UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER
IMAGE TECHNOLOGY LABORATORIES, INC.
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
DELAWARE 22-53531373
--------------- ----------------
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER I.D. NO.)
INCORPORATION OR ORGANIZATION)
167 SCHWENK DRIVE, KINGSTON, NEW YORK 12401
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(914) 338-3366
(ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)
Check whether the Issuer: (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes
|X| No |_|
APPLICABLE ONLY TO CORPORATE ISSUERS
The number of shares of common stock outstanding as of June 30, 2000 was
8,338,750.
<PAGE>
PART I
Item 1. Financial Statements. Attached.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
OVERVIEW
The following is a discussion of certain factors affecting Image
Technology Laboratories, Inc.'s results of operations, liquidity and capital
resources. You should read the following discussion and analysis in conjunction
with Image Technology Laboratories, Inc.'s unaudited condensed financial
statements and related notes which are included elsewhere in this filing.
Image Technology Laboratories, Inc., was incorporated on December 5,
1997 and commenced operations on January 1, 1998. We are in the process of
developing picture archiving and communications software which will be used to
input diagnostic images in digital format from original imaging sources and to
store, print and display those images. Such software is used in the management
of medical diagnostic images by hospitals, health maintenance organizations,
group medical practices and individual radiologists to increase accuracy, reduce
costs and boost productivity.
RESULTS OF OPERATIONS FOR THE SIX AND THREE MONTHS ENDED JUNE 30, 2000 COMPARED
TO THE SIX AND THREE MONTHS ENDED JUNE 30, 1999
As of June 30, 2000, we had not generated any revenues from
operations and, accordingly, we were still in the development stage. We do not
expect to generate any revenues from our planned operations prior to the first
quarter of 2001.
RESEARCH AND DEVELOPMENT EXPENSES:
During the six and three months ended June 30, 2000, the Company
incurred research and development expenses of $300,00 and $150,000,
respectively. These expenses, of which $200,000 and $87,500 were accrued, were
primarily compensation to the Company's three founders under their employment
contracts. In addition, $75,000 and $37,500, respectively, of these expenses
were attributed to compensation associated with the issuance to them of the
preferred stock, also a non-cash change.
GENERAL AND ADMINISTRATION EXPENSES:
During the six and three months June 30, 2000, the Company incurred
general and administrative expenses of $96,795 and $16,067, respectively, as
compared to $184 and $72 in the comparable prior periods. The increase was
primarily attributable to professional fees, of which $75,000 was associated
with the issuance of common stock, a non-cash change, and a general increase in
the Company's infrastructure.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 2000, we had cash and a working capital deficiency of
approximately $73,000 and $72,000, respectively. The primary reason for the
working capital deficiency is the $200,000 accrued compensation to the Company's
founders, described above. To date, the principal sources of capital resources
have been proceeds from the issuance of shares of common stock to our founders
of $21,250 and the net proceeds from the recently completed private placement of
units of common stock and warrants of $180,000. In addition, we received
proceeds from the issuance of notes payable to our founders in the amount of
$5,200.
2
<PAGE>
We do not have any pending material commitments regarding capital
expenditures. However, our current sources of liquidity and cash are
insufficient to satisfy our cash needs beyond the next twelve months. We will
require additional capital to fund our operations and pursue our business
strategies. We expect to raise or obtain additional capital through the sale of
securities and through the exercise of outstanding stock warrants. There can be
no assurance that additional funds will be available. If adequate funds are not
available, there will be a material adverse effect on our business, financial
condition and development strategies.
3
<PAGE>
Image Technology Laboratories, Inc.
(A Development Stage Company)
INDEX TO FINANCIAL STATEMENTS
-----------------------------
PAGE
----
Condensed Balance Sheet
June 30, 2000 (Unaudited) F-2
Condensed Statements of Operations
Six and Three Months Ended June 30, 2000 and 1999 and Period from
January 1, 1998 (Date of Inception) to June 30, 2000 (Unaudited) F-3
Condensed Statement of Stockholders' Equity (Deficiency)
Six Months Ended June 30, 2000 and Period from
January 1, 1998 (Date of Inception) to June 30, 2000 (Unaudited) F-4
Condensed Statements of Cash Flows
Six and Three Months Ended June 30, 2000 and 1999 and Period from
January 1, 1998 (Date of Inception) to June 30, 2000 (Unaudited) F-5
Notes to Condensed Financial Statements (Unaudited) F-6/8
* * *
<PAGE>
<TABLE>
<CAPTION>
Image Technology Laboratories, Inc.
(A Development Stage Company)
Condensed Balance Sheet
June 30, 2000
(Unaudited)
ASSETS
------
<S> <C>
Current assets:
Cash $ 73,318
Prepaid professional fees 60,000
Other current assets 45
----------
Total current assets 133,363
Capitalized software costs 7,152
----------
Total $140,515
==========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
Current liabilities:
Accrued compensation payable to stockholders $200,000
Notes payable to stockholders 5,200
----------
Total liabilities 205,200
---------
Commitments
Stockholders' deficiency:
Preferred stock, par value $.01 per share; 5,000,000 shares
authorized; 1,500,000 shares issued 15,000
Common stock, par value $.01 per share; 50,000,000 shares
authorized; 8,338,750 shares issued and outstanding 83,387
Additional paid-in capital 627,863
Unearned compensation (375,000)
Deficit accumulated in the development stage (415,935)
----------
Total stockholders' deficiency (64,685)
----------
Total $140,515
==========
</TABLE>
See Notes to Condensed Financial Statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
Image Technology Laboratories, Inc.
(A Development Stage Company)
Condensed Statements of Operations
Six and Three Months Ended June 30, 2000 and 1999
and Period from January 1, 1998
(Date of Inception) to June 30, 2000
(Unaudited)
SIX MONTHS THREE MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------------ -----------------------
2000 1999 2000 1999 CUMULATIVE
----------- ----------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues $ -- $ -- $ -- $ -- $ --
Research and development expenses 300,000 150,000 300,000
General and administrative expenses 96,795 184 16,067 72 115,935
----------- ----------- ----------- ----------- -----------
Net loss $ (396,795) $ (184) $ (166,067) $ (72) $ (415,935)
=========== =========== =========== =========== ===========
Basic net loss per share $ (.04) $ -- $ (.02) $ -- $ (.05)
=========== =========== =========== =========== ===========
Basic weighted average shares outstanding 9,522,816 7,288,750 9,838,750 7,288,750 7,734,095
=========== =========== =========== =========== ===========
</TABLE>
See Notes to Condensed Financial Statements.
F-3
<PAGE>
<TABLE>
<CAPTION>
Image Technology Laboratories, Inc.
(A Development Stage Company)
Condensed Statement of Stockholders' Equity (Deficiency)
Six Months Ended June 30, 2000
and Period from January 1, 1998
(Date of Inception) to December 31, 1999
(Unaudited)
DEFICIT
ACCUMU-
PREFERRED STOCK COMMON STOCK LATED TOTAL
-------------------- -------------------- ADDI- IN THE STOCK-
NUMBER NUMBER TIONAL UNEARNED DEVELOP HOLDERS'
OF OF PAID-IN COMPEN- MENT EQUITY
SHARES AMOUNT SHARES AMOUNT CAPITAL SATION STAGE (DEFICIENCY)
---------- ------- ----------- -------- ----------- ------------- -------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Issuance of shares effective
as of January 1, 1998
to founders 18,750 $ 187 $ 21,063 $ 21,250
Adjustments for 388.733 for
1 stock split affected in
January 2000 7,270,000 72,700 (72,700)
Net loss $ (18,407) (18,407)
--------- -------- -------- ----------- ---------
Balance, December 31, 1998
as adjusted 7,288,750 72,887 (51,637) (18,407) 2,843
Net loss (733) (733)
--------- -------- -------- ----------- ---------
Balance, December 31, 1999,
as adjusted 7,288,750 72,887 (51,637) (19,140) 2,110
Effects of issuance of pre-
ferred stock in exchange
for services 1,500,000 $15,000 435,000 $(450,000)
Effects of issuance of com-
mon stock in exchange
for services 250,000 2,500 72,500 75,000
Sales of units of common
stock and warrants
through private place-
ment, net of expenses
of $60,000 800,000 8,000 172,000 180,000
Amortization of unearned
compensation 75,000 75,000
Net loss (396,795) (396,795)
--------- ------- --------- -------- -------- --------- --------- ---------
Balance, June 30, 2000 1,500,000 $15,000 8,338,750 $ 83,387 $627,863 $(375,000) $(415,935) $ (64,685)
========= ======= ========= ======= ======== ========= ========= =========
</TABLE>
See Notes to Condensed Financial Statements.
F-4
<PAGE>
<TABLE>
<CAPTION>
Image Technology Laboratories, Inc.
(A Development Stage Company)
Condensed Statements of Cash Flows
Six Months Ended June 30, 2000 and 1999
and Period from January 1, 1998
(Date of Inception) to June 30, 2000
(Unaudited)
2000 1999 CUMULATIVE
---------- ------ ----------
Operating activities:
<S> <C> <C> <C>
Net loss $(396,795) $(184) $(415,935)
Adjustments to reconcile net loss to
net cash used in operating activities:
Amortization of unearned compensation 75,000 75,000
Common stock issued for services 75,000 75,000
Changes in operating assets and liabilities:
Prepaid professional fees (60,000) (60,000)
Other current assets (45) (45)
Accrued compensation payable to stockholders 200,000 200,000
---------- ------- ----------
Net cash used in operating activities (106,840) (184) (125,980)
---------- ------- ----------
Investing activities - software costs capitalized (4,966) (7,152)
---------- ----------
Financing activities:
Proceeds from issuance of notes payable to
stockholders 100 5,200
Proceeds from issuance of common stock 21,250
Net proceeds from private placement of units
of common stock and warrants 185,000 185,000
Payments of deferred private placement costs (5,000)
---------- ----------
Net cash provided by financing activities 185,100 206,450
---------- ----------
Net increase (decrease) in cash 73,294 (184) 73,318
Cash, beginning of period 24 657 -
---------- ------ ----------
Cash, end of period $ 73,318 $ 473 $ 73,318
========== ====== ==========
</TABLE>
See Notes to Condensed Financial Statements.
F-5
<PAGE>
Image Technology Laboratories, Inc.
(A Development Stage Company)
Notes to Condensed Financial Statements
(Unaudited)
Note 1 - Unaudited interim financial statements:
In the opinion of management, the accompanying unaudited condensed
financial statements reflect all adjustments, consisting of normal
recurring accruals, necessary to present fairly the financial
position of Image Technology Laboratories, Inc. (the "Company") as
of June 30, 2000, and its results of operations for the six and
three months ended June 30, 2000 and 1999, changes in
stockholders' equity (deficiency) for the six months ended June
30, 2000 and cash flows for the six months ended June 30, 2000 and
1999 and the related cumulative amounts for the period from
January 1, 1998 (date of inception) to June 30, 2000. Certain
terms used herein are defined in the audited financial statements
of the Company as of December 31, 1999 and for the years ended
December 31, 1999 and 1998 (the "Audited Financial Statements")
included in the Registration Statement previously filed with the
Securities and Exchange Commission (the "SEC") on Form SB-2 (the
"Registration Statement"). Pursuant to rules and regulations of
the SEC, certain information and disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted from
these financial statements unless significant changes have taken
place since the end of the most recent fiscal year. Accordingly,
the accompanying unaudited condensed financial statements should
be read in conjunction with the Audited Financial Statements and
the other information included in the Registration Statement.
The results of operations for the six and three months ended June
30, 2000 are not necessarily indicative of the results of
operations for the full year ending December 31, 2000.
Note 2 - Stock split:
On January 7, 2000, the Company affected a 388.733 for 1 split of
its outstanding common stock that had been approved by its Board
of Directors on December 23, 1999. The numbers of shares and
prices per share in the accompanying condensed financial
statements and these notes have been adjusted for the effects of
the split.
Note 3 - Issuance of preferred and common stock:
On January 7, 2000, the Board of Directors authorized the issuance
of a total of 1,500,000 shares of preferred stock to the three
founders of the Company in conjunction with the commencement of
their employment contracts on January 1, 2000 (see Notes 9 and 10
in the Audited Financial Statements). The preferred shares have
rights to dividends, rights with respect to liquidation and other
rights equivalent to those of holders of the Company's common
stock, including one vote for each share held on all matters to be
voted on by the Company's stockholders.
F-6
<PAGE>
Image Technology Laboratories, Inc.
(A Development Stage Company)
Notes to Condensed Financial Statements
(Unaudited)
Note 3 - Issuance of preferred and common stock (concluded):
Since the rights of the Company's preferred and common
stockholders are substantially equivalent, the preferred shares
were valued at $.30 per share based on the price of units of
common stock and warrants that the Company sold through the
private placement that was completed on February 4, 2000 (see Note
6 herein). The aggregate fair value of the preferred shares of
$450,000 has been recorded as unearned compensation and reflected
as a reduction of stockholders' equity, net of accumulated
amortization, in the accompanying unaudited condensed balance
sheet as of June 30, 2000. The unearned compensation is being
charged to the Company's results of operations over the terms of
the respective employment contracts.
During March 2000, the Company issued 250,000 shares of common
stock for the payment of legal services. The common shares and
legal services were valued at a total of $75,000, or $.30 per
share based on the price of units sold through the private
placement that was completed on February 4, 2000.
Note 4 - Earnings (loss) per share:
As further explained in Note 2 of the notes to the Audited
Financial Statements, the Company presents basic earnings (loss)
per share and, if appropriate, diluted earnings per share in
accordance with the provisions of Statement of Financial
Accounting Standards No. 128, "Earnings per Share" ("SFAS 128").
As explained in Note 3 herein, the rights of the Company's
preferred and common stockholders are substantially equivalent.
The Company has included the 1,500,000 preferred shares from the
date of their issuance in the weighted average number of shares
outstanding in the computation of basic loss per share for the six
and three months ended June 30, 2000 in accordance with the "two
class" method of computing earnings per share set forth in SFAS
128.
Since the Company had a loss for the six and three months ended
June 30, 2000, the assumed effects of the exercise of options and
warrants outstanding at June 30, 2000 would have been
anti-dilutive. The Company did not have any potentially dilutive
shares outstanding during the six and three months ended June 30,
1999. Therefore, no diluted per share amounts have been presented
in the accompanying condensed statements of operations.
Note 5 - Income taxes:
As of June 30, 2000, the Company had net operating loss
carryforwards of approximately $416,000 available to reduce future
Federal taxable income which, if not used, will expire at various
dates through 2020. The Company had no other material temporary
differences as of that date. Due to the uncertainties related to,
among other things, the changes in the ownership of the Company,
which could subject those loss carryforwards to substantial annual
limitations, and the extent and timing of its future taxable
income, the Company offset the deferred tax assets attributable to
the potential benefits of approximately $166,000 from the
utilization of those net operating loss carryforwards by an
equivalent valuation allowance as of June 30, 2000.
F-7
<PAGE>
Image Technology Laboratories, Inc.
(A Development Stage Company)
Notes to Condensed Financial Statements
(Unaudited)
Note 5 - Income taxes (concluded):
The Company had also offset the potential benefits from net
operating loss carryforwards by equivalent valuation allowances
during 1999. Although the Company had pre-tax losses in each
period, no credits for income taxes are included in the
accompanying statements of operations as a result of a $158,400
and $66,000 increase in the valuation allowance for the six and
three months ended June 30, 2000, respectively, and immaterial
increases for the six and three months ended June 30, 1999.
Note 6 - Private placement of units:
On February 4, 2000, the Company sold 800,000 units, at $.30 per
unit, pursuant to a private placement that was exempt from
registration under the Securities Act of 1933 and received
proceeds of $240,000 before related estimated costs of $60,000.
Each unit was comprised of one share of common stock and one
warrant. The Company also issued 250,000 warrants for the payment
of fees for services received in connection with the sale of the
units. Each of the 1,050,000 warrants issued in connection with
the private placement gives the holder the right to purchase one
share of common stock at the initial exercise price of $.40 per
share and expires one year from the date of issuance. All of the
warrants remained outstanding as of June 30, 2000.
Note 7 - Issuance of stock options:
On January 1, 2000, the Company granted options under its stock
option plan (see Note 8 in the Audited Financial Statements) to
its founders for the purchase of a total of 3,000,000 shares of
its common stock at $.33 per share (approximately 110% of the fair
market value on the date of grant) that are exercisable through
December 31, 2009. All of the options remained outstanding as of
June 30, 2000.
Note 8 - Proposed initial public offering:
The Company has filed a registration statement with the SEC
related to a proposed initial public offering of a minimum of
1,500,000 units, on a best-efforts, all-or-none basis and an
additional 1,500,000 units on a best efforts basis. As proposed,
each unit offered will consist of one share of common stock and
one warrant. Each warrant will give the holder the right to
purchase one share of common stock at the initial exercise price
of $.50 per share, expire one year from the date of issuance and
be redeemable by the Company at $.05 per warrant if the closing
bid price of the common stock exceeds $2.00 for ten consecutive
trading days. If the offering is consummated on the proposed
terms, management estimates that the Company will receive proceeds
net of related offering expenses of $475,000 if only 1,500,000
units are sold and $1,075,000 if all 3,000,000 units are sold.
Management expects that the proceeds will be used for working
capital and general corporate purposes.
* * *
F-8
<PAGE>
PART II
Item 1. Legal Proceedings. None
Item 2. Changes in Securities. There are no reportable events relating to
this item.
Item 3. Defaults Upon Senior Securities. None.
Item 4. Submission of Matters to a Vote of Security Holders. There are no
reportable events relating to this item.
Item 5. Other Information. There are no reportable events relating to this item.
Item 6. Exhibits and Reports on Form 8-K.
(A) Not applicable.
(B) None.
4
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
IMAGE TECHNOLOGY LABORATORIES, INC.
Date: November 10, 2000 /S/ DAVID RYON
--------------
David Ryon, CEO and President
5
