IMATEC LTD, SB-2/A, 1996-07-19

IMATEC LTD
SB-2/A, 1996-07-19
PHOTOGRAPHIC EQUIPMENT & SUPPLIES

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<PAGE>

As filed with the Securities and Exchange Commission on July 19, 1996
Registration No. 333-3589
=============================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------
AMENDMENT
NO. 2
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
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>

IMATEC, LTD.
CROSS REFERENCE SHEET
(SHOWING LOCATION IN THE PROSPECTUS OF INFORMATION REQUIRED BY ITEMS 1
THROUGH 23, PART I, OF FORM SB-2)

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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 Inside Front Cover Page of Prospectus; Outside Back
Prospectus.......................................... 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 JULY 19, 1996
IMATEC, LTD.
1,000,000 SHARES OF COMMON STOCK,
4,000,000 CLASS A REDEEMABLE WARRANTS AND
4,000,000 CLASS B 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"), 4,000,000
Class A redeemable Common Stock purchase warrants (the "Class A Redeemable
Warrants") and 4,000,000 Class B redeemable Common Stock purchase warrants
(the "Class B Redeemable Warrants"). The Class A Redeemable Warrants and
Class B Redeemable Warrants are collectively referred to as 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, the Class A Redeemable Warrants
and the Class B Redeemable Warrants will be $5.00, $.25 and $1.00,
respectively. Each Class A Redeemable Warrant and each Class B Redeemable
Warrant entitles the registered holder thereof to purchase one share of
Common Stock at an exercise price of $6.50 and $5.50, respectively, subject
to adjustment, commencing on the date of this Prospectus until _________,
1998 [24 months from the date of this Prospectus] and _______, 2001 [60
months from the date of this Prospectus], respectively, at which time the
Redeemable Warrants shall expire. Upon the prior written consent of A.S.
Goldmen & Co., Inc. (the "Underwriter"), each Class A Redeemable Warrant and
each Class B Redeemable Warrant is redeemable by the Company at any time
after ________, 1997, [9 months from the date of this Prospectus] and
_______, 1997, [12 months from the date of this Prospectus], respectively, 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"), if the Common Stock is
traded on the over-the-counter market, or the closing sale price of the
Common Stock on the primary exchange on which the Common Stock is traded, if
the Common Stock is traded on a national securities exchange, equals or
exceeds $7.50 and $9.00, respectively, 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," "Description of
Securities" and "Underwriting."

(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 4 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.
<PAGE>

- -----------------------------------------------------------------------------

<TABLE>
<CAPTION>
Price Underwriting Proceeds to
to Public Discount (1) Company (2)
Per share of Common Stock $ $ $
<S> <C> <C> <C>
Per Class A Redeemable Warrant ... $ $ $
Per Class B 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 (the "Offering"). For indemnification arrangements with,
and additional compensation payable to, the Underwriter, see
"Underwriting."
(2) Before deducting estimated expenses of the Offering payable by the
Company of $800,000, 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 Class A
Redeemable Warrants and/or 600,000 Class B 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
the 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. at 99 Wood
Avenue South, Iselin, New Jersey 08830, 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,
the Class A Redeemable Warrants and the Class B Redeemable Warrants on Nasdaq
under the symbols IMEC, IMECW and IMECZ, 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 8,000,000 shares of Common
Stock issuable by the Company upon the exercise of 8,000,000 Redeemable
Warrants to be issued in the 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) 551,785 shares of Common Stock, (ii)
4,000,000 Class A Redeemable Warrants, and (iii) 4,000,000 shares of Common
Stock issuable by the Company upon the exercise of the 4,000,000 Class A
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
50,000 shares for Dr. Hanoch Shalit, the Company's President and Chief
Executive Officer, the Bridge Selling Security Holders and the Founding
Selling Security Holders have agreed with the Underwriter not to effect any
sales of the securities issued to them until 18 months after the date of this
Prospectus without the prior written consent of the Underwriter. 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 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 "Prospectus
Summary - The Offering," "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 THE 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 Class A Redeemable Warrants and/or
600,000 Class B Redeemable Warrants and the issuance of up to 1,200,000
shares of Common Stock upon exercise of the Redeemable Warrants included in
the Underwriter's overallotment option; (ii) the issuance of 12,000,000
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, 400,000 Class A Redeemable Warrants, 400,000 Class B Redeemable
Warrants and the underlying 800,000 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 forward split effected in October 1995.

THE COMPANY

Imatec, Ltd. (the "Company") was formed in 1988 to develop, design, market
and license its Imatec 20/20 system ("Imatec 20/20(TR)"), which enhances
image reproduction by reducing distortion that normally occurs in the imaging
process. Based on the results of extensive testing by the Company, the Imatec
20/20(TR) system is capable of improving the quality of film reproduction of
images taken by medical imaging devices such as Magnetic Resonance Imaging
machines ("MRI"), Computer Topography machines ("CT") and Ultrasound
machines. In addition, the Imatec 20/20(TR) system achieves this goal
regardless of the type of the medical imaging film used and as a consequence,
may result in cost savings to the user. The Company also recently developed
the Imatec 20/20(TR) system to improve the quality of images in the medical
imaging field of teleradiology; which is the viewing of the same image on
different monitor screens in separate locations. The Company believes that,
in addition to the medical imaging field, the Imatec 20/20(TR) system can be
used in markets such as graphic arts, computers and video display.

The Imatec 20/20(TR) system is designed to measure the image
characteristics of an original image and compare it to its reproduction,
computing the existing distortion between the two images and correcting such
distortion. Current imaging systems create reproductions that have
distortions and are compensated for by subjective adjustments during the
reproduction process. Aspects of the Imatec 20/20(TR) system are set forth in
three United States patents (the "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(TR) system that can be used with MRI, CT and
Ultrasound machines.

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."

1
<PAGE>

the use of the Imatec 20/20(TR) system for other applications in the medical
imaging field and in other imaging fields, such as graphic arts, computers
and video display. The Company does not presently intend to engage in any
manufacturing, sales, distribution or service activities with respect to
products that incorporate the Imatec 20/20(TR) system.

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 20, 1995. The Company maintains its offices at 150 E.
58th Street, New York, NY 10155 and its telephone number is (212) 826-0440.

2
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<CAPTION>

THE OFFERING
<S> <C>
Securities Offered............. 1,000,000 shares of Common Stock, 4,000,000 Class A Redeemable Warrants and 4,000,000
Class B Redeemable Warrants. See "Description of Securities."

Securities Registered for the
Selling Security Holders..... An aggregate of 551,785 shares of Common Stock and 4,000,000 Class A Redeemable
Warrants are being registered hereby and may be sold by the Bridge Selling Security
Holders. An additional 150,000 shares of Common Stock are being registered and may be
sold by the Founding Selling Security Holders. None of the Selling Security Holders'
Securities are being underwritten in the 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 Class A Redeemable Warrants are exercised. See "Selling Security
Holders".

Terms of Redeemable Warrants... Each Class A Redeemable Warrant and Class B Redeemable Warrant entitles the holder
thereof to purchase one share of Common Stock at an exercise price of $6.50 and $5.50
per share, respectively, at any time commencing on the date of this Prospectus until
________, 1998 [24 months after the date of this Prospectus] and ________, 2001 [60
months from the date of this Prospectus], respectively, subject to adjustment in
certain circumstances. Each Class A Redeemable Warrant and each Class B Redeemable
Warrant, is redeemable by the Company commencing ________, 1997 [9 months after the
date of this Prospectus] and _______, 1997 [12 months after the date of this
Prospectus] respectively. The Class A Redeemable Warrants and the Class B 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 Class A Redeemable Warrant and
per Class B Redeemable Warrant provided that the average closing bid price of the
Common Stock as reported by Nasdaq, if the Common Stock is traded on the
over-the-counter market, or the closing sale price of the Common Stock on the primary
exchange on which the Common Stock is traded, if the Common Stock is traded on a
national securities exchange, equals or exceeds $7.50 and $9.00 per share,
respectively, 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 Offering........ 2,761,785 shares

After the Offering............ 3,761,785 shares

Use of Proceeds................ Repayment of indebtedness, research and development, 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 SmallCap
Symbols (1):
Common Stock................ IMEC

Class A Redeemable
Warrants................... IMECW

Class B Redeemable
Warrants................... IMECZ
</TABLE>
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(1) 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."

3
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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 only
earned nominal revenues from operations. Since inception in November 1988,
the Company's principal activities have been (i) research and development
related to the development of the Imatec 20/20(TR) system, (ii) testing of
the Imatec 20/20(TR) system, 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 the Company had an accumulated deficit of $1,280,109. The
Company has continued to incur losses since December 31, 1995. 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 developing, testing and marketing new
technologies. 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
Imatec 20/20(TR) system, the inability of the Company to respond in a timely
manner to changing technologies, the potential obsolescence of the Imatec
20/20(TR) system as a result of changing technologies, and the failure of a
market to develop for the Imatec 20/20(TR) system. 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
Imatec 20/20(TR) system to the medical imaging field, or to any other fields,
will be successful, or that the Company will be able to successfully license
or otherwise exploit the Imatec 20/20(TR) system. 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 repay $4,000,000 of
indebtedness plus interest that it incurred in an interim financing that was
completed in April, 1996 and 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 the 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 Imatec
20/20(TR) system. There can be no assurance that the Company will not suffer
from these or any other problems, 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(TR) system with respect to
the medical imaging field, the Company is unknown in the marketplace and
there can be no assurance that a market for products that incorporate the
Imatec 20/20(TR) system will develop. Consequently, although the Company will
seek to license the Imatec 20/20(TR) system to third parties in the medical
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 use of the Imatec 20/20(TR) system for other applications in the
medical imaging field and in other imaging fields, such as graphic arts,
computers and video display, although to date the Company has not engaged in
any research and development or marketing efforts with respect to any other
imaging fields besides medical imaging. There can be no assurance, however,
that the Company will be able to apply the Imatec 20/20(TR) system to any
other markets or that a market will develop for any products incorporating
the Imatec 20/20(TR) system in the medical imaging field or any other field,
or that any product incorporating the Imatec 20/20(TR) system will ever
receive acceptance from any intended users. See "Business -- The Company's
Business Strategy."

4
<PAGE>

Risks of Technological Change; Competition. The image enhancement field is
subject to rapid and significant technological change that may render the
Imatec 20/20(TR) system obsolete or products that incorporate the Imatec
20/20(TR) system 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 Imatec 20/20(TR) system to adapt to such changes. There can be no
assurance that the Company will be able to successfully modify or upgrade its
Imatec 20/20(TR) system 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 Imatec 20/20(TR) system, 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 Imatec 20/20(TR) system.
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 Imatec 20/20(TR) system, as a result of which the Imatec
20/20(TR) system 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 Imatec 20/20(TR) system 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 Imatec 20/20(TR) system. 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 Imatec
20/20(TR) system 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 Imatec 20/20(TR)
system, 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 Imatec 20/20(TR)
system. 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, 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 Imatec 20/20(TR) system 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 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.

5
<PAGE>

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 contain 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 "Intellectual Property" and "Management -- Executive
Compensation."

Possible Need for FDA Clearance. The Company is presently uncertain
whether clearance from the United States Food and Drug Administration ("FDA")
will be required for the Imatec 20/20(TR) System. 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 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 similar 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 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 one
hundred fifty (150) 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.

In order to conduct human clinical studies for any medical procedure
proposed for the Company's products, the Company could also be required to
obtain an Investigational Device Exemption ("IDE") from the FDA, which would
further increase the time before potential FDA clearance. In order to obtain
an IDE, the Company would be required to submit an application to the FDA,
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 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 FDA clearance is required for the Imatec 20/20(TR)
system, 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 will have sufficient
funds to pursue such clearances. Moreover, failure to receive requisite
clearance for the Imatec 20/20(TR) system, would prevent the Company from
commercializing its technologies as intended, and would have a material
adverse effect on the business of the Company.

6
<PAGE>

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.

Distribution of the Imatec 20/20(TR) system in countries other than the
United States may be subject to regulation in those countries. There can be
no assurance that the Company 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 27% 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 research and
production prototypes. Presently, the Company has only two executive
officers. Dr. Hanoch Shalit and Lawrence Kollender. 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.
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 completion of the Offering, the
Company's current officers and directors will own approximately 24.5% of the
issued and outstanding shares of Common Stock. Accordingly,

7
<PAGE>

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 completion of the 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 $3.22 per share, or approximately 64% per share. See
"Dilution."

Repayment of Indebtedness. Approximately fifty percent (50%) of the net
proceeds of this Offering have been allocated for the repayment of the Notes
which were issued to the Bridge Selling Security Holders in the Bridge
Financing. See "Use of Proceeds."

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."

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."

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 Class
A Redeemable Warrants and Class B Redeemable Warrants may exercise their
right to acquire the Common Stock and pay an exercise price of $5.50 or $6.50
per share, respectively, subject to adjustment, prior to ___________, 1998
[24 months after the date of this Prospectus] or ________, 2001 [60 months
after the date of this Prospectus], respectively, 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 Class A Redeemable Warrants and the Class B 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] and ______, 1997 [twelve (12) months after the date of this
Prospectus], respectively, on 30 days' prior written notice, at a price of
$.10 per Redeemable Warrant if the average closing bid price for the Common
Stock equals or exceeds $7.50 and $9.00 per share, respectively, 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 Redeem-

8
<PAGE>

able 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."

Shares Eligible for Future Sale. Upon consummation of the Offering, there
will be 3,761,785 shares of Common Stock outstanding (3,911,785 if the
Underwriter's over-allotment option is exercised in full). Prior to the
Offering there were 2,761,785 shares of Common Stock issued and outstanding.
Of such shares, 551,785 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 50,000 shares for Dr. Hanoch Shalit, the
Chief Executive Officer and President of the Company, all of the Selling
Security Holders have agreed not to directly or indirectly offer, sell,
transfer, or otherwise encumber or dispose of any of the Company's
securities, whether or not presently owned, for a period of 18 months after
the date of this Prospectus unless otherwise permitted by the Underwriter.
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," "Underwriting" and "Certain Transactions--Escrow
Agreement."

The 4,000,000 Class A Redeemable Warrants being offered by the Company and
the 4,000,000 Class A Redeemable Warrants being registered for the account of
the Bridge Selling Security Holders entitle the holders thereof to purchase
up to an aggregate of 8,000,000 shares of Common Stock any time during the
period commencing on the date of this Prospectus and expiring 24 months from
the date of this Prospectus. The 4,000,000 Class B Redeemable Warrants being
offered by the Company entitle the holders thereof to purchase up to an
aggregate of 4,000,000 shares of Common Stock at any time during the period
commencing on the date of this Prospectus and expiring 60 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."

9
<PAGE>

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 continued 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.

Forward Looking Statements. This Prospectus contains certain forward
looking statements concerning the Company's operations, economic performance
and financial condition. Such statements are subject to various risks and
uncertainties. Actual results could differ materially from those currently
anticipated due to a number of factors, including those identified under
"Risk Factors" and elsewhere in this Prospectus.

10
<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 $8,200,000, (or approximately
$9,505,000 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:

<TABLE>
<CAPTION>
Approximate Approximate
Amount Percentage
------------- -------------
<S> <C> <C>
Repayment of indebtedness(1) . $4,209,363 51.4%
Research and development(2) . 1,000,000 12.2%
Marketing and licensing(3) .. 750,000 9.1%
Working capital ............. 2,240,637 27.3%
------------- -------------
Total ..................... $8,200,000 100.0%
============= =============
</TABLE>

- ------
(1) Reflects outstanding principal of $4,000,000 and accrued interest thereon
at the rate of 10% per annum of approximately $209,363 through July 31,
1996. The Company used the principal amount (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.

(2) Consists of expenditures for equipment, materials and outside consultants
and in connection with research and development activities with respect
to the use of the Imatec 20/20(TR) system for other applications in the
medical imaging field and in other imaging fields such as the graphic
arts, computer and video display. In addition, the Company may also from
time to time purchase technologies related to or which may enhance the
Imatec 20/20(TR) system, although the Company has no understandings or
arrangements to do so at this time

(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, 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.

11
<PAGE>

DILUTION

After giving pro forma effect to the Second Closing of the Company's
Bridge Financing (as such terms are defined in "Plan of Operations--Liquidity
and Capital Resources"), the Company had a pro forma negative net tangible
book value of $(137,693) or ($.05) per share as of March 31, 1996. Pro forma
negative net tangible book value as of March 31, 1996 is determined by
subtracting intangible assets and deferred debt issuance costs of $357,698
from pro forma stockholders' equity of $220,005. Pro forma negative 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 Securities offered hereby
(after deducting the underwriting discount and estimated offering expenses)
and the initial application of the net proceeds therefrom, the pro forma net
tangible book value of the Company at March 31, 1996 would have been
$6,713,405 or $1.78 per share, representing an immediate dilution of $3.22
(or approximately 64%) 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 ... $5.00
Pro forma negative net tangible book value per share before Offering ($.05)
Increase in net tangible book value per share of Common Stock
attributable to public investors ................................. 1.83
---------
Pro forma net tangible book value per share after the Offering .... 1.78
-------
Dilution per share to public investors(1) ......................... $3.22
=======
</TABLE>

- ------
(1) In the event that the Underwriter exercises its over-allotment option in
full, the pro forma net tangible book value after this Offering would be
approximately $2.10 per share, which would result in immediate dilution
in net tangible book value to public investors of approximately $2.90 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. . 2,761,785 73% 26% $ 1,718,874 $ .62
Public Investors .... 1,000,000 27% 74% 5,000,000(1) $5.00
----------- ---------- --------------- ---------------
Total ............... 3,761,785 100% 100% $ 6,718,874
=========== ========== =============== ===============
</TABLE>

- ------
(1) 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.

12
<PAGE>

CAPITALIZATION

The following table sets forth the capitalization of the Company (i) at
March 31, 1996, (ii) on a pro forma basis to give effect to the Second
Closing of the Bridge Financing on April 12, 1996, and (iii) on a pro forma
as adjusted basis to give effect to the sale of the Common Stock, Class A
Redeemable Warrants and Class B Redeemable Warrants in this Offering at
assumed initial public offering prices of $5.00, $.25 and $1.00,
respectively, and the initial application of the net proceeds therefrom.

<TABLE>
<CAPTION>
March 31, 1996
---------------------------------- Pro Forma
Actual Pro Forma(1) As Adjusted(1)(2)
--------------- --------------- ---------------
<S> <C> <C> <C>
Long term notes payable ............................. $ 1,359,280(3) $ 2,651,098(4) $ 0
=============== =============== ===============
Stockholders' (Deficit) Equity:
Preferred Stock, par value $.0001 per share, 2,000,000
shares authorized, no shares issued and outstanding $ 0 $ 0 $ 0
Common Stock, par value $.0001, 20,000,000 shares
authorized, 2,465,194 shares issued and
outstanding actual, 2,761,785 pro forma, and
3,761,785 pro forma as adjusted .............. 246 276 376
Additional paid-in capital ..................... 1,176,108 1,865,725 10,065,625
Deficit accumulated during the development stage . (1,645,996) (1,645,996) (3,347,813)
--------------- --------------- ---------------
Total stockholders' (deficit) equity ................ $ (469,642) $ 220,005 $ 6,718,188
=============== =============== ===============
Total capitalization ................................ $ 889,638 $ 2,871,103 $ 6,718,188
=============== =============== ===============
</TABLE>

- ------

(1) Gives pro forma effect to (i) the issuance of 296,591 shares of Common
Stock, 2,150,000 Bridge Warrants and Notes with a face amount of $1,341,818,
net of original issue discount of $808,182, in connection with the Second
Closing of the Bridge Financing on April 12, 1996, (ii) the repayment, from
the proceeds therefrom, of a Note, with a face amount of $50,000, issued
prior to the First Closing of the Bridge Financing on November 30, 1995, and
(iii) expenses of $311,935.

(2) Gives effect on an as adjusted basis to (i) the sale of 1,000,000 shares
of Common Stock, 4,000,000 Class A Warrants and 4,000,000 Class B
Warrants in connection with this Offering at assumed initial public
offering prices of $5.00, $.25 and $1.00, respectively, (ii) the
repayment, from the proceeds of this Offering, of Notes with a face
amount of $4,000,000 issued in the Bridge Financing, (iii) expenses of
$1,800,000 and (iv) the write off of unamortized original issue discount
and deferred debt issuance costs of $1,701,817.

(3) Net of $540,720 of unamortized original issue discount.

(4) Net of $1,348,902 of unamortized original issue discount.

13
<PAGE>

SELECTED FINANCIAL DATA

The following selected financial data has been derived from the 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 Three months
Year Ended December 31 (Cumulative) Ended March 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 -- $ 35,000
Research and development .................... $ 17,881 11,773 $ 337,389 -- 10,000
General and administrative .................. $ 99,243 $ 163,682 $ 598,613 $ 7,376 $ 123,019
Interest expense (net) ...................... -- $ 67,139 $ 58,080 -- $ 197,868
============ ============ ================= =========== ============
Net loss .................................... $ (115,164) $ (662,594) $(1,280,109) $ (7,376) $ (365,887)
Net loss per share .......................... $ (.05) $ (.28) $ (.54) * (.09)
Weighted average number of shares outstanding . 2,367,255 2,376,159 2,368,512 2,367,255 3,862,518
</TABLE>

<TABLE>
<CAPTION>
March 31, 1996
----------------------------------------------
Pro forma as
adjusted
Balance Sheet Data: Actual Pro forma (1) (1)(2)
------------ ------------- --------------
<S> <C> <C> <C> <C>
Working capital (deficit) .... $ 645,913 $2,457,548 $6,657,548
Total assets ................. $1,001,742 $2,983,207 $6,830,292
Total liabilities ............ $1,471,384 $2,763,202 $ 112,104
Stockholders' equity (deficit) . $ (469,642) $ 220,005 $6,718,188
</TABLE>

- ------
* Less than ($.01)

14
<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 developing the Imatec 20/20(TR)
system. 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 Imatec 20/20(TR)
system to manufacturers of medical imaging products such as scanners and
cameras, (ii) engage in marketing activities to facilitate the licensing of
the Imatec 20/20(TR) system, (iii) continue research and development
activities with respect to use of the Imatec 20/20(TR) system for other
applications in the medical imaging field and in other imaging fields, such
as graphic arts, computers and video display, 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 March 31, 1996 the Company had accumulated
stockholders' deficit of $1,280,109 and $1,645,996, respectively. The Company
has continued to incur losses since March 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 (i) a $50,000 10% promissory note due the
earlier of fifteen (15) months from the date of issuance and the Company's
receipt of gross proceeds of at least $8,000,000 from a public or private
sale of its securities (the "Note"), (ii) 6,897 shares of Common Stock, and
(iii) 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 $3,220,000 (after commissions and
expenses) and in connection therewith the Company issued an aggregate of
551,785 shares of Common Stock and 4,000,000 Bridge Warrants. The Company
issued an additional 25 shares of Common Stock in the Bridge Financing as a
consequence of rounding to the nearest whole share in connection with the
purchase of fractional Units.

In connection with the issuance of Notes with a face 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 allocating of the relative fair market value of the Notes,
Bridge 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 recorded as deferred debt
issuance costs with the remainder recorded as a reduction to the paid-in capital
of the Common Stock and Bridge Warrants issued therewith. The original issue
discount is to be amortized over the term of the

15
<PAGE>

Notes as interest expense. Upon the closing of this Offering, all of the
Notes will be repaid with a portion of the net proceeds of this Offering at
which time, assuming a July 31, 1996 closing, the Company will take a non-
recurring charge to interest expense in an amount equal to the then remaining
unamortized portion of the original issue discount and deferred debt issuance
costs, of $1,701,817, after amortization of original issue discount and
deferred debt issuance cost through July 31, 1996. See "Use of Proceeds."

NET OPERATING LOSS CARRYFORWARDS

As of March 31, 1996, 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.

16
<PAGE>

BUSINESS

GENERAL

The Company was formed in 1988 to develop, design, market and license its
Imatec 20/20(TR) system, which enhances image reproduction by reducing
distortion that normally occurs in the imaging process. Based on the results
of extensive testing by the Company, the Imatec 20/20(TR) system is capable
of improving the quality of film reproduction of images taken by medical
imaging devices such as MRI, CT and Ultrasound machines. In addition, the
Imatec 20/20(TR) system achieves this goal regardless of the type of the
medical imaging film used which may result in cost savings to the user. The
Company also developed the Imatec 20/20(TR) system to improve the quality of
images in the medical imaging field of teleradiology; which is the viewing of
the same image on different monitor screens in separate locations. The
Company believes that, in addition to the medical imaging field, the Imatec
20/20(TR) system can be used in markets such as graphic arts, computers and
video display.

The Imatec 20/20(TR) system is designed to measure the image
characteristics of an original image and compare it to its reproduction,
computing the existing distortion between the two images and correcting such
distortion. Current imaging systems create reproductions that have
distortions and are compensated for by subjective adjustments during the
reproduction process. Aspects of the Imatec 20/20(TR) system are set forth in
three United States 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(TR) system which can be used with MRI, CT and
Ultrasound machines.

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 year end 1995, there were
approximately 3,680, 730 and 92,270 MRI, CT and Ultrasound machines,
respectively, operating in the United States. Based on industry statistics,
the U.S. market for medical imaging devices represents approximately 40% of
the worldwide market.

THE IMATEC 20/20(TR) SYSTEM

The Imatec 20/20(TR) system is designed to improve a reproduced image so
that it more closely resembles the original image. Presently, the image
reproduction process is a manual, subjective process. 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. The Imatec 20/20(TR) system enables an
objective rather than subjective method of image reproduction that adjusts
for these variables.

When used in connection with an MRI, CT or Ultrasound machine, the Imatec
20/20(TR) system uses a photometer (an instrument that measures properties
relating to light, especially luminous intensity) to measure the image and
tone characteristics that appear on the screen of the medical imaging device
via a test pattern representing such image. Thereafter, a densitometer (an
instrument that measures the optical density of a film) measures the image
and 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 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.

17
<PAGE>

This so-called closed loop system, which measures and compares the image
and tone characteristics set forth on the screen and the image and 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(TR) system can be an add on to MRI, CT and Ultrasound machines. In such
instances, the operator of the medical images 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(TR) system can also be incorporated inside
MRI, CT and Ultrasound machines, in which event the Imatec 20/20(TR) system
can automatically adjust for any change in these variables. The diagram below
illustrates the position of the Imatec 20/20(TR) system in the image
reproduction system in those instances where the Imatec 20/20(TR) system is
an add-on to an existing medical imaging device.

THE COMPANY'S BUSINESS STRATEGY

The Company's strategy is to (i) license the Imatec 20/20(TR) system to
manufacturers of medical imaging products such as scanners and cameras, (ii)
engage in marketing activities to facilitate the licensing of the Imatec
20/20(TR) system, and (ii) continue its research and development activities
with respect to the application of the Imatec 20/20(TR) system for additional
uses in the medical imaging field and for other imaging fields, such as
graphic arts, computers and video display. 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 the Imatec 20/20(TR) system
both as an add-on device for new and existing MRI, CT and Ultrasound machines
and as an enhancement to be included inside new MRI, CT and Ultrasound
machines. The Company does not presently intend to manufacture, sell or
distribute any products incorporating the Imatec 20/20(TR) system, or provide
technical service in connection therewith. The Company will assist a licensee
in preparing a technical manual for any product that incorporates the
Company's Imatec 20/20(TR) 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 the Imatec 20/20(TR) system
the Company may have to engage in manufacturing of products incorporating the
Imatec 20/20(TR) system. See "Risk Factors -- Dependence on Third Parties; No
Manufacturing Capabilities; Limited Marketing Capabilities".

MANUFACTURING AND DISTRIBUTION

As noted above, the Company has no present intention to engage in the
manufacturing or distribution process. In the event that due to the Company's
inability to successfully license its technology the Company determined that
it was necessary to manufacture and distribute imaging products incorporating
the Company's technology, the Company would manufacture its products on a
contract manufacturing or original equipment manufacturer (OEM) basis and
have such products distributed by a network of independent regional
distributors in the medical device field. 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 technologies, 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 in the medical device
field.

MARKETING

The Company intends to market its Imatec 20/20(TR) system in a number of
ways, all of which are intended to facilitate the licensing of the Imatec
20/20(TR) system. The Company will attend industry trade shows in the United
States where it believes it will gain additional exposure to potential
licensees for the Imatec 20/20(TR) system. The Company also will seek to
obtain awareness of the Imatec 20/20(TR) system through the publishing of
articles by Dr. Shalit, the first of which is expected to be a series of
articles commencing in August 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 visiting member, and expects to become a full
member in the near future, of the Digital Imaging Communication in Medicine
Com-

18
<PAGE>

mittee ("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 the Imatec 20/20(TR) system. The Company has hired 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(TR) system to other aspects of the medical
imaging field, as well as in connection with seeking application of the
Imatec 20/20(TR) system to 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 either enhance the Company's
Imatec 20/20(TR) system or further the application of the Imatec 20/20(TR)
system 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 $10,000 in research and
development activities in 1994, 1995 and the three months ended March 31,
1996, respectively. The Company presently intends to expend no more than
$500,000 on research and development during the last nine (9) months of 1996.

COMPETITION

The image enhancement field is subject to rapid and significant
technological change that may render the Company's Imatec 20/20(TR) system
obsolete or products that incorporate the Company's Imatec 20/20(TR) system
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 Imatec
20/20(TR) system to adapt to such changes. There can be no assurance that the
Company will be able to successfully modify or upgrade its Imatec 20/20(TR)
system 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 Imatec 20/20(TR) system,
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 Imatec
20/20(TR) system. 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 Imatec 20/20(TR) system, as a result of
which the Company's Imatec 20/20(TR) system 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 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

19
<PAGE>

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(TR) system 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 Imatec 20/20(TR) system to other
industries. Typically, when seeking to apply the Imatec 20/20(TR) system to
other industries, the Company will first design a research prototype to test
the technology in the laboratory. Thereafter, a production prototype will be
constructed for testing at a beta, or third party, site. After successful
beta testing, the Company will then seek to market the product 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 similar 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 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 one hundred fifty (150) 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.

20
<PAGE>

which would further increase the time before potential FDA clearance. In
order to obtain an IDE, the Company would be required to submit an
application to the FDA, 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 June 20, 1996, the Company had 3 full-time employees, Dr. Hanoch
Shalit, who serves as the Company's President and Chief Executive Officer,
and Lawrence P. Kollender, who serves as the Company's Vice President of
Sales and Marketing and one administrative assistant. The Company also
employs 2 part-time employees, 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.

21
<PAGE>

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

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

<TABLE>
<CAPTION>
Name Age Position Held
---- ----- -------------
<S> <C> <C>
Dr. Hanoch Shalit .... 42 President, Chief Executive Officer, Chairman
of the Board of Directors,
Principal Accounting Officer and Secretary
Steven Ai ............ 41 Director
Neal Factor .......... 44 Director
Lawrence P. Kollender . 55 Vice President -- Marketing and Sales
</TABLE>

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 at
the discretion of the Board of Directors. The Company presently intends to
retain a Chief Financial Officer upon the completion of this Offering.

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.

Mr. Lawrence P. Kollender, has been the Company's Vice President --
Marketing and Sales since January 2, 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.

22
<PAGE>

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
Principal Position Year Salary($) Bonus($) Compensation($) Awards($) Options/SARs(#) Payouts($) Compensation($)
- ------------------------- ---- -------- -------- --------------- --------- --------------- ---------- ---------------
<S> <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 fiscal 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 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

23
<PAGE>

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 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

24
<PAGE>

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.

25
<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth information as of June 20, 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, director and
director-nominee, and (iii) all officers and directors as a group.

<TABLE>
<CAPTION>
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
----------------------- ------------- ------------ ------------
<S> <C> <C> <C>
Dr. Hanoch Shalit 919,825(3) 33.3% 24.5%(4)
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% 17.6%
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 -0- -0- -0-
c/o City Mill Co.,
Ltd.
600 Nimits Highway
Honolulu, HI 96817
Neal Factor -0- -0- -0-
35 W. 44th Street,
Suite 1111
New York, NY 10036
Officers and 919,825 33.3% 24.5%
directors as a group
(4 persons)
</TABLE>
- ------
(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.
(3) 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.
(4) Does not give effect to the registration and sale of 50,000 shares of
Common Stock by Dr. Shalit. See "Selling Security Holders."

26
<PAGE>

SELLING SECURITY HOLDERS

The registration statement, of which this Prospectus forms a part, also
relates to the registration of (i) 551,785 shares of Common Stock and
4,000,000 Class A Redeemable Warrants issued by the Company to the Bridge
Selling Security Holders who provided an aggregate of $4,000,000 in interim
financing to the Company in a financing that was consummated in April, 1996,
and (ii) an aggregate of 2,210,000 shares of Common Stock owned by 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 50,000 shares of Common Stock owned by Dr. Hanoch Shalit, the Chief
Executive Officer and President of the Company, each of the Selling Security
Holders have agreed not to directly or indirectly offer, sell, transfer or
otherwise encumber or dispose of any of these securities for a period of
eighteen (18) months after the date of this Prospectus unless otherwise
permitted by the Underwriter and the Company. 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 Class A Redeemable Warrants by the
Selling Security Holders, or even the existence of the right to exercise the
Class A Redeemable Warrants, may depress the price of the Common Stock or the
Class A 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 Class A 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. David Ai whose son 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 Selling Security Holders in the table below may not sell or
otherwise transfer their Securities 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."

27
<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 .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

David Ai**
Common Stock .......................................... 55,250 55,250 -0- -0-
Class A Redeemable Warrants ........................... -0- -0- -0- -0-

Lelio J. Andreoli*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Alfred Angrisani*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-

Jay Bernath*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants. .......................... 25,000 25,000 -0- -0-

Robert H. Binns*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Michael Bio*
Common Stock .......................................... 13,794 13,794 -0- -0-
Class A Redeemable Warrants ........................... 100,000 100,000 -0- -0-

Cynthia Blum*
Common Stock .......................................... 13,794 13,794 -0- -0-
Class A Redeemable Warrants ........................... 100,000 100,000 -0- -0-

John Bogin*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Edward C. Brookins*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Joel Brownstein**
Common Stock .......................................... 5,525 5,525 -0- -0-
Class A Redeemable Warrants ........................... -0- -0- -0- -0-

Richard Carey**
Common Stock .......................................... 2,818 2,818 -0- -0-
Class A Redeemable Warrants ........................... -0- -0- -0- -0-

Nancy Carrieri*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants. .......................... 25,000 25,000 -0- -0-

Nicole Cassino*
Common Stock .......................................... 13,794 13,794 -0- -0-
Class A Redeemable Warrants ........................... 100,000 100,000 -0- -0-

John Catania*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Maria Cid*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-
</TABLE>

28
<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>
Bruce Cohen*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Craig Cohen*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants. .......................... 50,000 50,000 -0- -0-

Carmello Cotrino*
Common Stock .......................................... 663,000 663,000 -0- -0-
Class A Redeemable Warrants ........................... -0- -0- -0- -0-

Joseph DeAngelis*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Ronald and Emelia DeSena, JTWROS*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Janice DeSimone*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Brett Diamond*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Amelia DiDomenico*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-

D.J.'s Company*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-

Thomas Dunn*
Common Stock .......................................... 171,000 171,000 -0- -0-
Class A Redeemable Warrants ........................... -0- -0- -0- -0-

Boris Dyskin*
Common Stock .......................................... 20,691 20,691 -0- -0-
Class A Redeemable Warrants ........................... 150,000 150,000 -0- -0-

Dolores Esposito*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Walter S. Farr*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-

Edward J. Farrell, Jr.*
Common Stock .......................................... 3,449 34,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Ivan Feng**
Common Stock .......................................... 22,100 22,100 -0- -0-
Class A Redeemable Warrants ........................... -0- -0- -0- -0-

Robert A. Foise*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-
</TABLE>

29
<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 Forte*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-

Marc Foscolo*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Ian Freeman*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-

Frank Fronda*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Melissa Galindez*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Kenneth Gantz*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-

Andrew P. Geiss*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Paul Geraci*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Angelo Giamboi*
Common Stock .......................................... 10,346 10,346 -0- -0-
Class A Redeemable Warrants ........................... 75,000 75,000 -0- -0-

Barry J. Gordon*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-

Stacy Gozlan*
Common Stock .......................................... 6,897 3,449 -0- -0-
Class A Redeemable Warrants ........................... 50,000 25,000 -0- -0-

Richard Guerriero*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Douglas R. Hellstrom*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Logan L. Hurst*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Jim Jaeger**
Common Stock .......................................... 9,797 9,797 -0- -0-
Class A Redeemable Warrants ........................... -0- -0- -0- -0-

Emma M. Job*
Common Stock .......................................... 3,449 34,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
</TABLE>

30
<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 .......................................... 13,794 13,794 -0- -0-
Class A Redeemable Warrants ........................... 100,000 100,000 -0- -0-

Steven Kessler*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-

Marc H. Klee*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-

Daniel E. Koshland, Jr.*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Robert C. Lannert*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-

Donald L. Leonard*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Laura A. Lihach*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-

Angela LoPresto*
Common Stock .......................................... 103,449 103,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Frances LoPresto*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Carol Lundrigan*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Charles T. Maguire*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Louis Martelli*
Common Stock .......................................... 13,794 13,794 -0- -0-
Class A Redeemable Warrants ........................... 100,000 100,000 -0- -0-

Kathleen F. & Arthur R. Medici, Joint Tenants with Right of
Survivorship*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-

Jeffrey Michelson*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-

Silvio Minici*
Common Stock .......................................... 20,691 20,691 -0- -0-
Class A Redeemable Warrants ........................... 150,000 150,000 -0- -0-
</TABLE>

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>
Al Moschetto*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Donald A. Nader*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Mohamed Omar Nawar*
Common Stock .......................................... 10,346 10,346 -0- -0-
Class A Redeemable Warrants ........................... 75,000 75,000 -0- -0-

Arnold H. Neustadt and Francene Neustadt, JTWROS*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

New Vision*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-

S. Edwin Noffel, IRA*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Ralph Notaro*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-

Diane Paribello*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Joseph Perri*
Common Stock .......................................... 13,794 13,794 -0- -0-
Class A Redeemable Warrants ........................... 100,000 100,000 -0- -0-

Arthur Pidgeon*
Common Stock .......................................... 20,691 20,691 -0- -0-
Class A Redeemable Warrants ........................... 150,000 150,000 -0- -0-

Michael Pressberg*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Provence Business* Consultants, Inc.
Common Stock .......................................... 13,794 13,794 -0- -0-
Class A Redeemable Warrants ........................... 100,000 100,000 -0- -0-

Michael Pugliese*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-

Louis Raneri*
Common Stock .......................................... 171,000 171,000 -0- -0-
Class A Redeemable Warrants ........................... -0- -0- -0- -0-

Scott Roberts*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Louis C. Rose*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -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>
James D. Sauer*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Jack Schnitzer*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-

Dr. Hanoch Shalit**
Common Stock .......................................... 919,825 919,825 -0- -0-
Class A Redeemable Warrants ........................... -0- -0- -0- -0-

Allan Sherman*
Common Stock .......................................... 10,346 10,346 -0- -0-
Class A Redeemable Warrants ........................... 75,000 75,000 -0- -0-

Stephen Silverberg*
Common Stock .......................................... 72,000 72,000 -0- -0-
Class A Redeemable Warrants ........................... -0- -0- -0- -0-

David Smith*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Anthony Stropoli* ........................................
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Lorenzo Don Starling and Virginia Starling, Joint Tenants
with Right of Survivorship*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-

Paul and Teresa Tarantino, Joint Tenants with Right of
Survivorship*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-

John M. Thompson*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-

William M. Thompson*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-

Frank Tricarico*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Tri Ventures*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-

Neil Vaccaro*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -0- -0-

James W. Venezia*
Common Stock .......................................... 6,897 6,897 -0- -0-
Class A Redeemable Warrants ........................... 50,000 50,000 -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>
Robert and Christine Vitamante, JTWROS*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Samir R. Wahby*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Donald R. Waldrip*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Frederick B. Winston*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-

Yoram Yosifov**
Common Stock .......................................... 30,300 30,300 -0- -0-
Class A Redeemable Warrants ........................... -0- -0- -0- -0-

Joseph and Jacqueline Zambito, Joint Tenants with Right of
Survivorship*
Common Stock .......................................... 3,449 3,449 -0- -0-
Class A Redeemable Warrants ........................... 25,000 25,000 -0- -0-
</TABLE>
- ------
* Holders who have agreed not to sell or otherwise transfer their Securities
for 18 months from the date of this Prospectus without the consent of the
Underwriter.

** Holders who have 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.

(1) Assumes sale of all Securities registered hereby.

34
<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 3,761,785 shares of Common Stock issued
and outstanding after giving effect to the sale of the Common Stock 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.

35
<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 Class A Redeemable Warrant and Class B Redeemable Warrant entitles
the holder thereof to purchase one share of Common Stock at an exercise price
of $6.50 and $5.50 per share, respectively, at any time commencing on the
date of this Prospectus until _______, 1998 [24 months after the date of this
Prospectus] and ________, 2001 [60 months from the date of this Prospectus],
respectively, subject to adjustment in certain circumstances. Each Class A
Redeemable Warrant and each Class B Redeemable Warrant, is redeemable by the
Company at any time after ___________________, 1997 [9 months after the date
of this Prospectus] and ____, 1997 [12 months after the date of this
Prospectus] respectively. Each Class A Redeemable Warrant and each Class B
Redeemable Warrant is 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 provided that the average closing bid price of the
Common Stock as reported by Nasdaq, if the Common Stock is traded on the
over-the-counter market, or the closing sale price of the Common Stock on the
primary exchange on which the Common Stock is traded, if the Common Stock is
traded on a national securities exchange, equals or exceeds $7.50 and $9.00
per share, respectively, 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-

36
<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. 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. See "Risk Factors -- Barriers to Takeover." 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 completion of this Offering, there will be 3,761,785 shares of Common
Stock outstanding, (3,911,785 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 50,000 shares for
Dr. Hanoch Shalit, the Chief Executive Officer President and Chairman of the
Board of Directors of the Company, all of the Selling Security Holders have
agreed not to directly or indirectly offer, sell, transfer or otherwise
encumber or dispose of any such shares for a period of eighteen (18) months
from the date of this Prospectus unless otherwise permitted by the
Underwriter.

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 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

37
<PAGE>

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 may in turn be reallowed by such dealers to other dealers. After the
commencement of the 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 as 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
the 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 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

38
<PAGE>

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, the majority of all present
holders of the shares of Common Stock, and all holders of any options,
warrants or other securities convertible, exercisable or exchangeable for
shares of Common Stock have agreed 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 presently owned, for a
period of eighteen (18) months after the date of this Prospectus without the
prior consent of the Company and 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 Class A Redeemable Warrants and/or
600,000 Class B 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, 400,000 Class A Redeemable
Warrants and 400,000 Class B 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 Class A Redeemable Warrant [160% of the
initial offering price per Class A Redeemable Warrant] for a period of one
(1) year commencing one (1) year from the date of this Prospectus and $____
per Class B Redeemable Warrant [160% of the initial offering price per Class
B Redeemable Warrant] 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 Private Placement, 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 Private Placement 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."

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, New
York, New York. Certain matters regarding intellectual property rights shall
be passed upon for the Company by Wyatt, Gerber, Burke & Badie, LLP. Orrick,
Herrington & Sutcliffe, New York, New York has acted as counsel for the
Underwriter in connection with this Offering.

<PAGE>

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,
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.

<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 March 31, 1996 ......................... F-3

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

STATEMENT OF STOCKHOLDERS' (DEFICIT) -- November 17, 1988 (Inception) to December 31, 1995
and three months ended March 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 three months ended March 31, 1995 and 1996
(Unaudited)............................................................................ F-6

NOTES TO FINANCIAL STATEMENTS .......................................................... F-7 - F-10

</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 March 31,
------------------------
1994 1995 1996
-------- ------------ ------------
(Unaudited)
<S> <C> <C> <C>
CURRENT ASSETS
Cash .................................................... $1,897 $ 31,151 $ 87,290
Marketable securities (Note 3) .......................... 1,350,852 663,519
Other current assets .................................... 9,715 7,208
-------- ------------ ------------
TOTAL CURRENT ASSETS ............................... 1,897 1,391,718 758,017
OFFICE EQUIPMENT (net of accumulated depreciation of $1,715) 37,937
DEFERRED DEBT ISSUANCE COSTS (Note 2) ..................... 204,999 159,515
DEPOSIT ................................................... 17,920
OTHER ASSETS .............................................. 28,353
-------- ------------ ------------
TOTAL ASSETS ....................................... $1,897 $1,596,717 $1,001,742
======== ============ ============

LIABILITIES AND STOCKHOLDERS' (DEFICIT)

December 31 March 31,
----------------------------
1994 1995 1996
----------- ------------- -------------
(Unaudited)
CURRENT LIABILITIES
Accrued expenses (Note 7) ............................. $ 4,188 $ 412,735 112,104
BRIDGE NOTES PAYABLE (Note 2) ......................... 1,220,763 1,309,280
OTHER NOTES PAYABLE (Note 4) .......................... 50,000 50,000
----------- ------------- -------------
TOTAL LIABILITIES ................................ 4,188 1,683,498 1,471,384
----------- ------------- -------------
COMMITMENTS (Notes 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
and 2,465,194 in 1994, 1995 and 1996, respectively . 111 247 246
Additional paid-in capital ............................ 615,113 1,193,081 1,176,108
Deficit accumulated during the development stage ...... (617,515) (1,280,109) (1,645,996)
----------- ------------- -------------
TOTAL STOCKHOLDERS' (DEFICIT) .................... (2,291) (86,781) (469,642)
----------- ------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS
(DEFICIT) ..................................... $ 1,897 $ 1,596,717 $ 1,001,742
=========== ============= =============

</TABLE>

See notes to financial statements

F-3
<PAGE>

IMATEC, LTD.

(A DEVELOPMENT STAGE ENTERPRISE)

STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
November 17,
1988
Years Ended (Inception) Three months
December 31, to Ended March 31,
---------------------------- 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 35,000
Research and development ........ 17,881 11,773 337,389 10,000
General and administrative ...... 99,243 163,682 598,613 7,376 123,019
------------ ------------ --------------- ----------- ------------
TOTAL EXPENSES ............. 117,124 595,455 1,356,002 7,376 168,019
------------ ------------ --------------- ----------- ------------
LOSS FROM OPERATIONS ....... (115,164) (595,455) (1,222,029) (7,376) (168,019)
INTEREST EXPENSE AND AMORTIZATION OF
DEBT ISSUANCE COSTS ............. (72,596) (72,596) (209,066)
INTEREST INCOME ................... 5,457 14,516 11,198
------------ ------------ --------------- ----------- ------------
NET LOSS ................... ($ 115,164) ($ 662,594) ($ 1,280,109) ($ 7,376) ($ 365,887)
============ ============ =============== =========== ============

AVERAGE NUMBER OF SHARES OUTSTANDING
(Note 2) ........................ 2,367,255 2,376,159 2,368,512 2,367,255 3,862,518
============ ============ =============== =========== ============

NET LOSS PER COMMON SHARE ......... (.05) (.28) (.54) -- (.09)
============ ============ =============== =========== ============

</TABLE>

See notes to financial statements

F-4
<PAGE>

IMATEC, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF STOCKHOLDERS' (DEFICIT)
NOVEMBER 17, 1988 (INCEPTION) TO MARCH 31, 1996
(NOTE 2)

<TABLE>
<CAPTION>
Deficit
Accumulated
Aditional During the
Common Stock (Note 9) 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)
Net loss for the three months ended March
31, 1996 (Unaudited) .................. (365,887) (365,887)
----------- -------- ------------ -------------- -----------
Balance -- March 31, 1996
(Unaudited) ..................... 2,465,194 $246 $1,176,108 ($ 1,645,996) ($ 469,642)
=========== ======== ============ ============== ===========
</TABLE>

See notes to financial statements

F-5
<PAGE>

IMATEC, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
November 17, 1988
Years Ended (Inception) to Three months ended
December 31, December 31, March 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) ($ 7,376) ($ 365,887)
Adjustments to reconcile net loss to net
cash used in operating activities
Amortization of discount and debt
issuance costs ................. 52,147 52,147 160,211
Depreciation and other amortization 857 2,311
Increase (decrease) in cash flows
from Other current assets ....... (9,715) (9,715) 2,507
Deposit ......................... (17,920)
Other Assets .................... (21,853)
Accrued expenses ................ 1,948 408,547 412,735 1,435 (300,630)
--------- ------------- ------------- ---------- -----------
NET CASH USED IN OPERATING
ACTIVITIES .................. (113,216) (211,615) (824,085) (5,941) (541,261)
--------- ------------- ------------- ---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of marketable securities 50,000 50,000 1,200,942
Investment in marketable securities ... (1,400,852) (1,400,852) (513,609)
Purchases of fixed assets ............. (612) (39,933)
------------- ----------------- ----------- ------------
NET CASH USED IN INVESTING
ACTIVITIES .................. (1,350,852) (1,351,464) 647,400
------------- ----------------- ----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds (refund) from private placement
(net of expenses of $358,389 and
exchanges of notes payable of $125,000) 1,416,611 1,416,611 (50,000)
Proceeds from issuance of common stock . 94,224 110 615,334
Decrease in due to/from stockholder ... 15,971 13,800
Proceeds from other notes payable ..... 175,000 175,000
Payments of organization costs ........ (245)
------------ ------------- ----------------- ----------- ------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES .................. 110,195 1,591,721 2,206,700 13,800 (50,000)
--------- ------------- ------------- ---------- -----------
INCREASE (DECREASE) IN CASH .... (3,021) 29,254 31,151 7,859 56,139
CASH -- beginning ........................ 4,918 1,897 1,897 31,151
------------ ------------- ----------------- ----------- ------------
CASH -- ending ........................... $ 1,897 $ 31,151 $ 31,151 $ 9,756 $ 87,290
============ ============= ================= =========== ============
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 -- $ 1,039
============ ============= ================= =========== ============
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,
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, as restated
for the stock split (Note 2). 1,105,000 shares issued in May 1995, 262,091
shares issued in November 1995 and the 1,900,000 Bridge warrants 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 (Note 9)

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

All shares and per share amounts have been retroactively restated to
reflect the reverse stock split, May 2, 1995, and the stock split, October
19, 1995.

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.

PRIVATE PLACEMENT

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 shares and notes were canceled and then 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. 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 Class A Redeemable Warrant, subject to all of
the terms and conditions of the Class A Redeemable Warrants.

RESERVED SHARES

As of December 31, 1995 and March 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
=========== ===========

F-8
<PAGE>

3. MARKETABLE SECURITIES

As of December 31, 1995 and March 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 $663,519
------------ ----------
$1,350,852 $663,519
============ ==========

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).

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, March 31,
-------------------------- --------------------------
1994 1995 1995 1996
----------- ----------- ----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Research and development expenses . $ 130,000 $ 130,000 $ 130,000 $130,000
Net operating loss carryforward .. 120,000 360,000 120,000 480,000
----------- ----------- ----------- -----------
250,000 490,000 250,000 610,000
----------- ----------- ----------- -----------
Valuation allowance .............. (250,000) (490,000) (250,000) 610,000
----------- ----------- ----------- -----------
-- -- -- --
=========== =========== =========== ===========
</TABLE>
As of December 31, 1995 and March 31, 1996 (Unaudited), the Company has
net operating loss carryforwards available to reduce future taxable income of
approximately $900,000, expiring through 2011 and $1,200,000, 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 three months
ended March 31, 1996 (Unaudited), a director was paid attorney's fees of
$1,000, $31,000 and $10,406, 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.

F-9
<PAGE>

9. SUBSEQUENT EVENTS

EMPLOYMENT AGREEMENT (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.

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

Year Ending
March 31,
-------------
1997 $67,926
1998 69,976
1999 59,730
---------
$197,632
=========

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, the Company had not granted any options under the Plan.

PROPOSED PUBLIC OFFERING (UNAUDITED)

The Company anticipates a public offering in July 1996 of 1,000,000 shares
of common stock, at $5, per share, 4,000,000 Class A redeemable warrants, at
$.25, per warrant, and 4,000,000 Class B redeemable warrants, at $1.00 per
warrant. Each warrantholder will be entitled to purchase one share of common
stock at $6.50, per share, and $5.50, per share, respectively, and will be
exercisable for periods of two years and five years, respectively, from the
date of the offering. The Class A and Class B warrants will be redeemable by
the Company, under certain circumstances, at $.10, per warrant, commencing
nine months and one year, respectively, 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, an additional 600,000 Class A warrants and 600,000 Class B
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, 400,000 Class A redeemable warrants, and 400,000 Class B
redeemable warrants. The shares and warrants under the Underwriter's Warrants
will be exercisable at prices not yet determined for a period of five years
from the date the offering.

10. INTERIM FINANCIAL STATEMENT (UNAUDITED)

In the opinion of management, the interim Unaudited financial statements
as of March 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.

F-10
<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 .................. 1
The Offering ........................ 3
Risk Factors ........................ 4
Use of Proceeds ..................... 11
Dividend Policy ..................... 11
Dilution ............................ 12
Capitalization ...................... 13
Selected Financial Data ............. 14
Plan of Operations .................. 15
Business ............................ 17
Management .......................... 22
Principal Stockholders .............. 26
Selling Security Holders ............ 27
Certain Transactions ................ 35
Description of Securities ........... 35
Shares Available for Future Sale .... 37
Underwriting ........................ 38
Legal Matters ....................... 39
Experts ............................. 40
Change in Accountants ............... 40
Additional Information .............. 40
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.

1,000,000 SHARES OF COMMON STOCK,
4,000,000 CLASS A REDEEMABLE WARRANTS
AND
4,000,000 CLASS B 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* ....... 50,000.00
Legal fees and expenses* ............ 150,000.00
Blue Sky fees and expenses* ......... 35,000.00
Printing and engraving* ............. 100,000.00
Transfer Agent's and Registrar fees* . 10,000.00
Miscellaneous expenses* ............. 103,581.07
------------
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.

<TABLE>
<CAPTION>
Item 27. Exhibits.
- --------- ---------
<S> <C>
****1.1 Form of Underwriting Agreement by and between the Company and the Underwriter.

****1.2 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 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 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 License Agreement by and between the Company and Dr. Hanoch Shalit as amended.

****10.5 Form of Indemnification Agreement to be entered into with officers and directors.

** 10.6 Lease for the Company's principal offices located at 150 E. 58th Street, New York, NY 10155.

****10.7 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.

****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.

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.

(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 July 19, 1996.

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

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/ Dr. Hanoch Shalit President, Chief Executive Officer, July 19, 1996
------------------------ Director and Principal Accounting
Dr. Hanoch Shalit Officer

/s/ Steven Ai Director July 19, 1996
------------------------
Steven Ai

/s/ Neal Factor Director July 19, 1996
------------------------
Neal Factor
</TABLE>

II-4
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
Exhibits
--------
<S> <C>
****1.1 Form of Underwriting Agreement by and between the Company and the Underwriter.

****1.2 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 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 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 License Agreement by and between the Company and Dr. Hanoch Shalit as amended.

****10.5 Form of Indemnification Agreement to be entered into with officers and directors.

** 10.6 Lease for the Company's principal offices located at 150 E. 58th Street, New York, NY 10155.

****10.7 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.

<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
July 19, 1996