<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, 1998.
[ ] 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 jurisdiction (I.R.S. Employer Identification No.)
of incorporation)
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 May 8, 1998 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
-----------------------------
ITEM 1. FINANCIAL STATEMENTS
- ----------------------------
BALANCE SHEET - December 31, 1997 and March 31, 1998 3
STATEMENT OF OPERATIONS - November 17, 1988 (Inception) to March 31, 1998
(Cumulative) and Three months ended March 31, 1997 and 1998 4
STATEMENT OF STOCKHOLDERS' EQUITY - Three months ended March 31, 1998 5
STATEMENT OF CASH FLOWS - November 17, 1988 (Inception) to March 31, 1998
(Cumulative) and Three months ended March 31, 1997 and 1998 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
2
<PAGE>
IMATEC, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
<TABLE>
<CAPTION>
March 31, 1998 December 31, 1997
-----------------
(UNAUDITED)
-----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $43,339 $ 98,015
Marketable Securities 3,595,077 3,726,004
Other Current Assets 17,798 21,126
----------- -----------
TOTAL CURRENT ASSETS 3,656,214 3,845,145
FIXED ASSETS (net of accumulated depreciation
of $43,017 and $ 48,568 at December 31, 1997 and
March 31, 1998, respectively) 88,351 93,902
DEPOSIT 17,920 17,920
----------- -----------
TOTAL ASSETS $ 3,762,485 $ 3,956,967
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable and Accrued Expenses $ 47,317 $ 67,736
----------- -----------
TOTAL LIABILITIES 47,317 67,736
----------- -----------
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, 1997 and March 31, 1998 373 373
Additional paid-in capital 8,749,185 8,749,185
Deficit accumulated during the development stage (5,034,390) (4,860,327)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 3,715,168 3,889,231
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,762,485 $3,956,967
=========== ==========
</TABLE>
See notes to financial statements
3
<PAGE>
IMATEC, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended March 31,
November 17, 1988
(Inception) to
March 31, 1998
1998 1997 (cumulative)
---- ---- ------------------
<S> <C> <C> <C>
INCOME - consulting fees $133,973
------------
EXPENSES
Royalties $ (38,588) $ (36,750) (753,347)
Research and Development 0 (17,833) (542,054)
General and Administrative (182,083) (298,439) (3,215,198)
---------- ---------- ------------
TOTAL EXPENSES (220,671) (353,022) (4,510,599)
---------- ---------- ------------
LOSS FROM OPERATIONS (220,671) (353,022) (4,376,626)
INTEREST EXPENSE AND AMORTIZATION AND WRITE-OFF
OF DISCOUNT AND DEBT ISSUANCE COSTS (2,211,400)
INTEREST INCOME 46,608 61,531 388,924
------ ------ -------
LOSS BEFORE EXTRAORDINARY INCOME (174,063) (291,491) (6,199,102)
EXTRAORDINARY INCOME FROM FORGIVENESS OF INDEBTEDNESS 1,164,712
---------- ---------- ------------
NET LOSS $ (174,063) $ (291,491) $ (5,034,390)
========== ========== ============
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 5,295,201 5,295,201 4,446,698
========== ========== ============
LOSS PER COMMON SHARE
Loss before extraordinary income ($0.03) ($0.06) ($1.40)
Extraordinary income .27
---------- ---------- ------------
NET LOSS ($0.03) ($0.06) ($1.13)
====== ====== ======
</TABLE>
See notes to financial statements
4
<PAGE>
IMATEC, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
Deficit
Accumulated
COMMON STOCK During
------ ----- Additional the
Paid-in Development
Shares Amount Capital Stage Total
------ ------ ---------- ------------ -----
<S> <C> <C> <C> <C> <C>
Balance December 31, 1997 3,735,201 $ 373 $8,749,185 $(4,860,327) $ 3,889,231
Net loss for the 3 months ended March 31, 1998 (174,063) (174,063)
--------- ------ ---------- ----------- -----------
Balance March 31, 1998 3,735,201 $ 373 $8,749,185 $(5,034,390) $ 3,715,168
========= ===== ========== =========== ===========
</TABLE>
See notes to financial statements
5
<PAGE>
IMATEC, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
November 17, 1988
(Inception) to
March 31, 1998
1998 1997 (Cumulative)
---- ---- ----------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ($174,063) ($291,491) ($5,034,390)
Adjustments to reconcile net loss to net cash used in
operating activities
Amortization and write-off of discount and debt
issuance costs 1,914,490
Depreciation and other amortization 5,551 5,647 43,528
Net loss on disposal of fixed assets 5,932
Forgiveness of indebtedness (1,164,712)
Increase (decrease) in cash flows from
Other current assets 3,328 (150,003) (17,798)
Deposit (325) (17,920)
Accounts payable and accrued expenses (20,419) (34,677) 337,700
---------- --------- -----------
NET CASH USED IN OPERATING ACTIVITIES (185,603) (470,849) (3,933,170)
---------- --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of marketable securities 130,927 82,603 6,881,061
Investments in marketable securities (10,476,139)
Other 5,413
Purchases of fixed assets (4,877) (142,979)
---------- --------- -----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 130,927 77,726 (3,732,644)
---------- --------- -----------
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
$305,434 and exchange of notes payable of $50,000 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 -- -- (1,075,000)
---------- --------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES -- -- 7,709,153
---------- --------- -----------
INCREASE (DECREASE) IN CASH (54,676) (393,123) 43,339
CASH - beginning 98,015 510,713
---------- --------- -----------
CASH - end $ 43,339 $ 117,590 $ 43,339
========= ========= ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for income taxes $ 9,686 $ 4,353 $ 22,453
======= ======= ========
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, 1997 of Imatec, Ltd. (the "Company"),
as filed with the Securities and Exchange Commission. The December 31, 1997
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, 1998 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, 1998. Fully-dilutive loss per common share has not been presented
because it was anti-dilutive.
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 has ceased
development of the Imatec 20/20 System and has refocused its efforts on the
licensing of the Company's proprietary technology for imaging and other
applications.
The Company believes, based upon its operating plan, that the Company's
available cash resources will be sufficient for the Company :(i) to engage in
licensing the Company's technology for 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,
(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,
1998.
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 31,1998
decreased by $116,356 (39%) from $298,439 in 1997 to $182,083 in 1998. Most of
this decrease is the result of decreased personnel and professional fees.
For the three months ended March 31, 1998, interest income decreased from
$61,531 for 1997 to $ 46,608 for 1998.
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, 1998 the Company had an accumulated stockholders' deficit of $
5,034,390. The Company has continued to incur losses since March 31, 1998.
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: Hanoch Shalit
------------------------------------
Chairman of the Board of Directors,
President, and Chief Executive Officer
Dated: May 14, 1998
By: James Smith
------------------------------------
Chief Financial Officer
Dated: May 14, 1998
9
<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 10-QSB for the quarter ended March 31, 1998 and is qualified in
its entirety by reference to such financial statements
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 43,339
<SECURITIES> 3,595,077
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,656,214
<PP&E> 88,351
<DEPRECIATION> (48,568)
<TOTAL-ASSETS> 3,762,485
<CURRENT-LIABILITIES> 47,317
<BONDS> 0
0
0
<COMMON> 373
<OTHER-SE> 8,749,185
<TOTAL-LIABILITY-AND-EQUITY> 3,762,485
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 220,671
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (174,063)
<INCOME-TAX> 0
<INCOME-CONTINUING> (174,063)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (174,063)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
</TABLE>
