IMATEC LTD
SB-2/A, 1996-10-17
PHOTOGRAPHIC EQUIPMENT & SUPPLIES
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<PAGE>

   
   As filed with the Securities and Exchange Commission on October 17, 1996 
    
                                                     Registration No. 333-3589 
============================================================================= 

                      SECURITIES AND EXCHANGE COMMISSION 
                            WASHINGTON, D.C. 20549 
                                    ------ 
                                  AMENDMENT 
   
                                    NO. 4 
    
                                      TO 
                                  FORM SB-2 
                            REGISTRATION STATEMENT 
                                    UNDER 
                          THE SECURITIES ACT OF 1933 
                                    ------ 
                                 IMATEC, LTD. 
                (Name of small business issuer in its charter) 


<TABLE>
<CAPTION>
<S>                             <C>                                <C>
     Delaware                                    3861                            11-3289398 
     --------                                   -------                         ------------
(State or other juris-                (Primary Standard Industrial             (I.R.S. Employer 
diction of organization)                Classification Code No.)              Identification No.) 
</TABLE>

                              150 E. 58th Street 
                              New York, NY 10155 
                                (212) 826-0440 
   (Address, including zip code, and telephone number, including area code, 
                 of registrant's principal executive offices) 
                              150 E. 58th Street 
                              New York, NY 10155 
                                (212) 826-0440 
   (Address, including zip code, and telephone number, including area code, 
  of registrant's principal place of business or intended place of business) 
                                Hanoch Shalit 
                           Chief Executive Officer 
                              150 E. 58th Street 
                              New York, NY 10155 
                                (212) 826-0440 
   (Name, address, including zip code, and telephone number, including area 
                         code, of agent for service) 


                                  Copies to: 
        Clifford A. Brandeis, Esq.               Lawrence B. Fisher, Esq. 
       Zukerman Gore & Brandeis, LLP        Orrick, Herrington & Sutcliffe LLP 
            900 Third Avenue                         666 Fifth Avenue 
         New York, New York 10022                   New York, NY 10103 
            (212) 223-6700                            (212) 506-5000 


   Approximate date of commencement of proposed sale to the public: As soon 
as practicable after the effective date of this Registration Statement. 

   If any of the securities being registered on this Form are to be offered 
on a delayed or continuous basis, pursuant to Rule 415 under the Securities 
Act of 1933, check the following box: /X/ 

   If delivery of the prospectus is expected to be made pursuant to Rule 434, 
please check the following box: / / 

   If this Form is filed to register additional securities for an offering 
pursuant to Rule 462(b) under the Securities Act, please check the following 
box and list the Securities Act registration statement number of the earlier 
effective registration statement for the same offering: / / 

   If this Form is a post-effective amendment filed pursuant to Rule 462(c) 
under the Securities Act, check the following box and list the Securities Act 
registration statement number of the earlier effective registration statement 
for the same offering: / / 
============================================================================= 

<PAGE>

                       CALCULATION OF REGISTRATION FEE 
<TABLE>
<CAPTION>

- ---------------------------------------------------------------------------------------
                                               Proposed 
                                               maximum 
                                            offering price 
                                              per share 
                                              of Common 
                                              Stock and       Proposed 
                                              Redeemable      maximum 
  Title of each class of                     Common Stock    aggregate      Amount of 
      securities to be        Amount to be     Purchase    offering price  registration 
         registered            registered     Warrant(1)    per Unit(1)        fee 
- ---------------------------------------------------------------------------------------
<S>                           <C>          <C>             <C>             <C>
Common Stock par 
 value $.0001 per share (2)    1,150,000       $ 5.00       $ 5,750,000    $ 1,742.42 
- ---------------------------------------------------------------------------------------
Redeemable Common Stock 
 Purchase Warrants (3)  ...    4,600,000       $  .25       $ 1,150,000    $   348.48 
- ---------------------------------------------------------------------------------------
Common Stock, par value 
 $.0001 per share (4)(5)  .    4,600,000       $ 6.50       $29,900,000    $ 9,060.61 
- ---------------------------------------------------------------------------------------
Redeemable Common Stock 
 Purchase Warrants(6)  ....    2,150,000       $  .25       $   537,500    $   162.88 
- ---------------------------------------------------------------------------------------
Common Stock, par value 
 $.0001 per share (5)(7)  .    2,150,000       $ 6.50       $13,975,000    $ 4,234.85 
- ---------------------------------------------------------------------------------------
Underwriter's Warrants  ...        --          $.0001       $     --       $      -- 
- ---------------------------------------------------------------------------------------
Common Stock, par value 
 $.0001 per share (8)  ....      100,000       $ 6.00       $   600,000    $   181.82 
- ---------------------------------------------------------------------------------------
Redeemable Common Stock 
 Purchase Warrants (8)  ...      400,000       $  .30       $   120,000    $    36.36 
- ---------------------------------------------------------------------------------------
Common Stock, $.0001 par 
 value per share (5)(9)  ..      400,000       $ 7.80       $ 3,120,000    $   945.45 
- ---------------------------------------------------------------------------------------
Common Stock, 
 $.0001 par value per 
 share (10)  ..............      579,194       $ 5.00       $ 2,862,990    $   877.57 
- ---------------------------------------------------------------------------------------
Common Stock, $.0001 
 par value per share (11)      2,210,000       $ 5.00       $11,050,000    $ 3,348.48 
- ---------------------------------------------------------------------------------------
Total  ..................................................................  $20,938.92 
- ---------------------------------------------------------------------------------------
Amount Previously Paid  .................................................  $39,472.04 
- ---------------------------------------------------------------------------------------
Amount Due  .............................................................  $        0 
- ---------------------------------------------------------------------------------------
</TABLE>
- ------ 
 (1) Estimated solely for the purpose of calculating the registration fee 
     pursuant to rule 457. 
 (2) Includes shares of Common Stock included in the underwriter's 
     over-allotment option. 
 (3) Includes Redeemable Common Stock Purchase Warrants included in 
     underwriter's over-allotment option. 
 (4) Issuable upon exercise of the Redeemable Common Stock Purchase Warrants, 
     including the Redeemable Common Stock Purchase Warrants included in the 
     underwriter's over-allotment option. 
 (5) Pursuant to Rule 416, this Registration Statement also covers such 
     indeterminable additional shares of Common Stock as may become issuable 
     as a result of anti-dilution provisions of the Redeemable Warrants. 
 (6) Represents Redeemable Common Stock Purchase Warrants being registered on 
     behalf of lenders who have provided interim financing to the Company. 
 (7) Issuable upon exercise of the Redeemable Common Stock Purchase Warrants 
     being registered on behalf of lenders who have provided interim 
     financing to the Company. 
 (8) Reserved for issuance upon exercise of the Underwriter's Warrants. 
 (9) Issuable upon exercise of the Redeemable Common Stock Purchase Warrants 
     included in the Underwriter's Warrants. 
(10) Represents Common Stock being registered on behalf of lenders who have 
     provided interim financing to the Company. 
(11) Represents shares of Common Stock being registered on behalf of the 
     founding stockholders of the Company. 

   The registrant hereby amends this Registration Statement on such date or 
dates as may be necessary to delay its effective date until the Registrant 
shall file a further amendment which specifically states that this 
Registration Statement shall thereafter become effective in accordance with 
Section 8(a) of the Securities Act of 1933 or until the Registration 
Statement shall become effective on such date as the Commission, acting 
pursuant to said Section 8(a), may determine. 

<PAGE>
                                 IMATEC, LTD. 
                            CROSS REFERENCE SHEET 
    (SHOWING LOCATION IN THE PROSPECTUS OF INFORMATION REQUIRED BY ITEMS 1 
                      THROUGH 23, PART I, OF FORM SB-2) 
<TABLE>
<CAPTION>
            Item in Form SB-2                                          Prospectus Caption 
           -------------------                                         -------------------
<S>       <C>                                                           <C>
 1.       Front of Registration Statement and Outside Front Cover 
          of Prospectus..............................................  Facing Page of Registration Statement; Outside Front 
                                                                       Page of Prospectus 
 2.       Inside Front and Outside Back Cover Pages of 
          Prospectus.................................................. Inside Front Cover Page of Prospectus; Outside Back 
                                                                       Cover Page of Prospectus 
 3.       Summary Information and Risk Factors ....................... Prospectus Summary; Risk Factors 
 4.       Use of Proceeds............................................. Use of Proceeds 
 5.       Determination of Offering Price ............................ Outside Front Cover Page of Prospectus; Underwriting; 
                                                                       Risk Factors 
 6.       Dilution.................................................... Dilution; Risk Factors 
 7.       Selling Security Holders.................................... Outside Front Cover Page of Prospectus; 
                                                                       Selling Security Holders 
 8.       Plan of Distribution........................................ Outside Front Cover Page of Prospectus; Risk Factors; 
                                                                       Underwriting 
 9.       Legal Proceedings .......................................... Business - Legal Proceedings 
10.       Directors, Executive Officers, Promoters and Control 
          Persons .................................................... Management 
11.       Security Ownership of Certain Beneficial Owners and 
          Management.................................................. Principal Security Holders 
12.       Description of Securities................................... Description of Securities; Underwriting 
13.       Interest of Named Experts and Counsel ...................... Experts; Legal Matters 
14.       Disclosure of Commission Position on Indemnification 
          for Securities Act Liabilities.............................. Inside Front Cover Page of Prospectus; Underwriting 
15.       Organization Within Last 5 Years ........................... Prospectus Summary; The Company; Business; Certain 
                                                                       Transactions 
16.       Description of Business..................................... Business; Risk Factors 
17.       Management's Discussion and Analysis or Plan of Operation... Plan of Operations 
18.       Description of Property..................................... Business - Properties 
19.       Certain Relationships and Related Transactions ............. Certain Transactions 
20.       Market for Common Equity and Related Stockholder  
          Matters..................................................... Outside Front Cover Page of Prospectus; Prospectus 
                                                                       Summary; Description of Securities; Underwriting 
21.       Executive Compensation ..................................... Management - Executive Compensation 
22.       Financial Statements........................................ Selected Financial Information; Financial Statements 
23.       Changes in and Disagreements with Accountants on 
          Accounting and Financial Disclosures ....................... Change in Accountants 
</TABLE>

<PAGE>
Information contained herein is subject to completion or amendment. A 
registration statement relating to these securities has been filed with the 
Securities and Exchange Commission. These securities may not be sold nor may 
offers to buy be accepted prior to the time the registration statement 
becomes effective. This prospectus shall not constitute an offer to sell or 
the solicitation of an offer to buy nor shall there be any sale of these 
securities in any State in which such offer, solicitation or sale would be 
unlawful prior to registration or qualification under the securities laws of 
any such State. 

PROSPECTUS 
   
                SUBJECT TO COMPLETION, DATED OCTOBER 17, 1996 
    
                                 IMATEC, LTD. 
                       1,000,000 SHARES OF COMMON STOCK    [LOGO]
                                     AND 
                        4,000,000 REDEEMABLE WARRANTS 

   Imatec, Ltd. (the "Company") hereby offers 1,000,000 shares (the "Shares") 
of common stock, par value $.0001 per share (the "Common Stock") and 
4,000,000 redeemable Common Stock purchase warrants (the "Redeemable 
Warrants"). The Shares and the Redeemable Warrants (collectively, the 
"Securities") may be purchased separately and will be separately tradeable 
immediately upon issuance. It is currently anticipated that the initial 
public offering prices of the Common Stock and the Redeemable Warrants will 
be $5.00 and $.25, respectively. Each Redeemable Warrant entitles the 
registered holder thereof to purchase one share of Common Stock at an 
exercise price of $6.50, subject to adjustment, commencing on the date of 
this Prospectus until _________, 1999 [36 months from the date of this 
Prospectus], at which time the Redeemable Warrants shall expire. Upon the 
prior written consent of A.S. Goldmen & Co., Inc. (the "Underwriter"), each 
Redeemable Warrant is redeemable by the Company at any time after ________, 
1997, [9 months from the date of this Prospectus] at a redemption price of 
$.10 per Redeemable Warrant, on 30 days' prior written notice, provided that 
the average closing bid price of the Common Stock as reported on the Nasdaq 
SmallCap Market ("Nasdaq") equals or exceeds $7.50 for any 20 trading days 
within a period of 30 consecutive trading days ending on the fifth trading 
day prior to the date of notice of redemption. See "Risk Factors" and 
"Description of Securities." 
                                                (Cover continued on next page) 
       THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK AND 
              IMMEDIATE SUBSTANTIAL DILUTION. SEE "RISK FACTORS" 
                     BEGINNING ON PAGE 7 AND "DILUTION." 
                                    ------ 
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND 
  EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE 
    SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES 
       COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS 
             PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A 
                              CRIMINAL OFFENSE. 
<TABLE>
<CAPTION>
================================================================================
                                    Price       Underwriting     Proceeds to 
                                  to Public     Discount (1)     Company (2) 
- --------------------------------------------------------------------------------
<S>                               <C>           <C>               <C>                   
Per share of Common Stock ....    $              $                $ 
- --------------------------------------------------------------------------------
Per Redeemable Warrant  ......        $              $                $ 
- --------------------------------------------------------------------------------
Total (3)  ...................      $              $                $ 
================================================================================
</TABLE>
(1) Does not include additional compensation to the Underwriter in the form 
    of a non-accountable expense allowance equal to 3% of the gross proceeds 
    of this offering (this "Offering"). For indemnification and contribution 
    arrangements with, and additional compensation payable to, the 
    Underwriter, see "Underwriting." 
(2) Before deducting estimated expenses of this Offering payable by the 
    Company of $680,000, including the non-accountable expense allowance 
    payable to the Underwriter. 
(3) The Company has granted to the Underwriter a 45 day option, to purchase 
    up to an additional 150,000 shares of Common Stock and/or 600,000 
    Redeemable Warrants on the same terms and conditions as set forth above 
    solely to cover over-allotments, if any. If such over-allotment option 
    is exercised in full, the total Price to Public, Underwriting Discount 
    and Proceeds to Company will be $ _________, $ _________ and $ ________, 
    respectively. See "Underwriting." 
                                    ------ 
   The Securities are being offered by the Underwriter, subject to prior sale 
when, as and if delivered to and accepted by the Underwriter, and subject to 
the approval of certain legal matters by its counsel and certain other 
conditions. The Underwriter reserves the right to withdraw, cancel or modify 
this Offering and to reject any order in whole or in part. It is expected 
that the delivery of the certificates representing the Securities and payment 
therefor will be made at the offices of A.S. Goldmen & Co., Inc., Iselin, New 
Jersey, or its counsel on or about      , 1996. 

                           A.S. GOLDMEN & CO., INC. 
            The date of this Prospectus is _________________, 1996 

<PAGE>

(cover continued from previous page) 


   Prior to this Offering, there has been no public market for the 
Securities, and no assurance can be given that such a market will develop 
upon completion of this Offering, or if developed, that it will be sustained. 
The initial public offering prices of the Securities and the exercise price 
and other terms and conditions of the Redeemable Warrants have been 
arbitrarily determined by negotiations between the Company and the 
Underwriter and do not necessarily bear any relationship to the Company's 
assets, book value, results of operations or other generally accepted 
criteria of value. Application has been made for listing of the Common Stock 
and the Redeemable Warrants on Nasdaq under the symbols IMEC and IMECW, 
respectively. See "Risk Factors" and "Underwriting." 

   This Prospectus also relates to the registration by the Company, at its 
expense, (a) for the account of the Company of 4,000,000 shares of Common 
Stock issuable by the Company upon the exercise of 4,000,000 Redeemable 
Warrants to be issued in this Offering, (b) for the account of various 
security holders who provided interim bridge financing (the "Bridge 
Financing") to the Company (collectively, the "Bridge Selling Security 
Holders") of an aggregate of (i) 579,194 shares of Common Stock after giving 
effect, as of October 31, 1996, to the "Bridge Financing Restructuring," as 
such term is defined in "Plan of Operations -- Liquidity and Capital 
Resources", (ii) 2,150,000 Redeemable Warrants, and (iii) 2,150,000 shares of 
Common Stock issuable by the Company upon the exercise of such 2,150,000 
Redeemable Warrants issued to the Bridge Selling Security Holders, and (c) 
for the account of the founding stockholders of the Company (the "Founding 
Selling Security Holders") of an aggregate of 2,210,000 shares of Common 
Stock. Except with respect to 150,000 shares of Common Stock being registered 
on behalf of certain of the Founding Selling Security Holders (including 
72,093 shares for Dr. Hanoch Shalit, the Company's President and Chief 
Executive Officer) and any open market purchases on or after the effective 
date of this Offering, the Founding Selling Security Holders have agreed with 
the Underwriter not to effect any sales of their Common Stock or any other 
securities of the Company, whether or not beneficially owned, until 18 months 
after the date of this Prospectus without the prior written consent of the 
Underwriter. The Bridge Selling Security Holders have agreed with the Company 
not to effect any sales of their Common Stock and Redeemable Warrants (or any 
shares of Common Stock issuable upon exercise of the Redeemable Warrants) 
until 24 months and 18 months, respectively, after the date of this 
Prospectus. The Company will not receive any proceeds from any of the 
securities offered for sale by either the Bridge Selling Security Holders or 
the Founding Selling Security Holders, although it will receive proceeds from 
the exercise of the Redeemable Warrants by the Bridge Selling Security 
Holders. The Bridge Selling Security Holders and the Founding Selling 
Security Holders are sometimes hereinafter referred to collectively as the 
"Selling Security Holders," and all of the securities offered for sale by the 
Selling Security Holders are hereinafter referred to as the "Selling Security 
Holders' Securities." See "Selling Security Holders," and "Description of 
Securities." 

   The sale of the Selling Security Holders' Securities may be effected from 
time to time in transactions (which may include block transactions by or for 
the account of the Selling Security Holders) in the over-the-counter market 
or in negotiated transactions, through the writing of options on the Selling 
Security Holders' Securities, through a combination of such methods of sale, 
or otherwise. Sales may be made at fixed prices which may be changed, at 
market prices prevailing at the time of sale, or at negotiated prices. If any 
Selling Security Holder sells his, her or its Securities, or options thereon, 
pursuant to this Prospectus at a fixed price or at a negotiated price which 
is, in either case, other than the prevailing market price or in a block 
transaction to a purchaser who resells, or if any Selling Security Holder 
pays compensation to a broker-dealer that is other than the usual and 
customary discounts, concessions or commissions, or if there are any 
arrangements either individually or in the aggregate that would constitute a 
distribution of the Selling Security Holders' Securities, a post-effective 
amendment to the Registration Statement of which this Prospectus is a part, 
would need to be filed and declared effective by the Securities and Exchange 
Commission before such Selling Security Holders could make such sale, pay 
such compensation or make such a distribution. The Company is under no 
obligation to file a post-effective amendment to the Registration Statement 
of which this Prospectus is a part under such circumstances. 

   The Company intends to furnish its stockholders with annual reports 
containing audited financial statements after the close of each fiscal year. 

   IN CONNECTION WITH THIS OFFERING, THE UNDERWRITER MAY OVER-ALLOT OR EFFECT 
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK 
AND/OR THE REDEEMABLE WARRANTS OFFERED HEREBY AT LEVELS ABOVE THOSE WHICH 
MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, 
MAY BE DISCONTINUED AT ANY TIME. 

<PAGE>

                              PROSPECTUS SUMMARY 


   The following summary is qualified by, and must be read in conjunction 
with, the more detailed information and financial statements set forth 
elsewhere in this Prospectus. Unless otherwise indicated herein, all share 
and per share information does not give effect to (i) the exercise of the 
Underwriter's over-allotment option to purchase up to an additional 150,000 
shares of Common Stock and/or 600,000 Redeemable Warrants and the issuance of 
up to 600,000 shares of Common Stock upon exercise of the Redeemable Warrants 
included in the Underwriter's over-allotment option; (ii) the issuance of 
6,150,000 shares of Common Stock issuable upon exercise of the Redeemable 
Warrants, including the Redeemable Warrants offered by the Bridge Selling 
Security Holders; (iii) the issuance upon exercise of warrants granted to the 
Underwriter (the "Underwriter's Warrants") of up to 100,000 shares of Common 
Stock and 400,000 Redeemable Warrants, and the underlying 400,000 shares of 
Common Stock issuable upon exercise of the Redeemable Warrants contained in 
the Underwriter's Warrants; and (iv) 500,000 shares of Common Stock reserved 
for issuance upon the exercise of stock options that may be granted pursuant 
to the Company's stock option plan. See "Management -- Stock Option Plan" and 
"Underwriting." Unless otherwise indicated herein, all share and per share 
information gives effect to (i) a 1-for-4 reverse stock split effected in May 
1995 and (ii) a 22,100-for-1 stock split effected in October 1995. 


                                 THE COMPANY 


   Imatec, Ltd. (the "Company") was formed in 1988 to develop, design, market 
and license its proprietary technology, which enhances image reproduction by 
reducing distortion that normally occurs in the imaging process, for 
application in such markets as medical imaging, graphic arts, computers, 
cinematography and TV/video. Each application will be a system (an "Imatec 
20/20(TR) System") of hardware and software components expressly designed for 
a specific market. Based on the results of extensive testing, the Company has 
developed an Imatec 20/20(TR) System for medical diagnostic imaging devices 
which is capable of improving the quality of film reproduction of images 
taken by medical diagnostic imaging devices such as Magnetic Resonance 
Imaging scanners ("MRI"), computer tomography scanners ("CT") and Ultrasound 
scanners. The Imatec 20/20 System for medical diagnostic imaging devices 
achieves this goal regardless of the type of medical imaging film used and as 
a consequence, may result in cost savings to the user. The Company has also 
developed an Imatec 20/20 System for the medical imaging field of 
teleradiology; which is the viewing of the same medical image on different 
monitor screens in separate locations. Although the first applications of the 
Company's technology have been for the medical diagnostic imaging field, 
which only require black and white reproduction, the Company recently began 
developing an Imatec 20/20 System designed to reduce distortions of 
reproduction of color images and which is intended to facilitate the 
Company's development of Imatec 20/20 Systems for non-medical imaging fields. 

   The Company's technology is designed to objectively measure the image 
characteristics of an original image and compare it to its reproduced image, 
computing the existing tone and color distortions between the two images and 
correcting such distortions. Current imaging systems create reproductions 
that have distortions and are usually adjusted subjectively during the 
reproduction process. Aspects of the Company's technology are set forth in 
three United States patents and one European patent (the "Patents") which 
have been licensed to the Company from Dr. Hanoch Shalit, the Company's 
President and Chief Executive Officer. The Company has designed, built and 
tested a prototype of an Imatec 20/20 System that can be used with MRI, CT 
and Ultrasound scanners. 


   In 1995, U.S. sales of MRI, CT and Ultrasound machines were approximately 
$1.59 billion, representing sales of approximately 9,775 units. In addition, 
approximately $235 million was spent in 1994 in connection with upgrading and 
improving these medical imaging devices either to extend the life of the 
machines or to add on technical improvements. At the end of 1995, there were 
approximately 96,680 MRI, CT and Ultrasound machines operating in the United 
States. Based on industry statistics, the U.S. market for medical imaging 
devices represents approximately 40% of the worldwide market. See "Business 
- -- The Company -- The Medical Imaging Market." 

                                      3 
<PAGE>


   The Company's strategy is to (i) license the Company's technology and the 
Imatec 20/20 System developed for the medical diagnostic imaging field to 
manufacturers of medical imaging products such as scanners, cameras and image 
reproduction systems, (ii) engage in marketing activities to facilitate the 
licensing of the Company's technology and its Imatec 20/20 Systems and (iii) 
continue its research and development activities with respect to other 
applications of the Company's technology in the medical imaging field and in 
other imaging fields, such as graphic arts, cinematography, computers and 
TV/video. The Company does not presently intend to engage in any 
manufacturing, sales, distribution or service activities with respect to its 
Imatec 20/20 Systems or products that incorporate the Company's technology. 

   The Company is a development stage company and was incorporated in the 
State of New York on November 17, 1988 and reincorporated in the State of 
Delaware on October 19, 1995. The Company maintains its offices at 150 E. 
58th Street, New York, NY 10155 and its telephone number is (212) 826-0440. 


                                      4 
<PAGE>

                                 THE OFFERING 


Securities Offered.............  1,000,000 shares of Common Stock and 
                                 4,000,000 Redeemable Warrants. See 
                                 "Description of Securities." 

Securities Registered for the 
  Selling Security Holders.....  An aggregate of 579,194 shares of Common 
                                 Stock (after giving effect to the Bridge 
                                 Financing Restructuring as of October 31, 
                                 1996) and 2,150,000 Redeemable Warrants (and 
                                 the shares of Common Stock issuable upon 
                                 exercise of the Redeemable Warrants) are 
                                 being registered hereby and may be sold by 
                                 the Bridge Selling Security Holders, 
                                 although the Bridge Selling Security Holders 
                                 have agreed with the Company not to effect 
                                 any sales of their Common Stock and 
                                 Redeemable Warrants (or any shares of Common 
                                 Stock issuable upon exercise of the 
                                 Redeemable Warrants) until 24 months and 18 
                                 months, respectively, from the date of this 
                                 Prospectus. An additional 2,210,000 shares 
                                 of Common Stock are being registered and may 
                                 be sold by the Founding Selling Security 
                                 Holders, although except with respect to 
                                 150,000 shares of Common Stock and any open 
                                 market purchases on or after the effective 
                                 date of this Offering, the Founding Selling 
                                 Security Holders have agreed with the 
                                 Underwriter not to effect any sales of their 
                                 shares of Common Stock or any other 
                                 securities of the Company, whether or not 
                                 beneficially owned, until 18 months after 
                                 the date of this Prospectus without the 
                                 prior written consent of the Underwriter. 
                                 None of the Selling Security Holders' 
                                 Securities are being underwritten in this 
                                 Offering and the Company will not receive 
                                 any proceeds from their sale although it 
                                 will receive the exercise price of $6.50 per 
                                 share in the event that any Redeemable 
                                 Warrants are exercised. See "Plan of 
                                 Operations -- Liquidity and Capital 
                                 Resources" and "Selling Security Holders". 

Terms of Redeemable Warrants...  Each Redeemable Warrant entitles the holder 
                                 thereof to purchase one share of Common 
                                 Stock at an exercise price of $6.50 per 
                                 share at any time commencing on the date of 
                                 this Prospectus until ________, 1999 [36 
                                 months after the date of this Prospectus] 
                                 subject to adjustment in certain 
                                 circumstances. Each Redeemable Warrant, is 
                                 redeemable by the Company commencing 
                                 ________, 1997 [9 months after the date of 
                                 this Prospectus]. The Redeemable Warrants 
                                 are redeemable by the Company with the 
                                 consent of the Underwriter and will be 
                                 subject to redemption at a redemption price 
                                 of $.10 per Redeemable Warrant, on 30 days 
                                 prior written notice, provided that the 
                                 average closing bid price of the Common 
                                 Stock as reported by Nasdaq equals or 
                                 exceeds $7.50 per share, for any 20 trading 
                                 days within a period of 30 consecutive 
                                 trading days ending on the fifth trading day 
                                 prior to the date of the notice of 
                                 redemption. See "Description of Securities." 

Common Stock Outstanding: 
  Prior to the closing of this 
  Offering.....................  2,761,785 shares 

 After the closing of this 
  Offering.....................  3,789,194(1) shares 


                                      5 
<PAGE>


Use of Proceeds................  Research and development, repayment of 
                                 indebtedness, marketing and licensing and 
                                 working capital purposes. See "Use of 
                                 Proceeds." 

Risk Factors...................  The Securities offered hereby involve a high 
                                 degree of risk and immediate and substantial 
                                 dilution. See "Risk Factors" and "Dilution." 

Proposed Nasdaq Symbols (2): 
   Common Stock................  IMEC 

  Redeemable Warrants..........  IMECW 

- ------ 
(1) Gives effect to the Bridge Financing Restructuring in which, among other 
    things, (i) 551,785 outstanding shares of Common Stock issued in the 
    Bridge Financing were returned by the Bridge Selling Security Holders to 
    the Company for cancellation, and (ii) 579,194 shares of Common Stock 
    were issued to the Bridge Selling Security Holders in connection with the 
    conversion of Notes issued in the Bridge Financing. See "Plan of 
    Operations -- Liquidity and Capital Resources." 
(2) Application has been made for quotation of the Common Stock and the 
    Redeemable Warrants on Nasdaq. See "Risk Factors -- No Assurance of 
    Public Trading Market or Continued Nasdaq Inclusion; Risk of Low-Priced 
    Securities." 


                                      6 
<PAGE>

                                 RISK FACTORS 


   Development Stage Company; Lack of Revenues; Accumulated Deficit; 
Continued Losses for the Foreseeable Future; No Assurance of 
Profitability. The Company is in the development stage and, to date, has 
earned nominal revenues from operations. Since inception in November 1988, 
the Company's principal activities have been (i) research and development 
related to the Company's technology and the Imatec 20/20 System for the 
medical diagnostic imaging field, (ii) testing of the Imatec 20/20 System 
designed for the medical diagnostic imaging field, and (iii) the filing of, 
and other activities related to obtaining, the Patents. Primarily as a result 
of expenses incurred in connection with research and development and related 
activities, as of December 31, 1995 and August 31, 1996 the Company had an 
accumulated deficit of $1,280,109 and $2,837,005, respectively. The Company 
has continued to incur losses since August 31, 1996. Potential investors 
should be aware of the problems, delays, expenses, difficulties and risks 
encountered by a company in the development stage, many of which may be 
beyond the Company's control. Such risks may include, but are not limited to, 
unanticipated problems relating to the continued developing, testing and 
marketing of the Company's technology. In addition, the Company will also 
face a number of risks specific to entities attempting to introduce new 
technologies, including, but not limited to, the existence or development of 
competing technologies, the existence or development of new technologies that 
are incompatible with the Company's technology, the inability of the Company 
to respond in a timely manner to changing technologies, the potential 
obsolescence of the Company's technology as a result of changing 
technologies, and the failure of a market to develop for Imatec 20/20 
Systems. The Company expects to continue to incur losses until such time, if 
ever, as the Company's revenues exceed its expenses. There can be no 
assurance that the application of the Company's technology to the medical 
diagnostic imaging field, or to any other fields, will be successful, or that 
the Company will be able to successfully license or otherwise exploit its 
technology or any of its Imatec 20/20 Systems. There can be no assurance that 
the Company will ever achieve profitability. See "Business," "Plan of 
Operations" and Financial Statements. 

   Significant Capital Requirements; Dependence on Proceeds of this 
Offering. The Company's cash requirements are significant. The Company is 
dependent on the net proceeds of this Offering to implement its current 
business plan. The Company intends to substantially increase its level of 
business activities following the consummation of this Offering and, in 
connection therewith, will incur significant expenses without the guarantee 
of any revenues. See "Plan of Operations" and "Use of Proceeds." 

   Possible Need For Additional Financings. Although the Company anticipates 
that the net proceeds of this Offering will be sufficient to finance its 
activities for at least the 12 months following the date of this Prospectus, 
there is no assurance that the Company will not require additional financing 
and if required, that such additional financing will be available to the 
Company on acceptable terms, or at all. Factors that may lead to a need for 
additional financing include delays in market acceptance, changes in 
technologies or the need for the Company to directly engage in the 
manufacture, sales, distribution and service of products based on the 
Company's technology. There can be no assurance that the Company will not 
suffer from these or any other problems, any of which may have a material 
adverse effect on the Company See "Plan of Operations." 

   Uncertainty of Market Acceptance of the Company's Technology. Although the 
Company has successfully tested the Imatec 20/20 System with respect to the 
medical diagnostic imaging field, the Company is unknown in the marketplace 
and there can be no assurance that a market for products that incorporate the 
Company's technology will develop. Consequently, although the Company will 
seek to license the Company's technology and Imatec 20/20 System to third 
parties in the medical diagnostic imaging field, there can be no assurance 
that the Company will be successful in generating any licensing income. In 
addition, part of the Company's strategy is to continue its research and 
development activities with respect to the Company's technology for other 
applications in the medical imaging field and in other imaging fields, such 
as graphic arts, computer, cinematography and TV/video. The Company has 
recently began developing an Imatec 20/20 System designed to reduce 
distortion of reproduction of color images, and which is intended to 
facilitate the Company's application of an Imatec 20/20 System to non-medical 
imaging fields. There can be no assurance, however, that the Company will be 
able to apply its technology to any other markets or that a market will 
develop for the Imatec 20/20 System in the medical diagnostic imaging field 
or any other field, or that the Company's technology or Imatec 20/20 Systems 
will ever receive acceptance from any intended users. See "Business -- The 
Company's Business Strategy." 


                                      7 
<PAGE>


   Risks of Technological Change; Competition. The image enhancement field is 
subject to rapid and significant technological change that may render the 
Company's technology or an Imatec 20/20 System obsolete or products that 
incorporate the Company's technology obsolete or incompatible with the 
machines they are intended to complement. In addition, such rapid changes may 
impose additional, unforeseen costs on the Company in that the Company may be 
required to modify its technology and Imatec 20/20 Systems to adapt to such 
changes. There can be no assurance that the Company will be able to 
successfully modify or upgrade its technology and Imatec 20/20 Systems as may 
be necessary in a timely manner, or at all. 

   While the Company is not aware of any entities that build image 
enhancement devices that compete with the Company's technology or its Imatec 
20/20 Systems, there are a number of entities that are engaged in the 
research and development of image enhancement products. These entities may in 
the future develop technologies or products that compete with the Company's 
technology or its Imatec 20/20 Systems. Potential competitors of the Company 
include independent companies, universities and public and private research 
organizations, most of which are well established and have substantially 
greater marketing, financial, technological and other resources than the 
Company. In addition, the medical imaging field in particular is dominated by 
large, well established corporations. There can be no assurance that 
competitors will not succeed in securing patents and/or developing 
technologies or products that are more effective than the Company's 
technology or its Imatec 20/20 Systems, as a result of which the Company's 
technology and Imatec 20/20 Systems may become obsolete or non-competitive. 
See "Business -- Competition". 

   No Manufacturing, Sales, Distribution and Technical Services Support 
Capabilities; Limited Marketing Capabilities. The Company does not presently 
intend to engage in the manufacturing process or the accompanying sales, 
distribution and technical services support functions. The Company will be 
dependent on licensees of its technology or Imatec 20/20 Systems and other 
third parties with which it will attempt to establish commercial 
relationships in connection with the manufacturing, distribution and service 
of products that incorporate its technology or Imatec 20/20 Systems. The 
manufacturing, sales, distribution and service of products are capital and 
labor intensive, and beyond the Company's current capabilities. Similarly, 
the Company has, and will continue to have for the foreseeable future, 
limited marketing and licensing capabilities. The Company's marketing and 
licensing strategy will rely on unaffiliated licensees and other third 
parties to successfully manufacture and effect sales of products which 
incorporate the Company's technology or its Imatec 20/20 Systems as well as 
provide the necessary service, repair and technical support. There can be no 
assurance that the Company will be able to rely on unaffiliated licensees and 
third parties to successfully effect the manufacture, sales and service of 
products incorporating the Company's technology or its Imatec 20/20 Systems, 
or that the Company will not have to make significant additional capital 
expenditures in the event that it cannot rely on such licensees and third 
parties. Moreover, any such additional capital expenditures are beyond the 
Company's current means, and may also include the employment of additional 
personnel, in order to successfully effect the manufacture, sales, 
distribution or service of products incorporating the Company's technology or 
its Imatec 20/20 Systems. See "Business -- The Company's Business Strategy" 
"--Manufacturing and Distribution." 


   No Assurance as to Validity or Enforceability of Intellectual Property 
Rights. The Company is the exclusive licensee of the Patents. The owner and 
licensor of the Patents is Dr. Hanoch Shalit, the Company's President and 
Chief Executive Officer. Notwithstanding the Company's exclusive license with 
respect to the Patents, there can be no assurance that others will not 
independently develop similar technologies, or design around the Patents. If 
others are able to design around the Patents, the Company's business will be 
materially adversely affected. Further, the Company will have very limited, 
if any, protection of its proprietary rights in those jurisdictions where it 
has not effected any patent filings or where it fails to obtain patent 
protection despite filing therefor. 


   Even though the Patents have been issued by the United States Patent and 
Trademark Office and the European Patent Office, challenges may be instituted 
by third parties as to the validity and enforceability of the Patents. There 
also can be no assurance that third parties will not be able to successfully 
assert a claim with regard to the Patents and/or the Company's technology or 
its Imatec 20/20 Systems under their own intellectual property rights. The 
Company is not presently aware of any challenges to the Patents. Similarly, 
the Company may also have to institute legal actions in order to protect 
infringement of its Patents by third parties. The Company is not presently 
aware of any such infringements. The costs of litigation or settlement in 
connection with the 


                                      8 
<PAGE>

defense of any third party challenges relative to the validity and 
enforceability of its Patents and/or to prevent any infringement of the 
Patents by third parties, which pursuant to the License Agreement are the 
Company's responsibilities, could be substantial. Moreover, in the event that 
the Company was unsuccessful in any such litigation, the Company could be 
materially adversely affected. 


   In certain instances, for business reasons, the Company may choose not to 
seek patent protection for all of its innovations. In such instances, the 
Company may rely on trade secrets and know-how to protect its innovations. 
There can be no assurance that protectable trade secrets or know-how will be 
established or, if established, that they will remain protected, or that 
others will not independently and lawfully develop similar or superior 
innovations. The Company requires all employees to sign non-disclosure, 
non-competition, confidentiality and invention assignment agreements. 
Similarly, all directors, consultants and other parties to whom confidential 
information has been or will be disclosed have agreements containing 
confidentiality provisions and covenants not to compete. There can be no 
assurance, however, that any such confidentiality or non-compete provisions 
will be complied with or will be enforceable. See "Business -- Intellectual 
Property" and "Management -- Executive Compensation." 

   Possible Need for FDA Clearance. The Company is presently uncertain 
whether the Company, or a potential licensee of the Company's technology or 
the Imatec 20/20 System for medical imaging applications, will obtain any 
required clearances for medical devices from the United States Food and Drug 
Administration ("FDA") for the Imatec 20/20 System for medical imaging 
applications. The clearance process is expensive and time consuming. In order 
to clinically test, produce, and market a medical device that requires FDA 
clearance, the Company or a licensee, as the case may be, must satisfy 
numerous mandatory procedures, regulations, and safety standards established 
by the FDA, and comparable state and foreign regulatory agencies. Typically, 
such standards require that the products be cleared by the FDA as safe and 
effective for their intended use prior to being marketed for human 
applications. In the event that any FDA clearances are required, there can be 
no assurance that any such clearances will be granted, or that the length of 
time for clearance will not be extensive, or that the cost of attempting to 
obtain any such clearances will not be prohibitive. 

   The FDA employs a rigorous system of regulations and requirements 
governing the clearance processes for medical devices, requiring, among other 
things, the presentation of substantial evidence, including clinical studies, 
establishing the safety and efficacy of new medical devices. The principal 
methods by which FDA clearance is obtained are pre-market approval ("PMA"), 
which is for products that are not comparable to any other product in the 
market, or filing a pre-market notification under Section 510(k) of the 
Federal Food, Drug and Cosmetic Act (a "510(k)") which is for products that 
are substantially equivalent to products that have already received FDA 
clearance. Although both methods may require clinical testing of the products 
in question under an approved protocol, because PMA clearance relates to more 
unique, invasive and/or potentially higher risk products, the PMA procedure 
is more complex and time consuming. Applicants under the 510(k) procedure 
must prove that the products for which clearance is sought are substantially 
equivalent to products on the market prior to the Medical Device Amendments 
of 1976, or products approved thereafter pursuant to the 510(k). The review 
period for a 510(k) application is approximately ninety (90) days from the 
date of filing the application, although there can be no assurance that the 
review period will not extend beyond such a period. 


   Under the PMA procedure, the applicant is required to conduct substantial 
clinical testing to determine the safety, efficacy and potential hazards of 
the product. The review period under a PMA application is one hundred eighty 
(180) days from the date of filing, and the application is not automatically 
deemed cleared if not rejected during that period. The preparation of a PMA 
application is significantly more complex, expensive and time consuming than 
the 510(k) procedure. Further, the FDA can request additional information, 
which can prolong the clearance process. 


   The Company is of the belief, based upon the non-invasive nature of the 
Company's technology, the Imatec 20/20 System for medical imaging 
applications and other factors, that only a 510(k) application and approval 
will be required for the Imatec 20/20 System for medical imaging 
applications, although there can be no assurance that a PMA will not be 
required. 

   In order to conduct human clinical studies for any medical procedure 
proposed for the Company's products, the Company or a licensee, as the case 
may be, could also be required to obtain an Investigational Device 


                                      9 
<PAGE>


Exemption ("IDE") from the FDA or clearance of an Institutional Review Board 
("IRB"), which would further increase the time before potential FDA 
clearance. In order to obtain an IDE, the Company or a licensee, as the case 
may be, may be required to submit an application to the FDA or an IRB, 
including a complete description of the product, and detailed medical 
protocols that would be used to evaluate the product. In the event an 
application were found to be in order, an IDE would ordinarily be granted 
promptly thereafter. 

   The FDA also imposes various requirements on manufacturers and sellers of 
medical devices under its jurisdiction, such as medical device listing, 
labeling, manufacturing practices, record keeping and reporting requirements. 
The FDA may also require post-market testing and surveillance programs to 
monitor a product's effect. In the event that the Company or a licensee, as 
the case may be, is required to obtain clearance for the Imatec 20/20 
Systems, there can be no assurance that the appropriate clearance from the 
FDA will be obtained, that the process to obtain such clearance will not be 
excessively expensive or lengthy, or that the Company or a licensee, as the 
case may be, will have sufficient funds to pursue such clearances. 
Accordingly, the inability of the Company or potential licensees, as the case 
may be, to receive requisite clearance for the Imatec 20/20 Systems would 
prevent the Company from commercializing its technologies as intended, and 
would have a material adverse effect on the business of the Company. 

   Even after regulatory clearance is obtained, any such clearance may 
include significant limitations on indicated uses. Further, regulatory 
clearances are subject to continued review, and later discovery of previously 
unknown problems may result in restrictions with respect to a particular 
product or manufacturer, including withdrawal of the product from the market, 
or sanctions or fines being imposed on the Company or licensee, as the case 
may be. 

   Distribution of the Imatec 20/20 Systems or licensing of the Company's 
technology in countries other than the United States may be subject to 
regulation in those countries. There can be no assurance that the Company or 
licensee, as the case may be will be able to obtain the approvals necessary 
outside of the United States. See "Business -- FDA Clearance." 

   Management's Broad Discretion in Application of Proceeds. Although the 
Company intends to apply the net proceeds from the sale of the Common Stock 
and Redeemable Warrants in the manner described under "Use of Proceeds," it 
has broad discretion within such proposed uses as to the precise allocation 
of the net proceeds, the timing of expenditures and all other aspects of the 
use thereof. Further, approximately 43.3% of the net proceeds of this 
Offering are allocated to working capital, which is a general category that 
gives management a significant degree of latitude as to the expenditure 
thereof. See "Use of Proceeds." 


   Company's Obligation to Make Substantial Payments to Principal 
Stockholder. The Company will be obligated to make substantial payments to 
Dr. Hanoch Shalit, its President, Chief Executive Officer and Chairman of the 
Board of Directors and a principal stockholder of the Company, regardless of 
whether the Company ever achieves any revenues. Pursuant to the terms of his 
five-year exclusive employment agreement, the Company is obligated to pay to 
Dr. Shalit a base salary of $60,000 per annum, which shall increase at the 
rate of 5% per annum, plus benefits. Dr. Shalit is also entitled to receive a 
bonus of $10,000 for every $1,000,000 of gross annual sales received by the 
Company. In addition, pursuant to the terms of the License Agreement, Dr. 
Shalit is entitled to receive an annual flat royalty fee of $140,000 for so 
long as the Company or any successor of the Company is in existence. However, 
in the event that Dr. Shalit is no longer President, Chief Executive Officer 
and Chairman of the Board of the Company for any reason whatsoever, but the 
Company, or any successor of the Company, continues in existence, the annual 
flat royalty fee shall increase to $250,000. The annual flat royalty fee 
increases at the rate of 5% per annum so long as the Company or any successor 
of the Company continues to be in existence. 

   Dependence Upon Key Personnel. The Company's success depends upon the 
continued involvement of Dr. Hanoch Shalit, the Company's President and Chief 
Executive Officer. The loss or unavailability of Dr. Shalit could materially 
adversely affect the Company. On July 1, 1995, the Company entered into a 
five-year employment agreement with Dr. Shalit. The Company is the sole 
beneficiary of a "key man" life insurance policy on the life of Dr. Shalit in 
the principal amount of $1,000,000. See "Management" and "Certain 
Transactions." 


   Limited Business Experience of Management; Need for Additional 
Personnel. Since its inception in 1988, the Company has primarily engaged in 
research and development activities and the manufacture of test and pre- 


                                      10 
<PAGE>


production prototypes of an Imatec 20/20 System for the medical diagnostic 
imaging field. Presently, the Company has only three executive officers; Dr. 
Hanoch Shalit, Lawrence P. Kollender and James A. Smith. Dr. Hanoch Shalit, 
the Company's President and Chief Executive Officer does not have any 
experience in operating a business engaged in the licensing of intellectual 
property. Mr. Kollender, the Company's Vice President of Marketing and Sales, 
is primarily responsible for the marketing and sales activities of the 
Company. Mr. Smith, the Company's Chief Financial Officer, is primarily 
responsible for the Company's financial matters. The Company's ability to 
implement its business plan, the essential elements of which are licensing, 
marketing and research and development activities, will depend upon the 
Company's ability to hire and retain senior level, highly-skilled personnel 
experienced in the operation of certain aspects of the Company's business, 
such as accounting, management, licensing and marketing. Competition for such 
personnel is intense and there can be no assurance that the Company will be 
successful in attracting and retaining personnel. The Company's failure to 
attract and retain such additional personnel would have a material adverse 
effect on the Company. See "Management." 


   No Product Liability Insurance. The Company's business could expose the 
Company to product liability claims. The Company currently has no product 
liability insurance, although it intends to attempt to obtain such insurance 
before any of its products are sold commercially. There can be no assurance 
that the Company will be able to obtain such insurance on acceptable terms or 
that such insurance, if obtained, will provide adequate coverage against 
potential liabilities. 


   Control by Officers and Directors. Upon the closing date of this Offering, 
the Company's current officers and directors will own approximately 25.7% of 
the issued and outstanding shares of Common Stock. Accordingly, although not 
representing a majority of the Company's voting securities, the current 
management of the Company will nevertheless be able to significantly 
influence the election of the Company's directors and generally direct the 
affairs of the Company. See "Management," "Principal Stockholders" and 
"Description of Securities-Common Stock." 

   Immediate Substantial Dilution. Upon the closing date of this Offering, 
purchasers of the Common Stock offered hereby will experience immediate and 
substantial dilution of the net tangible book value of their investment in 
the Company of $3.42 per share, or approximately 68% per share. See 
"Dilution." 


   Absence of Dividends. The Company has never paid any dividends with 
respect to its Common Stock and does not anticipate paying dividends on its 
Common Stock in the foreseeable future. Any earnings which the Company may 
realize in the foreseeable future will be retained to finance the growth of 
the Company. See "Description of Securities" and "Dividend Policy." 


   Potential Litigation. In connection with its Bridge Financing 
Restructuring six of the investors in the Company's Bridge Financing, 
representing an aggregate of five "Units" (as that term is defined in Plan of 
Operations -- Liquidity and Capital Resources"), have not, to date, advised 
the Company whether they will choose "Option A" or "Option B" (as those terms 
are defined in "Plan of Operations -- Liquidity and Capital Resources"). In 
the event that any of these investors fail to choose either Option A or 
Option B on or before October 25, 1996, the Company will deem such investor 
to have chosen Option A. Such an investor may thereafter institute litigation 
against the Company disputing the Option they are deemed to have chosen 
and/or seeking to enforce the original terms and conditions of their 
investment in the Company. The Company intends to vigorously defend any such 
litigation. See "Plan of Operations -- Liquidity and Capital Resources". 


   Anti-Takeover Provisions; Issuance of Preferred Stock. The Company's Board 
of Directors has the authority to issue up to 2,000,000 shares of preferred 
stock in one or more series and to determine the number of shares in each 
series, as well as the designations, preferences, rights and qualifications 
or restrictions of those shares without any further vote or action by the 
stockholders. The rights of the holders of Common Stock will be subject to, 
and may be adversely affected by, the rights of the holders of any preferred 
stock that may be issued in the future. The issuance of preferred stock could 
have the effect of making it more difficult for a third party to acquire a 
majority of the outstanding voting stock of the Company. The Company has no 
present plans to issue shares of preferred stock. In addition, the Company is 
subject to the anti-takeover provisions of Section 203 of the Delaware 
General Corporation Law. In general, this statute prohibits a publicly-held 
Delaware corporation from engaging in a "business combination" with an 
"interested stockholder" for a period of three years after the date of the 
transaction in which the person became an interested stockholder, unless the 
business combination is approved in a prescribed manner. See "Description of 
Securities -- Preferred Stock." 

                                      11 
<PAGE>


   Speculative Nature of Redeemable Warrants; Adverse Effect of Possible 
Redemption of Redeemable Warrants. The Redeemable Warrants do not confer any 
rights of Common Stock ownership on its holders, such as voting rights or the 
right to receive dividends, but rather, merely represent the right to acquire 
shares of Common Stock at a fixed price for a limited period of time. 
Specifically, commencing on the date of this Prospectus, holders of the 
Redeemable Warrants may exercise their right to acquire the Common Stock and 
pay an exercise price of $6.50 per share, subject to adjustment, prior to 
___________, 1999 [36 months after the date of this Prospectus] after which 
date any unexercised Redeemable Warrants will expire and have no further 
value. Moreover, following this Offering, the market value of the Redeemable 
Warrants is uncertain and there can be no assurance that the market value of 
the Redeemable Warrants will equal or exceed their initial public offering 
prices. There can be no assurance that the market price of the Common Stock 
will ever equal or exceed the exercise price of the Redeemable Warrants, and 
consequently, whether it will ever be profitable for the holders of the 
Redeemable Warrants to exercise their Redeemable Warrants. 

   In addition, the Redeemable Warrants are subject to redemption by the 
Company, subject to the approval of the Underwriter, commencing _____, 1997 
[nine (9) months after the date of this Prospectus], on 30 days' prior 
written notice, at a price of $.10 per Redeemable Warrant if the average 
closing bid price for the Common Stock as reported on Nasdaq, equals or 
exceeds $7.50 per share, for any 20 trading days within a period of 30 
consecutive trading days ending on the fifth trading day prior to the date of 
the notice of redemption. In the event that the Redeemable Warrants are 
redeemed by the Company, holders of the Redeemable Warrants will lose their 
right to exercise their Redeemable Warrants after the 30 day notice period. 
Upon receipt of notice of redemption, holders of Redeemable Warrants would be 
required to: (i) exercise the Redeemable Warrants and pay the exercise price 
at a time when it may be disadvantageous for them to do so; (ii) sell the 
Redeemable Warrants at the then market price, if any, when they might 
otherwise wish to hold the Redeemable Warrants; or (iii) accept the 
redemption price, which is likely to be substantially less than the market 
value of the Redeemable Warrants at the time of redemption. In the event that 
holders of the Redeemable Warrants elect not to exercise their Redeemable 
Warrants upon notice of redemption, the unexercised Redeemable Warrants will 
be redeemed prior to exercise, and the holders thereof will lose the benefit 
of the appreciated market price of the Redeemable Warrants, if any, and/or 
the difference between the market price of the underlying Common Stock as of 
such date and the exercise price of such Warrants, as well as any possible 
future price appreciation in the Common Stock. See "Description of 
Securities--Redeemable Warrants." 

   Current Prospectus and State Registration Required to Exercise 
Warrants. The Redeemable Warrants are not exercisable unless, at the time of 
exercise, the Company has a current prospectus covering the shares of Common 
Stock issuable upon exercise of the Redeemable Warrants and such shares have 
been registered, qualified or deemed to be exempt under the securities or 
"blue sky" laws of the state or residence of the exercising holder of the 
Redeemable Warrants. In addition, in the event that any holder of the 
Redeemable Warrants attempts to exercise any Redeemable Warrants at any time 
after nine months from the date of this Prospectus, the Company will be 
required to file a post-effective amendment to the Registration Statement of 
which this Prospectus is a part and deliver a current prospectus before the 
Redeemable Warrants may be exercised. Although the Company has undertaken to 
use its best efforts to have all of the shares of Common Stock issuable upon 
exercise of the Redeemable Warrants registered or qualified on or before the 
exercise date and to maintain a current prospectus relating thereto until the 
expiration of the Redeemable Warrants, there is no assurance that it will be 
able to do so. The value of the Redeemable Warrants may be greatly reduced if 
a current prospectus covering the Common Stock issuable upon the exercise of 
the Redeemable Warrants is not kept effective or if such Common Stock is not 
qualified or exempt from qualification in the States in which the holders of 
the Redeemable Warrants then reside. The Redeemable Warrants will be 
separately tradeable immediately upon issuance and may be purchased 
separately from the Common Stock. Although the Redeemable Warrants will not 
knowingly be sold to purchasers in jurisdictions in which the Redeemable 
Warrants are not registered or otherwise qualified for sale, investors may 
purchase the Redeemable Warrants in the secondary market or may move to 
jurisdictions in which the shares underlying the Redeemable Warrants are not 
registered or qualified during the period that the Redeemable Warrants are 
exercisable. In such event, the Company will be unable to issue shares to 
those persons desiring to exercise their Redeemable Warrants unless and until 
the shares are qualified for sale in jurisdictions in which such purchasers 
reside, or an exemption from such qualification exists in such jurisdictions, 
and holders of the Redeemable Warrants would have no choice but to attempt to 
sell the Redeemable Warrants in a jurisdiction where such sale is permissible 
or allow them to expire unexercised. See "Description of 
Securities--Redeemable Warrants." 


                                      12 
<PAGE>


   Shares Eligible for Future Sale. Upon the closing date of this Offering, 
there will be 3,789,194 shares of Common Stock outstanding after giving 
effect to the Bridge Financing Restructuring and the Company's sale of the 
Securities offered hereby. (3,939,194 if the Underwriter's over-allotment 
option is exercised in full) all of which will be registered. Of such shares, 
579,194 are being registered on behalf of the Bridge Selling Security Holders 
and 2,210,000 shares of Common Stock are being registered on behalf of the 
Founding Selling Security Holders pursuant to the registration statement of 
which this Prospectus is a part. Except with respect to 150,000 shares of 
Common Stock being registered on behalf of certain of the Founding Selling 
Security Holders (including 72,093 shares for Dr. Hanoch Shalit, the Chief 
Executive Officer and President of the Company) and any open market purchases 
on or after the effective date of this Offering, the Founding Selling 
Security Holders, have agreed with the Underwriter, not to directly or 
indirectly offer, sell, transfer, or otherwise encumber or dispose of any of 
the Company's securities, whether or not beneficially owned, for a period of 
18 months after the date of this Prospectus unless otherwise permitted by the 
Underwriter. The Bridge Selling Security Holders have agreed with the Company 
not to effect any sales of their Common Stock and Redeemable Warrants (or any 
shares of Common Stock issuable upon exercise of the Redeemable Warrants) 
until 24 months and 18 months, respectively, after the date of this 
Prospectus. Possible or actual sales of the Company's outstanding Common 
Stock by certain of the present stockholders may, in the future, have a 
depressive effect on the price of the Common Stock should a public market 
develop for such shares. See "Shares Available for Future Sale," 
"Management--Stock Option Plan," "Principal Stockholders," and 
"Underwriting." 

   The 4,000,000 Redeemable Warrants being offered by the Company and the 
2,150,000 Redeemable Warrants being registered for the account of the Bridge 
Selling Security Holders entitle the holders thereof to purchase up to an 
aggregate of 6,150,000 shares of Common Stock any time during the period 
commencing on the date of this Prospectus and expiring 36 months from the 
date of this Prospectus. Sales of either the Redeemable Warrants or the 
underlying shares of Common Stock, or even the existence of the Redeemable 
Warrants, may depress the price of the Common Stock or the Redeemable 
Warrants in any markets that may develop for such Securities. See "Selling 
Security Holders," "Plan of Operations--Liquidity and Capital Resources," 
"Shares Eligible for Future Sale" and "Underwriting." 

   No Assurance of Public Trading Market or Continued Nasdaq Inclusion; Risk 
of Low-Priced Securities. Prior to this Offering, there has been no public 
market for the Securities, and there can be no assurance that an active 
public market for the Common Stock or Redeemable Warrants will develop after 
the completion of this Offering, or if developed, be sustained. To qualify 
for initial listing on Nasdaq, the Company must have, among other criteria, 
$4,000,000 in total assets and $2,000,000 in total capital and surplus, at 
least 300 stockholders, and a minimum bid price of $3.00. In order to qualify 
for continued listing on Nasdaq, a company, among other things, must have 
$2,000,000 in total assets, $1,000,000 in capital and surplus and a minimum 
bid price of $1.00 per share. If the Company is unable to satisfy the 
maintenance requirements for quotation on Nasdaq, of which there can be no 
assurance, it is anticipated that the Securities would be quoted in the 
over-the-counter market National Quotation Bureau ("NQB") "pink sheets" or on 
the NASD OTC Electronic Bulletin Board. As a result, an investor may find it 
more difficult to dispose of, or obtain, accurate quotations as to the market 
price of the Securities, which may materially adversely affect the liquidity 
of the market for the Securities. In addition, if the Securities are delisted 
from Nasdaq they might be subject to the low-priced security or so-called 
"penny stock" rules that impose additional sales practice requirements on 
broker-dealers who sell such securities. For any transaction involving a 
penny stock the rules require, among other things, the delivery, prior to the 
transaction, of a disclosure schedule required by the Securities and Exchange 
Commission (the "Commission") relating to the penny stock market. The 
broker-dealer also must disclose the commission payable to both the 
broker-dealer and the registered representative and current quotations for 
the securities. Finally, monthly statements must be sent disclosing recent 
price information for the penny stocks held in the customer's account. It is 
presently expected that the Underwriter will be the principal market maker in 
the Securities. Such market making activity may be discontinued at any time. 
The prices and liquidity of the Securities may be materially adversely 
affected if such market making activity were discontinued for any reason. 

   Although the Company believes that the Securities will not be defined as a 
penny stock due to their anticipated listing on Nasdaq, in the event the 
Securities subsequently become characterized as a penny stock, the market for 
and liquidity of the Securities could be severely affected. In such an event, 
the regulations relating to penny stocks could limit the ability of 
broker-dealers to sell the Securities and, thus, the ability of purchasers in 
the Offering to sell their Securities in the secondary market. 


                                      13 
<PAGE>

                               USE OF PROCEEDS 


   The estimated net proceeds to the Company from the sale of the Securities 
offered hereby, after deducting the underwriting discount and estimated 
offering expenses, will be approximately $4,720,000, (or approximately 
$5,503,000 if the Underwriter's over-allotment option is exercised in full). 
The Company intends to allocate the net proceeds of the Offering 
approximately as follows: 


                                         Approximate             Approximate 
                                           Amount                 Percentage 
                                        -------------            ------------- 
Research and development(1) ......       $1,000,000                  21.2% 
Repayment of indebtedness(2) .....          925,000                  19.6% 
Marketing and licensing(3)  ......          750,000                  15.9% 
Working capital  .................        2,045,000                  43.3% 
                                        -------------            ------------- 
  Total  .........................       $4,720,000                 100.0% 
                                        =============            ============= 

- ------ 
(1) Consists of expenditures for equipment, materials and outside consultants 
    and in connection with research and development activities with respect 
    to the application of the Imatec 20/20 System designed for the medical 
    diagnostic imaging field to other medical imaging fields and developing 
    an Imatec 20/20 System for non-medical imaging fields. In addition, the 
    Company may also from time to time purchase technologies which may 
    enhance or further the application of the Company's technology, although 
    the Company has no understandings or arrangements to do so at this time. 

(2) Reflects repayment of principal amount of $925,000 of Notes, pursuant to 
    the Bridge Financing Restructuring. See "Plan of Operations -- Liquidity 
    and Capital Resources." 

(3) Consists of expenditures in connection with participating in trade shows 
    (which includes constructing a booth for, and renting space at, trade 
    shows, preparation of special marketing materials, and travel to and 
    attendance at trade shows), preparation of marketing materials, hiring of 
    sales and marketing personnel and consultants, advertising and general 
    marketing and licensing activities. 


   The initial application for the use of proceeds represents management's 
estimates based upon current business and economic conditions. Although the 
Company does not contemplate material changes in the proposed use of 
proceeds, to the extent the Company finds that adjustment is required by 
reason of existing business conditions, the amounts shown may be adjusted 
among the uses indicated above. 

   The Company believes that the net proceeds of this Offering will be 
sufficient for the Company to sustain its operations and implement its 
business plan for at least twelve (12) months after the date of this 
Prospectus, although there can be no assurance that such net proceeds will be 
sufficient to finance the Company's operations for such period. 

   To the extent that the Company's expenditures are less than projected 
and/or the net proceeds of this Offering increase as a result of the exercise 
by the Underwriter of its over-allotment option, the resulting balance will 
be retained and used for general working capital purposes. The net proceeds 
of this Offering that are not expended immediately shall be deposited in 
interest bearing accounts, or invested in government obligations, 
certificates of deposit or similar short-term, low risk investments. 

                               DIVIDEND POLICY 

   The Company has never paid cash or other dividends and does not expect to 
pay any cash or other dividends in the foreseeable future with respect to its 
Common Stock. The Company's future dividend policy will depend upon the 
Company's earnings, capital requirements, financial condition and other 
factors considered relevant by the Company's Board of Directors. The Company 
presently intends to retain any earnings which the Company may realize in the 
foreseeable future to finance the growth of the Company. 

                                      14 
<PAGE>


                                   DILUTION 
   
   The Company had a pro forma net tangible book value of $1,152,094 or $.41 
per share of Common Stock as of August 31, 1996, after giving pro forma effect
to the Bridge Financing Restructuring. Net tangible book value per share is
determined by dividing the net tangible book value of the Company (total
tangible assets less total liabilities) by the number of outstanding shares of
Common Stock. After giving effect to the receipt of the net proceeds from the
sale of the Common Stock and Redeemable Warrants by the Company and the initial
application of the net proceeds therefrom, the net tangible book value of the
Company at August 31, 1996 would have been $5,975,181 or $1.58 per share,
representing an immediate dilution of $3.42 (or approximately 68%) per share to
the public investors as illustrated by the following table:
    
<TABLE>
<CAPTION>
<S>                                                                   <C>      <C>
Assumed initial public offering price per share of Common Stock  ..             $5.00 
Pro forma net tangible book value per share before Offering  ......   $ .41 
Increase in net tangible book value per share of Common Stock 
  attributable to public investors ................................    1.17 
                                                                      ------ 
Adjusted net tangible book value per share upon the Offering  .....              1.58 
                                                                               ------- 
Dilution per share to public investors (1)  .......................             $3.42 
                                                                               ======= 
</TABLE>

- ------ 
(1) In the event that the Underwriter exercises its over-allotment option in 
    full, the adjusted net tangible book value after this Offering would be 
    approximately $1.72 per share, which would result in immediate dilution 
    in net tangible book value to public investors of approximately $3.28 per 
    share. 

   The following table sets forth, as of the date of this Prospectus, the 
number of shares of Common Stock purchased, the percentage of Common Stock 
purchased, the total consideration paid, the percentage of total 
consideration paid, and the average price per share paid, by the existing 
stockholders of the Company and the investors in the Offering. 


<TABLE>
<CAPTION>
                             Number of     Percent        Percent of 
                              Shares       of Total     Total Consid-     Total Consid-      Average Price 
                             Purchased      Shares       eration Paid      eration Paid        Per Share 
                            -----------   ----------    ---------------   ---------------   --------------- 
<S>                         <C>           <C>           <C>               <C>               <C>
Present Stockholders(1).     2,789,194        74%             26%          $  1,718,904          $  .62 
Public Investors  .......    1,000,000        26%             74%             5,000,000(2)        $5.00 
                            -----------   ----------    ---------------   --------------- 
Total  ..................    3,789,194       100%            100%          $  6,718,904 
                            ===========   ==========    ===============   =============== 
</TABLE>

- ------ 
   
(1) Adjusted to give pro forma effect to the Bridge Financing Restructuring. 
    See "Plan of Operations -- Liquidity and Capital Resources." 
    
(2) Allocates no value to the Redeemable Warrants offered hereby. 


   The foregoing table assumes no exercise of the Redeemable Warrants or any 
stock options, of which none are currently issued. To the extent that any 
options issued by the Company in the future or the Redeemable Warrants are 
exercised, there may be further dilution to the new investors in this 
Offering. 

                                      15 
<PAGE>

                                CAPITALIZATION 


   The following table sets forth the capitalization of the Company at August 
31, 1996. This information should be read in conjunction with the financial 
statements and the notes thereto which are included elsewhere in this 
Prospectus. 

<TABLE>
<CAPTION>
                                                                        August 31, 1996 
                                                               --------------------------------- 
                                                                    Actual        As Adjusted(1) 
                                                                ---------------   -------------- 
<S>                                                            <C>                <C>
Bridge notes payable  .......................................     $ 3,084,284(2)             0 
Stockholders' (Deficit) Equity: 
     Preferred Stock, par value $.0001 per share, 2,000,000 
        shares authorized, no shares issued and outstanding .     $         0      $         0 
     Common Stock, par value $.0001, 20,000,000 shares 
        authorized, 2,761,785 shares issued and outstanding 
        actual, and 3,789,194 as adjusted ...................             276              379 
     Additional paid-in capital  ............................       1,865,725        8,902,398 
     Deficit accumulated during the development stage  ......      (2,837,005)      (2,927,596) 
                                                                ---------------   -------------- 
Total stockholders' (deficit) equity  .......................     $  (971,004)     $ 5,975,181 
                                                                ===============   ============== 
Total capitalization  .......................................     $ 2,113,280      $ 5,975,181 
                                                                ===============   ============== 
</TABLE>

- ------ 
(1) As adjusted to give effect to (i) the conversion of $2,150,000 of 
    principal indebtedness and $166,776 of accrued interest thereon into 
    579,194 shares of Common Stock, (ii) the forgiveness of $925,000 of 
    principal indebtedness and $122,511 of accrued interest thereon, (iii) 
    the cancellation of 1,850,000 Bridge Warrants, (iv) the write-off of 
    unamortized loan discount of $915,716 and deferred loan costs of 
    $222,386, all being deemed to occur as of October 31, 1996,and (v) the 
    sale of 1,000,000 shares of Common Stock and 4,000,000 Redeemable 
    Warrants in connection with this Offering at assumed initial public 
    offering prices of $5.00 and $.25, respectively, and the initial 
    application of the net proceeds therefrom. See "Plan of Operations -- 
    Liquidity and Capital Resources" and "Use of Proceeds." 

(2) Net of $915,716 of unamortized original issue discount. 

                                      16 

<PAGE>

                           SELECTED FINANCIAL DATA 
   
   The following selected financial data has been derived from the historical
financial statements of the Company. In the opinion of the Company's management,
all adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the information set forth therein have been made. The selected
financial data should be read in conjunction with the Financial Statements and
related notes thereto, which are included elsewhere in this Prospectus.
    
<TABLE>
<CAPTION>

                                                                               November 17, 1988 
                                                                                 (inception) to 
                                                                               December 31, 1995            Eight months 
                                                   Year Ended December 31         (Cumulative)            Ended August 31, 
                                                ----------------------------    -----------------  ------------------------------ 
                                                     1994           1995                               1995             1996 
                                                 ------------   ------------                        ------------   -------------- 
<S>                                               <C>            <C>              <C>                <C>            <C>          
Statement of Operations Data: 
Income  ......................................       $1,960             --           $133,973               --               -- 
                                                 ------------   ------------    -----------------   ------------   -------------- 
Royalties  ...................................           --       $420,000           $420,000         $373,334          $95,083 
Research and development  ....................      $17,881        $11,773           $337,389               --          $46,991 
General and administrative  ..................      $99,243       $163,682           $598,613          $51,631         $531,518 
Interest expense (net)  ......................           --        $67,139            $58,080               --         $883,304 
                                                 ------------   ------------    -----------------   ------------   -------------- 
Net loss  ....................................    $(115,164)     $(662,594)       $(1,280,109)       $(424,965)     $(1,556,896) 
                                                 ============   ============    =================   ============   ============== 
Net loss per share  ..........................        $(.02)         $(.12)             $(.22)           $(.07)           $(.26) 
                                                 ============   ============    =================   ============   ============== 
Weighted average number of shares outstanding .   5,741,072      5,749,976          5,742,329        5,738,313        5,893,715 
                                                 ============   ============    =================   ============   ============== 
</TABLE>

                                         August 31, 1996 
                                 ------------------------------- 
                                                         As 
Balance Sheet Data:                   Actual        adjusted (1) 
                                  ---------------   ------------ 
Working capital (deficit)  ....     $ 1,667,858       $5,785,983 
Total assets  .................     $ 2,369,215       $6,011,078 
Total liabilities  ............     $ 3,340,219(2)    $   35,897 
Stockholders' equity (deficit) .    $  (971,004)      $5,975,181 

- ------ 
(1) As adjusted to give effect to (i) the conversion of $2,150,000 of 
    principal indebtedness and $166,776 of accrued interest thereon into 
    579,194 shares of Common Stock, (ii) the forgiveness of $925,000 of 
    principal indebtedness and $122,511 of accrued interest thereon, (iii) 
    the cancellation of 1,850,000 Bridge Warrants, (iv) the write-off of 
    unamortized loan discount of $915,716 and deferred loan costs of 
    $222,386, all being deemed to occur as of October 31, 1996, and (v) the 
    sale of 1,000,000 shares of Common Stock and 4,000,000 Redeemable 
    Warrants in connection with this Offering at assumed initial public 
    offering prices of $5.00 and $.25, respectively, and the initial 
    application of the net proceeds therefrom. See "Plan of Operations -- 
    Liquidity and Capital Resources" and "Use of Proceeds." 

(2) Net of $915,716 of unamortized original issue discount. 

                                      17 
<PAGE>

                              PLAN OF OPERATIONS 


   The Company was organized on November 17, 1988 and is in the development 
stage. To date, the Company's activities have primarily consisted of research 
and development activities with respect to the development of the Company's 
technology and an Imatec 20/20 System for the medical diagnostic imaging 
field. During this time, the Company has received only minimal revenues from 
limited non-recurring consulting activities. The Company believes, based upon 
its internal budgets, that the net proceeds of this Offering will be 
sufficient for the Company to (i) engage in licensing the Company's 
technology and Imatec 20/20 System developed for the medical diagnostic 
imaging field to manufacturers of medical diagnostic imaging products such as 
scanners, cameras and image reproduction systems, (ii) engage in marketing 
activities to facilitate the licensing of the Company's technology and its 
Imatec 20/20 Systems, (iii) continue research and development activities with 
respect to other applications of the Company's technology in the medical 
imaging field and in other imaging fields, such as graphic arts, computer, 
cinematography and TV/video and (iv) otherwise conduct its operations for at 
least the twelve (12) month period following the date of this Prospectus. 


LIQUIDITY AND CAPITAL RESOURCES 


   The Company is in the development stage, and primarily as a consequence of 
expenses incurred in connection with research and development activities, at 
December 31, 1995 and August 31, 1996 the Company had an accumulated 
stockholders' deficit of $1,280,109 and $2,837,005, respectively. The Company 
has continued to incur losses since August 31, 1996. 


   To date, the Company has financed its operations principally from the sale 
of securities and loans. In 1991, the Company issued an aggregate of 55,250 
shares of Common Stock to an investor for aggregate gross proceeds of 
$500,000. In 1994, the Company issued an aggregate of 12,615 shares of Common 
Stock to two investors for aggregate gross proceeds of $114,224. 

   In the second and third quarters of 1995 the Company borrowed an aggregate 
of $175,000 from five non-affiliated, accredited investors pursuant to one 
(1) year promissory notes. All of these investors converted their respective 
loans into Units in the Bridge Financing described immediately below. 


   On November 30, 1995, the Company effected the initial closing (the "First 
Closing") of a private placement (the "Bridge Financing") pursuant to which 
it sold an aggregate of 37 units (the "Units") to non-affiliated, accredited 
investors, each Unit consisting of (a) a $50,000 10% promissory note due the 
earlier of (i) fifteen (15) months from the date of issuance, (ii) the 
Company's receipt of gross proceeds of at least $8,000,000 from a public or 
private sale of its securities in which the Underwriter acted as the 
underwriter or placement agent, respectively, or (iii) the Company's receipt 
of gross proceeds of at least $4,500,000 from a public or private sale of its 
securities in which the Underwriter did not act as the underwriter or 
placement agent, respectively (the "Note"), (b) 6,897 shares of Common Stock, 
and (c) 50,000 warrants (the "Bridge Warrants") exercisable at $1.00 per 
share. See "Description of Securities." The Company received gross proceeds 
from the sale of the 37 Units in the First Closing of $1,850,000, pursuant to 
which it issued an aggregate of 255,194 shares of Common Stock and 1,850,000 
Bridge Warrants. The investors in the First Closing received financial 
statements from the Company which did not properly account for the Company's 
research and development costs. As a result thereof, the Company circulated 
revised financial statements and gave recission offers to all of the 
investors in the First Closing, only one of whom accepted such recission 
offer. All of the other investors in the First Closing affirmatively chose 
not to rescind. On April 12, 1996 the Company effected a second closing of 
the Bridge Financing (the "Second Closing") pursuant to which it received an 
additional $2,150,000 in gross proceeds for which it issued an aggregate of 
43 Units, 296,591 shares of Common Stock and 2,150,000 Bridge Warrants. The 
net proceeds from the Bridge Financing were approximately $3,230,000 (after 
commissions and expenses) and in connection therewith the Company issued 
551,785 shares of Common Stock (including 25 shares of Common Stock which 
resulted from rounding to the nearest whole share in connection with the 
purchase of fractional units) and 4,000,000 Bridge Warrants. The Company used 
the net proceeds from the Bridge Financing (i) to make a one-time payment of 
$350,000 to the Company's President and Chief Executive Officer, Dr. Hanoch 
Shalit, pursuant to the License Agreement and (ii) for marketing and working 
capital purposes. 

   In connection with the issuance of Notes with an aggregate principal 
amount of $4,000,000, 551.785 shares of Common Stock and 4,000,000 Bridge 
Warrants in the Bridge Financing, the Company recorded an original issue 
discount of $1,503,570 based upon the allocation of the relative fair market 
value of the Notes, Bridge 


                                      18 
<PAGE>


Warrants and the Common Stock on the date of issuance. The Company incurred 
approximately $664,000 of offering costs related to the Bridge Financing, of 
which approximately $415,000 was allocated to deferred debt issuance costs 
with the remainder allocated to paid-in capital of the Common Stock and 
Bridge Warrants issued therewith. The original issue discount is being 
amortized over the term of the Notes as interest expense. 
   
   In October 1996, the Company restructured the Bridge Financing (the "Bridge
Financing Restructuring"). Accordingly, all of the investors in the Bridge
Financing (the "Bridge Investors") were given the choice to either (i) convert
on the closing date of this Offering, their entire principal and accrued
interest into shares of Common Stock at the rate of $4.00 per share, retain the
Bridge Warrants, and return all of the shares of Common Stock that they received
in the Bridge Financing ("Option A"), or (ii) upon the closing of this Offering
receive a one time payment equal to fifty percent (50%) of the principal amount
of their Note, not receive any accrued interest whatsoever, and return all of
the Bridge Warrants and Common Stock that they received in the Bridge Financing
("Option B"). Bridge Investors owning an aggregate of 38 Units elected Option A
and Bridge Investors owning an aggregate of 37 Units elected Option B. Those
Bridge Investors representing the remaining five (5) Units who fail to choose
either Option A or Option B by October 25, 1996 will be deemed to have chosen
Option A by the Company and the Company will cancel on its books and records the
Common Stock issued to them in the Bridge Financing. Consequently, the Bridge
Financing has been restructured such that, upon the closing of this Offering
(assuming a closing date of this Offering of October 31, 1996) the Company will
repay an aggregate of $925,000 of principal with respect to those investors who
chose Option B. The balance of the principal amount of the Notes issued in the
Bridge Financing, and all accrued interest thereon, is being forgiven and will
not be repaid. In addition, the Company will issue, upon the closing date of
this Offering an aggregate of 579,194 shares of Common Stock (assuming a closing
date of October 31, 1996) and 2,150,000 Bridge Warrants to those Bridge
Investors who chose Option A. The balance of 1,850,000 Bridge Warrants and all
551,785 shares of Common Stock issued in the Bridge Financing will be returned
to the Company upon the closing of this Offering.
    
   In connection with the Bridge Financing Restructuring, which is contingent 
on the closing of this Offering, the Company will (i) write-off $915,716 of 
unamortized loan discount and $222,386 of deferred loan costs, and, (ii) will 
recognize $1,047,511 of forgiveness of indebtedness income. See "Risk 
Factors--Potential Litigation." 

   The Company believes that the net proceeds of this Offering will be 
sufficient for the Company to sustain its operations and implement its 
business plan for at least twelve (12) months after the date of this 
Prospectus, although there can be no assurance that such net proceeds will be 
sufficient to finance the Company's operations for such period. 

NET OPERATING LOSS CARRYFORWARDS 

   As of December 31, 1995, the Company had net operating loss carryforwards 
under Section 172 of the Internal Revenue Code, as amended (the "Code"), of 
approximately $900,000 for Federal income tax purposes which may be used to 
offset future taxable income. The Federal income tax carryforward will expire 
as follows: $130,000 in the year 2008; $75,000 in the year 2009; $94,000 in 
the year 2010; and $601,000 in the year 2011. 

NEW ACCOUNTING PRONOUNCEMENTS 

   Statement of Financial Accounting Standards No. 121, "Accounting for the 
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" 
(SFAS No. 121) issued by the Financial Accounting Standards Board (FASB) is 
effective for financial statements for fiscal years beginning after December 
15, 1995. The new standard establishes guidelines regarding when impairment 
losses on long-lived assets, which include plant and equipment, and certain 
identifiable intangible assets, should be recognized and how impairment 
losses should be measured. The Company adopted SFAS No. 121 as of January 1, 
1996 and such adoption did not have a material effect on its financial 
position or results of operations. 

   Statement of Financial Accounting Standards No. 123, "Accounting for 
Stock-Based Compensation" (SFAS No. 123) recently issued by FASB is effective 
for specific transactions entered into after December 15, 1995, while the 
disclosure requirements of SFAS No. 123 are effective for financial 
statements for fiscal years beginning no later than December 15, 1995. The 
new standard establishes a fair value method of accounting for stock-based 
compensation plans and for transactions in which an entity acquires goods or 
services from nonemployees in exchange for equity instruments. At the present 
time, the Company has not adopted SFAS No. 123 because the Company has not 
engaged in any transactions involving stock-based compensation subsequent to 
December 15, 1995. 


                                      19 
<PAGE>

                                   BUSINESS 

GENERAL 


   The Company was formed in 1988 to develop, design, market and license its 
proprietary technology, which enhances image reproduction by reducing 
distortion that normally occurs in the imaging process, for application in 
such markets as medical imaging, graphic arts, computers, cinematography and 
TV/video. Each application will be a system of hardware and software 
components (an "Imatec 20/20 System"), expressly developed for a specific 
market. Based on the results of extensive testing, the Company has developed 
an Imatec 20/20 System for medical diagnostic imaging devices which is 
capable of improving the quality of film reproduction of images taken by 
medical diagnostic imaging devices such as MRI, CT and Ultrasound scanners. 
The Imatec 20/20 System for medical diagnostic imaging devices achieves this 
goal regardless of the type of medical imaging film used which may result in 
cost savings to the user. The Company has also developed an Imatec 20/20 
System for the medical field of teleradiology, which is the viewing of the 
same medical image on different monitor screens in separate locations. 
Although the first applications of the Company's technology have been for the 
medical diagnostic imaging field, which only require black and white 
reproduction, the Company recently began developing an Imatec 20/20 System 
designed to reduce distortions of reproduction of color images and which is 
intended to facilitate the Company's development of Imatec 20/20 Systems for 
non-medical imaging fields. 

   The Company's technology is designed to objectively measure the image 
characteristics of an original image and compare it to its reproduced image, 
computing the existing tone and color distortions between the two images and 
correcting such distortions. Current imaging systems create reproductions 
that have distortions and are usually adjusted subjectively during the 
reproduction process. Aspects of the Company's technology are set forth in 
its Patents which have been licensed by the Company from Dr. Hanoch Shalit, 
the Company's President and Chief Executive Officer. The Company has 
designed, built and tested a prototype of a device incorporating the Imatec 
20/20 System which can be used with MRI, CT and Ultrasound scanners. 


  THE MEDICAL IMAGING MARKET 


   In 1995, U.S. sales of MRI, CT and Ultrasound machines were approximately 
$1.59 billion, representing sales of approximately 9,775 units. In addition, 
approximately $235 million was spent in 1994 in connection with the upgrading 
and improving these medical imaging devices either to extend the life of the 
machines or to add on technical improvements. At the end of 1995, there were 
approximately 96,680 MRI, CT and Ultrasound machines operating in the United 
States. Based on industry statistics, the U.S. market for medical imaging 
devices represents approximately 40% of the worldwide market. 

  IMATEC 20/20 SYSTEMS 

   Imatec 20/20 Systems are designed to improve a reproduced image so that it 
more closely resembles the original image in terms of tone and color. 
Presently, many image reproduction applications employ manual adjustments 
based on subjecive assessment. The individual taking the image adjusts the 
imaging taking device (i.e. the camera) by adjusting the light intensity, 
exposure time, etc. The adjusting of these variables is based on the 
operator's subjective perceptions. In the medical imaging process, however, a 
number of variables, in addition to the subjective perceptions of the 
operator, influence the fidelity of the final image as compared to the 
original image. Such variables include lighting conditions, photographic 
materials used, particular equipment characteristics, calibration, and 
equipment age. Imatec 20/20 Systems employ an objective measurement of image 
and tone rather than subjective assessments of image and tone to reduce the 
distortion in the imaging process caused by these variables. 

   When used in connection with an MRI, CT or Ultrasound scanner, the Imatec 
20/20 System uses a photometer (an instrument that measures properties 
relating to light, especially luminous intensity) to measure the image tone 
characteristics that appear on the screen of the medical imaging device via a 
test pattern representing the tone of such images. Thereafter, a densitometer 
(an instrument that measures the optical density of a film) measures the 
image tone characteristics of the same image as reproduced on film via a test 
pattern that represents the image as it appears on the film. Thereafter, the 
characteristic of the screen image and the film image are transferred to a 
computer which calculates the distortion function between the two images and 
the required 


                                      20 
<PAGE>


correction function. This computed correction function is automatically 
transferred to a digital signal processor system that modifies the film image 
reproduction signal on a pixel-by-pixel basis to create an image reproduced 
on the film that more closely resembles the image and tone characteristics as 
set forth on the screen. 

   This so-called closed loop system, which measures and compares the image 
tone characteristics set forth on the screen and the image tone 
characteristics reproduced on the film, adjusting for those variables that 
influence the reproduced image, can take one of two forms. The Imatec 20/20 
System can be an add-on to MRI, CT and Ultrasound scanners. In such 
instances, the operator of the medical imaging device will be required to 
make adjustments each time a variable that influences the final picture is 
altered, such as a change in lighting conditions or the changing of the film. 
Alternatively, the Imatec 20/20 System can also be incorporated inside MRI, 
CT and Ultrasound scanners, in which event the Imatec 20/20 System can 
automatically adjust for any change in these variables. 

THE COMPANY'S BUSINESS STRATEGY 

   The Company's strategy is to (i) license the Company's technology and 
Imatec 20/20 System developed for the medical diagnostic imaging field to 
manufacturers of medical imaging products such as scanners, cameras and image 
reproduction systems, (ii) engage in marketing activities to facilitate the 
licensing of the Company's technology and its Imatec 20/20 Systems, and (iii) 
continue its research and development activities with respect to other 
applications of the Company's technology in the medical imaging field and for 
other imaging fields, such as graphic arts, computer, cinematography, and 
TV/video. The precise scope and length of any license granted by the Company 
will be dependent upon the overall nature of the license agreement and the 
remuneration to be received by the Company. The Company will simultaneously 
seek to license Imatec 20/20 Systems both as an add-on device for new and 
existing MRI, CT and Ultrasound scanners and as an enhancement to be included 
inside new MRI, CT and Ultrasound scanners. The Company does not presently 
intend to engage in any manufacturing, sales, distribution or service 
activities with respect to its Imatec 20/20 Systems or products that 
incorporate the Company's technology, or provide technical service in 
connection therewith. The Company may assist a licensee in adapting the 
Company's technology or an Imatec 20/20 System and preparing a technical 
manual for any product that incorporates the Company's technology or Imatec 
20/20 system, but will not engage in providing the actual technical 
assistance to end-users of any such product. In the event that the Company is 
unable to effectively license its technology or the Imatec 20/20 System the 
Company may have to engage in manufacturing of products incorporating its 
technology or the Imatec 20/20 System. See "Risk Factors -- No Manufacturing, 
Sales, Distribution and Technical Services Support Capabilities; Limited 
Marketing Capabilities." 

MANUFACTURING, SALES AND DISTRIBUTION 

   As noted above, the Company has no present intention to engage in the 
manufacturing, sales or distribution process. In the event that due to the 
Company's inability to successfully license its technology or any Imatec 
20/20 System the Company determined that it was necessary to manufacture, 
sell and distribute imaging products incorporating the Company's technology 
or Imatec 20/20 Systems, the Company would manufacture such products on a 
contract manufacturing or original equipment manufacturer (OEM) basis and 
have such products distributed by a network of independent regional 
distributors. The Company presently has an arrangement with an independent 
third party company that provides research and development services to the 
Company from time to time. Such third party also has pre-production and 
production capabilities. Consequently, since such third party is already 
familiar with the Company's technology, the Company would engage such third 
party on an OEM basis in the event that the Company was required to 
manufacture products. The Company presently does not have any relationship 
with any independent retail distributors. 

MARKETING 

   The Company intends to market its technology and Imatec 20/20 Systems in a 
number of ways, all of which are intended to facilitate the licensing of its 
technology and Imatec 20/20 Systems. The Company will attend industry trade 
shows in the United States where it believes it will gain additional exposure 
to potential licensees for its technology and Imatec 20/20 Systems. The 
Company also will seek to obtain awareness of Imatec 20/20 Systems through 
the publishing of articles by Dr. Shalit, the first of which is expected to 
be a series of 


                                      21 
<PAGE>


articles commencing in November of 1996 in Medical Imaging, a trade magazine. 
The Company also intends to gain exposure as well as keep current of emerging 
and changing imaging standards by joining certain industry trade associations 
and where feasible, having representatives of the Company serve on various 
standards committees in the imaging field. The Company recently became a 
member of the National Electronic Manufacturers Association ("NEMA") which is 
an industry trade association for the medical imaging industry. In addition, 
Dr. Shalit is currently a full voting member of the Digital Imaging 
Communication in Medicine Committee ("DICOM"), a committee under the auspices 
of NEMA and the American College of Radiology that is responsible for 
creating standards in the image communication business. The Company also 
intends to engage in general advertising in trade publications in order to 
gain recognition of the Company and its Imatec 20/20 Systems. The Company has 
a vice president of marketing to coordinate all of the Company's marketing 
activities and intends to hire additional marketing personnel and consultants 
subsequent to this Offering. 

RESEARCH AND DEVELOPMENT 

   In applying the Imatec 20/20 System designed for the medical diagnostic 
imaging field to other aspects of the medical imaging field, as well as in 
connection with developing Imatec 20/20 Systems for other fields, the Company 
intends to engage consultants and independent contractors from to time to 
conduct research and development activities. The Company, in discreet 
instances, may acquire certain technologies that the Company believes enhance 
or further the application of the Company's technology or its Imatec 20/20 
Systems to other imaging fields, although it will only effect such 
acquisitions in those instances where the Company believes that acquisition 
of such technologies is more economical and efficient than engaging in the 
research and development itself. The Company does not have any current 
arrangements or understandings at the present time to acquire any such 
technologies. 

   The Company incurred $17,881, $11,773 and $46,991 in research and 
development activities in 1994, 1995 and the eight months ended August 31, 
1996, respectively. The Company presently intends to expend no more than 
approximately $350,000 on research and development during the last four (4) 
months of 1996. 

COMPETITION 

   The image enhancement field is subject to rapid and significant 
technological change that may render an Imatec 20/20 System obsolete or 
products that incorporate the Company's technology obsolete or incompatible 
with the machines they are intended to complement. In addition, such rapid 
changes may impose additional, unforeseen costs on the Company in that the 
Company may be required to modify its technology and Imatec 20/20 Systems to 
adapt to such changes. There can be no assurance that the Company will be 
able to successfully modify or upgrade its technology and Imatec 20/20 
Systems as may be necessary in a timely fashion, or at all. 

   While the Company is not aware of any entities that build image 
enhancement devices that compete with the Company's technology or Imatec 
20/20 Systems, there are a number of entities that are engaged in the 
research and development of image enhancement products. These entities may in 
the future develop technologies or products that compete with the Company's 
technology or Imatec 20/20 Systems. Potential competitors of the Company 
include independent companies, universities and public and private research 
organizations, most of which are well established and have substantially 
greater marketing, financial, technological and other resources than the 
Company. In addition, the medical imaging field in particular is dominated by 
large, well established corporations. There can be no assurance that 
competitors will not succeed in securing patents and/or developing 
technologies or products that are more effective than the Company's 
technology or Imatec 20/20 Systems, as a result of which the Company's 
technology or Imatec 20/20 Systems may become obsolete or noncompetitive. 

THE LICENSE AGREEMENT 

   The Company entered into a license agreement as of June 25, 1995 with Dr. 
Hanoch Shalit, the Company's President and Chief Executive Officer (the 
"License Agreement"). The License Agreement grants the Company the exclusive 
right to make, use, sell and sublicense "Patentable Image Technology," which 
is defined in the License Agreement as the three United States Patents and 
certain foreign patent applications. Under the terms of 


                                      22 
<PAGE>

the License Agreement, Dr. Shalit received from the Company a one-time 
$350,000 payment in January 1996 subsequent to the First Closing of the 
Bridge Financing. Dr. Shalit is also entitled to receive a flat royalty fee 
of $140,000 per annum, payable in monthly installments of $11,667, for so 
long as the Company and any successor of the Company is in existence (the 
"Annual Royalty"); provided, however, that in the event that Dr. Shalit is no 
longer President, Chief Executive Officer and Chairman of the Company for any 
reason whatsoever, but the Company or any successor of the Company continues 
in existence, the Annual Royalty shall automatically be increased to $250,000 
per annum. Pursuant to the terms of the License Agreement, the Annual Royalty 
shall increase by 5% every year as long as the Company or any successor of 
the Company is in existence. The License Agreement also grants to the Company 
the exclusive right as to inventions made by Dr. Shalit in the course of his 
employment under his employment agreement with the Company. The Company's 
obligations to pay the Annual Royalty shall continue until the expiration of 
the License Agreement. The term of the License Agreement expires when the 
last licensed patent expires, whether in the United States or abroad. Under 
the License Agreement, the Company is obligated to use its reasonable best 
efforts to make, use, sell and sublicense to others the Patentable Image 
Technology. 

INTELLECTUAL PROPERTY 


   The Company presently intends to make all appropriate filings and 
registrations, or take all other actions the Company believes to be 
necessary, to obtain and protect all patents, trademarks, copyrights, 
tradenames, trade dress and all other intellectual property rights, if any, 
relating to the Company, although there can be no assurances that the Company 
will be able to effectively do so. In the event the Company is able to fully 
establish intellectual property rights with respect to the technology used by 
the Company, of which there can be no assurance, third parties may attempt to 
exercise alleged rights in any of their patents, trademarks, copyrights or 
other intellectual property or appropriate any patents, trademarks, 
copyrights, or other intellectual property rights obtained by the Company, 
and the Company's failure or inability to adequately protect any of its 
intellectual property rights may have a material adverse effect on the 
Company. In addition, there can be no assurance that third parties will not 
be able to successfully assert a claim with regard to the Patents and/or the 
Imatec 20/20 Systems under their own intellectual property rights. 


   The Company also requires all employees to sign non-disclosure, 
non-competition, confidentiality and invention assignment agreements. 

   Under the License Agreement, the Company has an exclusive, worldwide 
license from Dr. Hanoch Shalit, the Company's founder, principal stockholder 
and Chief Executive Officer, to make, use, sell and sublicense to others the 
Patentable Image Technology. 


   Subsequent to this Offering, the Company will seek to broaden its patent 
protection and the application of the Company's technology and Imatec 20/20 
Systems to other markets. When seeking to apply the Company's technology to 
other markets, the Company most likely will first design a research prototype 
of an Imatec 20/20 System for such market to test the technology in the 
laboratory. Thereafter, a production prototype of such Imatec 20/20 System 
will be constructed for testing at a beta, or third party, site. After 
successful beta testing, the Company will then seek to market the Imatec 
20/20 System and/or license the underlying technology. 


FDA CLEARANCE 


   The FDA employs a rigorous system of regulations and requirements 
governing the clearance processes for medical devices, requiring, among other 
things, the presentation of substantial evidence, including clinical studies, 
establishing the safety and efficacy of new medical devices. The principal 
methods by which FDA clearance is obtained are pre-market approval, which is 
for products that are not comparable to any other product in the market, or 
filing a pre-market notification under Section 510(k) of the Federal Food, 
Drug and Cosmetic Act which is for products that are substantially equivalent 
to products that have already received FDA clearance. Although both methods 
may require clinical testing of the products in question under an approved 
protocol, because PMA clearance relates to more unique, invasive and/or 
potentially higher risk products, the PMA procedure is more complex and time 
consuming. Applicants under the 510(k) procedure must prove that the products 
for which clearance is sought are substantially equivalent to products on the 
market prior to the Medical Device Amendments of 1976, or products approved 
thereafter pursuant to the 510(k). The review period for a 510(k) application 
is approximately ninety (90) days from the date of filing the application, 
although there can be no assurance that the review period will not extend 
beyond such a period. 


                                      23 
<PAGE>

   Under the PMA procedure, the applicant is required to conduct substantial 
clinical testing to determine the safety, efficacy and potential hazards of 
the product. The review period under a PMA application is one hundred eighty 
(180) days from the date of filing, and the application is not automatically 
deemed cleared if not rejected during that period. The preparation of a PMA 
application is significantly more complex, expensive and time consuming than 
the 510(k) procedure. Further, the FDA can request additional information, 
which can prolong the clearance process. 


   In order to conduct human clinical studies for any medical procedure 
proposed for the Company's products, the Company, or a licensee of the 
Company's technology or Imatec 20/20 System for medical imaging applications, 
as the case may be, could also be required to obtain an Investigational 
Device Exemption ("IDE") from the FDA or IRB, which would further increase 
the time before potential FDA clearance. In order to obtain an IDE, the 
Company or a licensee, as the case may be, may be required to submit an 
application to the FDA or IRB, including a complete description of the 
product, and detailed medical protocols that would be used to evaluate the 
product. In the event an application were found to be in order, an IDE would 
ordinarily be granted promptly thereafter. 


EMPLOYEES 


   As of September 30, 1996, the Company had 4 full-time employees, Dr. 
Hanoch Shalit, who serves as the Company's President and Chief Executive 
Officer, Lawrence P. Kollender, who serves as the Company's Vice President of 
Sales and Marketing, James A. Smith, who serves as the Company's Chief 
Financial Officer, and one administrative assistant. The Company also employs 
2 part-time consultants, consisting of 1 computer programmer and 1 electronic 
engineer. The Company believes that its relations with its employees are 
good. 


PROPERTIES 

   On January 31, 1996, the Company entered into a three (3) year lease for 
approximately 2,048 square feet for its principal executive offices at 150 
East 58th Street, NY, NY 10155 pursuant to which the Company pays rent of 
approximately $5,600 per month. Dr. Hanoch Shalit, the Company's President 
and Chief Executive Officer, has personally guaranteed the payments to be 
made under such lease. 

LEGAL PROCEEDINGS 

   There are no legal proceedings to which the Company is a party. 

                                      24 
<PAGE>

                                  MANAGEMENT 

DIRECTORS AND EXECUTIVE OFFICERS 

   The names and ages of the directors and executive officers of the Company 
are set forth below. 

 Name                      Age                   Position Held 
 ----------------------   -----   -------------------------------------------- 
Dr. Hanoch Shalit  ....    43    President, Chief Executive Officer, Chairman 
                                  of the Board of Directors, Principal 
                                  Accounting Officer and Secretary 
Steven Ai  ............    42    Director 
Neal Factor  ..........    45    Director 
Simon Cross  ..........    45    Director 
James A. Smith  .......    44    Chief Financial Officer 
Lawrence P. Kollender      56    Vice President -- Marketing and Sales 

   The Company has agreed with Dr. Shalit that he shall be entitled to a 
nominee on the Board of Directors until the expiration date of the last of 
the three Patents. The Company has also agreed with the Underwriter that, for 
a period of five years after the date of this Prospectus that it will use its 
best efforts to cause one individual designated by the Underwriter and 
acceptable to the Company to be elected to the Board of Directors, which 
individual may be a director, officer, employee or affiliate of the 
Underwriter. See "Underwriting." Directors serve until the next annual 
meeting of stockholders and the election and qualification of their 
successors. Directors will not receive any compensation for serving on the 
Board of Directors. The officers are elected by the directors and serve, 
subject to existing employment agreements, at the discretion of the Board of 
Directors. 

BACKGROUND OF EXECUTIVE OFFICERS AND DIRECTORS 

   Dr. Hanoch Shalit founded the Company in November 1988 and has been its 
Chief Executive Officer, President, Chairman of the Board and Secretary since 
inception. From September 1982 until June 1987 Dr. Shalit was employed as a 
senior chemist with Chemco Photo Products, a private imaging company. From 
June 1987 until the beginning of November 1988, Dr. Shalit was employed by 
the FONAR Corporation, a public imaging company where he was the President of 
the Photographic Sciences Division in charge of production, sales and service 
for the FONAR Corporation's photographic products. Dr. Shalit earned a B.S. 
(Honors) in the Sciences of Photography from the Polytechnic of Central 
London (now know as University of Westminster) in Great Britain in 1978 and a 
PhD in Physics from the University of London in 1981. 

   Mr. Steven Ai has been a director of the Company since November 30, 1995. 
Since 1992, Mr. Ai has been the President of City Mill Co., Ltd., a private 
company located in Honolulu, Hawaii, which owns and operates a chain of 
retail home product stores. Prior to 1992, Mr. Ai was a manager with the 
public accounting firm of KPMG Peat Marwick. 


   Mr. Neal Factor, who has been a director of the Company since November 30, 
1995, has maintained a private law practice in New York City principally in 
the areas of corporate and commercial law since 1979. Mr. Factor has 
represented the Company since inception and receives compensation from the 
Company for his legal services. See "Certain Transactions." 

   Mr. Simon Cross has been a director of the Company since July 15, 1996. 
Since February 1993, Mr. Cross has been the general manager of Shackman 
Instruments, a private company located in the United Kingdom which designs 
and manufactures identification cameras and associated security systems. From 
May 1992 to February 1993, Mr. Cross was the sales and marketing manager of 
Techspan Systems plc, a private company located in the United Kingdom which 
specializes in computer controlled large scale electronic displays. From June 
1990 to May 1992, Mr. Cross was the director of X-Tek Systems Ltd., a private 
company located in the United Kingdom which develops and manufactures high 
definition microfocus x-ray systems for industrial inspection. 

   Mr. James A. Smith has been the Company's Chief Financial Officer since 
September 24, 1996. From November 1992 until September 1996, Mr. Smith was 
the controller of Ferrara Food Company, a public 


                                      25 
<PAGE>


wholesale food company located in East Brunswick, New Jersey. From June 1995 
until November 1995, Mr. Smith also served as a financial consultant to 
William Greenberg Desserts & Cafes, Inc., a public company located in New 
York City. From September 1990 to August 1992, Mr. Smith was the Vice 
President of Finance and Chief Financial Officer of Ambico, Inc., a private 
wholesale electronics distribution company located in Norwood, New Jersey. 

   Mr. Lawrence P. Kollender has been the Company's Vice President -- 
Marketing and Sales since January 3, 1996. Since January 1995, Mr. Kollender 
has also been the President of LPK Unlimited, a private consulting firm to 
companies in the software, electronics and service industries. From 1989 
through December 1994, Mr. Kollender was the director of international 
defense programs at the Grumman Corporation, which was a public company until 
it was acquired by the Northrop Corporation. 


EXECUTIVE COMPENSATION 

   The following table sets forth the cash compensation paid by the Company 
to executive officers of the Company for the years ended December 31, 1993, 
1994 and 1995. 

                          SUMMARY COMPENSATION TABLE 
<TABLE>
<CAPTION>


                                                                                       Long-Term Compensation   
                                                                                       -----------------------
                                        Annual Compensation                       Awards              Payouts 
                               --------------------------------------    -------------------------   ---------- 
                                                                        Restricted 
     Name and                                            Other Annual     Stock                         LTIP         All Other  
 Principal Position   Year    Salary($)     Bonus($)   Compensation($)   Awards($)   Options/SARs(#)   Payouts($)   Compensation ($)
 -----------------   ------  ------------  ----------   -------------  ----------  ---------------   ----------   --------------- 
<S>                   <C>     <C>            <C>  <C>        <C>          <C>            <C>           <C>               <C>   
Dr. Hanoch Shalit,    1995    $  60,000(1)   $   -0-(2)      $ -0-        $ -0-         -0-            $ -0-             $ -0- 
 Chief Executive 
  Officer,            1994    $  24,258      $   -0-         $ -0-        $ -0-         -0-            $ -0-             $ -0- 
  President, 
  Director and        1993    $  42,000      $   -0-         $ -0-        $ -0-         -0-            $ -0-             $ -0- 
  Principal 
  Accounting 
  Officer 
</TABLE>

- ------ 
(1) Pursuant to his employment agreement, Dr. Shalit's salary is payable at 
    the rate of $60,000 per calendar year. However, for the calendar year 
    ending 1995, Dr. Shalit received less than $60,000 because his employment 
    agreement did not become effective until July 1, 1995. See "Management -- 
    Employment Agreements." 

(2) Pursuant to his employment agreement, Dr. Shalit is entitled to receive a 
    bonus equal to $10,000 for every $1,000,000 of gross annual sales 
    received by the Company. See "Management -- Employment Agreements." 

EMPLOYMENT AGREEMENTS 

   Effective July 1, 1995, the Company entered into a five-year employment 
agreement with Dr. Hanoch Shalit. Under his employment agreement, Dr. Shalit 
is to serve as the Company's President, Chief Executive Officer and Chairman 
of the Board of Directors and receive an annual base salary of $60,000, which 
shall increase at the rate of 5% per annum, plus benefits. Dr. Shalit is also 
entitled to receive a bonus of $10,000 for every $1,000,000 of gross annual 
sales received by the Company. In addition, Dr. Shalit's employment agreement 
provides that, during the term of such employment agreement, he shall not 
compete with the Company in the United States or Canada or disclose, without 
the Company's consent, confidential information that has been or will be 
disclosed to him by the Company. Dr. Shalit's employment with the Company 
shall terminate upon his death or disability, the Company no longer being 
involved in the imaging technology business, the bankruptcy of the Company or 
the Company having been merged into or acquired by another company. 
Furthermore, Dr. Shalit's employment may be terminated by the Company for 
"cause," which is defined as either dishonesty detrimental to the best 
interests of the Company or wilful disloyalty to the Company. 


   Effective September 24, 1996, the Company entered into a five-year 
employment agreement with Mr. James A. Smith. Under his employment agreement, 
Mr. Smith is to serve as the Company's Chief Financial Officer and receive an 
annual salary of $95,000, plus benefits. In addition, Mr. Smith's employment 
agreement provides that, 


                                      26 
<PAGE>


during the term of his employment agreement and for three years thereafter, 
he shall not compete with the Company or disclose, without the Company's 
consent, confidential information that has been or will be disclosed to him 
by the Company. Mr. Smith's employment agreement may be terminated by the 
Company for any cause or no cause. 


   Effective January 3, 1996, the Company entered into a one-year employment 
agreement with Mr. Lawrence P. Kollender. Under his employment agreement, Mr. 
Kollender is to serve as the Company's Vice President of Marketing and Sales 
and receive an annual base salary of $100,000, plus benefits. Mr. Kollender 
is also entitled to receive a commission equal to 4% of the Company's annual 
gross revenues in excess of $2.5 million. In addition, Mr. Kollender's 
employment agreement provides that, during the term of such employment 
agreement and for three years thereafter, he shall not compete with the 
Company or disclose, without the Company's consent, confidential information 
that has been or will be disclosed to him by the Company. Mr. Kollender's 
employment agreement shall terminate if he suffers a disability, the Company 
is no longer involved in the imaging technology business, or may be 
terminated by the Company for any cause. 

   The Company is the sole beneficiary of a "key man" life insurance policy 
on the life of Dr. Hanoch Shalit in the amount of $1 million. 

   There are no family relationships among any Directors or executive 
officers. 

DIRECTORS COMMITTEES 

   Subsequent to this Offering, the Company intends to seek to add at least 
two (2) individuals to the Board of Directors to form an Audit Committee and 
Compensation Committee. The Audit Committee will review the engagement of the 
independent accountants, review and approve the scope of the annual audit 
undertaken by the independent accountants and review the independence of the 
accounting firm. The Audit Committee will also review the audit and non-audit 
fees of the independent accountants and the adequacy of the Company's 
internal control procedures. The Compensation Committee will review executive 
compensation issues. 

INDEMNIFICATION AGREEMENTS 

   The Company intends to enter into an Indemnification Agreement with each 
of its Directors and any officer, employee, agent or fiduciary designated by 
the Board of Directors (the "Indemnified Party") which provides that the 
Company indemnify the Director or other party thereto to the fullest extent 
permitted by applicable law. The agreement includes indemnification, to the 
extent permitted by applicable law, against expenses, including reasonable 
attorneys' fees, judgments, penalties, fines and amounts paid in settlement 
actually and reasonably incurred by the Indemnified Party in connection with 
any civil or criminal action or administrative proceeding arising out of the 
Indemnified Party's performance of his duties as a Director or officer of the 
Company. Such indemnification is available if the Indemnified Party acted in 
good faith and in a manner he reasonably believed to be in, or not opposed 
to, the best interests of the Company, and, with respect to any criminal 
action, had no reasonable cause to believe his conduct was unlawful. 

   Under the Indemnification Agreement, the entitlement of an Indemnified 
Party to indemnification will be determined by a majority vote of a quorum of 
disinterested Directors, or if such quorum is not obtainable, either by 
independent counsel or by the stockholders of the Company, as determined by 
such disinterested Directors. If a change of control of the Company has 
occurred, the entitlement of such Indemnified Party shall be determined by 
independent counsel to the Company, unless such Indemnified Party requests 
that either the Board or the stockholders make such determination. 

   Each Indemnification Agreement will require the Company to advance 
litigation expenses at the request of the Indemnified Party who is a party 
thereto whether prior to or after final resolution of a proceeding, provided 
that he undertakes to repay such advances if it is ultimately determined that 
he is not entitled to indemnification for his expense. The advance of 
litigation expenses will therefore be mandatory upon satisfaction of certain 
conditions by the Indemnified Party. 

   Provided that it can do so at a reasonable expense, the Company intends to 
obtain officers' and directors' liability insurance from the net proceeds 
hereof allocated to working capital which insurance would provide for 

                                      27 
<PAGE>

a maximum of $10,000,000 of coverage, subject to a $100,000 corporate 
reimbursement per occurrence payable by the Company. There can be no 
assurance, however, that such insurance, or any similar coverage, will be 
available to the Company, or if available, will be on terms and conditions 
acceptable to the Company. Any payments made by the Company under an 
Indemnification Agreement which are not covered by the insurance policy may 
have an adverse impact on the Company's earnings. See "Description of 
Securities -- Limitation on Liability of Directors." 

STOCK OPTION PLAN 

   Incentive Stock Option Plan -- In February 1996, the Board of Directors of 
the Company adopted and the stockholders of the Company subsequently 
approved, the adoption of the Company's 1996 Stock Option Plan ("Stock Option 
Plan"). The purpose of the Stock Option Plan is to enable the Company to 
encourage key employees, officers, Directors and consultants to contribute to 
the success of the Company by granting such individuals and Directors 
nonqualified "stock options" within the meaning of Section 422 of The 
Internal Revenue Code of 1986, as amended ("ISOs"). 

   The Stock Option Plan will be administered by the Board of Directors or a 
committee appointed by the Board of Directors (the "Committee") which will 
determine, in its discretion, among other things, the recipients and vesting 
of grants and the number of shares to be subject to such options. 

   The Stock Option Plan provides for the granting of options to purchase 
Common Stock at an exercise price to be determined by the Board of Directors 
or the Committee. Notwithstanding the foregoing, the Company has agreed with 
the Underwriter that for a period of 18 months after the date of this 
Prospectus, the Company will not grant any stock option having an exercise 
price less than the greater of the fair market value of the Common Stock on 
the date of the grant or the initial public offering price per share of 
Common Stock. 

   The total number of shares with respect to which options may be granted 
under the Stock Option Plan is 500,000. 

   Upon the exercise of an option, the holder must make payment of the full 
exercise price. Such payment may be made in cash or in shares of Common 
Stock, or in a combination of both. The Company may lend to the holder of an 
option funds sufficient to pay the exercise price, subject to certain 
limitations. 

   The Stock Option Plan may be terminated or amended at any time by the 
Board of Directors, except that, without stockholder approval, the Stock 
Option Plan may not be amended to increase the number of shares subject to 
the Stock Option Plan, change the class of persons eligible to receive 
options under the Stock Option Plan or materially increase the benefits of 
participants. 

   As of the date of this Prospectus, no options have been granted under the 
Stock Option Plan. No determinations have been made regarding the persons to 
whom options will be granted in the future, the number of shares which will 
be subject to such options or the exercise prices to be fixed with respect to 
any option. 

                                      28 
<PAGE>

                            PRINCIPAL STOCKHOLDERS 


   The following table sets forth information as of October 9, 1996, with 
respect to the beneficial ownership of shares of Common Stock by (i) each 
person known by the Company to be the owner of more than 5% of the 
outstanding shares of Common Stock, (ii) each officer and director, and (iii) 
all officers and directors as a group. 

                                                                  Percentage 
                               Amount and        Percentage        of Shares 
                               Nature of         of Shares           Owned 
Name and Address of            Beneficial        Currently         After the 
Beneficial Owner            Ownership(1)(2)        Owned          Offering(3) 
 -----------------------      -------------     ------------      ------------ 
Dr. Hanoch Shalit                919,825(4)         33.3%             24.3%(5) 
  c/o Imatec, Ltd.                                                             
  150 E. 58th Street                                                           
  New York, NY 10155                                                           
James A. Smith                       -0-             -0-               -0-  
  c/o Imatec, Ltd.                                                             
  150 E. 58th Street                                                           
  New York, NY 10155                                                           
Lawrence P. Kollender                -0-             -0-               -0-   
  c/o Imatec, Ltd.                                                             
  150 E. 58th Street                                                           
  New York, NY 10155            
Carmello Cotrino                 663,000            24.0%             17.5%    
  8 Homsted Circle                                                             
  Marlboro, NJ 07746                                                           
Louis Raneri                     171,000             6.2%              4.5%    
  1266 41st Street                                                             
  Brooklyn, NY 11218                                                           
Thomas Dunn                      171,000             6.2%              4.5%  
  600 Hylan Boulevard                                                          
  Staten Island, NY                                                            
  10305                                                                        
Steven Ai                         55,250(6)          2.0%              1.5% 
  c/o City Mill Co.,                                                           
  Ltd.                                                                         
  600 Nimits Highway                                                           
  Honolulu, HI 96817            
Neal Factor                          -0-             -0-               -0-    
  36 W. 44th Street,                                                           
  Suite 1111                                                                   
  New York, NY 10036                                                           
Simon Cross                          -0-             -0-               -0-  
  c/o Imatec, Ltd.                                                             
  150 E. 58th Street                                                           
  New York, NY 10155               
Officers and                     975,075            35.3%             25.7%    
  directors as a group                                          
  (6 persons)                   

- ------ 
(1) The shares of Common Stock owned by each person or by the group, and the 
    shares included in the total number of shares of Common Stock 
    outstanding, have been adjusted in accordance with Rule 13d-3 under the 
    Securities Exchange Act of 1934, as amended, to reflect the ownership of 
    shares issuable upon exercise of outstanding options, warrants or other 
    common stock equivalents which are exercisable within 60 days. As 
    provided in such Rule, such shares issuable to any holder are deemed 
    outstanding for the purpose of calculating such holder's beneficial 
    ownership but not any other holder's beneficial ownership. 

(2) Unless otherwise noted, the Company believes that all persons named in 
    the table have sole voting and investment power with respect to all 
    shares of stock beneficially owned by them. 


                                      29 
<PAGE>


(3) The shares of Common Stock included in the total number of shares of 
    Common Stock outstanding after the offering give effect to the Bridge 
    Financing Restructuring as of October 31, 1996. See "Plan of Operations 
    -- Liquidity and Capital Resources." 

(4) The share ownership of Dr. Hanoch Shalit includes 12,615 shares of Common 
    Stock, consisting of 2,818 shares of Common Stock held by Richard Carey 
    and 9,797 shares of Common Stock held by Mr. Jim Jaeger, each a founding 
    stockholder of the Company, pursuant to an agreement dated November 9, 
    1993 among Dr. Shalit and Messrs. Carey and Jaeger in which Messrs. Carey 
    and Jaeger assigned the voting rights of such 12,615 shares of Common 
    Stock to Dr. Shalit. Accordingly, Dr. Shalit may be deemed to 
    beneficially own such 12,615 shares of Common Stock, although Dr. Shalit 
    is not entitled to receive any dividends with respect to such shares of 
    Common Stock and has no power of disposition over such shares of Common 
    Stock, or the right to any proceeds from any disposition of such shares 
    of Common Stock. 

(5) Does not give effect to the registration and sale of 72,093 shares of 
    Common Stock by Dr. Shalit or the registration and sale of an aggregate 
    of 12,615 shares of Common Stock held by Messrs. Richard Carey and Jim 
    Jaeger which may be deemed to be beneficially owned by Dr. Shalit. See 
    "Selling Security Holders." 

(6) All 55,250 shares of Common Stock beneficially owned by Steven Ai are 
    held by The Revocable Trust of David C. Ai, dated July 24, 1985, as 
    restated, of which Steven Ai serves as Chairman and, along with two other 
    individuals, is a trustee. 


                                      30 
<PAGE>

                           SELLING SECURITY HOLDERS 


   The registration statement, of which this Prospectus forms a part, also 
relates to the registration by the Company of (a) for the account of the 
Bridge Selling Security Holders, an aggregate of (i) 579,194 shares of Common 
Stock after giving effect, as of October 31, 1996, to the Bridge Financing 
Restructuring, (ii) 2,150,000 Redeemable Warrants, and (iii) 2,150,000 shares 
of Common Stock issuable by the Company upon the exercise of such 2,150,000 
Warrants, and (b) an aggregate of 2,210,000 shares of Common Stock for the 
account of the Founding Selling Security Holders. The Selling Security 
Holders' Securities are not being underwritten by the Underwriter in 
connection with this Offering. Except with respect to 150,000 shares of 
Common Stock being registered on behalf of certain of the Founding Selling 
Security Holders (including 72,093 shares of Common Stock owned by Dr. Hanoch 
Shalit, the Chief Executive Officer and President of the Company) and any 
open market purchases on or after the effective date of this Offering, the 
Founding Selling Security Holders have agreed with the Underwriter, not to 
directly or indirectly offer, sell, transfer or otherwise encumber or dispose 
of their Common Stock or any other securities of the Company, whether or not 
beneficially owned, for a period of eighteen (18) months after the date of 
this Prospectus unless otherwise permitted by the Underwriter and the 
Company. The Bridge Selling Security Holders have agreed with the Company not 
to directly or indirectly offer, sell, transfer or otherwise encumber or 
dispose of any of their Common Stock and Redeemable Warrants (or any shares 
of Common Stock issuable upon exercise of the Redeemable Warrants) for a 
period of 24 months, and 18 months, respectively, after the date of this 
Prospectus. See "Principal Stockholders" and "Underwriting." 


   The sale of the Selling Security Holders' Securities by the Selling 
Security Holders may be effected from time to time in transactions (which may 
include block transactions by or for the account of the Selling Security 
Holders) in the over-the-counter market or in negotiated transactions, or 
through the writing of options on the Selling Security Holders' Securities, a 
combination of such methods of sale, or otherwise. Sales may be made at fixed 
prices which may be changed, at market prices prevailing at the time of sale, 
or at negotiated prices. 

   The Selling Security Holders may effect such transactions by selling the 
Selling Security Holders' Securities directly to purchasers, through 
broker-dealers acting as agents for the Selling Security Holders or to 
broker- dealers who may purchase shares as principals and thereafter sell the 
Selling Security Holders' Securities from time to time in the 
over-the-counter market, in negotiated transactions, or otherwise. Such 
broker-dealers, if any, may receive compensation in the form of discounts, 
concessions or commissions from the Selling Security Holders and/or the 
purchasers for whom such broker-dealers may act as agents or to whom they may 
sell as principals or both (which compensation as to a particular 
broker-dealer may be in excess of customary commissions). 

   The Selling Security Holders and broker-dealers, if any, acting in 
connection with such sales, might be deemed to be "underwriters" within the 
meaning of Section 2(11) of the Securities Act and any commission received by 
them and any profit upon the resale of such securities might be deemed to be 
underwriting discounts and commissions under the Securities Act. 


   Sales of any shares of Common Stock or Redeemable Warrants by the Selling 
Security Holders, or even the existence of the right to exercise the 
Redeemable Warrants, may depress the price of the Common Stock or the 
Redeemable Warrants in any market that may develop for the Securities. 

   The following table sets forth certain information with respect to Selling 
Security Holders for whom the Company is registering shares of Common Stock 
and Redeemable Warrants for resale to the public. Other than Dr. Hanoch 
Shalit, who is the President and Chief Executive Officer of the Company, and 
Mr. Steven Ai who is a member of the Board of Directors of the Company, none 
of the Selling Security Holders has had any position with, held any office, 
or had any other material relationship with the Company. 

   Certain Founding Selling Security Holders in the table below may not sell 
or otherwise transfer their Securities, whether or not beneficially owned, 
for a period of 18 months from the date of this Prospectus without the 
consent of the Underwriter. In the event such Selling Security Holder 
received such consent, the sale shall be effected through the Underwriter who 
shall be compensated in accordance with its customary practices for such 
transactions. Unless otherwise indicated, ownership refers to ownership of 
shares of Common Stock. See "Shares Eligible for Future Sale" and 
"Underwriting." 


                                      31 
<PAGE>
<TABLE>
<CAPTION>

   
                                                                             Amount of       Amount of       Percent of 
                                                              Amount of      Securities      Securities      Securities 
                                                              Securities       Being        Owned After     Owned After 
    Name                                                        Owned        Registered     Offering(1)     Offering(1) 
    -----                                                     ------------   ------------    -------------   ------------- 
<S>                                                              <C>            <C>              <C>             <C>
Richard W. Ahrens* 
   Common Stock ..........................................       6,596          6,596           -0-             -0- 
   Redeemable Warrants ...................................      25,000         25,000           -0-             -0- 
Jay Bernath* 
   Common Stock ..........................................       6,596          6,596           -0-             -0- 
   Redeemable Warrants. ..................................      25,000         25,000           -0-             -0- 
Robert H. Binns* 
   Common Stock ..........................................       6,596          6,596           -0-             -0- 
   Redeemable Warrants ...................................      25,000         25,000           -0-             -0- 
John Bogin* 
   Common Stock ..........................................       6,826          6,826           -0-             -0- 
   Redeemable Warrants ...................................      25,000         25,000           -0-             -0- 
Edward C. Brookins* 
   Common Stock ..........................................       6,596          6,596           -0-             -0- 
   Redeemable Warrants ...................................      25,000         25,000           -0-             -0- 
Joel Brownstein**** 
   Common Stock ..........................................       5,525          5,525           -0-             -0- 
   Redeemable Warrants ...................................         -0-            -0-           -0-             -0- 
Richard Carey*** 
   Common Stock ..........................................       2,818          2,818           -0-             -0- 
   Redeemable Warrants ...................................         -0-            -0-           -0-             -0- 
Nicole Cassino* 
   Common Stock ..........................................      27,302         27,302           -0-             -0- 
   Redeemable Warrants ...................................     100,000        100,000           -0-             -0- 
John Catania* 
   Common Stock ..........................................       6,596          6,596           -0-             -0- 
   Redeemable Warrants ...................................      25,000         25,000           -0-             -0- 
Maria Cid* 
   Common Stock ..........................................      13,651         13,651           -0-             -0- 
   Redeemable Warrants ...................................      50,000         50,000           -0-             -0- 
Bruce Cohen* 
   Common Stock ..........................................       6,596          6,596           -0-             -0- 
   Redeemable Warrants ...................................      25,000         25,000           -0-             -0- 
Craig Cohen* 
   Common Stock ..........................................      13,651         13,651           -0-             -0- 
   Redeemable Warrants. ..................................      50,000         50,000           -0-             -0- 
Carmello Cotrino**** 
   Common Stock ..........................................     663,000        663,000           -0-             -0- 
   Redeemable Warrants ...................................         -0-            -0-           -0-             -0- 
Amelia DiDomenico* 
   Common Stock ..........................................      13,651         13,651           -0-             -0- 
   Redeemable Warrants ...................................      50,000         50,000           -0-             -0- 
D.J.'s Company*(2) 
   Common Stock ..........................................      13,651         13,651           -0-             -0- 
   Redeemable Warrants ...................................      50,000         50,000           -0-             -0- 
Thomas Dunn**** 
   Common Stock ..........................................     171,000        171,000           -0-             -0- 
   Redeemable Warrants ...................................         -0-            -0-           -0-             -0- 
</TABLE>
    
                                      32 
<PAGE>
<TABLE>
<CAPTION>


                                                                             Amount of       Amount of       Percent of 
                                                              Amount of      Securities      Securities      Securities 
                                                              Securities       Being        Owned After     Owned After 
    Name                                                        Owned        Registered     Offering(1)     Offering(1) 
    -----                                                     ------------   ------------    -------------   ------------- 
<S>                                                              <C>            <C>              <C>             <C>
Dolores Esposito* 
   Common Stock ..........................................       6,596          6,596           -0-             -0- 
   Redeemable Warrants ...................................      25,000         25,000           -0-             -0- 
Walter S. Farr* 
   Common Stock ..........................................      13,651         13,651           -0-             -0- 
   Redeemable Warrants ...................................      50,000         50,000           -0-             -0- 
Edward J. Farrell, Jr.* 
   Common Stock ..........................................       6,596          6,596           -0-             -0- 
   Redeemable Warrants ...................................      25,000         25,000           -0-             -0- 
Ivan Feng** 
   Common Stock ..........................................      22,100         22,100           -0-             -0- 
   Redeemable Warrants ...................................         -0-            -0-           -0-             -0- 
Richard Forte* 
   Common Stock ..........................................      13,192         13,192           -0-             -0- 
   Redeemable Warrants ...................................      50,000         50,000           -0-             -0- 
Marc Foscolo* 
   Common Stock ..........................................       6,596          6,596           -0-             -0- 
   Redeemable Warrants ...................................      25,000         25,000           -0-             -0- 
Ian Freeman* 
   Common Stock ..........................................      13,651         13,651           -0-             -0- 
   Redeemable Warrants ...................................      50,000         50,000           -0-             -0- 
Kenneth Gantz* 
   Common Stock ..........................................      13,192         13,192           -0-             -0- 
   Redeemable Warrants ...................................      50,000         50,000           -0-             -0- 
Andrew P. Geiss* 
   Common Stock ..........................................       6,826          6,826           -0-             -0- 
   Redeemable Warrants ...................................      25,000         25,000           -0-             -0- 
Barry J. Gordon* 
   Common Stock ..........................................      13,192         13,192           -0-             -0- 
   Redeemable Warrants ...................................      50,000         50,000           -0-             -0- 
Stacy Gozlan* 
   Common Stock ..........................................      13,651         13,651           -0-             -0- 
   Redeemable Warrants ...................................      50,000         25,000           -0-             -0- 
Richard Guerriero* 
   Common Stock ..........................................       6,826          6,826           -0-             -0- 
   Redeemable Warrants ...................................      25,000         25,000           -0-             -0- 
Douglas R. Hellstrom* 
   Common Stock ..........................................       6,596          6,596           -0-             -0- 
   Redeemable Warrants ...................................      25,000         25,000           -0-             -0- 
Logan L. Hurst* 
   Common Stock ..........................................       6,596          6,596           -0-             -0- 
   Redeemable Warrants ...................................      25,000         25,000           -0-             -0- 
Jim Jaeger*** 
   Common Stock ..........................................       9,797          9,797           -0-             -0- 
   Redeemable Warrants ...................................         -0-            -0-           -0-             -0- 
Emma M. Job* 
   Common Stock ..........................................       6,596          6,596           -0-             -0- 
   Redeemable Warrants ...................................      25,000         25,000           -0-             -0- 

</TABLE>

                                      33 
<PAGE>

<TABLE>
<CAPTION>
   
                                                                             Amount of       Amount of       Percent of 
                                                              Amount of      Securities      Securities      Securities 
                                                              Securities       Being        Owned After     Owned After 
    Name                                                        Owned        Registered     Offering(1)     Offering(1) 
    -----                                                     ------------   ------------    -------------   ------------- 
<S>                                                              <C>            <C>              <C>             <C>
Paul E. Judd* 
   Common Stock ..........................................      27,302         27,302           -0-             -0- 
   Redeemable Warrants ...................................     100,000        100,000           -0-             -0- 
Marc H. Klee* 
   Common Stock ..........................................      13,192         13,192           -0-             -0- 
   Redeemable Warrants ...................................      50,000         50,000           -0-             -0- 
Robert C. Lannert*(2) 
   Common Stock ..........................................      13,651         13,651           -0-             -0- 
   Redeemable Warrants ...................................      50,000         50,000           -0-             -0- 
Donald L. Leonard* 
   Common Stock ..........................................       6,596          6,596           -0-             -0- 
   Redeemable Warrants ...................................      25,000         25,000           -0-             -0- 
Angela LoPresto***** 
   Common Stock ..........................................     106,826        106,826           -0-             -0- 
   Redeemable Warrants ...................................      25,000         25,000           -0-             -0- 
Frances LoPresto* 
   Common Stock ..........................................       6,596          6,596           -0-             -0- 
   Redeemable Warrants ...................................      25,000         25,000           -0-             -0- 
Kathleen F. & Arthur R. Medici, Joint Tenants with Right 
   of Survivorship* 
   Common Stock ..........................................      13,651         13,651           -0-             -0- 
   Redeemable Warrants ...................................      50,000         50,000           -0-             -0- 
Jeffrey Michelson* 
   Common Stock ..........................................      13,651         13,651           -0-             -0- 
   Redeemable Warrants ...................................      50,000         50,000           -0-             -0- 
Donald A. Nader*(2) 
   Common Stock ..........................................       6,596          6,596           -0-             -0- 
   Redeemable Warrants ...................................      25,000         25,000           -0-             -0- 
Mohamed Omar Nawar* 
   Common Stock ..........................................      20,477         20,477           -0-             -0- 
   Redeemable Warrants ...................................      75,000         75,000           -0-             -0- 
Arnold H. Neustadt and Francene Neustadt, JTWROS* 
   Common Stock ..........................................       6,596          6,596           -0-             -0- 
   Redeemable Warrants ...................................      25,000         25,000           -0-             -0- 
New Vision*(2) 
   Common Stock ..........................................      13,651         13,651           -0-             -0- 
   Redeemable Warrants ...................................      50,000         50,000           -0-             -0- 
S. Edwin Noffel, IRA* 
   Common Stock ..........................................       6,596          6,596           -0-             -0- 
   Redeemable Warrants ...................................      25,000         25,000           -0-             -0- 
Michael Pressberg*(2) 
   Common Stock ..........................................       6,596          6,596           -0-             -0- 
   Redeemable Warrants ...................................      25,000         25,000           -0-             -0- 
Provence Business* Consultants, Inc. 
   Common Stock ..........................................      26,384         26,384           -0-             -0- 
   Redeemable Warrants ...................................     100,000        100,000           -0-             -0- 
</TABLE>
    
                                      34 
<PAGE>
<TABLE>
<CAPTION>
   
                                                                             Amount of       Amount of       Percent of 
                                                              Amount of      Securities      Securities      Securities 
                                                              Securities       Being        Owned After     Owned After 
    Name                                                        Owned        Registered     Offering(1)     Offering(1) 
    -----                                                     ------------   ------------    -------------   ------------- 
<S>                                                              <C>            <C>              <C>             <C>
Louis Raneri**** 
   Common Stock ..........................................     171,000        171,000           -0-             -0- 
   Redeemable Warrants ...................................         -0-            -0-           -0-             -0- 
Jack Schnitzer* 
   Common Stock ..........................................      13,651         13,651           -0-             -0- 
   Redeemable Warrants ...................................      50,000         50,000           -0-             -0- 
Dr. Hanoch Shalit** 
   Common Stock ..........................................     907,210        907,210           -0-             -0- 
   Redeemable Warrants ...................................         -0-            -0-           -0-             -0- 
Stephen Silverberg**** 
   Common Stock ..........................................      72,000         72,000           -0-             -0- 
   Redeemable Warrants ...................................         -0-            -0-           -0-             -0- 
David Smith* 
   Common Stock ..........................................       6,826          6,826           -0-             -0- 
   Redeemable Warrants ...................................      25,000         25,000           -0-             -0- 
Anthony Stropoli* 
   Common Stock ..........................................       6,596          6,596           -0-             -0- 
   Redeemable Warrants ...................................      25,000         25,000           -0-             -0- 
Lorenzo Don Starling and Virginia Starling, Joint Tenants 
   with Right of Survivorship* 
   Common Stock ..........................................      13,651         13,651           -0-             -0- 
   Redeemable Warrants ...................................      50,000         50,000           -0-             -0- 
The Revocable Trust of David C. Ai, 
   dated July 24, 1985, as restated** 
   Common Stock ..........................................      55,250         55,250           -0-             -0- 
   Redeemable Warrants ...................................         -0-            -0-           -0-             -0- 
John M. Thompson* 
   Common Stock ..........................................      13,651         13,651           -0-             -0- 
   Class A Redeemable Warrants ...........................      50,000         50,000           -0-             -0- 
William M. Thompson* 
   Common Stock ..........................................      13,651         13,651           -0-             -0- 
   Redeemable Warrants ...................................      50,000         50,000           -0-             -0- 
Tri Ventures*(2) 
   Common Stock ..........................................      13,651         13,651           -0-             -0- 
   Redeemable Warrants ...................................      50,000         50,000           -0-             -0- 
James W. Venezia* 
   Common Stock ..........................................      13,651         13,651           -0-             -0- 
   Redeemable Warrants ...................................      50,000         50,000           -0-             -0- 
Robert and Christine Vitamante, JTWROS* 
   Common Stock ..........................................       6,596          6,596           -0-             -0- 
   Redeemable Warrants ...................................      25,000         25,000           -0-             -0- 
Samir R. Wahby* 
   Common Stock ..........................................       6,596          6,596           -0-             -0- 
   Redeemable Warrants ...................................      25,000         25,000           -0-             -0- 
Donald R. Waldrip* 
   Common Stock ..........................................       6,596          6,596           -0-             -0- 
   Redeemable Warrants ...................................      25,000         25,000           -0-             -0- 
</TABLE>
    
                                      35 
<PAGE>
<TABLE>
<CAPTION>


                                                                             Amount of       Amount of       Percent of 
                                                              Amount of      Securities      Securities      Securities 
                                                              Securities       Being        Owned After     Owned After 
    Name                                                        Owned        Registered     Offering(1)     Offering(1) 
    -----                                                     ------------   ------------    -------------   ------------- 
<S>                                                              <C>            <C>              <C>             <C>
Frederick B. Winston* 
   Common Stock ..........................................       6,596          6,596           -0-             -0- 
   Redeemable Warrants ...................................      25,000         25,000           -0-             -0- 
Yoram Yosifov*** 
   Common Stock ..........................................      30,300         30,300           -0-             -0- 
   Redeemable Warrants ...................................         -0-            -0-           -0-             -0- 
Joseph and Jacqueline Zambito, Joint Tenants with Right 
   of Survivorship* 
   Common Stock ..........................................       6,826          6,826           -0-             -0- 
   Redeemable Warrants ...................................      25,000         25,000           -0-             -0- 
</TABLE>

- ------ 
    * Holder has agreed with the Company not to sell or otherwise transfer 
      their Common Stock or Redeemable Warrants (or shares of Common Stock 
      issuable upon exercise of the Redeemable Warrants) for 24 months and 18 
      months, respectively, from the date of this Prospectus. The amount of 
      Common Stock owned and registered by the holder gives effect to the 
      Bridge Financing Restructuring as of October 31, 1996. 

   ** Holder has agreed not to sell or otherwise transfer only a portion of 
      their Securities for 18 months from the date of this Prospectus without 
      the consent of the Underwriter. 

  *** Holder may sell or otherwise transfer all of their Securities from the 
      date of this Prospectus without the consent of the Underwriter. 

 **** Holder has agreed not to sell or otherwise transfer any of their 
      Securities for 18 months from the date of this Prospectus without the 
      consent of the Underwriter. 

***** Holder has agreed with the Company not to sell or otherwise transfer 
      81,826 shares of Common Stock and 25,000 Redeemable Warrants for 24 
      months and 18 months, respectively, from the date of this Prospectus 
      and has agreed not to sell or otherwise transfer 100,000 shares of 
      Common Stock for 18 months from the date of this Prospectus without the 
      consent of the Underwriter. 

(1) Assumes sale of all securities registered hereby. 
   
(2) Assumes holder fails, in connection with the Bridge Financing Restructuring,
    to choose either Option A or Option B by October 25, 1996 and is deemed to
    have chosen Option A by the Company. See "Plan of Operations -- Liquidity 
    and Capital Resources" and "Risk Factors -- Potential Litigation."
    
                                      36 
<PAGE>

                             CERTAIN TRANSACTIONS 

   Mr. Neal Factor, a director of the Company and an attorney who has 
represented the Company since inception, charged the Company legal fees of 
approximately $31,000 in 1995. 

   The Company entered into the License Agreement as of June 25, 1995 with 
Dr. Hanoch Shalit, the Company's President and Chief Executive Officer. The 
License Agreement grants the Company the exclusive right to make, use, sell 
and sublicense "Patentable Image Technology," which is defined in the License 
Agreement as the three United States Patents and certain foreign patent 
applications. Under the terms of the License Agreement, Dr. Shalit received 
from the Company a one-time $350,000 payment in January 1996 subsequent to 
the First Closing of the Bridge Financing. Dr. Shalit is also entitled to 
receive a flat royalty fee of $140,000 per annum, payable in monthly 
installments of $11,667, for so long as the Company and any successor of the 
Company is in existence (the "Annual Royalty"); provided, however, that in 
the event that Dr. Shalit is no longer President, Chief Executive Officer and 
Chairman of the Company for any reason whatsoever, but the Company or any 
successor of the Company continues in existence, the Annual Royalty shall 
automatically be increased to $250,000 per annum. Pursuant to the terms of 
the License Agreement, the Annual Royalty shall increase by 5% every year as 
long as the Company or any successor of the Company is in existence. The 
License Agreement also grants to the Company the exclusive right as to 
inventions made by Dr. Shalit in the course of his employment under his 
employment agreement with the Company. The Company's obligations to pay the 
Annual Royalty shall continue until the expiration of the License Agreement. 
The term of the License Agreement expires when the last licensed patent 
expires, whether in the United States or abroad. Under the License Agreement, 
the Company is obligated to use its reasonable best efforts to make, use, 
sell and sublicense to others the Patentable Image Technology. 

   Each of the transactions between the Company and Mr. Neal Factor and 
between the Company and Dr. Hanoch Shalit was made on terms no less favorable 
to the Company than those that were available from unaffiliated third 
parties. All future transactions, including loans, between the Company and 
its officers, directors, principal stockholders and their affiliates will be 
approved by a majority of the Board of Directors, including a majority of the 
independent and disinterested outside directors on the Board of Directors, 
and will be on terms no less favorable to the Company than those that could 
be obtained from unaffiliated third parties. 

                          DESCRIPTION OF SECURITIES 


   The authorized capital of the Company consists of (i) 20,000,000 shares of 
Common Stock, par value $.0001 per share, 2,761,785 of which are currently 
issued and outstanding and (ii) 2,000,000 shares of preferred stock, par 
value $.0001 per share ("Preferred Stock"), none of which are currently 
issued and outstanding. There will be 3,789,194 shares of Common Stock issued 
and outstanding upon the closing date of this Offering after giving effect to 
the Bridge Financing Restructuring and the Company's sale of Securities 
offered hereby. 


COMMON STOCK 

   Each share of Common Stock is entitled to one vote, either in person or by 
proxy, on all matters that may be voted upon by the owners thereof at a 
meeting of the stockholders, including the election of directors. The holders 
of Common Stock (i) have equal, ratable rights to dividends from funds 
legally available therefor, when as and if declared by the Board of Directors 
of the Company; (ii) are entitled to share ratably in all of the assets of 
the Company available for distribution to holders of Common Stock upon 
liquidation, dissolution or winding up of the affairs of the Company; (iii) 
do not have pre-emptive or redemption provisions applicable thereto; and (iv) 
are entitled to one non-cumulative vote per share on all matters on which 
stockholders may vote at all meetings of stockholders. 

   All shares of Common Stock issued and outstanding are, and those offered 
hereby, when issued, will be fully-paid and non-assessable, with no personal 
liability attaching to the ownership thereof. 

                                      37 
<PAGE>

REDEEMABLE WARRANTS 

   The Redeemable Warrants will be issued pursuant to a Warrant Agreement 
(the "Warrant Agreement") between the Company and Continental Stock Transfer 
& Trust Company, as Warrant Agent (the "Warrant Agent"). The following 
discussion of certain terms and provisions of the Redeemable Warrants is 
qualified in its entirety by reference to the detailed provisions of the 
Redeemable Warrants and of the Warrant Agreement, the forms of which have 
been filed as exhibits to the Registration Statement, of which this 
Prospectus forms a part. See "Additional Information." 


   Each Redeemable Warrant entitles the holder thereof to purchase one share 
of Common Stock at an exercise price of $6.50 per share at any time 
commencing on the date of this Prospectus until _______, 1999 [36 months 
after the date of this Prospectus], subject to adjustment in certain 
circumstances. Each Redeemable Warrant is redeemable by the Company at any 
time after ___________________, 1997 [9 months after the date of this 
Prospectus]. Each Redeemable Warrant is redeemable by the Company with the 
consent of the Underwriter, upon 30 days prior written notice, and will be 
subject to redemption at a redemption price of $.10 per Redeemable Warrant 
provided that the average closing bid price of the Common Stock as reported 
by Nasdaq or , if the Common Stock is not quoted on Nasdaq, as reported by 
any other recognized quotation system on which the price of the Common Stock 
is quoted, equals or exceeds $7.50 per share, for any 20 trading days within 
a period of 30 consecutive trading days ending on the fifth trading day prior 
to the date of the notice of redemption. The Company, at its sole discretion, 
may elect, at any time, to decrease the exercise price of the Redeemable 
Warrants or change the consideration payable upon redemption of the 
Redeemable Warrants; provided, however, that in no event shall the 
consideration payable upon redemption of the Redeemable Warrants be less than 
the equivalent of $.10 per Redeemable Warrant. 


   To exercise a Redeemable Warrant, the holder must send the certificate 
evidencing the Redeemable Warrant (the "Warrant Certificate") to the Warrant 
Agent, together with an election to exercise, setting forth the number of 
shares to be purchased and payment by certified check or money order for the 
total exercise price of the shares to be purchased. The Warrant Agent will 
return a certificate evidencing the number of shares of Common Stock issued 
upon exercise of the Redeemable Warrant. 

   The Redeemable Warrants contain anti-dilution provisions regarding certain 
events, including but not limited to, stock dividends, stock splits, and 
reclassifications. The holders of Redeemable Warrants, as such, have no right 
to vote on matters submitted to the stockholders of the Company or to receive 
dividends and are not entitled to share in the assets of the Company in the 
event of liquidation, dissolution or the winding-up of the Company's affairs. 
However, upon the exercise of the Redeemable Warrants and issuance of shares 
of Common Stock to the holder, such shares of Common Stock shall have rights 
identical to all other shares of Common Stock. 

   The Company is required to have a current Registration Statement on file 
with the Commission and to effect appropriate qualifications under the laws 
and regulations of the states in which the holders of the Redeemable Warrants 
reside in order to comply with applicable laws in connection with such 
exercise. The Company has agreed to register and to qualify such issuable 
shares of Common Stock. There can be no assurance that the Company will be 
able to cause such registration statement to become effective and remain 
current or to effect appropriate qualification under applicable state 
securities laws, the failure of which may result in the exercise of the 
Redeemable Warrants and the resale or other disposition of Common Stock 
issued upon such exercise becoming unlawful. 

   The exercise prices of the Redeemable Warrants bear no relation to any 
objective criteria of value and should in no event be regarded as an 
indication of any future market price of the securities offered thereby. 

PREFERRED STOCK 

   The Company's Certificate of Incorporation provides for 2,000,000 shares 
of Preferred Stock, whereby the Board of Directors of the Company shall have 
the authority, without further action by the holders of the out- 

                                      38 
<PAGE>


standing Common Stock, to issue up to 2,000,000 shares of Preferred Stock 
from time to time in one or more classes or series, to fix the number of 
shares constituting any class or series and the stated value thereof, if 
different from the par value, and to fix the terms of any such series or 
class, including dividend rights, dividend rates, conversion or exchange 
rights, voting rights, rights and terms of redemption (including sinking fund 
provisions), the redemption price and the liquidation preference of such 
class or series. Consequently, the issuance of Preferred Stock may be used as 
an "anti-takeover" device without further action on the part of the 
stockholders. See "Risk Factors -- Anti-Takeover Provisions; Issuance of 
Preferred Stock." Issuance of Preferred Stock, which may be accomplished 
through a public offering or a private placement to parties favorable to 
current management, may dilute the voting power of holders of Common Stock 
(such as by issuing Preferred Stock with super voting rights) and may render 
more difficult the removal of current management, even if such removal may be 
in the stockholders' best interests. Further, the Company's stock option 
plans provide for the immediate acceleration of, and removal of restrictions 
from, options and other awards under the plans upon a "change of control" (as 
defined therein). Such provisions may also have the result of discouraging 
acquisitions of the Company. The Company presently has no shares of Preferred 
Stock outstanding and has no present intention to issue any Preferred Stock. 
The designations, rights and preferences of any Preferred Stock would be set 
forth in a Certificate of Designation which would be filed with the Secretary 
of State of Delaware. 


LIMITATION ON LIABILITY OF DIRECTORS 

   The Company's Certificate of Incorporation provides that a director of the 
Company will not be personally liable to the Company or its stockholders for 
monetary damages for breach of the fiduciary duty of care as a director, 
including breaches which constitute gross negligence. By its terms and in 
accordance with the Delaware General Corporation Law, however, this provision 
does not eliminate or limit the liability of a director of the Company (i) 
for breach of the director's duty of loyalty to the Company or its 
stockholders, (ii) for acts or omissions not in good faith or which involve 
intentional misconduct or a knowing violation of law, (iii) under Section 174 
of the Delaware General Corporation Law (relating to unlawful payments or 
dividends or unlawful stock repurchases or redemptions), (iv) for any 
improper benefit or (v) for breaches of a director's responsibilities under 
the Federal securities laws. The Company also intends to enter into an 
Indemnification Agreement with each of its Directors and any officer, 
employee, agent or fiduciary designated by the Board of Directors which 
provides that the Company indemnify the Director or other parties thereto to 
the fullest extent permitted by applicable law. See "Business -- 
Indemnification Agreements." 

TRANSFER AGENT AND WARRANT AGENT 

   The transfer agent and registrar for the Common Stock and warrant agent 
for the Redeemable Warrants is Continental Stock Transfer & Trust Company, 
located at 2 Broadway, New York, New York 10004. 

                       SHARES AVAILABLE FOR FUTURE SALE 


   Upon the closing date of this Offering, there will be 3,789,194 shares of 
Common Stock outstanding after giving effect to the Bridge Financing 
Restructuring and the Company's sale of the Securities offered hereby 
(3,939,194 shares of Common Stock if the Underwriter's over-allotment option 
is exercised in full) all of which will be registered. Except for 150,000 
shares of Common Stock being registered on behalf of certain of the Founding 
Selling Security Holders (including 72,093 shares for Dr. Hanoch Shalit, the 
Chief Executive Officer President and Chairman of the Board of Directors of 
the Company) and any open market purchases on or after the effective date of 
this Offering, the Founding Selling Security Holders have agreed with the 
Underwriter not to directly or indirectly offer, sell, transfer or otherwise 
encumber or dispose of their Common Stock or any other securities of the 
Company, whether or not beneficially owned, for a period of eighteen (18 
months from the date of this Prospectus unless otherwise permitted by the 
Underwriter. The Bridge Selling Security Holders have agreed with the Company 
not to effect any sales of their Common Stock and Redeemable Warrants (or 
shares of Common Stock issuable upon exercise of the Redeemable Warrants) 
until 24 months and 18 months, respectively, after the date of this 
Prospectus. 


   Since all of the shares of Common Stock outstanding will be registered 
upon completion of this Offering, none of the shares of Common Stock will be 
"restricted securities" as that term is defined by Rule 144 of the 

                                      39 
<PAGE>


Securities Act, as amended. Ordinarily, under Rule 144, a person who is an 
affiliate of the Company (as that term is defined in Rule 144) and has 
beneficially owned restricted securities for a period of two (2) years may, 
every three (3) months, sell in brokerage transactions an amount that does 
not exceed the greater of (i) 1% of the outstanding class of such securities 
or (ii) the average weekly trading volume of trading in such securities on 
all national exchanges and/or reported through the automated quotation system 
of a registered securities association during the four weeks prior to the 
filing of a notice of sale by a securities holder. A person who is not an 
affiliate of the Company who beneficially owns restricted securities is also 
subject to the foregoing volume limitations but may, after the expiration of 
three (3) years, sell unlimited amounts of such securities under certain 
circumstances. 


   Prior to this Offering, there has been no market for the Securities. The 
Underwriter intends to make a market in the shares of Common Stock and 
Redeemable Warrants after completion of this Offering. No predictions can be 
made as to the effect, if any, that the availability of shares for sale will 
have on the market, if any, prevailing from time to time. Sales of 
substantial amounts of the Common Stock that are subject to the prior 
approval of the Underwriter may adversely affect the market price of the 
Common Stock or the Redeemable Warrants offered hereby. 

                                 UNDERWRITING 

   A.S. Goldmen & Co., Inc. (the "Underwriter") has entered into an 
Underwriting Agreement with the Company pursuant to which, and subject to the 
terms and conditions thereof, it has agreed to purchase all of the shares of 
Common Stock and Redeemable Warrants offered by the Company hereby. 


   The Underwriter has advised the Company that it proposes to offer the 
shares of Common Stock and Redeemable Warrants to the public at the public 
offering prices set forth on the cover page of this Prospectus and that the 
Underwriter may allow to certain dealers who are members of the National 
Association of Securities Dealers, Inc (the "NASD") concessions of not in 
excess of $ _______ per share of Common Stock and $_____ per Redeemable 
Warrant, of which amount a sum not in excess of $ ______ per share of Common 
Stock and $_______ per Redeemable Warrant may in turn be reallowed by such 
dealers to other dealers. After the commencement of this Offering, the public 
offering price, the concessions and the reallowances may be changed. The 
Underwriter has informed the Company that it does not expect sales to 
discretionary accounts by the Underwriter to exceed 5% of the total number of 
securities offered by the Company hereby. 

   The Company has agreed to indemnify the Underwriter against certain 
liabilities, including liabilities under the Act. The Company has agreed to 
pay to the Underwriter a non-accountable expense allowance equal to 3% 
percent of the gross proceeds derived from the sale of the shares of Common 
Stock and Redeemable Warrants underwritten, $25,000 of which has been paid to 
date. 

   The Company has also agreed to retain the Underwriter as the Company's 
financial consultant for a period of 24 months from the date of this 
Prospectus and to pay the Underwriter $2,000 per month in connection 
therewith, the total amount of which ($48,000) is due upon consummation of 
this Offering. The Company has agreed that, at the request of the 
Underwriter, for five years after the date of this Prospectus, that it will 
use its best efforts to cause one individual designated by the Underwriter 
and acceptable to the Company to be elected to the Company's Board of 
Directors, which individual may be a director, officer, employee or affiliate 
of the Underwriter. As of the date of this Prospectus, the Underwriter has 
not determined if it will designate an individual to the Company's Board of 
Directors. 

   Upon the exercise of any Redeemable Warrants more than one year after the 
date of this Prospectus, which exercise was solicited by the Underwriter, and 
to the extent not inconsistent with the guidelines of the NASD and the Rules 
and Regulations of the Commission, the Company has agreed to pay the 
Underwriter a commission of four percent of the aggregate exercise price of 
such Redeemable Warrants. However, no compensation will be paid to the 
Underwriter in connection with the exercise of the Redeemable Warrants if (a) 
the market price of the Common Stock is lower than the exercise price, (b) 
the Redeemable Warrants are held in a discretionary account, or (c) the 
Redeemable Warrants are exercised in an unsolicited transaction where the 
holder of the Redeemable Warrants has not stated in writing that the 
transaction was solicited and has not designated in writing the Underwriter 
as the soliciting agent. Unless granted an exemption by the Commission from 
Rule 


                                      40 
<PAGE>

10b-6 under the Securities Exchange Act of 1934, as amended, the Underwriter 
and any soliciting broker-dealers are prohibited from engaging in any 
market-making activities or solicited brokerage activities with regard to the 
Company's securities during the periods prescribed by exemption (xi) to Rule 
10b-6 before the solicitation of the exercise of any Warrants until the later 
of the termination of such solicitation activity or the termination (by 
waiver or otherwise) of any right that the Underwriter and any soliciting 
broker-dealers may have to receive a fee for the exercise of the Redeemable 
Warrants following such solicitation. As a result, the Underwriter and any 
soliciting broker-dealers will be required to continue to provide a market 
for the Company's Securities during certain periods while the Redeemable 
Warrants are exercisable. If the Underwriter has engaged in any of the 
activities prohibited by Rule 10b-6 during the periods described above, the 
Underwriter undertakes to waive unconditionally its right to receive a 
commission on the exercise of such Redeemable Warrants. 


   Each director and officer of the Company and the Founding Selling Security 
Holders (except with respect to 150,000 shares of Common Stock and any open 
market purchases on or after the effective date of this Offering), have 
agreed with the Underwriter, not to, directly or indirectly, offer, sell, 
transfer, pledge, assign, hypothecate or otherwise encumber or dispose of any 
of the Company's securities, whether or not beneficially owned, for a period 
of eighteen (18) months after the date of this Prospectus without the prior 
consent of the Underwriter. An appropriate legend shall be marked on the back 
of stock certificates representing all such securities. 


   The Company has granted to the Underwriter an option exercisable during 
the forty-five (45) day period commencing on the date of this Prospectus to 
purchase from the Company, at the offering price less underwriting discount 
and expense allowance, up to an aggregate of 150,000 additional shares of 
Common Stock and/or an additional 600,000 Redeemable Warrants for the sole 
purpose of covering over-allotments, if any. 


   In connection with this Offering, the Company has agreed to sell to the 
Underwriter or its designees, for nominal consideration, warrants to purchase 
from the Company 100,000 shares of Common Stock and 400,000 Redeemable 
Warrants (the "Underwriter's Warrants"). The Underwriter's Warrants are 
initially exercisable at a price of $ ______ per share of Common Stock [160% 
of the initial offering price per share of Common Stock] and $____ per 
Redeemable Warrant [160% of the initial offering price per Redeemable 
Warrant] for a period of one (1) year commencing one (1) year from the date 
of this Prospectus for a period of four (4) years commencing one (1) year 
from the date of this Prospectus. The Underwriter's Warrants provide for 
adjustment of the type of securities issuable upon exercise of the 
Underwriter's Warrants to reflect certain subdivisions and combinations of 
the Common Stock. The Underwriter's Warrants grant to the holders thereof 
certain rights of registration for the securities issuable upon exercise of 
the Underwriter's Warrants. 

   In connection with the Bridge Financing, the Company paid the Underwriter, 
as placement agent, $400,000 in cash as a commission and a nonaccountable 
expense allowance of $120,000. The Company also agreed in connection with the 
Bridge Financing to indemnify the Underwriter against certain liabilities, 
including liabilities under the Securities Act, or to contribute to related 
payments that the Underwriter may be required to make. 


   Prior to this Offering, there has been no public market for any of the 
Company's securities. Accordingly, the offering prices of the Shares and the 
Redeemable Warrants and the terms of the Redeemable Warrants were determined 
by negotiation between the Company and the Underwriter. Factors considered in 
determining such price and terms, in addition to prevailing market 
conditions, included the prospects for the industry in which the Company 
competes, an assessment of the Company's management, the prospects of the 
Company, its capital structure and such other factors which were deemed 
relevant. 


   The foregoing is a summary of certain terms of the Underwriting Agreement, 
copies of which were filed with the Commission as an exhibit to the 
Registration Statement of which this Prospectus is a part. Reference is 
hereby made to such exhibit for a detailed description of the provisions 
thereof as summarized above. See "Additional Information." 


                                      41 
<PAGE>

                                LEGAL MATTERS 


   The validity of the shares of Common Stock and Redeemable Warrants offered 
hereby will be passed upon for the Company by Zukerman Gore & Brandeis, LLP, 
New York, New York. Certain matters regarding intellectual property rights 
shall be passed upon for the Company by Wyatt, Gerber, Burke & Badie, LLP, 
New York, New York. Orrick, Herrington & Sutcliffe LLP, New York, New York 
has acted as counsel for the Underwriter in connection with this Offering. 


                                   EXPERTS 


   The financial statements of the Company included in this Prospectus and 
elsewhere in the Registration Statement, to the extent and for the periods 
indicated in their reports, have been examined by Most Horowitz & Company, 
LLP, independent certified public accountants, whose reports thereon appear 
elsewhere herein and in the Registration Statement. Such financial statements 
have been included in reliance upon the reports of Most Horowitz & Company, 
LLP, given upon their authority as experts in accounting and auditing. 


                            CHANGE IN ACCOUNTANTS 


   On March 14, 1996, the Company replaced its independent accountants, 
Present, Cohen, Smallowitz & Glassman ("Present, Cohen") with Most Horowitz & 
Company, LLP ("Most Horowitz") to act as its independent accountants from and 
after March 14, 1996. All of the financial statements of the Company included 
in the prospectus and registration statement of which this Prospectus forms a 
part were examined by Most Horowitz. None of Present, Cohen's reports for 
either of the past two years contained an adverse opinion or disclaimer of 
opinion, or was modified as to uncertainity, audit scope, or accounting 
principles. Further, during the Company's two most recent fiscal years and 
any subsequent interim period preceding the Company replacing Present, Cohen 
there were no disagreements with Present, Cohen on any matter of accounting 
principles or practices, financial statement disclosure, or auditing scope or 
procedures. 


   The decision to replace Present, Cohen with Most Horowitz was approved by 
the Company's Board of Directors and was made as a result of the Company's 
desire to engage an accounting firm more experienced in auditing public 
companies. 

                            ADDITIONAL INFORMATION 

   The Company has filed with the Securities and Exchange Commission (the 
"Commission") a Registration Statement on Form SB-2 under the Securities Act 
of 1933, as amended (the "Securities Act") with respect to the Securities 
offered hereby. This Prospectus filed as a part of the Registration Statement 
does not contain certain information set forth in or annexed as exhibits to 
the Registration Statement certain parts of which are omitted in accordance 
with the rules and regulations of the Commission. For further information 
with respect to the Company and the Securities offered hereby, reference is 
made to the Registration Statement and to the exhibits filed as part thereof, 
which may be inspected at the office of the Commission without charge, or 
copies thereof may be obtained therefrom upon payment of a fee prescribed by 
the Commission. Statements contained in this Prospectus as to the contents of 
any contract or other document are not necessarily complete, and where the 
contract or other document has been filed as an exhibit to the Registration 
Statement, each statement is qualified in all respects by reference to the 
applicable document filed with the Commission. 


   The Registration Statement and such exhibits and schedules may be 
inspected and copied at the public reference facilities maintained by the 
Commission at 450 Fifth Street, N.W., Room 1024, Washington D.C. 20549, and 
at the Regional Offices of the Commission located at 7 World Trade Center, 
13th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison 
Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such material may 
be obtained from the Public Reference Section of the Commission at 450 Fifth 
Street, N.W., Room 1025, Washington, D.C. 20549, at prescribed rates. Such 
material may also be accessed electronically by means of the Commission's 
home page on the Internet at http:/www.sec.gov. 


                                      42 
<PAGE>

                                 IMATEC, LTD 
                       (A DEVELOPMENT STAGE ENTERPRISE) 
                             FINANCIAL STATEMENTS 
                                    INDEX 
<TABLE>
<CAPTION>

<S>                                                                                              <C>
INDEPENDENT AUDITORS' REPORT  ...........................................................        F-2 

BALANCE SHEET -- December 31, 1994 and 1995 and August 31, 1996  ........................        F-3 

STATEMENT OF OPERATIONS -- November 17, 1988 (Inception) to December 31, 1995 
  (Cumulative), years ended December 31, 1994 and 1995 and eight months ended August 31, 
  1995 and 1996 (Unaudited) .............................................................        F-4 

STATEMENT OF STOCKHOLDERS' (DEFICIT) -- November 17, 1988 (Inception) to December 31, 
  1995 and eight months ended August 31, 1996 (Unaudited) ...............................        F-5 

STATEMENT OF CASH FLOWS -- November 17, 1988 (Inception) to December 31, 1995 
  (Cumulative), years ended December 31, 1994 and 1995 and eight months ended August 31, 
  1995 and 1996 (Unaudited) .............................................................        F-6 

NOTES TO FINANCIAL STATEMENTS  ..........................................................     F-7 - F-11 


</TABLE>













                                     F-1
<PAGE>


                                                                April 29, 1996 
                         INDEPENDENT AUDITORS' REPORT 


Stockholders and Board of Directors 
Imatec, Ltd. 
New York, New York 

   We have audited the accompanying balance sheet of Imatec, Ltd. (A 
Development Stage Enterprise) as of December 31, 1994 and 1995, and the 
related statements of operations, stockholders' (deficit) and cash flows for 
the years ended December 31, 1994 and 1995 and November 17, 1988 (Inception) 
to December 31, 1995 (Cumulative). These financial statements are the 
responsibility of the Company's management. Our responsibility is to express 
an opinion on these financial statements based on our audit. 

   We conducted our audit in accordance with generally accepted auditing 
standards. Those standards require that we plan and perform the audit to 
obtain reasonable assurance about whether the financial statements are free 
of material misstatement. An audit includes examining, on a test basis, 
evidence supporting the amounts and disclosures in the financial statements. 
An audit also includes assessing the accounting principles used and 
significant estimates made by management, as well as evaluating the overall 
financial statement presentation. We believe that our audit provides a 
reasonable basis for our opinion. 

   In our opinion, the financial statements referred to above present fairly, 
in all material respects, the financial position of Imatec, Ltd., as of 
December 31, 1994 and 1995, and the results of its operations and its cash 
flows for the years ended December 31, 1994 and 1995 and November 17, 1988 
(Inception) to December 31, 1995 (Cumulative) in conformity with generally 
accepted accounting principles. 


                                        /s/ Most Horowitz & Company, LLP 
                                        -------------------------------------
                                        Most Horowitz & Company, LLP 
New York, New York 

                                       F-2
<PAGE>

                                 IMATEC, LTD. 

                       (A DEVELOPMENT STAGE ENTERPRISE)
 
                                BALANCE SHEET 

                                    ASSETS 
<TABLE>
<CAPTION>
    
                                                                  December 31                August 31, 1996    
                                                            ------------------------    --------------------------
                                                               1994         1995               (Unaudited)
                                                            ---------    -----------     
                                                                                                        Pro Forma
                                                                                        Historical      (Note 11)
                                                                                        ----------      ----------
<S>                                                            <C>        <C>            <C>           <C>       
CURRENT ASSETS 
   Cash ...................................................    $1,897     $   31,151     $   71,061    $   71,061
   Marketable securities (Note 3) .........................                1,350,852      1,843,782     1,843,782
   Other current assets ...................................                    9,715          8,950        78,199
                                                            ---------    -----------    -----------    ----------
        TOTAL CURRENT ASSETS ..............................     1,897      1,391,718      1,923,793     1,993,042
OFFICE EQUIPMENT (net of accumulated depreciation of 
   $8,030) ................................................                                 101,275       101,275
DEFERRED DEBT ISSUANCE COSTS (Note 2)  ....................                  204,999        222,386 
DEFERRED COSTS OF PROPOSED PUBLIC 
   OFFERING (Note 9) ......................................                                 103,087       103,087
DEPOSIT  ..................................................                                  18,674        18,674
                                                            ---------    -----------    -----------    ----------
        TOTAL ASSETS ......................................    $1,897     $1,596,717     $2,369,215    $2,216,078
                                                            =========    ===========    ===========    ==========

                   LIABILITIES AND STOCKHOLDERS' (DEFICIT) 

                                                                   December 31                August 31, 1996    
                                                            ------------------------    --------------------------
                                                               1994         1995               (Unaudited)
                                                            ---------    -----------     
                                                                                                        Pro Forma
                                                                                        Historical      (Note 11)
                                                                                        ----------      ----------
CURRENT LIABILITIES 
   Accrued expenses (Note 7) .............................    $ 4,188     $  412,735     $  255,935   $    35,897
   Due to former bridge shareholders (Note 2) ............                                                925,000
                                                            ---------    -----------    -----------   -----------
        TOTAL CURRENT LIABILITIES ........................      4,188        412,735        255,935       960,897
BRIDGE NOTES PAYABLE (Note 2)  ...........................                 1,220,763      3,084,284  
OTHER NOTES PAYABLE (Note 4)  ............................                    50,000 
                                                            ---------    -----------    -----------   -----------    
        TOTAL LIABILITIES ................................      4,188      1,683,498      3,340,219       960,897
                                                            ---------    -----------    -----------   -----------    
COMMITMENTS AND CONTINGENCY (Notes 2, 7, 8 and 9) 
STOCKHOLDERS' (DEFICIT) (Notes 2 and 9) 
   Preferred stock, $.0001 par value; authorized -- 
     2,000,000 shares; issued and outstanding -- none 
   Common stock, $.0001 par value; authorized -- 
     20,000,000 shares; issued and outstanding -- 
     1,105,000, 2,472,091, 2,761,785 and 2,789,194 in 
     1994, 1995, 1996 Historical and 1996 Pro Forma,
     respectively  .......................................        111            247            276           279
   Additional paid-in capital ............................    615,113      1,193,081      1,865,725     4,182,498
   Deficit accumulated during the development stage ......   (617,515)    (1,280,109)    (2,837,005)   (2,927,596)
                                                            ---------    -----------    -----------   -----------     
        TOTAL STOCKHOLDERS' (DEFICIT) ....................     (2,291)       (86,781)      (971,004)    1,255,181
                                                            ---------    -----------    -----------   -----------    
        TOTAL LIABILITIES AND
          STOCKHOLDERS (DEFICIT)  ........................  $   1,897    $ 1,596,717    $ 2,369,215    $2,216,078
                                                            =========    ===========    ===========    ==========
    
</TABLE>
                      See notes to financial statements 

                                       F-3
<PAGE>

                                 IMATEC, LTD. 

                       (A DEVELOPMENT STAGE ENTERPRISE) 

                           STATEMENT OF OPERATIONS 

                                                              
<TABLE>
<CAPTION>
                                                              
                                                               November 17,   
                                       Years Ended                 1988                 Eight months 
                                      December 31,             (Inception)            Ended August 31, 
                              ----------------------------          to          ------------------------------ 
                                                               December 31,        1995 
                                   1994           1995         (Cumulative)        1995             1996 
                               ------------   ------------    ---------------   ------------   -------------- 
                                                                                (Unaudited)     (Unaudited) 
<S>                             <C>                <C>            <C>             <C>                <C>
INCOME -- consulting fees  .    $    1,960                     $   133,973 
                               ------------                   --------------- 
EXPENSES 
   Royalties (Note 7) ......                   $  420,000          420,000      $  373,334       $   95,083 
   Research and development         17,881         11,773          337,389                           46,991 
   General and 
     administrative  .......        99,243        163,682          598,613          51,631          531,518 
                               ------------   ------------    ---------------   ------------   -------------- 
        TOTAL EXPENSES .....       117,124        595,455        1,356,002         424,965          673,592 
                               ------------   ------------    ---------------   ------------   -------------- 
        LOSS FROM OPERATIONS      (115,164)      (595,455)      (1,222,029)       (424,965)        (673,592) 
INTEREST EXPENSE AND 
   AMORTIZATION OF DEBT 
   ISSUANCE COSTS ..........                      (72,596)         (72,596)                        (930,772) 
INTEREST INCOME  ...........                        5,457           14,516                           47,468 
                               ------------   ------------    ---------------   ------------   -------------- 
        NET LOSS ...........    ($ 115,164)   ($  662,594)    ($ 1,280,109)    ($  424,965)     ($1,556,896) 
                               ============   ============    ===============   ============   ============== 

AVERAGE NUMBER OF SHARES 
   OUTSTANDING (Note 2) ....     5,741,072      5,749,976        5,742,329       5,738,313        5,893,715 
                               ============   ============    ===============   ============   ============== 

NET LOSS PER COMMON SHARE  .         ($.02)         ($.12)           ($.22)          ($.07)           ($.26) 
                               ============   ============    ===============   ============   ============== 

</TABLE>

                      See notes to financial statements 

                                       F-4
<PAGE>


                                 IMATEC, LTD. 
                       (A DEVELOPMENT STAGE ENTERPRISE) 
                     STATEMENT OF STOCKHOLDERS' (DEFICIT) 
               NOVEMBER 17, 1988 (INCEPTION) TO AUGUST 31, 1996 
                                   (NOTE 2) 
<TABLE>
<CAPTION>
                                                                      
                                                                                        Deficit   
                                                                                      Accumulated 
                                            Common Stock (Note 9)      Aditional      During the  
                                           -----------------------      Paid-In       Development 
                                              Shares       Amount       Capital          Stage            Total 
                                            -----------   --------    ------------   --------------   ------------- 
<S>                                          <C>            <C>       <C>                 <C>            <C>         
Issuance of shares  .....................    1,105,000      $111      $      889                       $     1,000 
Contribution of shares  .................      (82,875)       (8)              8 
Issuance of shares  .....................       55,250         5         499,995                           500,000 
Issuance of shares  .....................       27,625         3              (3) 
Net loss for the period inception to 
  December 31, 1993 .....................                                             ($  502,351)        (502,351) 
                                            -----------   --------    ------------   --------------   ------------- 
  Balance -- December 31, 1993  .........    1,105,000       111         500,889         (502,351)          (1,351) 
Contribution of shares  .................      (12,615)       (1)              1 
Issuance of shares  .....................       12,615         1         114,223                           114,224 
Net loss for the year ended December 31, 
  1994 ..................................                                                (115,164)        (115,164) 
                                            -----------   --------    ------------   --------------   ------------- 
  Balance -- December 31, 1994  .........    1,105,000       111         615,113         (617,515)          (2,291) 
Issuance of shares  .....................    1,105,000       110                                               110 
Issuance of shares and warrants under 
  private placement .....................      262,091        26         714,156                           714,182 
Expenses of private placement  ..........                               (136,188)                         (136,188) 
Net loss for the year ended December 31, 
  1995 ..................................                                                (662,594)        (662,594) 
                                            -----------   --------    ------------   --------------   ------------- 
  Balance -- December 31, 1995  .........    2,472,091       247       1,193,081       (1,280,109)         (86,781) 
Cancellation of shares of private 
  placement (net of expenses of $1,820) .       (6,897)       (1)        (16,973)                          (16,974) 
Issuance of shares and warrants in 
  private placement .....................      296,591        30         808,152                           808,182 
Expenses of private placement  ..........                               (118,535)                         (118,535) 
Net loss for the eight months ended 
  August 31, 1996 (Unaudited) ...........                                              (1,556,896)      (1,556,896) 
                                            -----------   --------    ------------   --------------   ------------- 
     Balance -- August 31, 1996 
        (Unaudited) .....................    2,761,785      $276      $1,865,725     ($ 2,837,005)    ($   971,004) 
                                            ==========   ========    ============   ==============   ============= 

</TABLE>

                       See notes to financial statements

                                       F-5
<PAGE>

                                 IMATEC, LTD. 
                       (A DEVELOPMENT STAGE ENTERPRISE) 
                           STATEMENT OF CASH FLOWS 
   
<TABLE>
<CAPTION>
                                                                Years Ended            November 17, 1988      Eight months ended 
                                                                December 31,             (Inception) to              August 31, 
                                                       -----------------------------      December 31,     ------------------------ 
                                                            1994           1995        1995 (Cumulative)       1995         1996 
                                                        ------------   -------------    -----------------   -----------  ---------- 
                                                                                                           (Unaudited) (Unaudited) 
<S>                                                      <C>            <C>               <C>               <C>        <C>      
CASH FLOWS FROM OPERATING ACTIVITIES 
   Net loss .........................................    ($ 115,164)    ($  662,594)     ($ 1,280,109)     ($424,965)  ($1,556,896) 
     Adjustments to reconcile net loss to net cash used 
        in operating activities 
        Amortization of discount and debt issuance costs                     52,147            52,147                      724,241 
        Depreciation and other amortization .........                                             857                        8,030 
        Increase (decrease) in cash flows from 
          Other current assets  .....................                        (9,715)           (9,715)                         765 
          Deposit....................................                                                                      (18,674) 
          Accrued expenses  .........................        1,948          408,547           412,735        375,854      (150,300) 
                                                        ----------     ------------      ------------    -----------   ----------- 
          NET CASH USED IN OPERATING 
             ACTIVITIES .............................     (113,216)        (211,615)         (824,085)       (49,111)     (992,834) 
                                                        ----------     ------------      ------------    -----------   ----------- 
CASH FLOWS FROM INVESTING ACTIVITIES 
   Proceeds from sale of marketable securities ......                        50,000            50,000                    1,749,098 
   Investment in marketable securities ..............                    (1,400,852)       (1,400,852)                  (2,242,028) 
   Purchases of fixed assets ........................                                            (612)                    (109,305) 
                                                                       ------------      ------------    -----------   ----------- 
          NET CASH USED IN INVESTING 
             ACTIVITIES .............................                    (1,350,852)       (1,351,464)                    (602,235) 
                                                                       ------------      ------------    -----------   ----------- 
CASH FLOWS FROM FINANCING ACTIVITIES 
   Proceeds from Bridge Financing (net of expenses of 
     $358,389 and $311,934 and exchanges of notes 
     payable of $125,000 and $50,000 in 1995 and 1996, 
     respectively) ..................................                     1,416,611         1,416,611                    1,788,066 
   Proceeds from issuance of common stock ...........       94,224              110           615,334 
   Increase in costs of proposed public offering ....                                                                     (103,087) 
   Decrease in due to/from stockholder ..............       15,971                                            21,152 
   Proceeds from other notes payable ................                       175,000           175,000         75,000 
   Payment of other notes payable ...................                                                                      (50,000) 
   Payments of organization costs ...................                                            (245) 
                                                        ----------     ------------      ------------    -----------   ----------- 
          NET CASH PROVIDED BY FINANCING ACTIVITIES .      110,195        1,591,721         2,206,700         96,152     1,634,979 
                                                        ----------     ------------      ------------    -----------   ----------- 
          INCREASE (DECREASE) IN CASH  ..............       (3,021)          29,254            31,151         47,041        39,910 
CASH -- beginning  ..................................        4,918            1,897                            1,897        31,151 
                                                        ----------     ------------      ------------    -----------   ----------- 
CASH -- ending  .....................................    $   1,897      $    31,151       $    31,151       $ 48,938      $ 71,061 
                                                        ==========     ============      ============    ===========   =========== 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION 
   Cash paid for income taxes .......................    $     812      $     1,000       $     3,744             --      $    808 
                                                        ==========     ============      ============    ===========   =========== 
   Cash paid for interest ...........................           --      $     3,315       $     3,315             --      $  3,534 
                                                        ==========     ============      ============    ===========   =========== 
NONCASH TRANSACTIONS 
   In 1994, a loan payable was capitalized (Note 2). 
    
</TABLE>

                      See notes to financial statements 

                                       F-6
<PAGE>

                                 IMATEC, LTD. 
                       (A DEVELOPMENT STAGE ENTERPRISE) 
                        NOTES TO FINANCIAL STATEMENTS 

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 

LINE OF BUSINESS 


   Imatec, Ltd. (Company) was incorporated on November 17, 1988 to develop, 
design, market and license image reproduction and enhancement products. The 
Company has been in the development stage since its inception. 


USE OF ESTIMATES 

   The preparation of financial statements in conformity with generally 
accepted accounting principles requires management to make estimates and 
assumptions that affect the reported amounts of assets and liabilities and 
disclosure of contingent assets and liabilities at the date of the financial 
statements and the reported amounts of revenues and expenses during the 
reporting period. Actual results could differ from those estimates. 

MARKETABLE SECURITIES 

   Marketable securities have been classified as available-for-sale and 
recorded at fair value. 

FIXED ASSETS 

   Office equipment was stated at cost and is being depreciated on the 
straight-line method over the estimated useful lives of the assets of five to 
seven years. 

DEBT ISSUANCE COSTS AND DISCOUNTS 

   Debt issuance costs on the Bridge Notes (Note 2) have been capitalized and 
are being amortized on the straight-line method over the term of the notes 
payable. 

   Discounts on the Bridge Notes are being amortized on the interest method 
over the term of the notes payable. 

PATENTS 

   Patent costs have been charged to operations as incurred as their 
realizability was uncertain and were included in research and development 
expenses. Effective January 1, 1996, the Company adopted SFAS No. 121 
(Accounting for the Impairment of Long-Lived Assets), without material 
effect. 

RESEARCH AND DEVELOPMENT COSTS AND ROYALTY EXPENSES 

   Research and development costs and royalty expenses (Note 7) have been 
charged to operations as incurred. 

LOSS PER SHARE 


   Loss per share was computed based on the weighted average number of common 
shares and common share equivalents outstanding during the year. All shares 
and per share amounts have been retroactively restated to reflect the reverse 
stock split on May 2, 1995, and the stock split on October 19, 1995. The 
1,105,000 shares issued in May 1995 and the shares and warrants issued in the 
Bridge Financing have been treated as outstanding for all periods in 
calculating loss per common share because such shares were issued at prices 
below the proposed public offering price (Notes 2 and 9). 


   Fully-dilutive loss per common share has not been presented because it was 
anti-dilutive. 

2. CAPITALIZATION 

ISSUANCE OF COMMON STOCK 

   On December 1, 1988, the Company issued 1,105,000 shares for $1,000. On 
September 20, 1991, a stockholder contributed 82,875 shares to the Company 
and the Company reissued 55,250 shares of common stock for $500,000 and 
27,625 shares in exchange for assistance with raising equity. Also in 1991, 
the stockholder gave 102,300 shares of common stock of the Company for 
assistance with raising equity for the Company. The Company valued the 27,625 
and 102,300 shares at $25,000 and $92,580, respectively, the values of the 
consulting services and charged additional paid-in-capital. 

                                     F-7
<PAGE>

   During 1994, a stockholder contributed 12,615 shares to the Company and 
the Company reissued the shares for $114,224, including the capitalization of 
a loan payable. 

   On May 30, 1995, the Company issued 1,105,000 shares of common stock in 
exchange for $110. Had the private placement not been fully sold, the Company 
could have reacquired up to the total of these shares for $110. 

REVERSE STOCK SPLIT 

   On May 2, 1995, the Company had a one-for-four reverse stock split. All 
shares and per share amounts have been retroactively restated to reflect the 
reverse stock split. 

REINCORPORATION 

   On September 20, 1995, the Company reincorporated in Delaware, authorizing 
20,000,000 shares of $.0001 par value common stock and 2,000,000 shares of 
$.0001 par value preferred stock. 

STOCK SPLIT 

   On October 19, 1995, the Company authorized a 22,100 for 1 stock split and 
issued 2,210,000 shares of new common stock in exchange for 100 shares of old 
common stock. All shares and per share amounts have been retroactively 
restated to reflect the stock split. 


BRIDGE FINANCING 

   On November 30, 1995 and April 12, 1996, the Company had closings under a 
private placement. Under the private placement, the Company issued 10% 
promissory notes in the aggregate principal amount of $1,900,000 and 
$2,100,000 (Bridge Notes), 262,091 and 289,694 shares of common stock and 
warrants to purchase 1,900,000 and 2,100,000 shares of common stock (Bridge 
Warrants), respectively. The Company has allocated $2, per share, and $.10, 
per warrant, of the proceeds of the private placement to the common stock and 
warrants, the values of the shares and warrants at the dates of issuance. 

   In February, 1996, an investor in one unit of the first closing was 
refunded $50,000, the notes, shares and warrants were canceled and then all 
were resold in the second closing. The cancellation has been included net in 
the second closing amounts. 

   The Company received net proceeds from the private placement of $1,517,834 
and $1,811,635, respectively, after disbursements of: 

                                            November 30,           April 12, 
                                                1995                  1996 
                                            --------------         ----------- 
Commission  .......................           $190,000              $210,000 
Non-accountable expense allowance               57,000                63,000 
Other expenses of placement agent               10,166                15,365 
Exchanges of notes payable  .......            125,000                50,000 
                                            --------------         ----------- 
                                              $382,166              $338,365 
                                            ==============         =========== 

   In addition, the Company incurred additional expenses of $101,223 under 
the first closing and $23,569 under the second closing (Unaudited). Total 
expenses of the private placement have been allocated between the Bridge 
Notes and common stock. 

   The Bridge Notes are payable upon the earlier of: (1) a public or other 
private financing by the placement agent of $8,000,000, (2) any other public 
or private placement of $4,500,000 or (3) 15 months from issuance. 

   Each Bridge Warrant is exercisable at $1, per warrant, commencing a year 
from closing for a period of five years. However, upon the effective date of 
the Company's proposed initial public offering (Note 9), each Bridge Warrant 
will automatically convert into a Redeemable Warrant (Note 9), subject to all 
of the terms and conditions of the Redeemable Warrants. 


                                       F-8
<PAGE>



BRIDGE FINANCING RESTRUCTURING (UNAUDITED) 
   
   In October 1996, the Company restructured the Bridge Financing. Accordingly,
all investors in the Bridge Financing were given the choice to either: (A)
convert, on the closing date of the proposed public offering, the principal
amount of their Bridge Note plus all accrued interest into shares of common
stock, at $4, per share, return all the common stock received in the Bridge
Financing and retain their Bridge Warrants or (B) upon the closing of the
proposed public offering receive a one-time cash payment equal to 50% of the
principal amount of their Bridge Notes, not receive any accrued interest and
return all the shares of common stock and Bridge Warrants that they received in
the Bridge Financing. The Bridge Restructuring is contingent on the closing of
the proposed public offering.

   As of October 15, 1996, substantially all Bridge Loan investors have 
responded, although six of the investors representing $250,000 of the Bridge 
Notes, 34,485 of the Bridge shares and 250,000 of the Bridge Warrants, have 
not as yet advised the Company whether they will choose option A or option B. 
Those investors that fail to choose either option A or option B by October 
25, 1996 will be deemed to have chosen option A by the Company. Consequently, 
assuming a closing date of the proposed public offering of October 31, 1996, 
the Company anticipates converting $2,150,000 principal amount of Bridge 
Notes and $166,776 of accrued interest thereon into 579,194 shares of common 
stock and repaying $925,000 of principal, all 551,785 shares of common stock 
and the balance of 1,850,000 Bridge Warrants issued in the Bridge Financing 
will be returned to the Company upon closing of the proposed public offering 
and exchanging 2,150,000 of Bridge Warrants for Redeemable Warrants (Note 9). 
The Company also anticipates the write-off of unamortized loan discount of 
$915,716 and deferred loan costs of $222,386 and the recognition of 
forgiveness of indebtedness income of $1,047,511. 
    

   Those investors that fail to choose either option A or option B by October 
25, 1996 may, thereafter, institute litigation against the Company disputing 
the option they were deemed to have chosen and/or seek to enforce the 
original terms and condition of their Bridge investment in the Company. The 
Company intends to vigorously defend any such litigation. 

RESERVED SHARES 

   As of December 31, 1995 and August 31, 1996 (Unaudited), the Company has 
reserved the following shares of common stock: 

                                        1995                          1996 
                                     -----------                   ----------- 
Bridge warrants  .............       4,000,000                     4,000,000 
Stock option plan ............                                       500,000 
                                     -----------                   ----------- 
                                     4,000,000                     4,500,000 
                                     ===========                   =========== 

   Does not include the cancellation of 1,850,000 of Bridge Warrants or the
shares to be reserved for issuance upon the conversion of the Bridge Notes under
the Bridge Financing restructuring.

3. MARKETABLE SECURITIES 

   As of December 31, 1995 and August 31, 1996 (Unaudited), the fair value of 
marketable securities, which approximated unamortized cost, were as follows: 

                                                1995                 1996 
                                            ------------          ------------ 
U.S. Treasury Bill  ...............          $  494,800 
U.S. Government Money Market Fund..             856,052           $1,843,782 
                                            ------------          ------------ 
                                             $1,350,852           $1,843,782 
                                            ============          ============ 

4. OTHER NOTES PAYABLE 

   During August, September and October 1995, the Company borrowed, with 
interest at 10%, per annum, $175,000 from customers of the placement agent, 
which were exchanged for units under the closings of the private placement 
(Note 2). 


                                      F-9
<PAGE>

5. INCOME TAXES 

   As of December 31, 1995 and 1994, the tax effects of timing differences 
between financial statement and income tax reporting were as follows: 
<TABLE>
<CAPTION>

                                            December 31,                   August 31, 
                                     --------------------------   ---------------------------- 
                                         1994          1995           1995           1996 
                                      -----------   -----------    -----------   ------------- 
                                                                  (Unaudited)    (Unaudited) 
<S>                                    <C>           <C>           <C>           <C>         
Research and development expenses      $ 130,000     $ 130,000     $ 130,000     $   150,000 
Net operating loss carryforward  ..      120,000       360,000       290,000         960,000 
                                      -----------   -----------    -----------   ------------- 
                                         250,000       490,000       420,000       1,110,000 
Valuation allowance  ..............     (250,000)     (490,000)     (420,000)     (1,110,000) 
                                      -----------   -----------    -----------   ------------- 
                                           --            --            --             -- 
                                      ===========   ===========    ===========   ============= 
</TABLE>

   As of December 31, 1995 and August 31, 1996 (Unaudited), the Company has 
net operating loss carryforwards available to reduce future taxable income of 
approximately $900,000, expiring through 2011 and $2,400,000, expiring 
through 2012. 

6. RELATED PARTY TRANSACTIONS 

   During 1995, the Company borrowed $21,152 from a stockholder/officer on 
demand, without interest, and it was repaid in December 1995. 

   During the years ended December 31, 1994 and 1995 and the eight months 
ended August 31, 1996 (Unaudited), a director was paid attorney's fees of 
$1,000, $31,000 and $49,423, respectively. 

7. LICENSE AGREEMENT 

   On June 25, 1995, the Company was granted a license from a stockholder/ 
officer (President, Chief Executive Officer and Chairman of the Board) of the 
Company to make, use, sell and otherwise exploit certain technologies under 
patents, including future technologies. The Company is required to pay the 
stockholder/officer a non-refundable advance royalty of $350,000, which was 
paid in January 1996, and, commencing July 1, 1995, an annual royalty of 
$140,000. If the stockholder/officer ceases to be employed by the Company, 
the annual royalty increases to $250,000. The annual royalty shall increase 
at the rate of 5%, per annum. The license agreement shall end when the last 
patent expires. 

8. EMPLOYMENT AGREEMENT 

   On July 1, 1995, the Company entered into an employment agreement with a 
stockholder to be President, Chief Executive Officer and Chairman of the 
Board of Directors expiring on the earlier of July 1, 2000, the Company being 
no longer involved in the technology business or a bankruptcy, merger or 
reorganization of the Company. Compensation under the agreement shall be 
$60,000, per year, 5% annual increases and a bonus equal to 1% of annual 
sales. In addition, the employee shall receive director's and officer's 
insurance, an automobile lease up to $8,400, per year, disability insurance 
for 60% of salary through age 65, Company paid disability of 40% of salary 
for one year and a life insurance policy of $1,000,000. 

9. SUBSEQUENT EVENTS 


EMPLOYMENT AGREEMENTS (UNAUDITED) 

   Effective January 1, 1996, the Company entered into an employment 
agreement with a vice president of marketing and sales expiring in one year. 
The agreement provides for an annual compensation of $100,000, plus a 
commission equal to 4% of revenues, as defined, in excess of $2,500,000. 

   Effective September 24, 1996, the Company entered into an employment 
agreement with a chief financial officer expiring September 23, 2001. The 
agreement provides for annual compensation of $95,000. 


                                      F-10
<PAGE>

LEASE 

   Effective February 1996, the Company entered into a noncancellable lease 
for office space through January 1999. The lease requires minimum annual rent 
ranging from $67,584 to $71,680 and additional rent for increases in real 
estate taxes and operating expenses. 


   As of August 31, 1996 (Unaudited), the future minimum aggregate annual 
payments under the lease were as follows: 

           Years Ending             
             August 31, 
           -------------- 
                1997                       $ 68,779 
                1998                         70,826 
                1999                         29,867 
                                           --------- 
                                           $169,472 
                                           ========= 

STOCK OPTION PLAN 

   In February, 1996, the Company adopted a nonqualified stock option plan 
under which it may grant up to 500,000 shares of common stock. The Company 
may not grant any options with a purchase price of less than fair market 
value of the common stock as of the date of the grant. Through April 29, 1996 
and August 31, 1996 (Unaudited), the Company had not granted any options 
under the Plan. 

PROPOSED PUBLIC OFFERING (UNAUDITED) 

   The Company anticipates a public offering in the fourth quarter of 1996 of 
1,000,000 shares of common stock, at $5 per share and 4,000,000 redeemable 
warrants, at $.25, per warrant (Redeemable Warrant). Each warrantholder will 
be entitled to purchase one share of common stock at $6.50, per share, and 
will be exercisable for period of three years from the date of the offering. 
The warrants will be redeemable by the Company, under certain circumstances, 
at $.10, per warrant, commencing nine months from the date of offering. The 
Company will also grant the underwriter an overallotment option for 45 days 
from the date of the offering to purchase up to an additional 150,000 shares 
of common stock and an additional 600,000 Redeemable Warrants. 

   The underwriter of the public offering will receive a discount of 10% and 
a non-accountable expense allowance equal to 3% of the gross proceeds of the 
public offering. The Company will also retain the underwriter as a financial 
consultant for a period of two years for $48,000, payable upon closing of the 
public offering. In addition, the Company has agreed to sell to the 
underwriter, for nominal consideration, warrants to purchase 100,000 shares 
of common stock and 400,000 Redeemable Warrants. The shares and Redeemable 
Warrants under the Underwriter's Warrants will be exercisable at 160% of the 
initial offering price per share of common stock and 160% of the initial 
offering price per Redeemable Warrants, respectively, for a period of five 
years from the date of the offering. 

10. INTERIM FINANCIAL STATEMENT (UNAUDITED) 

   In the opinion of management, the interim unaudited financial statements 
as of August 31, 1995 and 1996, reflect all material adjustments, consisting 
only of normal recurring adjustments, necessary for a fair presentation of 
the financial position, the results of operations and cash flows. Interim 
results are not necessarily indicative of the results of the entire year. 
   
11. PRO FORMA BALANCE SHEET (UNAUDITED)

    The pro forma balance sheet of Imatec, Ltd., as of August 31, 1996, reflects
the Bridge Financing Restructuring (Note 2) as if it had occurred on August 31,
1996 and does not include any adjustments related to the proposed public
offering (Note 9).
    

                                      F-11
<PAGE>

============================================================================= 

   No dealer, salesman or other person has been authorized to give any 
information or to make any representations other than those contained in this 
Prospectus and if given or made, such information or representations must not 
be relied upon as having been authorized by the Company or any Underwriter. 
Neither the delivery of this Prospectus nor any sale made hereunder shall, 
under any circumstances create any implication that there has been no change 
in the affairs of the Company since the date hereof or that information 
contained herein is correct as of any date subsequent to the date hereof. 
This Prospectus does not constitute an offer to sell or a solicitation of an 
offer to buy any of the securities offered hereby by anyone in any 
jurisdiction in which such offer or solicitation is not authorized or in 
which the persons making such offer or solicitation are not qualified to do 
so or to anyone to whom it is unlawful to make such offer or solicitation. 

                              TABLE OF CONTENTS 


                                                                       Page 
                                                                     -------- 
Prospectus Summary  .............................................       3 
The Offering  ...................................................       5 
Risk Factors  ...................................................       7 
Use of Proceeds  ................................................      14 
Dividend Policy  ................................................      14 
Dilution  .......................................................      15 
Capitalization  .................................................      16 
Selected Financial Data  ........................................      17 
Plan of Operations  .............................................      18 
Business  .......................................................      20 
Management  .....................................................      25 
Principal Stockholders  .........................................      29 
Selling Security Holders  .......................................      31 
Certain Transactions  ...........................................      37 
Description of Securities  ......................................      37 
Shares Available for Future Sale  ...............................      39 
Underwriting  ...................................................      40 
Legal Matters  ..................................................      42 
Experts  ........................................................      42 
Change in Accountants  ..........................................      42 
Additional Information  .........................................      42 
Index to Financial Statements  ..................................     F-1 

   Until _____, 1996 (25 days after the date of this Prospectus), all dealers 
effecting transactions in the registered securities, whether or not 
participating in this distribution, may be required to deliver a Prospectus. 
This is in addition to the obligation of dealers to deliver a Prospectus when 
acting as underwriters and with respect to their unsold allotments or 
subscriptions. 


============================================================================= 


<PAGE>

============================================================================= 

                                 IMATEC, LTD. 










                                     [LOGO]












                             1,000,000 SHARES OF 
                                 COMMON STOCK 
                                     AND 
                             4,000,000 REDEEMABLE 
                                   WARRANTS 




                                  ------------
                                   PROSPECTUS
                                  ------------






                           A.S. GOLDMEN & CO., INC.







                                 ------, 1996 

================================================================================
<PAGE>

                                   PART II 
                    INFORMATION NOT REQUIRED IN PROSPECTUS 

ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS. 

   The Company's Certificate of Incorporation provides for indemnification of 
personal liability of the Directors of the Corporation to the fullest extent 
permitted by paragraph "7" of Subsection (b) of Section 102 of the General 
Corporation Law of the State of Delaware. 

   Article VIII of the By-Laws of the Company ("By-Laws"), which is set forth 
below in its entirety, provides for indemnification of officers, directors, 
employees and agents substantially to the extent permitted under the Delaware 
General Corporation Law. 

   Article VIII of the By-Laws provides as follows: 

                                "ARTICLE VIII" 
                               INDEMNIFICATION 

   The corporation shall indemnify, to the extent permitted by the General 
Corporation Law of Delaware as amended from time to time, (a) each of its 
present and former officers and directors, and (b) each of its present or 
former officers, directors, agents or employees who are serving or have 
served at the request of the corporation as an officer, director or partner 
(or in any similar position) of another corporation, partnership, joint 
venture, trust or other enterprise, against expenses (including attorney's 
fees), judgments, fines and amounts paid in settlement actually and 
reasonably incurred in connection with any threatened, pending or completed 
action, suit or proceeding, whether by or in the right of the corporation by 
a third party or otherwise, to which such person is made a party or 
threatened to be made a party by reason of such office in the corporation or 
in another corporation, partnership, joint venture, trust or other 
enterprise. Such indemnification shall inure to the benefit of the heirs, 
executors and administrators of any indemnified person. To the extent 
permitted by the General Corporation Law of Delaware, under general or 
specific authority granted by the Board of Directors, (a) the corporation by 
specific action of the Board of Directors may furnish such indemnification to 
its agents and employees with respect to their activities on behalf of the 
corporation; (b) the corporation by specific action of the Board of Directors 
may furnish such indemnification to each present or former officer, director, 
employee or agent of a constituent corporation absorbed in a consolidation or 
merger with the corporation and to each officer, director, agent or employee 
who is or was serving at the request of such constituent corporation as an 
officer, director, agent or employee of another corporation, partnership, 
joint venture, trust or other enterprise; and (c) the corporation may 
purchase and maintain indemnification insurance on behalf of any of the 
officers, directors, agents or employees whom it is required or permitted to 
indemnify as provided in this Article. 

ITEMS 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION. 

   The estimated expenses in connection with this Offering are as follows: 


SEC filing fee  ...........................................      $39,472.04 
NASD filing fee  ..........................................       11,946.89 
Accounting fees and expenses*  ............................       75,000.00 
Legal fees and expenses*  .................................      175,000.00 
Blue Sky fees and expenses*  ..............................       60,000.00 
Printing and engraving*  ..................................      100,000.00 
Transfer Agent's and Registrar fees* ......................       10,000.00 
Miscellaneous expenses*  ..................................       28,581.07 
     Total  ...............................................     $500,000.00 


- ------ 
* Estimated 

                                      II-1
<PAGE>

ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES. 

   In February 1994, the Company issued an aggregate of 12,615 shares of 
Common Stock to two investors for aggregate gross proceeds of $114,244.00. 
Such sale was made pursuant to Section 4(2) of the Securities Act. 

   In May 1995, the Company sold an aggregate of 1,105,000 shares of Common 
Stock to four investors for aggregate gross proceeds of $110.50. Such sale 
was made pursuant to Section 4(2) of the Securities Act. 

   
   In October 1995, the Company entered into a placement agent agreement with 
the Underwriter, which was subsequently amended, to act as placement agent 
with respect to a best efforts private placement for a minimum of $1,000,000 
and a maximum of $4,000,000 of the Company's securities. On April 12, 1996, 
the Company concluded the private placement pursuant to which it sold an 
aggregate of 80 units for aggregate gross proceeds of $4,000,000. Each unit 
consisted of (i) a $50,000 unsecured promissory note bearing interest at the 
rate of 10% per annum, (ii) 6,897 shares of Common Stock, and (iii) 50,000 
Common Stock purchase warrants exercisable at $1.00 per share. The private 
placement was made pursuant to Section 4(2) of the Securities Act in 
compliance with Rule 506 of Regulation D promulgated thereunder, and all of 
the purchasers were accredited investors, and there was no general 
solicitation or advertising with respect thereto. In October 1996, the Bridge
Financing was restructured such that the Company, upon the closing of this
Offering, will repay an aggregate of $925,000 of principal with respect to the
Notes of those Bridge Investors who chose Option B. The balance of the principal
amount of the Notes issued in the Bridge Financing of those investors who chose
Option B, and all accrued interest thereon, is being forgiven and will not be
repaid. In addition, the Company will issue, upon the closing date of this
Offering an aggregate of 579,194 shares of Common Stock (assuming a closing date
of October 31, 1996) and 2,150,000 Bridge Warrants to those Bridge Investors who
chose Option A. The balance of 1,850,000 Bridge Warrants and all 551,785 shares
of Common Stock issued in the Bridge Financing will be returned to the Company
for cancellation upon the closing of this Offering.
    
<TABLE>
<CAPTION>
   
     Item 27.  Exhibits. 
 ------------   ------------------------------------------------------------------------------------------------ 
<S>                      <C>                                                                                         
     *****1.1  Revised Form of Underwriting Agreement by and between the Company and the Underwriter. 
     *****1.2  Revised Form of Underwriter's Warrant Agreement, including form of specimen certificate for Underwriter's 
               Warrant. 
      *** 3.1  Certificate of Incorporation of the Company. 
      *** 3.2  By-Laws of the Company. 
      ****4.1  Form of Specimen certificate for shares of Common Stock. 
     *****4.2  Revised Form of Redeemable Warrant Agreement by and between the Company and Continental Stock Transfer 
               & Trust Company, including a form of specimen certificate for the Redeemable Warrants. 
     *****5    Revised Opinion of Zukerman Gore & Brandeis, LLP. 
     ****10.1  Form of Financial Advisory and Consulting Agreement by and between the Company and the Underwriter. 
      ***10.2  Employment Agreement by and between the Company and Dr. Hanoch Shalit. 
       **10.3  Form of Employment Agreement by and between the Company and Lawrence Kollender. 
        *10.4  Employment Agreement by and between the Company and James A. Smith. 
     ****10.5  License Agreement by and between the Company and Dr. Hanoch Shalit as amended. 
     ****10.6  Form of Indemnification Agreement to be entered into with officers and directors. 
      ***10.7  Lease for the Company's principal offices located at 150 E. 58th Street, New York, NY 10155. 
     ****10.8  Form of Stock Option Plan. 
     ****16.1  Letter from Present, Cohen, Smallowitz & Glassman regarding change in certifying accountants. 
    *****24    Consent of Zukerman Gore & Brandeis, LLP contained in Exhibit 5. 
        *24.1  Consent of Most Horowitz & Company, LLP. 
     ****24.2  Consent of Wyatt, Gerber, Burke & Badie, L.L.P. 
</TABLE>
    
- ------ 
    * Filed herewith. 
   ** Previously filed as an exhibit to the Company's Registration Statement 
      on Form SB-2, Registration No. 333-3589, dated May 13, 1996. 
  *** Previously filed as an exhibit to the Company's Registration Statement 
      on Form SB-2, Registration No. 333-3589, dated May 13, 1996 and 
      Amendment No. 1 to the Company's Registration Statement on Form SB-2, 
      Registration No. 333-3589, dated June 24, 1996. 
 **** Previously filed as an exhibit to Amendment No. 1 to the Company's 
      Registration Statement on Form SB-2, Registration No. 333-3589, dated 
      June 24, 1996. 
   
***** Previously filed as an exhibit to Amendment No. 3 to the Company's
      Registration Statement on Form SB-2, Registration No. 333-3589, dated
      October 11, 1996.
    


                                      II-2
<PAGE>

ITEM 28. UNDERTAKINGS. 

   The undersigned Registrant will provide to the Underwriter at the closing 
specified in the underwriting agreement certificates in such denominations 
and registered in such names as required by the Underwriter to permit prompt 
delivery to each purchaser. 

   (b) Insofar as indemnification for liabilities arising under the 
Securities Act may be permitted to directors, officers or controlling persons 
of the Registrant pursuant to the provisions referred to in Item 24 of this 
Registration Statement or otherwise, the Registrant has been advised that in 
the opinion of the Securities and Exchange Commission such indemnification is 
against public policy as expressed in the Securities Act and is, therefore, 
unenforceable. In the event that a claim for indemnification against such 
liabilities (other than the payment by the Registrant of expenses incurred or 
paid by a director, officer or controlling person of the Registrant in the 
successful defense of any action, suit or proceeding) is asserted by such 
director, officer or controlling person in connection with the securities 
being registered, the Registrant will, unless in the opinion of its counsel 
the matter has been settled by controlling precedent, submit to a court of 
appropriate jurisdiction the question whether such indemnification by it is 
against public policy as expressed in the Securities Act and will be governed 
by the final adjudication of such issue. 

   (c) The undersigned Registrant will: 

   (1) For determining any liability under the Securities Act, treat the 
information omitted from the form of prospectus filed as part of this 
registration statement in reliance upon Rule 430A and contained in the form 
of a prospectus filed by the small business issuer under Rule 424(b)(1) or 
(4) or 497(h) under the Securities Act as part of this Registration Statement 
as of the time the Commission declared it effective. 

   (2) For any liability under the Securities Act, treat each post-effective 
amendment that contains a form of prospectus as a new Registration Statement 
for the securities offered in the Registration Statement, and that the 
offering of the securities at that time as the initial bona fide offering of 
those securities. 

   Undertakings Required by Regulation S-B, Item 512(a): 

   The undersigned registrant hereby undertakes: 

   1. To file, during any period in which offers or sales are being made, a 
post-effective amendment to this registration statement: 

   (i) To include any prospectus required by section 10(a)(3) of the 
Securities Act of 1933; 

   (ii) To reflect in the prospectus any facts or events arising after the 
effective date of the registration statement (or the most recent 
post-effective amendment thereof) which, individually or in the aggregate, 
represent a fundamental change in the information set forth in the 
registration statement. Notwithstanding the foregoing, any increase or 
decrease in volume of securities offered (if the total dollar value of 
securities offered would not exceed that which was registered) and any 
deviation from the low or high end of the estimated maximum offering range 
may be reflected in the form of prospectus filed with the Commission pursuant 
to Rule 424(b) if, in the aggregate, the changes in volume and price 
represent no more than a 20% change in the maximum aggregate offering price 
set forth in the "Calculation of Registration Fee" table in the effective 
registration statement; 

   (iii) To include any material information with respect to the plan of 
distribution not previously disclosed in the registration statement or any 
material change to such information set forth in the registration statement; 

   2. That, for the purpose of determining any liability under the Securities 
Act of 1933, each such post-effective amendment shall be deemed to be a new 
registration statement relating to the securities offered therein, and the 
offering of such securities at the time shall be deemed to be the initial 
bona fide offering thereof. 

   3. To remove from registration by means of a post-effective amendment any 
of the securities being registered which remain unsold at the termination of 
the offering. 

                                      II-3
<PAGE>

                                  SIGNATURES 

   
   In accordance with the requirements of the Securities Act of 1933, as 
amended, the Registrant certifies that it has reasonable grounds to believe 
that it meets all the requirements for filing on Form SB-2 and authorized 
this Registration Statement to be signed on its behalf by the undersigned, in 
the City of New York, State of New York on October 17, 1996. 
    


                                          IMATEC, LTD. 
                                          By: /s/ Hanoch Shalit 
                                              ------------------------------- 
                                              Hanoch Shalit, President, 
                                              Chief Executive Officer, 
                                              Chairman of the Board of 
                                              Directors 

   In accordance with the requirements of the Securities Act of 1933, as 
amended, this Registration Statement was signed by the following persons in 
the capacities and on the dates stated. 
<TABLE>
<CAPTION>
   
       Signature                          Title                           Date 
 ----------------------   --------------------------------------   ------------------- 
<S>                          <C>                                        <C>  
   /s/ Hanoch Shalit     President, Chief Executive Officer and     October 17, 1996 
  ---------------------  Director. 
      Hanoch Shalit 

     /s/ Steven Ai       Director                                   October 17, 1996 
  --------------------- 
        Steven Ai 

    /s/ Neal Factor      Director                                   October 17, 1996 
  --------------------- 
       Neal Factor 

   /s/ Simon Cross      Director                                    October 17, 1996 
  --------------------- 
       Simon Cross 

  /s/ James A. Smith     Chief Financial Officer                    October 17, 1996 
  --------------------- 
     James A. Smith 

</TABLE>
    
                                      II-4
<PAGE>

                                EXHIBIT INDEX 
<TABLE>
<CAPTION>

                Exhibits 
                ---------
   <S>          <C>                                                                                         
     *****1.1  Revised Form of Underwriting Agreement by and between the Company and the Underwriter. 
     *****1.2  Revised Form of Underwriter's Warrant Agreement, including form of specimen certificate for Underwriter's 
               Warrant. 
      *** 3.1  Certificate of Incorporation of the Company. 
      *** 3.2  By-Laws of the Company. 
     *****4.1  Form of Specimen certificate for shares of Common Stock. 
     *****4.2  Revised Form of Redeemable Warrant Agreement by and between the Company and Continental Stock Transfer 
               & Trust Company, including a form of specimen certificate for the Redeemable Warrants. 
     *****5    Revised Opinion of Zukerman Gore & Brandeis, LLP. 
     ****10.1  Form of Financial Advisory and Consulting Agreement by and between the Company and the Underwriter. 
      ***10.2  Employment Agreement by and between the Company and Dr. Hanoch Shalit. 
       **10.3  Form of Employment Agreement by and between the Company and Lawrence Kollender. 
        *10.4  Employment Agreement by and between the Company and James A. Smith. 
     ****10.5  License Agreement by and between the Company and Dr. Hanoch Shalit as amended. 
     ****10.6  Form of Indemnification Agreement to be entered into with officers and directors. 
      ***10.7  Lease for the Company's principal offices located at 150 E. 58th Street, New York, NY 10155. 
     ****10.8  Form of Stock Option Plan. 
     ****16.1  Letter from Present, Cohen, Smallowitz & Glassman regarding change in certifying accountants. 
    *****24    Consent of Zukerman Gore & Brandeis, LLP contained in Exhibit 5. 
        *24.1  Consent of Most Horowitz & Company. LLP. 
     ****24.2  Consent of Wyatt, Gerber, Burke & Badie, L.L.P. 
</TABLE>

- ------ 
    * Filed herewith. 
   ** Previously filed as an exhibit to the Company's Registration Statement 
      on Form SB-2, Registration No. 333-3589, dated May 13, 1996. 
  *** Previously filed as an exhibit to the Company's Registration Statement 
      on Form SB-2, Registration No. 333-3589, dated May 13, 1996 and 
      Amendment No. 1 to the Company's Registration Statement on Form SB-2, 
      Registration No. 333-3589, dated June 24, 1996. 
 **** Previously filed as an exhibit to Amendment No. 1 to the Company's 
      Registration Statement on Form SB-2, Registration No. 333-3589, dated 
      June 24, 1996. 
***** Included herewith and previously filed as an exhibit to Amendment No. 1 
      to the Company's Registration Statement on Form SB-2, Registration No. 
      333-3589, dated June 24, 1996. 
   
***** Previously filed as an exhibit to Amendment No. 3 to the Company's
      Registration Statement on Form SB-2, Registration No. 333-3589, dated
      October 11, 1996.
    


<PAGE>
                          MOST HOROWITZ & COMPANY, LLP
                          Certified Public Accountants
                          1133 Avenue of the Americas
                               New York, NY 10036
                               Tel (212) 764-4910
                               Fax (212) 575-2017

               CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

We hereby consent the use in this Registration Statement on Form SB-2 of our
report dated April 29, 1996, relating to the financial statements of Imatec,
Ltd. and the reference to our Firm under the caption "Experts" in the
prospectus.

                                        /s/ Most Horowitz & Company, LLP
                                        --------------------------------
                                         Most Horowitz & Company, LLP

New York, New York
October 17, 1996



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