<PAGE>
QUARTERLY REPORT FOR SMALL BUSINESS ISSUERS SUBJECT
TO THE 1934 ACT REPORTING REQUIREMENTS
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark one)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the quarterly period ended March 31, 1997.
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the transition period from ___ to ___.
Commission File Number 0-21752
IMATEC, LTD.
(Name of small business issuer in its charter)
Delaware 11-3289398
(State or other (I.R.S. Employer
jurisdiction of incorporation) Identification No.)
150 East 58th Street 10155
New York, New York (Zip Code)
(Address of principal executive offices)
(212) 826-0440
(Issuer's Telephone Number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No ___
The number of shares outstanding of the Issuer's Common Stock, $.0001 par value,
as of April 24, 1997 was 3,735,201.
Transitional small business disclosure format: Yes ___ No X
<PAGE>
IMATEC, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
FINANCIAL STATEMENTS
INDEX
PART I. FINANCIAL INFORMATION
-----------------------------
<TABLE>
<CAPTION>
<S> <C>
ITEM 1. FINANCIAL STATEMENTS
- ----------------------------
BALANCE SHEET - December 31, 1996 and March 31, 1997 3
STATEMENT OF OPERATIONS - November 17, 1988 (Inception) to March 31, 1997
(Cumulative) and Three months ended March 31, 1996 and 1997 4
STATEMENT OF STOCKHOLDERS' EQUITY - Three months ended March 31, 1997 5
STATEMENT OF CASH FLOWS - November 17, 1988 (Inception) to March 31, 1997
(Cumulative) and Three months ended March 31, 1996 and 1997 6
NOTES TO FINANCIAL STATEMENTS 7
ITEM 2.
- -------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 7
PART II. OTHER INFORMATION
--------------------------
ITEM 1. LEGAL PROCEEDINGS 8
- ------
ITEM 2. CHANGES IN SECURITIES 8
- ------
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 8
- ------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 8
- ------
SIGNATURES 9
</TABLE>
<PAGE>
IMATEC, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
March 31, 1997 December
31, 1996
--------
(UNAUDITED)
-----------
<S> <C> <C>
CURRENT ASSETS
Cash $ 117,590 $ 510,713
Marketable Securities 4,619,712 4,702,315
Other Current Assets 294,616 144.613
----------- -----------
TOTAL CURRENT ASSETS 5,031,918 5,357,641
FIXED ASSETS (net of accumulated depreciation
of $12,803 and $18,450 at December 31,
1996 and March 31, 1997, respectively) 116,826 117,596
DEPOSIT 18,245 17,920
----------- -----------
TOTAL ASSETS $ 5,166,989 $ 5,493,157
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable and Accrued Expenses $ 61,649 $ 96,326
----------- -----------
TOTAL LIABILITIES 61,649 96,326
----------- -----------
STOCKHOLDERS' EQUITY
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 - 3,735,201
in December 31, 1996 and March 31, 1997 373 373
Additional paid-in capital 8,749,185 8,749,185
Deficit accumulated during the development stage (3,644,218) (3,352,727)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 5,105,340 5,396,831
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $5,166,989 $5,493,157
=========== ==========
</TABLE>
See notes to financial statements
3
<PAGE>
IMATEC, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three months ended March 31, November 17, 1988
1997 1996 (Inception) to
---- ---- March 31, 1997
(UNAUDITED) (UNAUDITED) (cumulative)
----------- ----------- -----------------
<S> <C> <C> <C>
INCOME - consulting fees $133,973
--------
EXPENSES
Royalties $ (36,750) $ (35,000) (600,834)
Research and Development (17,833) (20,137) (493,192)
General and Administrative (298,439) (165,724) (1,817,757)
--------- --------- -----------
TOTAL EXPENSES (353,022) (220,861) (2,911,783)
--------- --------- -----------
LOSS FROM OPERATIONS (353,022) (220,861) (2,777,810)
INTEREST EXPENSE AND
AMORTIZATION AND WRITE-
OFF OF DISCOUNT AND DEBT
ISSUANCE COSTS
(214,106) (2,211,400)
INTEREST INCOME 61,531 14,323 180,280
--------- --------- -----------
LOSS BEFORE EXTRAORDINARY
INCOME (291,491) (420,644) (4,808,930)
EXTRAORDINARY INCOME FROM
FORGIVENESS OF INDEBTEDNESS 1,164,712
--------- --------- -----------
NET LOSS $ (291,491) $ (420,644) $ (3,644,218)
=========== =========== =============
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 5,295,201 4,126,293 4,344,856
========= ========= =========
LOSS PER COMMON SHARE
Loss before extraordinary income ($0.06) ($0.10) (1.11)
Extraordinary income .27
--------- --------- -----------
NET LOSS ($0.06) ($0.10) ($0.84)
========= ========= =========
</TABLE>
See notes to financial statements
4
<PAGE>
IMATEC, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Deficit
Accumulated During
COMMON STOCK the
------------------------ Additional Development
Shares Amount Paid-in Capital Stage Total
------ ------ --------------- ----- -----
<S> <C> <C> <C> <C> <C>
Balance December 31, 1996 3,735,201 $ 373 $8,749,185 ($3,352,727) $5,396,831
Net loss for the 3 months
ended March 31, 1997 (291,491) (291,491)
--------- ----- ---------- ----------- -----------
Balance March 31, 1997 3,735,201 $ 373 $8,749,185 $(3,644,218) $ 5,105,340
========= ===== ========== =========== ===========
</TABLE>
See notes to financial statements
5
<PAGE>
IMATEC, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
THREE MONTHS ENDED MARCH, 31
<TABLE>
<CAPTION>
November 17,1988
1997 1996 (Inception) to
---- ---- March 31, 1997
(UNAUDITED) (UNAUDITED) (Cumulative)
------------ ------------ -----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ($291,491) ($432,310) ($3,644,218)
Adjustments to reconcile net loss to net cash used in operating
activities
Amortization and write-off of discount and debt
issuance costs 170,206 1,914,490
Depreciation and other amortization 5,647 134 19,307
Forgiveness of indebtedness (1,164,712)
Increase (decrease) in cash flows from
Other current assets (150,003) 4,381 (294,616)
Deposit (325) (17,920) (18,245)
Accounts payable and accrued expenses (34,677) (287,556) 352,032
--------- ------------ -----------
NET CASH USED IN OPERATING ACTIVITIES (470,849) (563,065) (2,835,962)
--------- ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of marketable securities 82,603 687,333 5,856,426
Investments in marketable securities (10,476,139)
Purchases of fixed assets (4,877) (18,129) (135,888)
--------- ------------ -----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 77,726 669,204 (4,755,601)
--------- ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from public offering (net of conversion of bridge
notes payable and accrued interest of $1,960,671 and
expenses of $1,367,163) 4,782,887
Proceeds from bridge financing (net of expenses of
$358,389 and $305,434 and exchange of notes
payable of $125,000 and $50,000 in 1995 and
1996, respectively) 3,211,177
Proceeds from issuance of common stock 615,334
Proceeds from other notes payable 175,000
Payment of organization expenses (245)
Payments of notes payable - (50,000) (1,075,000)
--------- -------- -----------
NET CASH PROVIDED BY (USED) IN
FINANCING ACTIVITIES - (50,000) 7,709,153
--------- -------- -----------
INCREASE (DECREASE) IN CASH (393,123) 56,139 117,590
CASH - beginning 510,713 31,151
--------- -------- -----------
CASH - end $ 117,590 $ 87,290 $ 117,590
========= ======== =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for income taxes $4,353 $ 808 $12,767
====== ===== =======
Cash paid for interest $ 0 $ 0 $6,818
=== === ======
</TABLE>
See notes to financial statements
6
<PAGE>
IMATEC, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
1. The accompanying unaudited financial statements, which are for interim
periods, do not include all disclosures provided in the annual financial
statements. These unaudited financial statements should be read in conjunction
with the financial statements and the footnotes thereto included in Form 10-KSB
for the year ended December 31, 1996 of Imatec, Ltd. (the "Company"), as filed
with the Securities and Exchange Commission. The December 31, 1996 balance sheet
was derived from audited financial statements, but does not include all
disclosures required by generally accepted accounting principles.
2. In the opinion of the Company, the accompanying unaudited financial
statements contain all adjustments (which are of a normal recurring nature)
necessary for a fair presentation of the financial statements. The results of
operations for the three months ended March 31, 1997 are not necessarily
indicative of the results to be expected for the full year.
3. LOSS PER SHARE
Loss per share was computed based upon the weighted average number of common
shares and common share equivalents outstanding during the three months ended
March 31, 1997. Fully-dilutive loss per common share has not been presented
because it was anti-dilutive.
In February 1997, the FASB issued Statement No. 128, "Earnings Per Share", which
changes the calculations and disclosures of earnings per share. As of January 1,
1997 the Company adopted Statement No. 128 without material effect.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company was organized on November 17, 1988 and is in the development stage.
To date, the Company's activities have primarily consisted of research and
development activities with respect to the development of the Company's
technology and an Imatec 20/20 System for the medical diagnostic imaging field.
During this time, the Company has received only minimal revenues from limited
non-recurring consulting activities. The Company believes, based upon its own
internal budgets, that the Company's available cash resources will be sufficient
for the Company :(i) to engage in licensing the Company's technology and the
Imatec 20/20 System developed for the medical diagnostic imaging field to
manufacturers of medical diagnostic imaging products such as scanners, cameras
and image reproduction systems, (ii) to engage in marketing activities to
facilitate the licensing of the Company's technology and its Imatec 20/20
Systems, (iii) to continue research and development activities with respect to
other applications of the Company's technology in other imaging fields, such as
graphic arts, computer, cinematography and television/video, and (iv) otherwise
conduct its operations at least through the year ending December 31, 1997.
7
<PAGE>
IMATEC, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
The Company does not currently anticipate any major research and development
expenditures during the next 12 months, however, this may change depending upon
the marketplace's reaction and requirements to implement the Company's
technology.
The Company has no current plans to purchase any significant fixed assets or to
significantly change the number of employees.
General and administrative expenses for the three months ended March 31
increased $132,714 (80%) from $165,724 in 1996 to $298,438 in 1997. Most of this
increase is the result of increased personnel, office rent and supplies and
professional fees. Most of the professional fees increased as a result of the
Company's filing requirements by the SEC and NASDAQ.
For the three months ended March 31, interest income increased from $14,323 for
1996 to $61,531 for 1997. Similarly, interest expense decreased from $214,106 to
$0 from 1996 to 1997.
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
March 31, 1997 the Company had an accumulated stockholders' deficit of
$3,644,218. The Company has continued to incur losses since March 31, 1997.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
8
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
IMATEC, LTD.
By: /s/ Hanoch Shalit
--------------------------------------
Hanoch Shalit
Chairman of the Board of Directors,
President, and Chief Executive Officer
Dated: April 29, 1997
By:/s/ James Smith
-------------------------------------
James Smith
Chief Financial Officer
Dated: April 29, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the balance
sheet and statement of operations found on pages 3 and 4 of the Company's form
10QSB for the quarter ended March 31, 1997 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 117,590
<SECURITIES> 4,619,712
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,031,918
<PP&E> 135,276
<DEPRECIATION> 18,450
<TOTAL-ASSETS> 5,166,989
<CURRENT-LIABILITIES> 61,649
<BONDS> 0
0
0
<COMMON> 373
<OTHER-SE> 5,104,966
<TOTAL-LIABILITY-AND-EQUITY> 5,166,989
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 353,022
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (291,491)
<INCOME-TAX> 0
<INCOME-CONTINUING> (291,491)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (291,491)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
