPTIONEE:______________________________
EXHIBIT 1
NAME OF OPTIONEE: _______________
DATE OF GRANT: ___________, 20__
NUMBER OF OPTION SHARES ISSUABLE UPON FULL OPTION EXERCISE: _______
EXERCISE PRICE: $____
EXERCISE SCHEDULE
Initial Date of Exercisability Number of Shares with respect
to which Option Is initially
exercisable
___________, 200 [Date of Grant] ________ [1/3rd]
__________, 200_[Date one year from
Date of Grant] ________ [1/3rd]
________, 200__ [Date two years from
Date of Grant] ________ [1/3rd]
|
EXHIBIT 10.2
ICAD, INC.
STOCK OPTION AGREEMENT
AGREEMENT, entered into ___________ 20__ (the "Date of Grant"), by and between iCAD, Inc. (the "Company") and __________ ("Optionee").
WHEREAS, the Company has adopted the 2002 Stock Option Plan (the "Plan") which authorizes the Board of Directors of the Company (the "Board") to select a committee of disinterested persons (the "Committee"), which Committee may grant options to certain board members, officers and key employees of the Company under the Plan;
WHEREAS, the Company desires to give the Optionee an inducement to acquire a proprietary interest in the Company and an added incentive to advance the interests of the Company by granting to the Optionee an option to purchase shares of common stock of the Company.
THEREFORE, in consideration of the promises set forth below, the parties agree as follows:
1. GRANT OF OPTION
The Company hereby grants to the Optionee the right, privilege, and option (the "Option") to purchase _____ shares (the "Option Shares") of the Company's common stock (the "Common Stock" or "Stock"), according to the terms and subject to the conditions set forth below and in the plan.
2. OPTION EXERCISE PRICE
The per share price to be paid by Optionee in the event of an exercise of the Option shall be $____.
3. WHEN OPTIONS ARE EXERCISABLE
The Options become exercisable in the amounts and on the dates set forth on Exhibit 1 hereto.
The right to exercise the Options shall be cumulative. However, in no event shall this Option be exercisable after 5:00 p.m. (Nashua, New Hampshire USA time) on the tenth anniversary of the Date of Grant. At that time this Option Agreement expires and becomes void.
4. TERMINATION OF RELATIONSHIP
4.1 Generally: Regardless of what Paragraph 3 says, if Optionee's relationship with the Company should be terminated other than by Death or Disability (as defined below), then Optionee only has ninety (90) days after the date of termination to exercise those Options which were exercisable on the date of termination. The exercise of an Option under this Paragraph 4.1 shall be deemed to have occurred one (1) day prior to the date of termination.
4.2 Death or Disability: In the event of the Death or Disability of Optionee prior to the expiration of this Option, the following provisions shall apply:
4.2.1 If Optionee, at the time of Death or Disability, is a member
of the Company's Board of Directors (as determined by the
Committee in its sole discretion) since the Date of Grant,
then the Option may be exercised; (i) by Optionee within one
(1) year following the date Disability commenced, but only to
the extent Optionee is entitled to exercise such Option on the
date his or her Disability commenced; or (ii) by Optionee's
estate, or by a person who acquired the right to exercise the
Option because of Optionee's will or the laws of descent or
distribution, within one (1) year from the date of Optionee's
Death, but only to the extent of which Optionee is entitled to
exercise the Option at the date of Death. For the purpose of
this Agreement, the term "Disability" shall have the meaning
given to it in section 22(e)(3) of the Code. Whether Optionee
suffers a Disability shall be determined by the Committee in
its sole discretion.
4.2.2 If Optionee dies within thirty (30) days after the date of termination from the Board of Directors, the Option may be exercised at any time within one (1) year following the date of Death, by Optionee's estate or by a person who acquired the right to exercise the Option because of Optionee's will or the laws of descent or distribution, but only to the extent Optionee is entitled to exercise the Option at the date of termination.
4.3 Cancellation of Options: By giving written notice to the Optionee, the Committee in its sole discretion may cancel this Option, in whole or in part, in either of the following circumstances: (i) where Optionee's employment has been terminated for cause; (ii) where Optionee enters into competition with the Company; or (iii) upon failure of Optionee to achieve performance related goals and objectives agreed in advance by Optionee and the Company.
5. MANNER OF OPTION EXERCISE
5.1 Notice: Optionee may exercise this Option, in whole or in part from time to time, subject to the conditions contained in the Plan and this Agreement, by giving written notice of exercise to the Company at its principal exective office. That notice must specify the number of Option Shares with respect to which the Option is being exercised. Optionee must also pay in full the total purchase price for the Option Shares purchased. Subject to Paragraph 5.3 below, as soon as practical after receipt of notice and payment, Optionee shall be recorded on the books of the Company as the owner of the Option Shares and the Company shall deliver to Optionee one or more duly issued stock certificates evidencing such ownership. Until certificates for the Option Shares are issued to Optionee, Optionee shall not have any rights as a shareholder.
5.2 Payment: Optionee can pay the total purchase price of the Option Shares to be purchased solely in cash or may ask the Committee for permission to be allowed to pay either by transfer to the Company of previously acquired shares of Common Stock of the Company with a then current aggregate Fair Market Value equal to such total purchase price, or by a combination of cash and previously acquired shares of Common Stock. For purposes of the Agreement; (i) "Previously Acquired Shares" shall mean only shares of Common Stock of the Company that are already owned by the Optionee at the time of exercise and (ii) "Fair Market Value" shall be determined as set forth in the Plan.
5.3 Limitation on Obligation to Issue: The Company shall not be required to sell or issue any shares under this Option if, in the sole opinion of the Committee; (i) the issuance of such shares would constitute a violation by Optionee or the Company of any applicable law or regulation including, without limitation, federal and state securities law, or (ii) the consent or approval of any governmental body is necessary or desirable in connection with the issuance of such shares.
6. LEGENDS
Each certificate representing any shares of Stock issued to Optionee hereunder may have endorsed thereon a legend in a form as may be determined by the Company to be necessary, in its sole discretion, reflecting any limitations on resale.
7. CHANGES IN CAPITAL STRUCTURE
7.1 If the Company declares a stock dividend or a stock split is authorized, the number of Option Shares still outstanding under this Option shall be increased proportionately and the exercise price per share proportionately decreases. In the event the Company declares or authorizes a reverse stock split or combination of shares, the number of Option Shares shall be proportionately reduced and the exercise price per share shall be proportionately increased.
7.2 If the Company's Common Stock shall be changed into a different class of shares or if, because of reorganization, recapitalization, merger or consolidation it is necessary to exchange the Option Shares for shares of another company, then the appropriate substitution or exchange shall be made in the shares subject to this Option. The Committee may make such adjustments in the number, kind, exercise date of the Option Shares as is necessary. However, none of these changes shall give the Optionee additional benefits or increase the differential between the exercise price and the Fair Market Value.
7.3 If the Company is dissolved or liquidated, or if the Company is not the surviving or resulting corporation in connection with a merger or consolidation, the Committee (in its sole discretion) may allow Optionee the right to exercise this Option prior to the occurrence of the event which would otherwise terminate this Option.
9. DISPOSITION OF STOCK
Prior to making a disposition (as defined in Section 425(c) of the Code) of any shares of Stock acquired pursuant to the exercise of this Option before the expiration of two years after the Date of Grant or before the expiration of one year after the date on which such shares of Stock were transferred to the Optionee pursuant to exercise of this Option, the Optionee shall send written notice to the Company of the proposed date of such disposition, the number of shares to be disposed of, the amount of proceeds to be received from such disposition and any other information relating to such disposition that the Company may reasonably request.
9. NON-TRANSFERABILITY
This Option shall not be transferable by Optionee, either voluntarily or involuntarily, except by will or the laws of descent and distribution, and then only to the extent provided in Paragraph 4.2. Any attempt to transfer this Option other than as permitted shall void the Option. The Option shall be exercisable during Optionee's lifetime only by Optionee.
10. LIMITATION ON LIABILITY
Nothing in this agreement shall be construed to: (i) limit in any way the right of the Company to terminate the relationship of Optionee at any time, or (ii) be evidence of any agreement or understanding, express or implied, that the Company will employ Optionee in any particular position, at any particular rate of compensation or for any particular period of time.
11. BINDING EFFECT
This agreement shall be binding upon the heirs, executors, administrators and successors of the parties hereto.
12. GOVERNING LAW
This Agreement and all rights and obligations in it shall be construed in accordance with the Plan and governed by the laws of the State of New Hampshire. The parties hereto agree to submit to the personal jurisdiction of courts sitting in the State of New Hampshire for the purpose of resolving any dispute under this Agreement.
13. INTEGRATION
This Agreement supersedes any prior agreement, discussions or understandings between the parties on the subject matter covered by this Agreement.
14. SEVERABILITY
Should any provision of the Agreement be deemed by a court of competent jurisdiction to be unenforceable, the remaining provisions shall continue to be in full force and effect.
15. AMENDMENT
This Agreement may only be amended by written agreement signed by both parties, by amendment of the Plan or as provided for in the Plan document.
IN WITNESS WHEREOF, the parties have executed this Agreement effective on the Grant Date.
ICAD, INC.
ITS: Chief Executive Officer
OPTIONEE:______________________________
EXHIBIT 1
NAME OF OPTIONEE: _______________
DATE OF GRANT: ___________, 20__
NUMBER OF OPTION SHARES ISSUABLE UPON FULL OPTION EXERCISE: _______
EXERCISE PRICE: $____
EXERCISE SCHEDULE
Initial Date of Exercisability Number of Shares with respect
to which Option Is initially
exercisable
___________, 200 [Date of Grant] ________ [1/3rd]
__________, 200_[Date one year from
Date of Grant] ________ [1/3rd]
________, 200__ [Date two years from
Date of Grant] ________ [1/3rd]
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EXHIBIT 10.3
ICAD, INC.
STOCK OPTION AGREEMENT
AGREEMENT, entered into ___________ 20__ (the "Date of Grant"), by and between iCAD, Inc. (the "Company") and __________ ("Optionee").
WHEREAS, the Company has adopted the 2004 Stock Incentive Plan (the "Plan") which authorizes the Board of Directors of the Company (the "Board") to select a committee of disinterested persons (the "Committee"), which Committee may grant options to certain board members, officers and key employees of the Company under the Plan;
WHEREAS, the Company desires to give the Optionee an inducement to acquire a proprietary interest in the Company and an added incentive to advance the interests of the Company by granting to the Optionee an option to purchase shares of common stock of the Company.
THEREFORE, in consideration of the promises set forth below, the parties agree as follows:
1. GRANT OF OPTION
The Company hereby grants to the Optionee the right, privilege, and option (the "Option") to purchase _____ shares (the "Option Shares") of the Company's common stock (the "Common Stock" or "Stock"), according to the terms and subject to the conditions set forth below and in the plan.
2. OPTION EXERCISE PRICE
The per share price to be paid by Optionee in the event of an exercise of the Option shall be $____.
3. WHEN OPTIONS ARE EXERCISABLE
The Options become exercisable in the amounts and on the dates set forth on Exhibit 1 hereto.
The right to exercise the Options shall be cumulative. However, in no event shall this Option be exercisable after 5:00 p.m. (Nashua, New Hampshire USA time) on the tenth anniversary of the Date of Grant. At that time this Option Agreement expires and becomes void.
4. TERMINATION OF RELATIONSHIP
4.1 Generally: Regardless of what Paragraph 3 says, if Optionee's relationship with the Company should be terminated other than by Death or Disability (as defined below), then Optionee only has ninety (90) days after the date of termination to exercise those Options which were exercisable on the date of termination. The exercise of an Option under this Paragraph 4.1 shall be deemed to have occurred one (1) day prior to the date of termination.
4.2 Death or Disability: In the event of the Death or Disability of Optionee prior to the expiration of this Option, the following provisions shall apply:
4.2.1 If Optionee, at the time of Death or Disability, is a member
of the Company's Board of Directors (as determined by the
Committee in its sole discretion) since the Date of Grant,
then the Option may be exercised; (i) by Optionee within one
(1) year following the date Disability commenced, but only to
the extent Optionee is entitled to exercise such Option on the
date his or her Disability commenced; or (ii) by Optionee's
estate, or by a person who acquired the right to exercise the
Option because of Optionee's will or the laws of descent or
distribution, within one (1) year from the date of Optionee's
Death, but only to the extent of which Optionee is entitled to
exercise the Option at the date of Death. For the purpose of
this Agreement, the term "Disability" shall have the meaning
given to it in section 22(e)(3) of the Code. Whether Optionee
suffers a Disability shall be determined by the Committee in
its sole discretion.
4.2.2 If Optionee dies within thirty (30) days after the date of termination from the Board of Directors, the Option may be exercised at any time within one (1) year following the date of Death, by Optionee's estate or by a person who acquired the right to exercise the Option because of Optionee's will or the laws of descent or distribution, but only to the extent Optionee is entitled to exercise the Option at the date of termination.
4.3 Cancellation of Options: By giving written notice to the Optionee, the Committee in its sole discretion may cancel this Option, in whole or in part, in either of the following circumstances: (i) where Optionee's employment has been terminated for cause; (ii) where Optionee enters into competition with the Company; or (iii) upon failure of Optionee to achieve performance related goals and objectives agreed in advance by Optionee and the Company.
5. MANNER OF OPTION EXERCISE
5.1 Notice: Optionee may exercise this Option, in whole or in part from time to time, subject to the conditions contained in the Plan and this Agreement, by giving written notice of exercise to the Company at its principal exective office. That notice must specify the number of Option Shares with respect to which the Option is being exercised. Optionee must also pay in full the total purchase price for the Option Shares purchased. Subject to Paragraph 5.3 below, as soon as practical after receipt of notice and payment, Optionee shall be recorded on the books of the Company as the owner of the Option Shares and the Company shall deliver to Optionee one or more duly issued stock certificates evidencing such ownership. Until certificates for the Option Shares are issued to Optionee, Optionee shall not have any rights as a shareholder.
5.2 Payment: Optionee can pay the total purchase price of the Option Shares to be purchased solely in cash or may ask the Committee for permission to be allowed to pay either by transfer to the Company of previously acquired shares of Common Stock of the Company with a then current aggregate Fair Market Value equal to such total purchase price, or by a combination of cash and previously acquired shares of Common Stock. For purposes of the Agreement; (i) "Previously Acquired Shares" shall mean only shares of Common Stock of the Company that are already owned by the Optionee at the time of exercise and (ii) "Fair Market Value" shall be determined as set forth in the Plan.
5.3 Limitation on Obligation to Issue: The Company shall not be required to sell or issue any shares under this Option if, in the sole opinion of the Committee; (i) the issuance of such shares would constitute a violation by Optionee or the Company of any applicable law or regulation including, without limitation, federal and state securities law, or (ii) the consent or approval of any governmental body is necessary or desirable in connection with the issuance of such shares.
6. LEGENDS
Each certificate representing any shares of Stock issued to Optionee hereunder may have endorsed thereon a legend in a form as may be determined by the Company to be necessary, in its sole discretion, reflecting any limitations on resale.
7. CHANGES IN CAPITAL STRUCTURE
7.1 If the Company declares a stock dividend or a stock split is authorized, the number of Option Shares still outstanding under this Option shall be increased proportionately and the exercise price per share proportionately decreases. In the event the Company declares or authorizes a reverse stock split or combination of shares, the number of Option Shares shall be proportionately reduced and the exercise price per share shall be proportionately increased.
7.2 If the Company's Common Stock shall be changed into a different class of shares or if, because of reorganization, recapitalization, merger or consolidation it is necessary to exchange the Option Shares for shares of another company, then the appropriate substitution or exchange shall be made in the shares subject to this Option. The Committee may make such adjustments in the number, kind, exercise date of the Option Shares as is necessary. However, none of these changes shall give the Optionee additional benefits or increase the differential between the exercise price and the Fair Market Value.
7.3 If the Company is dissolved or liquidated, or if the Company is not the surviving or resulting corporation in connection with a merger or consolidation, the Committee (in its sole discretion) may allow Optionee the right to exercise this Option prior to the occurrence of the event which would otherwise terminate this Option.
8. DISPOSITION OF STOCK
Prior to making a disposition (as defined in Section 425(c) of the Code) of any shares of Stock acquired pursuant to the exercise of this Option before the expiration of two years after the Date of Grant or before the expiration of one year after the date on which such shares of Stock were transferred to the Optionee pursuant to exercise of this Option, the Optionee shall send written notice to the Company of the proposed date of such disposition, the number of shares to be disposed of, the amount of proceeds to be received from such disposition and any other information relating to such disposition that the Company may reasonably request.
9. NON-TRANSFERABILITY
This Option shall not be transferable by Optionee, either voluntarily or involuntarily, except by will or the laws of descent and distribution, and then only to the extent provided in Paragraph 4.2. Any attempt to transfer this Option other than as permitted shall void the Option. The Option shall be exercisable during Optionee's lifetime only by Optionee.
10. LIMITATION ON LIABILITY
Nothing in this agreement shall be construed to: (i) limit in any way the right of the Company to terminate the relationship of Optionee at any time, or (ii) be evidence of any agreement or understanding, express or implied, that the Company will employ Optionee in any particular position, at any particular rate of compensation or for any particular period of time.
11. BINDING EFFECT
This agreement shall be binding upon the heirs, executors, administrators and successors of the parties hereto.
12. GOVERNING LAW
This Agreement and all rights and obligations in it shall be construed in accordance with the Plan and governed by the laws of the State of New Hampshire. The parties hereto agree to submit to the personal jurisdiction of courts sitting in the State of New Hampshire for the purpose of resolving any dispute under this Agreement.
13. INTEGRATION
This Agreement supersedes any prior agreement, discussions or understandings between the parties on the subject matter covered by this Agreement.
14. SEVERABILITY
Should any provision of the Agreement be deemed by a court of competent jurisdiction to be unenforceable, the remaining provisions shall continue to be in full force and effect.
15. AMENDMENT
This Agreement may only be amended by written agreement signed by both parties, by amendment of the Plan or as provided for in the Plan document.
IN WITNESS WHEREOF, the parties have executed this Agreement effective on the Grant Date.
ICAD, INC.
ITS: Chief Executive Officer
OPTIONEE:______________________________
EXHIBIT 1
NAME OF OPTIONEE: _______________
DATE OF GRANT: ___________, 20__
NUMBER OF OPTION SHARES ISSUABLE UPON FULL OPTION EXERCISE: _______
EXERCISE PRICE: $____
EXERCISE SCHEDULE
Initial Date of Exercisability Number of Shares with respect
to which Option Is initially
exercisable
___________, 200 [Date of Grant] ________ [1/3rd]
__________, 200_[Date one year from
Date of Grant] ________ [1/3rd]
________, 200__ [Date two years from
Date of Grant] ________ [1/3rd]
|
EXHIBIT 31.1
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
I, W. Scott Parr, Chief Executive Officer of iCAD, Inc., certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2004 of iCAD, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and;
c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and;
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: November 15, 2004
/s/ W. Scott Parr
----------------------------------
W. Scott Parr
Chief Executive Officer
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EXHIBIT 31.2
CERTIFICATION OF CHIEF FINANCIAL OFFICER
I, Annette Heroux, Chief Financial Officer of iCAD, Inc., certify that:
1. I have reviewed this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2004 of iCAD, Inc.;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:
a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and;
c) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and;
5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
Date: November 15, 2004
/s/ Annette Heroux
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Annette Heroux
Chief Financial Officer
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EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of iCAD, Inc. (the "Company") on Form 10-Q for the quarterly period ended September 30, 2004 (the "Report"), I, W. Scott Parr, as Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ W. Scott Parr
--------------------------------
W. Scott Parr
Chief Executive Officer
Date: November 15, 2004
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A signed original of this written statement required by Section 906 has been provided to iCAD, Inc. and will be retained by iCAD, Inc. and furnished to the Securities and Exchange Commission upon request.
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of iCAD, Inc. (the "Company") on Form 10-Q for the quarterly period ended September 30, 2004 (the "Report"), I, Annette Heroux, as Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
/s/ Annette Heroux
-----------------------
Annette Heroux
Chief Financial Officer
Date: November 15, 2004
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A signed original of this written statement required by Section 906 has been provided to iCAD, Inc. and will be retained by iCAD, Inc. and furnished to the Securities and Exchange Commission upon request.