<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
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 for the quarterly period ended March 31, 2000.
[ ] 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
of incorporation) Identification No.)
150 East 58th Street
New York, New York 10155
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(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 15, 2000 was 3,735,201.
Transitional small business disclosure format: Yes No X
---
<PAGE>
IMATEC, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
FINANCIAL STATEMENTS
INDEX
PART 1. - FINANCIAL INFORMATION (UNAUDITED)
ITEM 1. - FINANCIAL STATEMENTS
BALANCE SHEET - December 31, 1999 and March 31, 2000 3
STATEMENT OF OPERATIONS - November 17, 1988 (Inception)
to March 31, 2000 (Cumulative) and Three months ended
March 31, 1999 and 2000 4
STATEMENT OF STOCKHOLDERS' EQUITY - Three months
ended March 31, 2000 5
STATEMENT OF CASH FLOWS - November 17, 1988 (Inception)
to March 31, 2000(Cumulative) and Three months
ended March 31, 1999 and 2000 6
NOTES TO FINANCIAL STATEMENTS 7
ITEM 2. - PLAN OF OPERATION 7
PART II. - OTHER INFORMATION
ITEM 1. - LEGAL PROCEEDINGS 9
ITEM 2. - CHANGES IN SECURITIES 9
ITEM 3. - DEFAULTS UPON SENIOR SECURITIES 9
ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 9
ITEM 5. - OTHER INFORMATION 9
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K 9
SIGNATURES 9
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENT (UNAUDITED)
IMATEC, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
March 31,
2000 December
(UNAUDITED) 31, 1999
<S> <C> <C>
CURRENT ASSETS
Cash $1,981,506 $2,169,252
Other Current Assets 30,854 45,999
---------- ----------
TOTAL CURRENT ASSETS 2,012,360 2,215,251
FIXED ASSETS (net of accumulated depreciation of $78,012 and $72,773
at March 31, 2000 and December 31, 1999, respectively)
48,401 53,640
DEPOSIT 10,654 10,654
---------- ----------
TOTAL ASSETS $2,071,415 $2,279,545
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable and Accrued Expenses $ 115,735 $ 41,166
---------- ----------
TOTAL LIABILITIES 115,735 41,166
---------- ----------
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 at March 31,
2000 and December 31, 1999 373 373
Additional paid-in capital 8,749,185 8,749,185
Deficit accumulated during the development stage (6,793,878) (6,511,179)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 1,955,680 2,238,379
---------- ----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $2,071,415 $2,279,545
========== ==========
</TABLE>
See notes to financial statements
3
<PAGE>
IMATEC, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
November 17, 1988
(Inception) to
THREE MONTHS ENDED MARCH 31, March 31, 2000
2000 1999 (cumulative)
------ ---- ------------
<S> <C> <C> <C>
INCOME - consulting fee $ 133,973
----------
EXPENSES
Royalties ($ 42,543) ($ 40,513) (1,081,620)
Research and development (557,168)
General and administrative (269,651) (236,641) (4,911,105)
----------- ----------- ----------
TOTAL EXPENSES (312,194) (277,154) (6,549,893)
----------- ----------- ----------
LOSS FROM OPERATIONS (312,194) (277,154) (6,415,920)
INTEREST EXPENSE AND
AMORTIZATION AND WRITE-
OFF OF DISCOUNT AND DEBT
ISSUANCE COSTS (2,211,400)
INTEREST INCOME 29,495 32,463 668,730
----------- ----------- ----------
LOSS BEFORE EXTRAORDINARY
INCOME (282,699) (244,691) (7,958,590)
EXTRAORDINARY INCOME
FROM FORGIVENESS OF
INDEBTEDNESS 1,164,712
----------- ----------- ----------
NET LOSS ($282,699) $ (244,691) ($6,793,878)
=========== ========== ===========
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 3,735,201 5,295,201 2,705,477
=========== ========== ===========
BASIC LOSS PER COMMON SHARE
Loss before extraordinary income ($0.08) ($.05) ($2.94)
Extraordinary income 0.43
----------- ----------- ----------
BASIC NET LOSS ($0.08) ($.05) ($2.51)
=========== ========== ===========
</TABLE>
See notes to financial statements
4
<PAGE>
IMATEC, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF STOCKHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
<TABLE>
<CAPTION>
Deficit
Accumulated
Common Stock Additional During the
-------------------- Paid-in Development
Shares Amount Capital Stage Total
--------- ------ ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Balance December 31, 1999 3,735,201 $373 $ 8,749,185 $(6,511,179) $2,238,379
Net loss for the 3 months
ended March 31, 2000 (282,699) (282,699)
--------- ---- ----------- ----------- ----------
Balance March 31, 2000 3,735,201 $373 $ 8,749,185 $(6,793,878) $1,955,680
========= ==== =========== =========== ==========
</TABLE>
See notes to financial statements
5
<PAGE>
IMATEC, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
November 17,1988
(Inception) to
THREE MONTHS ENDED MARCH 31, March 31, 2000
2000 1999 (Cumulative)
---- ---- ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ($282,699) $(244,691) ($6,793,878)
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 5,239 5,239 85,141
Net loss on disposal of fixed assets 5,932
Forgiveness of indebtedness (1,164,712)
Increase (decrease) in cash flows from
Other current assets 15,145 21,738 (30,854)
Deposit (10,654)
Accounts payable and accrued expenses 74,569 3,359 406,118
----------- ---------- ------------
NET CASH USED IN OPERATING ACTIVITIES (187,746) (214,355) (5,588,417)
----------- ---------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of marketable securities 245,951 10,544,622
Investments in marketable securities (10,544,622)
Purchases of fixed assets (148,422)
Other 9,192
----------- ---------- ------------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES
245,951 (139,230)
----------- ---------- ------------
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 (1,075,000)
Payments of notes payable (245)
----------- ---------- ------------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 7,709,153
----------- ---------- ------------
INCREASE (DECREASE) IN CASH (187,746) 31,596 1,981,506
CASH - beginning 2,169,252 13,086
----------- ---------- ------------
CASH - end $1,981,506 $ 44,682 $1,981,506
========== ========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Cash paid for income taxes NONE $14,991 $54,511
==== ======= =======
Cash paid for interest NONE NONE $6,893
==== ==== ======
</TABLE>
See notes to financial statements
6
<PAGE>
IMATEC, LTD.
(A DEVELOPMENT STAGE ENTERPRISE)
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
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, 1999 of Imatec, Ltd. (Company), as filed with the
Securities and Exchange Commission. The December 31, 1999 balance sheet was
derived from audited financial statements, but does not include all disclosures
required by generally accepted accounting principles.
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, 2000 are not necessarily indicative of the results
to be expected for the full year.
2. LOSS PER SHARE
Basic loss per share was computed based upon the weighted average number of
common shares and common share equivalents outstanding. Dilutive loss per common
share has not been presented because it was anti-dilutive.
ITEM 2. PLAN OF OPERATION
The Company was organized on November 17, 1998. The Company was involved in
significant patent litigation against Apple Computer Corp. ("Apple"), as
discussed in Item 1 of Part II herein. The Company believes, based upon its
internal budgets, that its available cash resources will be sufficient for the
Company to: (i) engage in licensing the Company's technology and Imatec 20/20
System developed for the medical diagnostic imaging field to manufacturers of
medical diagnostic imaging products such as scanners, cameras and image
reproduction systems, (ii) engage in marketing activities to facilitate the
licensing of the Company's technology and its Imatec 20/20 Systems, and (iii)
conduct its operations at least through the year ending March 31, 2001. Thus,
although there can be no guarantee that the Company will not raise additional
funds in the next twelve months, the Company currently has no plans to do so.
The Company has no plans to pursue its business plan until the resolution of its
patent litigation. The Company does not intend to utilize any cash resources
towards research and development or the purchase and/or sale of any significant
equipment. In addition, the Company does not anticipate any significant change
in its number of employees.
General and administrative expenses for the three months ended March 31, 2000
increased by $33,010 from $236,641 in 1999 to $269,651 in 2000. This increase
results from an increase in litigation expenses net of decreases in other
expenses.
For the three months ended March 31, 2000, interest income decreased from
$32,463 for 1999 to $29,495 for 2000.
7
<PAGE>
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, 2000, the Company had an accumulated stockholders' deficit of
$6,793,878. The Company has continued to incur losses since March 31, 2000.
The Company believes that the remaining balance from their initial public
offering will be sufficient for the Company to sustain its business plan through
at least March 31, 2001, although there can be no assurance that such balance
will be sufficient to finance the Company's operations for such period.
FORWARD LOOKING INFORMATION
Statements contained in this report regarding the Company's future operations,
strategy, future performance and results and the anticipated liquidity are
forward looking and therefore are subject to certain risks and uncertainties,
including those discussed herein. In addition, any forward-looking information
regarding the operations of the Company will be affected by the outcome of the
Apple motion to recover attorneys fees or the licensing of the Company's
technology. There can be no assurance that the Company will be successful in its
plan of operation.
8
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In February 1998, the Company and an officer filed a patent infringement
complaint for $1.1 billion against Apple Computer Corp. (Apple) in the United
States District Court for the Southern District of New York, alleging
infringement on certain of the Company's patents. In 1999, Apple filed motions
to dismiss and for summary judgement. In January 2000, the Court granted Apple's
motions, held that the inventions which are the subject of the patents had been
previously assigned and held a certain system does not infringe.
The Company and the officer have appealed the decision to the United States
Court of Appeals for the Second Circuit and believe the court erred in
determining the previous assignment and incorrectly construed the claim of the
patents.
In addition, Apple filed a motion to recover attorney's fees of approximately
$1,700,000.
On May 13, 2000, the motion for attorney's fees was overturned.
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.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits - Exhibit 15 - Letter on unaudited financial information
- Exhibit 27 - Financial Data Schedule
Forms 8-K - March 20, 2000 - Item 5. Other Events - Developments in legal
proceedings.
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
---------------------------------------
Chairman of the Board of Directors,
President and Chief Executive Officer
Dated: May 19, 2000
9
<PAGE>
Board of Directors
Imatec, Ltd.
New York, NY
INDEPENDENT ACCOUNTANTS' REPORT
We have reviewed the accompanying balance sheet of Imatec, Ltd. as of
March 31, 2000, and the accompanying statements of operations, stockholders'
equity and cash flows for the three months then ended. These interim financial
statements are the responsibility of the company's management.
We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures
applied to financial data and making inquiries of persons responsible for
financial and accounting matters. It is substantially less in scope than an
audit conducted in accordance with generally accepted auditing standards, the
objective of which is the expression of an opinion regarding the interim
financial statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our review, we are not aware of any material modifications
that should be made to the accompanying interim financial statements in order
for them to be in conformity with generally accepted accounting principles.
May 1, 2000 By: /s/ Most Horowitz & Company, LLP
------------------------------------
Most Horowitz & Company, LLP
10
<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, 2000 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 1,981,506
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,012,360
<PP&E> 126,413
<DEPRECIATION> (78,012)
<TOTAL-ASSETS> 2,071,415
<CURRENT-LIABILITIES> 115,735
<BONDS> 0
0
0
<COMMON> 373
<OTHER-SE> 8,749,185
<TOTAL-LIABILITY-AND-EQUITY> 2,071,415
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> (312,194)
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (282,699)
<INCOME-TAX> 0
<INCOME-CONTINUING> (282,699)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (282,699)
<EPS-BASIC> (.08)
<EPS-DILUTED> 0
</TABLE>
