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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB [AMENDMENT NO. 2]
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
UNDER
THE SECURITIES EXCHANGE ACT OF 1934
DICOM IMAGING SYSTEMS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEVADA 88-0422026
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
1350 E. FLAMINGO ROAD
SUITE 847
LAS VEGAS, NV 89119
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
(877) 624-6243
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
(520) 441-8755
(REGISTRANT'S FACSIMILE NUMBER, INCLUDING AREA CODE)
Securities to be registered pursuant to Section 12(b) of the Act: NONE
Securities to be registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $0.001
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(TITLE OF CLASS)
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INFORMATION REQUIRED IN REGISTRATION STATEMENT
CERTAIN FORWARD-LOOKING INFORMATION
The information contained in this Registration Statement includes
forward-looking statements. Since this information is based on current
expectations which involve risks and uncertainties, actual results could differ
materially from those expressed in the forward-looking statements. Various
important factors known to Dicom Imaging Systems, Inc. that could cause such
material differences are identified in the section entitled Plan of Operation
contained in Part I, Item 2 of this Registration Statement.
PART I.
Item 1. Description of Business
BUSINESS DEVELOPMENT
Dicom Imaging Systems, Inc., a Nevada Corporation ("Dicom" or "DIS" or
the "Company") is a development stage software provider to the dental industry
and associated groups. It is the plan of Dicom to capture market share of
imaging software in dentistry by producing and distributing, free of charge, an
imaging software application known as IMAGE EXPLORER AND IMAGE EDITOR ("Image
Explorer") to dentists, dental specialists, dental laboratories, dental
insurance companies, and educational facilities throughout North America. Dicom
requires registration of its Image Explorer product by its customers through a
telephone registration system. At the point of registration of IMAGE EXPLORER,
it is anticipated that Dicom representatives will market a series of value added
software modules, support services and select imaging hardware devices to its
software registrants.
The core Image Explorer product functions primarily as a means for
dental professionals to categorize, manage and manipulate patient images by
means of a visual interface. The value added software modules each provide
products to assist dental professionals with a specific area of image management
and manipulation, such as cosmetic whitening procedures on teeth. The value
added software modules can be added and integrated as dental professionals
become more familiar with the Dicom's Image Explorer technology.
By providing dental care providers with a DICOM (Digital Imaging
Communications in Medicine) compliant standard image database application,
management believes that DIS could provide an industry wide standard for dealing
with dental images across the profession. The Digital Imaging Communications in
Medicine (DICOM) standard is a detailed specification that describes a means of
formatting and exchanging images and associated information. DICOM is a standard
similar to JPEG, TIFF or any other standaridized protocol for storage and
retrieval of digital images. The standard applies to the operation of the
interface which is used to transfer data in and out of an imaging device.
Currently, dental professionals as a group are moving toward the DICOM standard.
Most providers of dental hardware and software do not use the DICOM standard.
The corporate name Dicom Imaging Systems, Inc. was inspired by the DICOM
standard. It is anticipated that substantially all of Dicom's revenues will be
derived from sales of value added software modules, support services and select
imaging hardware devices to its software registrants.
Dicom provides telephone and email based technical support services for
product users with questions concerning use of a Dicom software product. Such
questions may relate to device compliance, software features, installation of
software or advice on how to optimize use of the software for the needs of a
particular dentist. Dicom provides such service and support, which also includes
free-upgrades of the Dicom software
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product, for an annual fee of $495, paid directly by the software user to Dicom
via a credit card over the Internet or telephone.
Dicom also stocks an imaging capture card, which is a device added to a
personal computer to support input of digital images, an intraoral camera, which
is a camera for taking digital images of the inside of a patient's mouth and
footpedals, which are used to control intraoral cameras by pressing down with
the foot. These products are manufactured by third parties and Dicom receives a
commission on the sale of each of these products through our website or
toll-free telephone number.
Dicom anticipates that 45% of its revenues will come from the sale of
software modules, 45% will come from revenue for technical support and upgrade
service and 10% will come from revenue derived from the sale of the hardware
devices described above.
BANKRUPTCY OR RECEIVERSHIP
Dicom has never initiated or been the subject of any action under the
United States Bankruptcy Code or any receivership or any similar proceeding.
COMPANY HISTORY; FORM AND YEAR OF ORGANIZATION; PURCHASE OF SIGNIFICANT
ASSETS
Dicom was incorporated as a Nevada Corporation on March 17, 1999.
Although certain officers of Dicom had been developing and structuring the
software license and other contractual relationships for Dicom prior to
incorporation, Dicom has been active in pursuing its customers and distributing
its products only since April 2, 1999. Dicom intends to handle its customer
service, order fulfillment and sales functions directly in its Las Vegas
offices. Certain technical support and customer service functions, but no sales
functions, are handled by Dicom's wholly owned subsidiary, 527403 British
Columbia Limited, a Canadian corporation incorporated under the laws of British
Columbia, Canada ("BC Ltd.") in April 6, 1996. However, as of March, 1999, there
were no assets or liabilities in BC Ltd. and was no business being conducted out
of BC Ltd. Prior to March, 1999 no person was conducting any business related to
Dicom out of BC Ltd. In March, 1999, BC Ltd. became a wholly-owned subsidiary of
Dicom for the purpose of handling Dicom's service and support calls in Canada.
BC Ltd. is not a predecessor of Dicom and none of the officers of Dicom were
conducting Dicom's business or any business related to Dicom out of BC Ltd.
prior to March, 1999.
Presently, Dicom does not have sufficient personnel in Las Vegas to
provide the telephone technical support which it sells to its customers for $495
per year. Therefore, Dicom has organized BC Ltd. to provide technical support to
Dicom customers through a toll-free number which is answered at BC Ltd. BC Ltd.
is staffed with personnel who have the expertise to answer questions regarding
installation problems, sophisticated hardware/software compatibility problems
and advise on optimum usage techniques for the Software. Dicom intends for all
sales functions, closing of orders, shipping of products, processing of credit
card information to occur in Las Vegas. BC Ltd. will be responsible solely for
paid telephone customer technical support. Because Dicom's Las Vegas offices are
still being set up, presently BC Ltd. also handles questions from customers
regarding Dicom's available products and services. It is anticipated that this
function will shift to Las Vegas within the next two months.
Dicom did not develop the Image Explorer or value added module
software, but licensed the same from Torchmark Holdings, Ltd., a Turks and
Caicos Islands B.W.I. corporation ("Torchmark") under a License Agreement dated
March 17, 1999 by and between Torchmark and Dicom and a Capital Contribution
Agreement dated March 17, 1999 by and between Torchmark and Dicom. Torchmark
acquired the license for the Image Explorer and value added module software (the
"Software") from Image F/X Software Solutions, Inc., a Canadian Corporation
("Image"). Torchmark became acquainted with Image by means of Walter Sutherland,
who was an employee of Image at the time of the introduction and who was friends
with the principals of Torchmark. Walter Sutherland is currently an employee of
Dicom. Torchmark paid Image $150,000 Canadian Dollars for a full transfer of all
right, title and interest in the Image Explorer software.
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Dicom has no operating history prior to March 17, 1999. Dicom has had
no significant revenues to date and has funded its activities through the sale
of its common stock and through loans by shareholders. Dicom's corporate
headquarters are located in Las Vegas, Nevada. Dicom is presently negotiating
the lease on its Las Vegas administrative and sales headquarters in Las Vegas.
Certain of the officers and other employees of Dicom presently conduct the
certain aspects of the corporation's business at the physical location of BC
Ltd. Outside Corporate Counsel to Dicom maintains most of Dicom's administrative
and financial records at the offices of Corporate Counsel until a final lease is
negotiated on Dicom's Las Vegas headquarters.
BUSINESS OF DICOM
PRINCIPAL PRODUCTS AND SERVICES OF DICOM AND THEIR MARKETS
The core product, (Image Explorer) is a software program designed to
provide storage, archiving and access to digital images captured by dental
professionals. Image Explorer operates in the Windows operating system
environment on a personal computer using the DICOM standard for archiving
digital images. Image Explorer captures images from a variety of sources such as
digital cameras, intra oral cameras, digital x-ray, e-mail, internet transfers,
operating microscopes or any twain compliant device, and then stores them in an
"electronic file cabinet" visual interface. Twain stands for technology without
an interesting name and is a hardware/software standard for exporting digital
images. Most digital imaging devices used in the dental profession are twain
compliant. After storage, the images can be accessed in the patient file for
review, comparison, printing, and communication. There are other modules or
plug-ins designed to enhance the ability of the Image Explorer(TM) software
program. The core product consists of Image Explorer, as described above, and
Image Editor(TM) described below, as well as the other plug in modules which
dental professionals can purchase. Image Explorer and Image Editor(TM) are the
core product and are given away free. The core product is enhanced by the
purchase of plug-in modules that add features to the core product. In order to
take advantage of enhanced features, users of the core product may purchase the
other plug ins described below.
Core product of Free Software:
Image Explorer: Allows users to capture images from a variety of sources such as
digital cameras, intra oral cameras, digital x-ray, e-mail, internet transfers,
operating microscopes or any twain compliant device, and then stores them in an
"electronic file cabinet" visual interface.
Image Editor(TM): Allows the user to enhance the captured images without
substantially altering the image from its original state. This may include such
actions as color enhancement, sharpen, soften, cropping, rotating and flipping.
Plug-ins which must be purchased separately:
Lab RX(TM): A lab module that facilitates communication between the dentist and
the laboratory technician especially with respect to esthetic restorations,
visually prescribing porcelain procedures to be performed by the lab. It
provides the lab technician certain information which can assist in the
preparation of accurate and cost-effective lab products. Lab RX generates an
enhanced electronic prescription as either a print report or an electronic file.
X-Ray(TM): An x-ray module that allows the dentist to acquire x-ray images of
the patient into Image Explorer via direct acquisition or by film scanning
devices. The radiographic imaging tools allows the dentist to enhance the
radiograph for improved diagnosis, measure areas of the radiograph, attach
diagnosis notes,
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and communicate with colleagues via print or modem. If the dentist already has a
digital x-ray system, Image Explorer will allow the user to view, enhance, print
and communicate those existing images using the DICOM standard.
Whitener(TM): Whitener is an additional add-on module to Image Explorer.
Whitener is a module which identifies the teeth in an image and lightens them to
simulate a bleaching procedure. This module allows the patient to see what a
tooth whitening procedure would look like when completed.
Simulator(TM): Simulator's image manipulation tools show the patient what he or
she could look like with an alteration to their smile before committing to the
actual dentistry. The dentist can then send the patient's image to the
laboratory along with the prescription so the technicians making the restoration
will be able to view the proposed changes. With Simulator, the dentist can
simulate a range of dental procedures, including bleaching, bonding, veneers,
implants, amalgam replacement and orthodontics.
The above products are all intended to be sold to Dentists,
Orthodontists, Oral Surgeons and other dental professionals for use in their
practice with patients.
Distribution Method of Products and Services
Dicom distributes the core Image Explorer software free of charge
directly to dental professionals through direct mail, certain dental product
dealers and through partnering arrangements still in negotiation with other
manufacturers of dental products. Dental professionals who wish to use these
free products must call a toll free number to register the product. At the time
of the call, representatives of Dicom offer the customers the opportunity to
purchase the value added software modules and well as technical support and
upgrade packages. Sales of the value added software modules, such as Lab RX,
Whitener, Simulator and X-Ray are conducted primarily through this telephone
"upselling."
In addition to the above method, where customers call our toll free
number to register their free core product and are offered the opportunity to
purchase value added plug in modules by our representatives during the call,
Dicom intends to generate the sales of it's software modules, support services
and hardware devices from attending trade shows and educational forums where
dentists and their staffs congregate, via the Dicom's internet web site, via
telemarketing to dental professionals and those who have already registered the
free core product but have not yet purchased a module, as well as through
traditional dental dealers or distributors. We anticipate that between 60% and
75% of our revenue will be derived from sales of our value added software
modules and technical support packages that are made through our toll free
number.
Sales of value added modules to distributors and value added resellers
will involve the distributor or reseller buying CDs of the Software directly
from Dicom in quantity and selling them to dental professionals.
Each technical support package costs $495 per year and is paid for by a
credit card number over the telephone or through our internet web site. We are
in the process of devising a fee schedule for Lab-RX, Whitener, Simulator and
X-Ray. Customers will license these value added modules directly from Dicom by
paying the appropriate licensing fee by credit card or check and receiving a CD
containing the purchased modules. We do not lease imaging hardware, but simply
derive a commission for each sale of imaging hardware which we close with a
customer and forward on to a reseller for shipping. We have relationships with
resellers of intra-oral cameras, video imaging cards and foot pedals.
It is anticipated that IMAGE EXPLORER will be given away free of charge
to all dental care providers through a mass mailing of CDs containing the Image
Explorer core product. This mass mailing has not yet occurred and is anticipated
to occur in September, 1999. There is no assurance that the mass mailing will
occur. Presently, in the month of July, we have attempted, by writing and
mailing a targeted direct mail letter
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to thousands of dentists, to cause them to call us to request the software. If
response to this campaign is sufficient, we may not feel it necessary to do the
mass mailing of the CDs. We believe that dentists desire a core imaging product
which is DICOM compliant, so they may all have a standard method which is DICOM
compliant to store, view, print, and communicate images, thus increasing the
standard of care to patients.
The Software will come on a CD, which will install the IMAGE EXPLORER
image database system. On the main menu bar of the IMAGE EXPLORER program the
tabs for all of the additional optional modules will reside. When they are
pressed a description of the module and instructions on how to order will
appear. Also on the CD will be a short training video on how to use IMAGE
EXPLORER and an introduction to the benefits of the other available modules. In
the package will be instructions on how to load the software, the benefits of
the software, and how to purchase the additional modules and the service/support
agreement. In order to activate the software the user must first load the
software onto their computer, then when they go to run the software they will be
requested to call our 1-877-62-IMAGE number for the activation code. At that
time the Dicom Imaging Systems (DIS) support representative will take the user's
key information for our database and market the additional modules. The support
representative will also market the service/support contract. If the end user
would like to purchase additional hardware such as cameras, video cards, and
intra-oral cameras, DIS can either provide them or assist the user in finding
the best source. The IMAGE EXPLORER product that is provided at no charge will
assist the user with their standard day to day handling of images.
Status of Publicly Announced Products or Services
Image Explorer, Image Editor and Whitener are all available for
distribution and are being distributed presently by Dicom. Lab RX, X-Ray and
Simulator are still in development. Estimated completion dates are as follows:
Simulator August 17, 1999, X-ray August 26, 1999 and Lab RX Sept 9, 1999. Of
course, no assurance can be given that any of these products will be ready by
the anticipated completion date. Therefore, with the exception of Whitener, all
of the products which we intend to sell for revenue are in presently in
development. We are currently selling technical support packages for $495 per
year. There is no further development necessary for the technical support
packages.
We are currently selling hardware through a commissioned sales
mechanism. We are currently offering intra-oral cameras, video cards and foot
pedals for sale by an arrangement where we close the order with one of our
customers and collect payment, which we forward less our commission, to the
seller who ships the hardware item to the customer.
The technical support package offers value to the dental professional
by providing support, advice, guidance and troubleshooting regarding
installation, usage, features, problems and functions of the Software, thus
making the dental professionals use of the Software more efficient.
An intra-oral camera is a device which allows the dental professional
to take digital images of the inside of a patient's mouth, which can be stored
and manipulated using the Software. This allows the dental professional to show
a patient what a particular dental problem looks like and assists the dental
professional in helping his or her patient to select appropriate treatment. A
video card is necessary in order to allow the dentist to capture and manipulate
video images. A foot pedal allows the dental professional to use his or her
hands to position a camera and the foot pedal to activate the camera to capture
the image.
Competitive Business Conditions, Competitive Position and Methods of
Competition
Competition in the dental products and services industry is intense.
There are many established companies who offer products that compete indirectly
with Dicom. Although growth in the dental industry in general and sales of
dental products and supplies in particular is expected to grow and expand as
cosmetic and elective dental procedures become more widely accepted, the number
of competitors in the marketplace
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makes competitive pressures severe. There are competitors to Dicom with
significantly greater financial, technical, marketing, distribution and human
resources. There is no guarantee Dicom will be able to meet or survive these
significant competitive challenges. The dental software industry in particular,
because of the potentially high profit margins compared with other manufactured
dental products, has attracted large and sophisticated competitors with
established brand names who have already successfully developed and marketed
products.
In spite of the competitive challenges in the industry, Dicom's
competitive position is somewhat unique. Currently there are no companies that
compete directly with Dicom in offering a free core product similar to Image
Explorer. Each competitor uses a different data base structure, file format and
interface design making it difficult for the dentist to come up with a
comprehensive solution by purchasing modules from different manufacturers. IMAGE
EXPLORER is presently one of only a few image storage and retrieval systems
available which are DICOM compliant and which operate at 32 bit resolution on
the Windows operating system. Since Windows is the dominant operating system for
personal computers in the dental profession, and since 32 bit resolution
provides enhanced image quality over 16 bit resolution, Image Explorer is a more
widely usable, higher resolution DICOM compliant product than many other
products available. Dental professionals can find advantages in the
cross-platform adaptability of the DICOM standard and can use Image Explorer
with many of their existing images and hardware devices. Combined with the
higher resolution and the ease of access to the Windows operating system, and
the competitive position of the Software is enhanced over lower resolution,
non-Windows based, non-DICOM compliant products.
Dicom's main competitors are SciCan (which markets products Image FX
and CosmetiX), Dentsply/New Image Industries (which markets Capture It Plus) and
Dynamic Dental Systems (which markets VIPERSOFT). All of these competitors
charge at least $2000 for their core imaging product, which is competitive with
Image Explorer. All of these competitors compete in the areas of hardware,
software and support services. If any of these more established competitors were
to also give-away or substantially discount their products, such a move might
have a material, adverse effect on Dicom's ability to compete in the dental
imaging software market.
The methods of competition in the industry currently are to advertise
software products in trade magazines, feature them at trade shows and promote
them through direct mailings. Products tend to be distributed by distributors
who have a variety of dental products in their inventory and have a familiarity
with a wide base of dental professionals. Currently, no other imaging software
provider is providing a free imaging software product in order to sell value
added modules or services and support. Another method of competition in the
industry is to acquire another manufacturer with a product that will compliment
existing products and that has an established distribution mechanism.
Sources of Raw Materials and the Names of Principal Suppliers
As Dicom produces and sells a software product, there are a limited
number of raw materials necessary for the conduct of its business. Blank compact
disks, mastered compact disks, printed software mailers and manuals and
marketing brochures are the main materials that go into the Dicom product.
Standard business papers, blank and mastered compact disks and printed software
mailers are available from a wide variety of suppliers. Dicom presently relies
on Peripherals of British Columbia to manufacture its compact discs containing
its software. There are more than 100 other suppliers available for this
function as well as Dicom's other raw material needs. Most of these suppliers
offer substantially identical prices. A sharp rise in these prices, however, by
Peripherals or a large number of other suppliers would have a material, adverse
effect on Dicom's ability to compete and achieve profitability.
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Dependence on one of a few major customers
Dicom markets to over 20,000 dentists and dental professionals and is
not dependent on any particular customer. Although historical information is not
yet available due to Dicom's short operating history, it is anticipated that no
one customer will account for more than 1% of Dicom's yearly sales volume.
Patents, trademarks, licenses, royalty agreements or labor contracts
Dicom does not have any patents. Dicom does not intend to apply for any
patents on any product or service currently available or in development. Dicom
protects its software via copyright, trademark and by guarding the source code
as a trade secret. Though Dicom requires its programmers to sign industry
standard agreements to protect its trade secrets, there can be no assurance that
these agreements will be honored or that the remedies available in the event of
breach of these agreements would be adequate. A compromise of Dicom's source
code, for any reason, would have a severe negative impact on Dicom's ability to
compete effectively. Dicom has applied for trademark protection on Image
Explorer, Dicom Imaging Systems, Lab RX, X-Ray, Whitener, Simulate and Image
Editor. There is no assurance that such trademarks will actually be applied for
or approved. If such trademarks were not to be secured, there could be a
material adverse effect on Dicom's competitive position and ability to
distinguish and differentiate its products.
Dicom has a thirty year license from Torchmark for the Software. A
breach of the terms of this license by Torchmark or the cancellation of the
license for any other reason would almost certainly have a severe materially
adverse effect on Dicom's ability to sell its products and on its financial
condition.
Need for Governmental Approval
Dicom's products are regulated by Federal, State, Provincial and Local
regulations. The products require approval of the United States Food and Drug
Administration ("FDA"). Dicom is in the process of gathering data necessary for
the submission of an approval application to the FDA, as described below. It is
anticipated that such an application will be completed by September 15, 1999 and
submitted to the FDA for review. However, there is no assurance that such
applications will be completed, submitted or approved. If the required
applications were not to be completed, submitted and approved, Dicom may not be
able to successfully market or sell these products, which would have a
materially adverse effect on Dicom's revenues and profits.
Pursuant to the Federal Food, Drug, and Cosmetic Act, the FDA regulates
the research, design, testing, manufacture, safety, labeling, storage,
record-keeping, advertising and promotion, distribution, and production of
medical devices in the United States. Certain medical and dental imaging
software products are medical devices and are subject to FDA regulation.
Generally, before new a device can be introduced into the market in the
United States, the manufacturer must obtain FDA clearance of a 510(k) pre-market
notification or approval of a pre-market approval application (PMA). A PMA is an
application that the manufacturer submits to the FDA which provides the FDA
basic information about the device so that the FDA can make a determination if
the device is safe and effective. A 510(k) application is much less detailed
than a PMA and takes less time to prepare. It gives the FDA general information
necessary to make a determination if a device is safe and effective without
in-depth review. The FDA classifies devices into three groups. Class I devices
do not require any pre-sale applications and may be sold without application to
the FDA. Class I devices tend to pose little risk to the health and safety of
the public. Class II devices require a 510(k) premarket notification as
described above, because the FDA has determined Class II devices warrant
pre-market notification. Class II devices have the potential to pose a small
degree of risk to the public unless proper quality, validation and instruction
and advertising protocols are adhered to. Class III devices tend to pose
substantial risks to public health and welfare and require an in-depth
examination of the device. If the device is " substantially equivalent" to a
legally marketed Class I or Class II device or to a Class III device for which
the FDA has not called for a PMA, the manufacturer may seek clearance from the
FDA to market the device by filing a 510(k) pre-market
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notification. The 510(k) pre-market notification will need to be supported by
appropriate data establishing the claim of substantial equivalence to the
satisfaction of the FDA.
If Dicom cannot establish that its Simulator, Whitener and X-Ray
software is substantially equivalent to a legally marketed predicate device, the
Company must seek pre-market approval through submission of a PMA application.
The PMA application must be supported by valid scientific evidence, including
pre-clinical and clinical trial data, as well as extensive literature to
demonstrate a reasonable assurance of safety and effectiveness of the device.
The PMA represents the most vigorous form of FDA regulatory review.
Dicom's products are likely to be regulated by the FDA as Class II
medical devices, requiring a 510(k) premarket notification for these modules,
according to the FDA guidelines and recommendations, as articulated by the FDA
Center for Devices and Radiological Health in its Draft Guidance Statements,
including the Draft "General Principals of Software Validation, Version 1.1"
released on June 9, 1997. These products are likely regulated as PACS (picture
archiving and communications systems) and therefore must be DICOM and Joint
Photographic Experts Group (JPEG) compliant. While FDA guidance documents are
not legally binding, Dicom is in the process of making such an application to
comply with the guidance documents. We anticipate that the application will be
filed on or before October 15, 1999. In spite of these efforts, Dicom could
encounter regulatory difficulties which could have a material effect on its
financial condition, as there is no assurance that regulatory approvals will be
granted or that Dicom will complete the regulatory process in a timely manner.
Though Dicom has made an effort to comply with applicable regulations,
it is possible that Dicom is not in compliance with current FDA regulations, as
interpreted by the FDA staff, in its present distribution of products. Such
non-compliance could have a material adverse effect on Dicom's financial
condition, sales and profits.
Effect of Existing or Probable Governmental Regulation
Although it is not certain, it appears that Dicom's products, after
necessary applications have been made and approved, will still be subject to
governmental regulation that could have a material, adverse effect on the
ability of Dicom to market and sell the Software. The dental imaging field is
relatively new and it is quite possible that new regulations could be proposed
and adopted which could severely restrict products similar to the Software.
Although management is not presently aware of any such pending or proposed
regulations, there is no assurance that they will not be imposed. The dental
industry is a heavily regulated field, operating under a wide range of local,
state, federal and provincial regulations. It is possible that additional
regulations could be adopted or current enforcement practices changed in a way
that makes it more difficult or impossible to market or sell the Software. In
addition, because dental science is constantly evolving, new regulatory regimes
and processes could be adopted at any time and could have a material, adverse
effect on Dicom's ability to conduct its business.
Estimate of the amount spent on Research and Development
As little historical data is available, such data does not necessarily
provide a representative sample of what research and development expenses Dicom
will incur in the future. To date, Dicom estimates that it has spent
approximately $150,000 on research and development expenses and that these costs
will be borne only indirectly by customers, through the cost of Dicom products.
To date, no customer has borne any direct research and development expense.
Costs and effects of environmental compliance
Dicom has no significant costs associated with environmental
compliance.
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Number of total employees and number of full time employees.
Dicom has seven total employees and seven full time employees.
Item 2. Plan of Operation
Plan of Operation Over the Next Twelve Months
Dicom's plan of operation over the next twelve months is to continue to
develop and improve the Software throughout the year, responding to customer
comments and requests and producing an updated version of the core product,
Image Explorer. Dicom intends to aggressively capture market share over the next
twelve months through attendance at nearly every significant dental tradeshow
held in Canada and the United States. We plan to staff our booths at these
tradeshows with Dicom personnel who can explain and market our product to the
dentists in attendance. In addition, Dr. Gane plans an aggressive lecture,
seminar campaign, where he will speak to audiences of dental professionals
throughout Canada about dental imaging in general and Image Explorer in
particular. Because Dr. Gane receives a number of invitations to speak
throughout the year to dental professionals eager to improve and develop their
practices, we feel that these events provide him with an opportunity to promote
Image Explorer throughout the year to a large number of dental professionals.
Dicom intends over the next twelve months to negotiate supply
relationships with most of the major dental product distributors in North
America and to greatly expand the number of distributors who stock the Dicom
product. Dicom has planned an aggressive advertising campaign in Dental Products
Report and other dental trade magazines to continue to promote Image Explorer
throughout the year to dental professionals.
Dicom intends to purchase the license rights to the medical version of
the Image Explorer product from Torchmark sometime in August or September of
1999 and to spend the balance of the next twelve months developing and marketing
the medical version of Image Explorer to medical professionals.
Dicom intends to develop and enhance its web site over the next twelve
months and to drive traffic to the site by pursuing links with other dental
related sites and by purchasing banner advertisements on dental product sites.
Dicom is currently in discussions with various Internet consultants to add
multimedia and enhanced functionality to the web site, as well as improve
graphic design elements.
Dicom intends to streamline its customer support functions over the
next twelve months through extensive scripting of commonly experienced technical
and product usage problems as they are encountered by our customer support
staff. In addition, Dicom intends to begin its intensive telemarketing campaign
and to continue it throughout the next twelve months, with a goal of contacting
by telephone all leads generated by our presence at trade shows, Dr. Gane's
lectures, through our web site and through reader responses to our
advertisements in dental trade maganizes.
In addition to developing an upgraded version of the core Image
Explorer product during the next twelve months, Dicom intends to develop other
value-added software modules and other methods for enhancing its revenue stream,
including corporate partnering agreements and agreements to bundle the Image
Explorer core product with other manufacturer's hardware products.
YEAR 2000 READINESS ISSUE
Our plan of operation over the next 12 months may be impacted by the
Year 2000 readiness issue. The Year 2000 readiness issue, which is common to
most businesses, arises from the inability of information systems, and other
time and date sensitive products and systems, to properly recognize and process
date-sensitive information or system failures. Estimates of the potential cost
and effects of Year 2000 issues vary significantly among businesses, and it is
extremely difficult to predict the actual impact.
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<PAGE> 11
To date, we have not made any remediation efforts to date to address
Year 2000 issues and have no plan to do so in the future. We do not have a
remediation plan. This is primarily due to the fact that we constructed and
designed our Image Explorer software to be Year 2000 compliant. The Year 2000
issue has an impact on both information technology systems and non-information
technology systems, such as manufacturing systems and physical facilities
including, but not limited to, security systems and utilities. We do not intend
to test all of our information technology systems and non-information technology
systems for Year 2000 readiness. Management has no basis to conclude whether or
not our information technology or non-information technology systems are ready
for Year 2000.
In our office and to develop our software, we use personal computers
and computer peripherals, such as scanners, intra-oral cameras, tape back up
systems and Compact Discs. We also use non-information technology, such as
calculators, clocks, software manuals, telephones and telephone switching
equipment, mail services, postage meters and credit card processing equipment.
We have not made an assessment of whether or not any of this equipment is Year
2000 compliant. Failure of this equipment to be Year 2000 compliant could result
in our total inability to conduct our business, contact our customers, update
our product or expand our market share.
The Year 2000 readiness of our customers varies. We are not
investigating whether or not our customers are evaluating and/or preparing their
own systems to be Year 2000 compliant. These efforts by customers to address
Year 2000 issues may affect the demand for certain products and services;
however, the impact on our revenue is highly uncertain.
We have not investigated the Year 2000 readiness of our key suppliers,
however, management believes that the large number of available suppliers makes
it unlikely that we will experience disruptions due to a non compliant supplier,
although a widespread supplier shortage due to non-compliance would have a
material adverse impact on our business.
We do not have written assurances from any vendor or material third
parties that they are Year 2000 compliant. We do not believe that there are any
material third parties who provide services to us which could not easily be
transferred to a large number of other potential suppliers who could meet our
needs immediately. We essentially need traditional business printing, CD
mastering and dye screening, mailing services, advertising services and
telephone support. Short of a general failure of AT & T to provide long distance
service or route our calls effectively, all other vendors are replaceable with a
minimum of disturbance and cost. We have no contingency plans in the event that
material third parties are not ready on time. This could result in the total
disruption of our business and an inability to develop or market our products.
We do not intend to spend any money on Year 2000 remediation over the
next twelve months. We have not spent any money to date. If we are forced to
spend money over the next twelve months on Year 2000 remediation, such spending
may negatively impact our financial performance and exhaust our available
working capital.
The Year 2000 issue presents a number of other risks and uncertainties
that could impact us, such as public utilities failures, potential claims
against us for damages arising from products and services that are not Year 2000
compliant, and the response ability of certain government commissions of the
various geographic areas where Dicom conducts business.
If we, our customers or suppliers are unable to resolve any Year 2000
compliance problems in a timely manner, we could face business interruptions or
a shutdown, financial loss, regulatory actions, reputational harm and/or legal
liability. We have determined that we will not be developing any contingency
plans that address a reasonably likely worst case scenario.
In the event of a worst case scenario, if our material third party
suppliers, information technology systems and non-information technology systems
were to cease function, we could be forced to shut down our operations.
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<PAGE> 12
Cash Requirements
As of March 31, 1999, Dicom had an accumulated net loss of $102,934 and
had total cash of $222,902. Management believes that Dicom can satisfy its cash
needs out of available cash and operating income and will not have to engage in
any sale of Dicom's securities during the next twelve months.
We anticipate total income of approximately $4,000,000 during the next
twelve months and we expect profits of approximately $3,000,000 for the same
period before taxes. We anticipate generating approximately $150,000 to $500,000
per month in cash to fund our operations. We expect out overhead to remain
constant at $75,000 to $150,000 per month. Dicom believes that it can satisfy
its cash requirements for the foreseeable future out of a combination of cash
now available from the previous sale of shares of common stock in Dicom and
operating revenues. In addition, Dicom is prohibited from the issuance of
additional shares and the undertaking of material debt without the consent of
its shareholders. There can be no assurance that, in the event Dicom had a need
for additional capital, that such consent will be forthcoming.
Product Development and Research Plan for the Next Twelve Months
It is anticipated that Dicom will spend $12,000 per month over the next
twelve months to improve and develop the Image Explorer Software and modules.
These improvements might include customer requested enhancement as well as the
amelioration of any technical problems that become manifested with the Image
Explorer Software and modules
Expected Purchase or Sale of Plant and Significant Equipment
None.
Expected Significant changes in number of employees.
None.
Risk Factors
WE HAVE A LIMITED OPERATING HISTORY UPON WHICH TO EVALUATE OUR LIKELIHOOD OF
SUCCESS.
We have only manufactured and distributed our software and manufactured and
distributed our Image Explorer product since April, 1999. Therefore, we have a
limited relevant operating history upon which to evaluate the likelihood of our
success. Factors such as the risks, expenses and difficulties frequently
encountered in the operation and expansion of a relatively new business and the
development and marketing of new products must be considered in evaluating the
likelihood of success of our company.
WE HAVE A HISTORY OF LOSSES AND ACCUMULATED DEFICIT AND THIS TREND OF LOSSES MAY
CONTINUE IN THE FUTURE.
At March 31, 1999, our accumulated deficit was $102,934. Our ability to obtain
and sustain profitability will depend, in part, upon the successful marketing of
our existing products and the successful and timely introduction of new
products. There can be no assurance that we will ever be profitable.
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<PAGE> 13
FLUCTUATION IN QUARTERLY RESULTS MAY RESULT IN DECLINES IN OUR STOCK PRICE.
Certain quarterly influences may affect our business. Sales are generally
higher in the fourth quarter due to the purchasing patterns of dentists in the
United States and are generally lower in the first quarter due primarily to the
effect upon demand of increased purchases in the prior quarter. We also expect
to experience lower sales in the summer months as a consequence of holiday
vacations and a lesser number of trade shows. These fluctuations could result in
significant fluctuations, including significant declines in our stock price when
Dicom's stock begins to trade on the public markets.
OUR FUTURE DEPENDS ON OUR ABILITY TO INCREASE DEMAND FOR OUR IMAGE EXPLORER
PRODUCT AS WELL AS OUR ABILITY TO DEVELOP AND INTRODUCE NEW PRODUCTS.
Our future depends upon our ability to increase demand for our Image Explorer
and related products and our ability to develop and successfully introduce new
products. Development of new product lines is risk intensive and often requires:
- long-term forecasting of market trends;
- the development and implementation of new designs;
- compliance with extensive governmental regulatory requirements; and
- a substantial capital commitment.
Also, the medical and dental device industry is characterized by rapid
technological change. As technological changes occur in the marketplace, we may
have to modify our products in order to become or remain competitive or ensure
that our products do not become obsolete. If we fail to anticipate or respond in
a cost-effective and timely manner to government requirements, market trends or
customer requirements, or if there are any significant delays in product
development or introduction, this could have a material adverse effect on our
business.
THE GOVERNMENT EXTENSIVELY REGULATES OUR PRODUCTS AND FAILURE TO COMPLY WITH
APPLICABLE REGULATIONS COULD RESULT IN FINES, SUSPENSIONS, SEIZURE ACTIONS,
PRODUCT RECALLS, INJUNCTIONS AND CRIMINAL PROSECUTIONS.
The United States Food and Drug Administration, as well as state and foreign
agencies, regulate almost all aspects of our medical devices including:
- entry into the marketplace;
- design;
- testing;
- manufacturing procedures;
- reporting of complaints;
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<PAGE> 14
- labeling; and
- promotional activities.
Under the Federal Food, Drug, and Cosmetic Act, the FDA has the authority to
control the introduction of new products into the United States marketplace.
Unless specifically exempted by the agency, medical devices enter the
marketplace through either FDA clearance of a premarket approval application or
FDA approval of an application for 510(k) clearance. The FDA conducts periodic
inspections to assure compliance with that agency's regulations.
Unless specifically exempted by FDA's regulations, we will need to file a
510(k) submission or pre-market approval application for any new products
developed in the future. The process of obtaining a clearance or approval can be
time-consuming and expensive. Compliance with the FDA's regulatory requirements
can be burdensome. We do not guarantee that the required regulatory approvals or
clearances will be obtained. Any approval or clearance obtained from the FDA may
include significant limitations on the use of the medical device which is the
subject of the approval or clearance. In addition, in order to sell our products
internationally we need to obtain the appropriate approvals of foreign
regulators, none of which can be guaranteed to be received. The international
regulatory review process varies from country to country. For example in Europe,
the regulations of the European Union require that a device have a CE mark
before it can be sold in that market. We cannot market a medical device in any
particular market if the required approval or clearance is not granted.
Inability to obtain such approval or clearance could result in a delay or
suspension of the manufacture and sale of affected medical devices in that
market. Any such delay or suspension would have a material adverse effect on our
business. Also changes in existing regulations or the adoption of new
regulations could make regulatory compliance by us more difficult in the future.
The failure to obtain the required regulatory clearances or to comply with
applicable regulations could result in one or more of the following:
- fines;
- delays or suspensions of device clearances;
- seizure actions;
- mandatory recalls;
- injunction action; and
- criminal prosecution.
We believe we will be required to file a 510(k) application for
Whitener, Simulator and X-Ray. We are currently gathering the information
required for such an application and anticipate completing the applications by
September 15, 1999. We expect to receive approval of the applications 120 days
after receipt of the completed applications by the FDA, according to the
regulatory consultants who are assisting Dicom in the completion of the
application materials. An individual application is required for each module. We
have not yet obtained a clearance for any Dicom product. We do not believe that
Image Explorer, Image Editor or Lab-RX will require any FDA clearance, pre
market application or review. The FDA has not imposed any limitation on the use
of our proprietary products that we are aware of presently.
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<PAGE> 15
We do not have any intention presently to sell our products outside of
the United States and Canada during the next twelve months. Of course, our plans
could change, in which case we would be subject to the regulatory regimes of any
particular host country. However, as we do not have a present intention to sell
in a particular foreign country outside of the United States and Canada, we do
not have any information regarding the specific regulatory processes in other
foreign countries. We believe that there is no premarket or other filing
required by any Canadian federal or provincial authority regulating the
Software. We anticipate that less than 5% of our revenue will be derived from
Canadian sources.
THE LOSS OF OUR CHIEF EXECUTIVE OFFICER COULD LEAD TO THE LOSS OF A SIGNIFICANT
PORTION OF OUR BUSINESS BECAUSE OF HIS PERSONAL CONTACTS IN OUR INDUSTRY.
Our success is highly dependent upon our President and Chief Executive
Officer, Dr. David Gane. Unlike larger companies, we rely heavily on a small
number of officers to conduct a large portion of our business. The loss of
service of Dr. Gane along with the loss of his numerous contacts and
relationships in the industry would have a material adverse effect on our
business. We have not entered into an employment agreement with Dr. Gane. We do
not have key person life insurance on Dr. Gane.
OUR PRODUCTS HAVE NO PATENT PROTECTION, AND THEREFORE, THEY MAY NOT BE
ADEQUATELY PROTECTED FROM COPYING BY COMPETITORS.
Our future success and ability to compete is dependent in part upon our
proprietary technology. We have been advised by counsel that our software cannot
easily be protected by patent. We have not applied for any patents, nor do we
intend to apply for any patents in the future. Consequently, we rely primarily
on trademark, trade secret and copyright laws to protect our technology. We have
applied for trademark protection on Image Explorer, Dicom Imaging Systems, Lab
RX, X-Ray, Whitener, Simulate and Image Editor. There is no assurance that
trademark protection will ultimately be granted under these applications.
However, there can be no assurance that third parties will not try to copy our
products. In addition, many foreign countries' laws may not protect us from
improper use of our proprietary technology overseas. We may not have adequate
remedies if our proprietary rights are breached and therefore a breach of our
proprietary rights could have a material adverse effect on our financial
condition.
SHAREHOLDER VOTING AGREEMENT.
Because the Shareholder Voting Agreement, attached hereto as exhibit 10.5
determines and fixes the composition of the board of directors until the
shareholders that are a party to it have sold their shares, no change of control
may be possible for a significant period of time, even if such a change of
control may be in the best interests of the corporation.
WE ARE SUSCEPTIBLE TO PRODUCT LIABILITY SUITS AND IF A LAWSUIT IS BROUGHT
AGAINST US IT COULD RESULT IN US HAVING TO PAY LARGE LEGAL EXPENSES AND/OR
JUDGMENTS.
Although we have not yet had any product liability claims, because of
the nature of the medical/dental device industry, there can be no assurance
that we will not be subject to such claims in the future. Our products relate to
procedures which involve vulnerable areas of the human body, such as the mouth,
tongue, teeth and gums, and, therefore, the sale and support of dental products
makes us susceptible to the risk of such claims. A successful product liability
claim or claim arising as a result of use of our products brought against
15
<PAGE> 16
us, or the negative publicity brought up by such claim, could have a material
adverse effect upon our business. As of August 1, 1999, we are still in the
process of obtaining product liability insurance, but do not yet have such
insurance secured. We have not yet decided on product liability insurance terms
or amounts and have not agreed on such terms with any carrier yet. While we
intend to maintain adequate insurance coverage, we do not guarantee that the
amount of insurance will be adequate to satisfy claims made against us in the
future, or that we will be able to obtain insurance in the future at
satisfactory rates or in adequate amounts.
THE YEAR 2000 ISSUE COULD HAVE AN IMPACT ON OUR INFORMATION TECHNOLOGY AND
NON-INFORMATION TECHNOLOGY SYSTEMS AS WELL AS THOSE OF OUR SUPPLIERS AND/OR
CUSTOMERS, ANY OF WHICH COULD NEGATIVELY AFFECT SALES OF OUR PRODUCTS.
The Year 2000 readiness issue, which is common to most businesses,
arises from the inability of information systems, and other time and date
sensitive products and systems, to properly recognize and process date-sensitive
information or system failures. Estimates of the potential cost and effects of
Year 2000 issues vary significantly among businesses, and it is extremely
difficult to predict the actual impact. We have not made any remediation efforts
to date to address Year 2000 issues and have no plan to do so in the future. We
do not have a remediation plan.
In our office and to develop our software, we use personal computers
and computer peripherals, such as scanners, intra-oral cameras, tape back up
systems and Compact Discs. We also use non-information technology, such as
calculators, clocks, software manuals, telephones and telephone switching
equipment, mail services, postage meters and credit card processing equipment.
We have not made an assessment of whether or not any of this equipment is Year
2000 compliant. Failure of this equipment to be Year 2000 compliant could result
in our total inability to conduct our business, contact our customers, update
our product or expand our market share.
THE NASDAQ OTC BULLETIN BOARD MARKET HAS A LIMITED OPERATING HISTORY
CHARACTERIZED BY HIGH VOLATILITY WHICH MAY NEGATIVELY AFFECT OUR STOCK PRICE.
We intend to apply for admission to trading of our shares on the
Nasdaq OTC bulletin board ("Bulletin Board"). The Bulletin Board has a limited
operating history and is characterized by high volatility. We cannot guarantee
any market for out shares. We cannot guarantee that any market for our shares
will develop or be sustained. We cannot predict the effect, if any, that future
sales of our shares, or the availability of our shares for future sale, will
have on the market price of our shares.
Item 3. Description of Property
Dicom is currently in negotiation for office space in Las Vegas.
Dicom's administrative functions are largely carried out by use of space at the
offices of corporate counsel, which it receives without cost. In addition, Dicom
uses the offices of BC Ltd. for some customer service functions while permanent
leased office space in Las Vegas is being negotiated.
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<PAGE> 17
Investment Policies.
Dicom owns no real estate, makes no real estate investments of any kind
or character and management has no intention of doing so during the next twelve
months.
Item 4. Security Ownership of Certain Beneficial Owners and Management
Beneficial Owners of More than Five Percent.
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of
Title of Class Beneficial Owner Beneficial Owner Percent of Class
- -------------- -------------------- -------------------- ----------------
<S> <C> <C> <C>
Common Dr. David Gane 333,433 President, CEO and 8.9%
1081 Kent Street Director(1)
White Rock, BC
Canada V4B4T2
Common Wayne Rees 333,433 Vice President and 8.9%
13670 Malabar St. Director(1)
White Rock, BC
Canada V4B2X9
Common Todd Rees 333,433 Vice President and 8.9%
112-15282 19th Avenue Director(1)
Surrey, BC
Canada v4B1X6
Common Stephen Winter 250,000 Vice President, 6.7%
4610 Boulderwood Drive Director, Secretary,
Victoria, BC Treasurer (2)
Canada
</TABLE>
(1) Includes rights to acquire 333,333 shares of common stock
(2) Includes rights to acquire 250,000 shares of common stock
Item 5. Directors, Executive Officers and Control Persons
<TABLE>
<CAPTION>
Name, Address and Age of Amount and Nature of
Title of Class Beneficial Owner Beneficial Owner Percent of Class
- -------------- ------------------------ -------------------- ----------------
<S> <C> <C> <C>
Common Dr. David Gane 333,433 President, CEO and 8.9%
1081 Kent Street Director(1)
White Rock, BC
Canada V4B4T2
46 years old
Common Wayne Rees 333,433 Vice President and 8.9%
13670 Malabar St. Director(1)
White Rock, BC
Canada V4B2X9
41 years old
</TABLE>
17
<PAGE> 18
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Common Todd Rees 333,433 Vice President and 8.9%
112-15282 19th Avenue Director(1)
Surrey, BC
Canada v4B1X6
40 years old
Common Stephen Winter 250,000 Vice President, 6.7%
4610 Boulderwood Drive Director, Secretary,
Victoria, BC Treasurer (2)
Canada
38 years old
</TABLE>
(1) Includes rights to acquire 333,333 shares of common stock
(2) Includes rights to acquire 250,000 shares of common stock
DR. DAVID GANE PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR
PERSONAL: BIRTH DATE: APRIL 17, 1954
Dr. Gane graduated from the University of Western Ontario in 1977, (B.Sc.
Honors) and in 1981 with his Doctorate in Dental Surgery (D.D.S.)
CORPORATE:
Dr. Gane has been an officer and director of Dicom since March 17, 1999. Dr.
Gane was the President and Co-Founder of Source Dental Image Inc. from March of
1992 until January of 1995, a company specializing in the development and sales
of Dental Imaging Software, Co-Founder of Image FX Software Solutions Inc. from
February of 1995 until February of 1999, a company specializing in the
development and sales of Imaging Solutions to Dentists and Physicians and is
currently Program Director, Imaging Technologies for Experdent Centers of Dental
Excellence. Dr. Gane has consulted for a number of Corporations and Universities
on matters related to dental imaging. He has also lectured worldwide and
published on the topic of dental imaging and cosmetic dentistry. Dr. Gane has
practiced dentistry since June of 1981 and maintains an exclusive part time
dental practice limited to advanced restorative dentistry.
WAYNE REES, VICE-PRESIDENT, DIRECTOR
CORPORATE:
Wayne Rees
Wayne Rees has been an officer and director of Dicom since March 17,
1999. His employment experience includes:
SDS Data Systems Regional Sales Manager Oct 1979-June 1980
Inter Data Management Account Manager June 1980- June 1986
Data Tech Sytems Account Manager July 1986-July 1987
Vice President Source 1 Computers Inc. July 1987-Aug 1988
Vice President Sales Source Dental Image Inc. Aug 1988-1995
Consultant Image FX Software Solutions Inc Feb 1995 - 1999
Vice President and Director of Dicom Imaging Systems Inc. March 1999 - present.
Wayne's background in sales began with his commerce and business administration
training at Malaspina College where he majored in marketing. Wayne's front line
experience has encompassed computer hardware, software, service, and dental
peripheral products. Wayne co-founded Intadata Management, a national computer
support company with eleven branch offices throughout Canada. His
responsibilities included negotiating supplier agreements, establishing
technical training programs for colleges and government, and establishing an in
house leasing division, in addition to managing all
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marketing activities. Wayne co-developed "CHOICES" the initial hair salon
imaging system back in 1987. He co-founded Source 1 Dental Imaging, the
developers of the "Picture Perfect Imaging System" in DOS which was marketed
exclusively by Dentsply International and the "InfoSource / Picture Perfect"
system for MS Windows. Wayne co-founded and was Vice President of ProDentec
Canada where he was responsible for international marketing of computer and
imaging related products. Wayne set up dealer marketing programs, established
and trained large international dental distributors on the imaging products,
attended and presented at most of the major dental trade shows over the past six
years, and assisted lecturers in presentations throughout the US and Canada.
Wayne consulted and assisted in writing the dental textbook by Goldstein,
Goldstein, and Garber, called "Imaging in Esthetic Dentistry". He was also on
the American Dental Association Standards Committee. Wayne co-founded Image FX
Software Solutions and co-designed the Image FX / CosmetiX imaging systems for
dentistry, and the MedX / Simulate System for Medical use. Sales training
courses provided by suppliers such as Micom, Xerox, AES, MAI, IBM, DEC and
Honeywell round out Wayne's experience in technical sales, and support services.
TODD REES VICE-PRESIDENT AND DIRECTOR
PERSONAL: Birthdate April 1, 1959
CORPORATE:
Todd Rees
Todd Rees has been an officer and director of Dicom since March 17,
1999. Todd's employment experience includes:
SDS Data Systems Service Manager June 1978- Nov 1980
Interdata Management Service Managerr Nov 1980 - June 1985
Data Tech Systems Service Manager June 1985- Aug 1988
Technical Consultant Source Dental Image Inc. Aug 1988-Feb 1995
President Image FX Software Solutions Inc. March 1995- March 1999
Vice-President and Director, Dicom Imaging Systems Inc. March 1999 to present
Todd has an extensive background in electronics design and software development.
He graduated from Camosun College with a certificate in electronics. From there
he co-founded a national computer support company with 11 branch offices
throughout Canada. This company was then sold to Datatech Systems Inc. There he
headed up the support division for Western Canada with a directive of decreasing
the budget of $8.5 million CDN, this was accomplished by a decrease in overhead
of approx. 28% within a 6-month period. His skills include teaching electronics'
program at Camosun College and co-authoring a technical program at Malispina
College which are both still active today. Todd was President and co-founder of
ImageFX Software Solutions where he co-managed an International software
development company with products in the Medical and Dental fields.
STEPHEN WINTER VICE-PRESIDENT, TREASURER, SECRETARY AND DIRECTOR
PERSONAL: Birthdate February 11, 1961
Stephen Winter has been an officer and director of Dicom since March
17, 1999. Stephen Winter is presently the Vice President of Photo Type Composing
Ltd. located in Victoria, BC Canada, where he has held various positions since
January of 1984. He is responsible for the design, development, and promotion of
seven publications specializing in Recreational Atlases. Stephen has obtained a
degree in Cartography and has fifteen years experience in graphic design,
computer programming, printing, and marketing new products. Stephen has been a
director of an oil and gas
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<PAGE> 20
company for two years. Other areas of experience include surveying and
photogrammetry, certified welder, and dental lab technician.
Family Relationships
Vice President and Director Todd Rees and Vice President and Director
Wayne Rees are brothers.
Involvement in Legal Proceedings.
None.
Item 6. Executive Compensation
Dr. David Gane, President, CEO and Director, receives payments of
$6,000 per month in salary and options to purchase 333,433 shares of common
stock in Dicom as compensation. As of March 31, 1999, Dr. Gane had received
$9,000 in compensation from Dicom, $3,000 from February 15, 1999 to February 28,
1999 and $6,000 from March 1, 1999 to March 31, 1999.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
Other Restricted LTIP Other
Name and Position Year Salary Bonus Compensation Stock Awards SAR(s) Payouts Compensation
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David Gane, CEO 1999 $9,000(1) None None None 333,433 shares None None
</TABLE>
(1) Although Dr. Gane receives an annual salary of $72,000, he has only been
paid $9000 to March 31, 1999, covering the period February 15, 1999 to March 31,
1999.
Item 7. Certain Relationships and Related Transactions
Dicom did not develop the Image Explorer or value added module
software, but licensed the same from Torchmark Holdings, Ltd., a Turks and
Caicos Islands B.W.I. corporation ("Torchmark") under a License Agreement dated
March 17, 1999 by and between Torchmark and Dicom and a Capital Contribution
Agreement dated March 17, 1999 by and between Torchmark and Dicom. Under the
terms of the agreement, Torchmark has given Dicom an exclusive, world-wide,
royalty free, fully paid-up license to use, sell, distribute and sublicense the
Software for a thirty year period. Torchmark was compensated for the license by
a grant of 1,000,000 common shares of Dicom stock, pursuant to the agreement.
The agreement has a condition subsequent, that Dicom raise $1,000,000 in its
private placement. The condition has been satisfied. The agreement also provides
Dicom with the option to license the medical version of the Software from
Torchmark for a payment of $250,000.
Torchmark acquired the license for the Image Explorer and value added
module software (the "Software") from Image F/X Software Solutions, Inc., a
Canadian Corporation ("Image"). Torchmark became acquainted with Image by means
of Walter Sutherland, who was an employee of Image at the time of the
introduction and who was friends with the principals of Torchmark. Walter
Sutherland is currently an
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<PAGE> 21
employee of Dicom. Torchmark paid Image $150,000 Canadian Dollars for a full
transfer of all right, title and interest in the Image Explorer software.
Directors Wayne Rees, Todd Rees and David Gane are the sole
shareholders of Image. Directors Todd Rees and David Gane are officers of Image.
Image sold the license to the Software to Torchmark for $150,000 canadian
dollars. Torchmark entered into the License Agreement and the Capital
Contribution Agreement with Dicom attached as exhibits 10.2 and 10.3 hereto.
To date, Dicom has lent $44,000 to Image under a promissory note, at 6%
interest, payable by May 15, 2000. This loan was made in consideration for Image
providing otherwise uncompensated software development assistance to Dicom in
preparing the Software for its commercial launch. Image was reimbursed for its
acutal expenses paid to third-parties in rendering such development assistance
in addition to the compensation in the form of a loan, described above.
Certain shareholders of Dicom have entered into a lock-up agreement
amongst themselves whereby they each voluntarily agree to hold ninety percent of
their shares for a period of one hundred and eighty days from the date Dicom
commences trading on the Nasdaq OTC bulletin board. Although Dicom is not a
party to this lock-up agreement, the lock up agreement could have a severely
restrictive impact on the public trading float of Dicom's stock and could limit
the ability of Dicom shares to be sold into the public markets.
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<PAGE> 22
Item 8. Description of Securities
The following summary of the Common Stock is subject to, and qualified
in its entirety by, the provisions of applicable law and the provisions of the
Company's Articles of Incorporation, which are included as an exhibit to this
Registration Statement. Since this is a summary, it may not contain all of the
information important to an investor.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share
held of record on all matters submitted to a vote of stockholders. Subject to
preferences that may be applicable to any outstanding shares of Preferred Stock,
the holders of Common Stock are entitled to receive ratably such dividends, if
any, as may be declared by the Board of Directors out of funds legally available
for the payment of dividends. Holders of Common Stock have no preemptive rights
or rights to convert their Common Stock into any other securities. There are no
redemption or sinking fund provisions applicable to the Common Stock. All
outstanding shares of Common Stock are fully paid and non-assessable.
There are no other material rights of common stockholders as a class.
However, under the terms of the Stock Purchase Agreement executed by and between
certain holders of Dicom common stock and Dicom, a representative of the holders
must consent to the undertaking of any material indebtedness outside the
ordinary course of business and any issuance of additional equity in Dicom. The
representative of the holders is Director Stephen Winter. The representative is
under no obligation to obtain consent from the holders before giving the consent
outlined above. In addition, Dicom has the obligation to repurchase certain
shares of common stock upon demand of the holders thereof, pursuant to the
conditions of the Stock Purchase Agreement attached hereto as exhibit 10.1.
Part II.
Item 1. Market Price of and Dividends on the Registrant's Common Equity
and Other Shareholder Matters
There is no public trading market in the registrant's stock. There are
approximately 30 holders of the registrant's common stock. There have been no
dividends declared to date. There are no restrictions on the ability to declare
dividends in the future. No shares of the Company's common stock have previously
been registered with the Securities and Exchange Commission (the "Commission")
or any state securities agency or authority. The Company intends to make an
application to the NASD for the Company's shares to be quoted on the OTC
Bulletin Board. The Company's application to the NASD will consist of current
corporate information, financial statements and other documents as required by
Rule 15c2-11 of the Securities Exchange Act of 1934, as amended. Inclusion on
the OTC Bulletin Board permits price quotations for the Company's shares to be
published by such service. The Company is not aware of any established trading
market for its common stock. Although the Company intends to submit its
application to the OTC Bulletin Board contemporaneously with the filing of this
registration statement, there is no assurance that such an application will be
granted. Except for the application to the OTC Bulletin Board, there are no
plans, proposals, arrangements or understandings with any person concerning the
development of a trading market in any of the Company's securities. The
Company's common stock has not traded in a public market.
As of April 30, 1999 there were 30 holders of record of the Company's
common stock, which figure does not take into account those shareholders whose
certificates are held in the name of broker-dealers or other
22
<PAGE> 23
nominees. Because there has been no established public trading market for the
Company's securities, no trading history is presented herein.
As of the date hereof, the Company has issued and outstanding 2,400,000
shares of common stock. In March, 1997, the Company issued 1,400,000 shares of
common stock to various purchasers for the purchase price between $0.001 and
$1.00 per share for a total sale price of $1,000,000 and an average per share
price of $0.71. The funds were used to pay various payables including payments
to certain persons for prior services rendered to the Company.
Of the Company's total outstanding shares, 1,400,000 may be sold,
transferred or otherwise traded in the public market without restriction, unless
held by an affiliate or controlling shareholder of the Company or otherwise
restricted by agreements between individual stockholders. Of these 1,400,000
shares, the Company has identified 400 shares as being held by affiliates of the
Company.
A total of 1,000,400 shares are considered restricted securities and
are presently held by affiliates and/or principal shareholders of the Company.
None of the 1,000,400 restricted shares are presently eligible for sale pursuant
to Rule 144, subject to the volume and other limitations set forth under Rule
144. In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated) who has beneficially owned restricted shares of the
Company for at least one year, including any person who may be deemed to be an
"affiliate" of the Company (as the term "affiliate" is defined under the Act),
is entitled to sell, within any three-month period, an amount of shares that
does not exceed the greater of (i) the average weekly trading volume in the
Company's common stock, as reported through the automated quotation system of a
registered securities association, during the four calendar weeks preceding such
sale or (ii) 1% of the shares then outstanding. A person who is not deemed to be
an "affiliate" of the Company and has not been an affiliate for the most recent
three months, and who has held restricted shares for at least two years would be
entitled to sell such shares without regard to the resale limitations of Rule
144.
The Company has not previously filed a registration statement with the
Commission. No private placement memorandum was used in relation to the issuance
of shares.
Dividend Policy
Dicom has not declared any dividends in the past and there is no
intention to declare dividends in the future.
Item 2. Legal Proceedings
There are presently no material pending legal proceedings to which the
Company or any of its subsidiaries is a party or to which any of its property is
subject and, to the best of its knowledge, no such actions against the Company
are contemplated or threatened.
Item 3. Changes in and Disagreements with Accountants.
None.
23
<PAGE> 24
Item 4. Recent Sales of Unregistered Securities
Between March 17, 1999 and April 6, 1999, the registrant sold 2,400,000
shares of common stock. There was no public offering of the shares. The duration
of the offering period was March 17, 1999 to April 6, 1999. The shares were
offered to acquaintances of the officers and directors and issued as payment for
the licensing of the Company's software. Between March 17 and March 19, 1999,
400,200 shares were sold to founders of Dicom at par value of $0.0001 per share.
Between March 26, 1999 and April 6, 1999, 999,800 shares were sold to investors
of Dicom at $1.00 per share. On March 17, 1999, 1,000,000 shares of common stock
were issued to Torchmark and its assignees pursuant to the license agreement
between Torchmark and Dicom dated March 17, 1999.
The total offering price for the common stock sold for cash was
$1,000,000. Dicom paid a consulting fee to Landmark Consulting and Developing
Ltd., an International Business Corporation, of $100,000 and an expense
allowance of $35,000 as consulting fees in connection with the sale of shares of
Dicom's common stock.
Dicom issued 950,000 shares of common stock to Torchmark under the
Capital Contribution Agreement and the License Agreement attached hereto as
exhibits 10.2 and 10.3 respectively and 25,000 shares to VCBM Ltd. and 25,000
shares to James Ullock under the same agreements. James Ullock and VCBM Ltd. are
assignees of Torchmark who provided consulting services to Torchmark and are not
related in any way to Dicom, its officers or directors. Torchmark elected to
have 50,000 of the original 1,000,000 shares to be paid for the license assigned
to VCBM Ltd. and James Ullock as compensation for consulting services provided
to Torchmark. Dicom and Torchmark entered into a license agreement for the
Software on March 17, 1999. Under the terms of the agreement, Torchmark has
given Dicom an exclusive, world-wide, royalty free, fully paid-up license to
use, sell, distribute and sublicense the Software for a thirty year period in
exchange for 1,000,000 shares of common stock issued to Torchmark and/or its
assignees.
Dicom issued 1,400,000 in an offering which raised $1,000,000 for the
shares pursuant to the exemption contained in Regulation D, Rule 504 of the
Securities Act of 1933, as amended. The shares were sold and payment received
therefrom on or before April 6, 1999. The offering was for no more than
$1,000,000. No general solicitation was made. There were no more than 8
unaccredited investors in the offering.
The shares issued to Torchmark, James Ullock and VCBM Ltd. were issued
and sold pursuant to Rule 505 of Regulation D of the Securities Act of 1933. The
factual basis for this exemption is that (1) Torchmark, VCBM Ltd. and James
Ullock have represented themselves as accredited investors and (2) the dollar
amount attributable to the issuance falls within the exemption of Rule 505.
The issuance of the securities described above were deemed to be exempt
from registration under the Securities Act in reliance on Section 4(2), Rule 701
promulgated thereunder, Section 3(a)(9) among other exemptions. The recipients
of securities in each such transaction represented their intentions to acquire
the securities for investment only and not with a view to or for sale in
connection with any distribution thereof and appropriate legends were affixed to
the share certificates issued in such transactions. All recipients had access,
through their relationships with the Registrant, to information about the
Registrant.
Item 5. Indemnification of Officers and Directors
The Company's Articles of Incorporation provide for indemnification to
the full extent permitted by Nevada law of all persons it has the power to
indemnify under Nevada law. In addition, Article VII of the Company's By Laws
provide for indemnification to the full extent permitted by Nevada law of all
persons it has the power to indemnify under Nevada law. Such indemnification is
not deemed to be exclusive of any other rights to which those indemnified may be
entitled, under any bylaw, agreement, vote of stockholders or otherwise. The
provisions of the Company's Articles of Incorporation and By Laws which provide
indemnification may reduce the likelihood of derivative litigation against the
Company's directors and
24
<PAGE> 25
officers for breach of their fiduciary duties, even though such action, if
successful, might otherwise benefit the Company and its stockholders.
Part F/S
(a) (1) See Audited Financial Statements and supplementary data index which
appears on page F-1 herein.
(2) Schedules have been omitted because they are either not applicable
or the required information is shown in the financial statements or
notes thereto.
(3) Exhibits
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION OF EXHIBIT
----------- ----------------------
3.1(a) Articles of Incorporation of the Registrant
3.2(a) Bylaws of the Registrant
10.1(a) Form of Stock Purchase Agreement between the
Registrant and purchasers of shares of common stock
in the Registrant.
10.2(a) License Agreement between Torchmark Holdings, Ltd.
and Registrant dated March 17, 1999.
10.3(a) Capital Contribution Agreement between Torchmark
Holdings, Ltd. and Registrant dated March 17, 1999.
10.4(a) Order Fulfillment Agreement between 527403 British
Columbia Limited and Registrant dated May 14, 1999.
10.5(a) Voting Agreement between certain holders of common
stock in the Registrant and the Registrant, dated
March 17, 1999.
27.1(b) Financial Data Schedule
(a) Filed previously with the commission in Registrant's Filing on Form 10 SB on
June 15, 1999
(b) Filed previously with the commission in Registrant's Filing on Form 10 SB,
Amendment No. 1 on July 22, 1999.
25
<PAGE> 26
DICOM IMAGING SYSTEMS, INC.
INDEX TO AUDITED FINANCIAL STATEMENTS
Page
----
Report of Kurt Saliger, CPA, Independent Auditor..................... F-1
Balance Sheets....................................................... F-2
Statements of Operations............................................. F-3
Statements of Stockholders' Equity................................... F-4
Statements of Cash Flows............................................. F-5
Notes to Financial Statements........................................ F-6
26
<PAGE> 27
Kurt D. Saliger, CPA
5000 W. Oakey, Suite A-4
Las Vegas, NV 89146
INDEPENDENT AUDITOR'S REPORT
I have audited the accompanying balance sheet of Dicom Imaging Systems,
Inc. (a development stage Company), as of March 31, 1999; and the related
statements of operations, stockholders' equity and cash flows for the period
from March 17, 1999 (date of inception) to March 31, 1999. These financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audit.
I concluded my audit in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. I believe that my audit provides a reasonable
basis for my opinion.
In my opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Dicom Imaging
Systems, Inc. (a development stage company) at March 31, 1999 in conformity with
generally accepted accounting principles.
/s/ Kurt D. Saliger C.P.A.
Kurt D. Saliger C.P.A.
April 27, 1999
F-1
<PAGE> 28
DICOM IMAGING SYSTEMS, INC.
(A Development Stage Company)
BALANCE SHEET
March 31, 1999
ASSETS
CURRENT ASSETS
Cash $ 222,902
Stock Subscription Receivable $ 443,950
Total Current Assets $ 666,852
PROPERTY AND EQUIPMENT, NET $ 34,914
LICENSING AGREEMENT 97,500
DEFERRED TAXES 34,998
TOTAL ASSETS $ 834,264
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts Payable $ 0
TOTAL CURRENT LIABILITIES $ 0
LONG TERM DEBT $ 0
STOCKHOLDERS' EQUITY
Common Stock, $.001 par value authorized
50,000,000 shares issued and outstanding at March 31, 1999
2,400,000 shares $ 2,400
Preferred Stock, $.001 par value authorized
10,000,000 shares issued and outstanding at March 31, 1999
zero shares $ 0
Additional Paid In Capital $ 899,800
Deficit Accumulated During Development Stage $ (67,936)
TOTAL STOCKHOLDERS' EQUITY $ 834,264
TOTAL LIABILITIES AND STOCKHOLDERS $ 834,264
EQUITY
F-2
<PAGE> 29
DICOM IMAGING SYSTEMS, INC.
(A Development Stage Company)
STATEMENT OF OPERATIONS
March 17, 1999 (Inception) to March 31, 1999
INCOME
Revenue $ 0
TOTAL INCOME $ 0
EXPENSES
General and Administrative $ 103,223
TOTAL EXPENSES $ 103,223
INCOME (LOSS) FROM OPERATIONS $ (103,223)
Interest Income $ 289
INCOME (LOSS) BEFORE INCOME TAXES $ (102,934)
Benefit from Income taxes $ 34,998
NET INCOME (LOSS) $ (67,936)
NET INCOME (LOSS)
PER SHARE - BASIC AND DILUTED $ (0.0283)
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 2,400,000
F-3
<PAGE> 30
DICOM IMAGING SYSTEMS, INC.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
March 31, 1999
<TABLE>
<CAPTION>
(Deficit)
Accumulated
Additional Paid in During
Common stock Number of Shares Amount Capital Development Stage
- ------------- ---------------- ------ ------------------ -----------------
<S> <C> <C> <C> <C>
Issued for cash 1,400,000 $1,400 $803,300
March 17, 1999
Issued for licensing and 1,000,000 $1,000 $ 96,500
distribution agreement
March 31, 1999
(Net Loss) March 17, 1999
(Inception) to March 31, 1999 $(67,936)
Balance March 31, 1999 2,400,000 $2,400 $899,800
$(67,936)
</TABLE>
F-4
<PAGE> 31
DICOM IMAGING SYSTEMS, INC.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
March 17, 1999 (Inception) to March 31, 1999
CASH FLOWS FROM OPERATING ACTIVITIES
(Net loss) $ (67,936)
(Increase) in deferred tax asset $ (34,998)
Net Cash (Used) In Operating Activities $(102,934)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment $ 34,914
$(137,848)
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock for cash
net of stock subscriptions receivables $ 360,750
Net increase in cash $ 222,902
Cash, March 17, 1999 $ 0
Cash, March 17, 1999 $ 222,902
Non-cash transaction:
Insurance of common stock for licensing agreement $ 97,500
F-5
<PAGE> 32
DICOM IMAGING SYSTEMS, INC.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
March 17, 1999 (inception) to March 31, 1999
Note 1 - HISTORY AND ORGANIZATION OF THE COMPANY
The Company was incorporated March 17, 1999 under the laws of the State
of Nevada. The Company was organized to engage in any lawful activity. The
Company currently has no operations and, in accordance with SFAS #7, is
considered a development stage company.
In March of 1999 the Company entered into a license and distribution
agreement with Torchmark Holdings to secure rights to image archiving and
retrieval software for use in dental diagnostic procedures and for other
applications.
Note 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Accounting Method
The Company records income and expenses on the accrual method.
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 revenue and expenses during the reporting
period. Actual results could differ from those estimates.
Property and equipment
Property and equipment is stated at cost. Depreciation is recorded
using the straight-line method over the estimated useful life of computer
hardware equipment over a period of three years.
Income Taxes
Income Taxes are provided for using the liability method of accounting
in accordance with Statement of Financial Accounting Standards No. 109 (SFAS
#109) "Accounting for Income Taxes." A deferred tax asset or liability is
recorded for all temporary differences between financial and tax reporting.
Deferred tax expense (benefit) results from the net change during the year of
deferred tax assets and liabilities.
Stock Subscription Receivable
Stock subscription receivables reflects $443,950 of common stock
subscriptions received after the March 31, 1999 balance sheet date. ALL monies
were received by April 27, 1999.
Cash and Cash Equivalents
The Company maintains a cash balance in an interest bearing bank that
currently exceeds federally insured limits. As of March 31, 1999 this risk of
funds uninsured totals $122,902. For purpose of the statement of cash flows, all
highly liquid investments with the maturity of three months or less are
considered to be cash equivalents. There are no cash equivalents as of March 31,
1999.
Research and Development
Research and development costs are expensed as incurred. There were no
such costs expensed as of March 31, 1999.
Loss per share
Net loss per share is provided in accordance with Statement of
Financial accounting Standards No. 128 (SFAS #128) "Earnings Per Share." Basic
loss per share is computed by dividing losses available to common stockholders
by the weighted average number of common shares outstanding during the period.
Diluted loss per share reflects per share amounts that would have resulted if
dilutive common stock equivalents had been converted to common stock. The common
stock equivialents outstanding at March 31, 1999 are antidilutive.
F-6
<PAGE> 33
Recently Issued Accounting Standards
Management expects none of the recently issued accounting standards to
have a material effect on the Company's financial statements at March 31, 1999.
NOTE 3 - INCOME TAXES
There is no provision for income taxes for the period from March 17,
1999 (inception) to March 31, 1999 due to the net loss and no Nevada state
income tax in the state of the Company's domicile.
The tax effects of temporary differences that that give rise to
deferred tax assets by applying the U.S. federal income tax rate of 34% to
pretax loss of $102,934 results in a deferred tax asset of $34,998 at March 31,
1999.
Net Operating Losses $34,998
Less: valuation allowance $ 0
Net deferred tax assets $34,998
The deferred taxes are presented in the balance sheet as a long
term asset.
At March 31, 1999 the Company has net operating loss carryfowards
for federal income tax purposes of $102,934 which are available to offset future
taxable income through 2019.
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of the
deferred tax asset will not be realized. The ultimate realization of deferred
tax assets is dependent upon the generation of future taxable income during the
periods in which the related temporary differences become deductible.
NOTE 4 - STOCKHOLDERS' EQUITY
Common Stock
The authorized common stock of the Company consists of 50,000,000
shares with a par value of $0.001 per share. Issued and outstanding common stock
shares equal to 2,400,000 were issed on March 31, 1999.
Preferred Stock
The authorized preferred stock of the Company consists of 10,000,000
shares with a par value of $0.001 per share. No preferred stock shares were
issued and outstanding at March 31, 1999.
NOTE 5 - LICENSE AND DISTRIBUTION AGREEMENT
The Company entered into a license and distribution agreement with
Torchmark Holdings in March of 1999. The agreement was conditional upon the
Company raising a minimum of $1,000,000 in equity through the sale of common
stock on or prior to June 1, 1999. Upon reaching the aforementioned equity
level, the Company would issue 1,000,000 shares of common stock to Torchmark
Holdings.
Torchmark Holdings has secured rights to image archiving and retrieval
software for use in dental diagnostic procedures and for other medicinal
applications.
The Company will obtain an exclusive, transferable, limited, paid-up,
royalty-free, worldwide right and license to: reproduce, publish, transmit or
otherwise distribute to third parties the software.
The Company issued 1,000,000 shares to Torchmark for the license and
distribution agreement on March 31, 1999 as substantially all the equity
requirements were met. The Company is amortizing the cost of the license and
distribution agreement over the term of thirty years.
F-7
<PAGE> 34
NOTE 6 - STOCK OPTION PLAN & INCENTIVE PLAN
As of March 31, 1999 the Board of Directors has adopted an
Incentive Plan (the plan) which permits the granting of incentive compensation
to the Board of Directors through a pool of stock incentive options representing
a maximum of 1,250,000 shares.
Information for the period ended March 31, 1999 with respect to the
incentive plan is as follows:
<TABLE>
<CAPTION>
weighted avrg
option exercise
shares price price
<S> <C> <C> <C>
Incentive stock options issued 200,000 $ 7.50 $ 7.50
Incentive stock options issued 200,000 $ 10.00 $10.00
Incentive stock options issued 200,000 $ 12.50 $12.50
Incentive stock options issued 650,000 $ 15.00 $15.00
Outstanding at March 31, 1999 1,250,000 $7.5-15.00 $12.60
Shares excercisable at March 31, 1999 -0- $7.5-15.00 $12.60
No shares are available for grant at March 31, 1999.
</TABLE>
The company applies ABA opinion No. 25 in accounting for its stock
options and, accordingly, no compensation cost has been recognized in the
financial statements. The pro forma impact of recognizing compensation cost
based on the fair value at the grant date for stock options under SFAS No. 123
on the Company's reported operations was zero for the period ending March 31,
1999. Accordingly, the pro forma impact of recognizing compensation cost under
SFAS No. 123 on basic and diluted loss per share was immaterial for the period
ending March 31, 1999
F-8
<PAGE> 35
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the Registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized.
DICOM IMAGING SYSTEMS, INC.
- ---------------------------
(Registrant)
Date: September 14, 1999
------------------
By: /s/ David Gane
--------------
David Gane
President and Chief Executive Officer
