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 SEPTEMBER 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 September 30, 2000 was
10,075,225.
<PAGE>
PART I
Item 1. Financial Statements.
Image Technology Laboratories, Inc.
(A Development Stage Company)
INDEX TO FINANCIAL STATEMENTS
PAGE
Condensed Balance Sheet
September 30, 2000 (Unaudited) F-2
Condensed Statements of Operations
Nine and Three Months Ended September 30, 2000
and 1999 and Period from January 1, 1998
(Date of Inception) to September 30, 2000 (Unaudited) F-3
Condensed Statement of Stockholders' Equity
Nine Months Ended September 30, 2000 and Period from
January 1, 1998 (Date of Inception) to September
30, 2000 (Unaudited) F-4
Condensed Statements of Cash Flows
Nine Months Ended September 30, 2000
and 1999 and Period from
January 1, 1998 (Date of Inception) to
September 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
September 30, 2000
(Unaudited)
ASSETS
------
Current assets:
<S> <C>
Cash $ 632,028
Other current assets 10,940
-----------
Total current assets 642,968
Capitalized software costs 8,379
-----------
Total $ 651,347
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accrued compensation payable to stockholders $ 264,974
Notes payable to stockholders 5,200
-----------
Total liabilities 270,174
-----------
Commitments
Stockholders' equity:
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; 10,075,225 shares issued and outstanding 100,752
Additional paid-in capital 1,245,262
Unearned compensation (337,500)
Deficit accumulated in the development stage (642,341)
-----------
Total stockholders' equity 381,173
-----------
Total $ 651,347
===========
</TABLE>
See Notes to Condensed Financial Statements.
F-2
<PAGE>
<TABLE>
<CAPTION>
Image Technology Laboratories, Inc.
(A Development Stage Company)
Condensed Statements of Operations
Nine and Three Months Ended September 30, 2000 and 1999
and Period from January 1, 1998
(Date of Inception) to September 30, 2000
(Unaudited)
NINE MONTHS THREE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
2000 1999 2000 1999 CUMULATIVE
---------- ----------- ------------ ------------ ----------
<S> <C> <C> <C> <C> <C>
Revenues $ -- $ -- $ -- $ -- $ --
Research and development expenses 493,663 193,663 493,663
General and administrative expenses 129,538 220 32,743 36 148,678
----------- ----------- ----------- ----------- -----------
Net loss $ (623,201) $ (220) $ (226,406) $ (36) $ (642,341)
=========== =========== =========== =========== ===========
Basic net loss per share $ (.06) $ ( -) $ (.02) $( - ) $ (.08)
=========== =========== =========== =========== ===========
Basic weighted average shares outstanding 9,654,246 7,288,750 9,914,249 7,288,750 7,933,671
=========== =========== =========== =========== ===========
</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
Nine Months Ended September 30, 2000
and Period from January 1, 1998
(Date of Inception) to December 31, 1999
(Unaudited)
PREFERRED STOCK COMMON STOCK ADDITIONAL
NUMBER NUMBER PAID-IN UNEARNED
OF OF CAPITAL COMPENSATION
SHARES AMOUNT SHARES AMOUNT
--------------------------------------------------------------------------------------------
Issuance of shares effective
as of January 1, 1998
<S> <C> <C> <C> <C> <C> <C>
to founders 18,750 $ 187 $ 21,063
Adjustments for 388.733 for
1 stock split affected in
January 2000 7,270,000 72,700 (72,700)
Net loss
------------ ------------ ------------
Balance, December 31, 1998
as adjusted 7,288,750 72,887 (51,637)
Net loss
------------ ------------ ------------
Balance, December 31, 1999
as adjusted 7,288,750 72,887 (51,637)
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
Sales of units of common
stock and warrants
through private place-
ment, net of expenses
of $60,000 in February 2000 800,000 8,000 172,000
Sales of units of common stock
and warrants through public
offering, net of expenses of
$60,000 in September 2000 1,736,475 17,365 617,399
Amortization of unearned
compensation 112,500
Net loss
------------ ------------ ------------ ------------ ------------ ------------
Balance, September 30, 2000 1,500,000 $ 15,000 10,075,225 $ 100,752 $ 1,245,262 $ (337,500)
============ ============ ============ ============ ============ ============
DEFICIT
ACCUMULATED
IN THE TOTAL
DEVELOPMENT STOCKHOLDERS'
STAGE EQUITY
--------------------------------
Issuance of shares effective
as of January 1, 1998
to founders $ 21,250
Adjustments for 388.733 for
1 stock split affected in
January 2000
Net loss $ (18,407) (18,407)
------------ ------------
Balance, December 31, 1998
as adjusted (18,407) 2,843
Net loss (733) (733)
------------ ------------
Balance, December 31, 1999
as adjusted (19,140) 2,110
Effects of issuance of pre-
ferred stock in exchange
for services
Effects of issuance of com-
mon stock in exchange
for services 75,000
Sales of units of common
stock and warrants
through private place-
ment, net of expenses
of $60,000 in February 2000 180,000
Sales of units of common stock
and warrants through public
offering, net of expenses of
$60,000 in September 2000 634,764
Amortization of unearned
compensation 112,500
Net loss (623,201) (623,201)
------------ ------------
Balance, September 30, 2000 $ (642,341) $ 381,173
============ ============
</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
Nine Months Ended September 30, 2000 and 1999
and Period from January 1, 1998
(Date of Inception) to September 30, 2000
(Unaudited)
2000 1999 CUMULATIVE
---- ---- ----------
Operating activities:
<S> <C> <C> <C>
Net loss $(623,201) $ (220) $(642,341)
Adjustments to reconcile net loss to
net cash used in operating activities:
Amortization of unearned compensation 112,500 112,500
Common stock issued for services 75,000 75,000
Changes in operating assets and liabilities:
Accrued compensation payable to stockholders 264,974 264,974
--------- --------- ---------
Net cash used in operating activities (170,727) (220) (189,867)
--------- --------- ---------
Investing activities - software costs capitalized (6,193) (8,379)
--------- ---------
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 and
public offering of units
of common stock and warrants 808,824 808,824
Payments of deferred private placement costs (5,000)
--------- ---------
Net cash provided by financing activities 808,924 830,274
--------- ---------
Net increase (decrease) in cash 632,004 (220) 632,028
Cash, beginning of period 24 860 --
--------- --------- ---------
Cash, end of period $ 632,028 $ 640 $ 632,028
========= ========= =========
</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 September 30, 2000, its results of
operations for the nine and three months ended September 30,
2000 and 1999, changes in stockholders' equity for the nine
months ended September 30, 2000 and cash flows for the nine
months ended September 30, 2000 and 1999 and the related
cumulative amounts for the period from January 1, 1998 (date of
inception) to September 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 nine and three months ended
September 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 September 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 nine and three months ended September 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 nine and three months
ended September 30, 2000, the assumed effects of the exercise
of options and warrants outstanding at September 30, 2000 would
have been anti-dilutive. The Company did not have any
potentially dilutive shares outstanding during the nine and
three months ended September 30, 1999. Therefore, no diluted
per share amounts have been presented in the accompanying
condensed statements of operations.
Note 5 - Income taxes:
As of September 30, 2000, the Company had net operating loss
carryforwards of approximately $642,000 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 $257,000 from the utilization of
those net operating loss carryforwards by an equivalent
valuation allowance as of September 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 $249,400 and $91,000 increase in the valuation
allowance for the nine and three months ended September 30,
2000, respectively, and immaterial increases for the nine and
three months ended September 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 $180,000 net of 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 September 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 September 30, 2000.
Note 8 - Initial public offering:
The Company has filed a registration statement with the SEC
related to an 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. Each unit
offered consists 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. Management will use the proceeds for
working capital and general corporate purposes. As of
September 30, 2000, the Company had sold 1,736,475 units at
$.40 per unit from which it received proceeds of $634,590 net
of related estimated costs of $60,000 (net proceeds of
$623,824 were received prior to September 30, 2000 and net
proceeds of $10,940 were received in October 2000). During the
period from October 1, 2000 through October 15, 2000, the
Company sold another $575,750 units and received net proceeds
of approximately $343,000.
* * *
F-8
<PAGE>
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 NINE AND THREE MONTHS ENDED SEPTEMBER 30, 2000
COMPARED TO THE NINE AND THREE MONTHS ENDED SEPTEMBER 30, 1999
As of September 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 nine and three months ended September 30, 2000, the
Company incurred research and development expenses of $493,663 and $193,663,
respectively. These expenses, of which $264,974 and $64,974 were accrued, were
primarily compensation to the Company's three founders under their employment
contracts. In addition, $112,500 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 nine and three months September 30, 2000, the Company
incurred general and administrative expenses of $129,538 and $32,743,
respectively, as compared to $220 and $36 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 September 30, 2000, we had cash and working capital of
approximately $632,000 and $362,000, respectively. 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, on October 15, 2000, we completed an initial public offering
whereby we sold 2,594,050 units at $.40 per unit and received net proceeds of
approximately $978,000. Each unit consisted of one share of common stock and one
warrant. The proceeds from this offering will be used for working capital and
general corporate purposes.
2
<PAGE>
We do not have any pending material commitments regarding capital
expenditures. Although our current sources of liquidity and cash are sufficient
to satisfy our cash needs for the next twelve months, we will require additional
capital to fully develop 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>
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 13, 2000 /S/ DAVID RYON
--------------
David Ryon, CEO and President
5
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