SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[Mark One]
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the quarterly period ended: March 31, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 for the transition period from _____to______
Commission file number: 0-26028
-------
IMAGING DIAGNOSTIC SYSTEMS, INC.
(Name of small business issuer in its charter)
Florida 22-2671269
(State of incorporation) (IRS Employer Ident. No.)
6531 N.W. 18th Court, Plantation, FL 33313
(address of principal office) (Zip Code)
Registrant's telephone number: (954) 581-9800
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days. Yes _X__ No_____
The number of shares outstanding of each of the issuer's classes of equity
as of March 31, 2000: 97,327,486 shares of common stock, no par value; and 123
shares of Series I preferred convertible stock, no par value.
<PAGE>
IMAGING DIAGNOSTIC SYSTEMS, INC.
(A Developmental Stage Company)
Part I - Financial Information Page
Item 1. Financial Statements
Condensed Balance Sheet -
March 31, 2000 and June 30, 1999........................... 3
Condensed Statement of Operations -
Nine months and three months ended
March 31, 2000 and 1999, and December 10,
1993(date of inception) to March 31, 2000.................. 4
Condensed Statement of Cash Flows -
Nine months ended March 31, 2000 and 1999,
and December 10, 1993(date of inception)
to March 31, 2000.......................................... 5
Notes to Condensed Financial Statements.......................... 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results....................... 7
Part II - Other Information
Item 1. Legal Proceedings..................................... 11
Item 2. Changes in Securities................................. 11
Item 3. Defaults Upon Senior Securities....................... 11
Item 4. Submission of Matters to a Vote of
Security Holders...................................... 11
Item 5. Other Information..................................... 12
Item 6. Exhibits and Reports on Form 8-K...................... 13
Signature........................................................ 14
2
<PAGE>
IMAGING DIAGNOSTIC SYSTEMS, INC.
(A Developmental Stage Company)
Condensed Balance Sheet
Assets
Mar. 31, 2000 Jun. 30, 1999
------------- -------------
Current Assets Unaudited
Cash $ 774,592 $ 70,037
Inventory 3,944,886 3,698,343
Prepaid expenses 10,000 58,250
Other current assets 13,360 30,950
------------ ------------
Total Current Assets 4,742,838 3,857,580
------------ ------------
Property and Equipment, net 2,557,037 2,707,994
Other Assets 821,240 561,158
------------ ------------
$ 8,121,115 $ 7,126,732
============ ============
Liabilities and Stockholders' Equity
Current Liabilities
Accounts Payable, Accrued Exp
and Accrued Dividends Payable $ 2,621,814 $ 1,597,083
Loans Payable 1,444,077 1,232,271
Current maturity of capital
lease obligation 11,264 10,572
Other current liabilities -- 529,880
------------ ------------
Total Current Liabilities 4,077,155 3,369,806
------------ ------------
Convertible Debenture 3,131,000 1,100,000
Long-Term capital lease obligation 7,024 15,561
------------ ------------
Total Liabilities 7,215,179 4,485,367
------------ ------------
Commitments and contingencies:
Redeemable convertible
preferred stock Series G 117,117 477,117
Stockholders Equity:
Convertible Preferred
(Series B) 7% cum. Div - 3,900,000
Convertible Preferred (Series H) - 680,000
Convertible Preferred (Series I) 1,230,000 1,380,000
Common Stock 37,095,369 29,820,729
Additional paid-in capital 1,463,468 1,490,827
Deficit accumulated during
development stage (38,985,709) (35,092,999)
------------ -----------
803,128 2,178,557
Less: subscriptions receivable (14,309) (14,309)
------------ -----------
Total stockholders' equity 788,819 2,164,248
------------ -----------
$ 8,121,115 $ 7,126,732
============ ===========
3
<PAGE>
IMAGING DIAGNOSTIC SYSTEMS, INC.
(A Developmental Stage Company)
(Unaudited)
Condensed Statement of Operations
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended Since Inception
March 31, March 31, (12/10/93) to
2000 1999 2000 1999 Mar. 31, 2000
<S> <C> <C> <C> <C> <C>
Compensation and related benefits:
Administrative and engineering $ 996,920 $1,005,848 $ 324,655 $ 363,426 $ 8,949,454
Research and development 637,375 643,085 207,566 232,355 3,326,964
Research and development expenses 1,422 76,779 529 2,808 2,991,824
Advertising and promotion expenses 26,133 33,761 7,029 2,183 927,247
Selling, general and administrative 347,636 501,338 84,378 150,476 2,035,597
Clinical expenses 58,484 14,901 5,039 1,108 435,923
Consulting expenses 32,276 79,687 19,000 4,000 3,058,497
Insurance costs 128,383 121,376 41,453 38,588 629,590
Professional fees 118,330 245,635 41,788 (60,563) 1,762,993
Stockholder expenses - 7,889 - 7,889 161,675
Trade show expenses 153,809 100,208 71,408 17,358 810,670
Travel and subsistence costs 138,055 74,059 49,100 12,869 706,575
Rent expense 10,551 27,066 3,077 7,058 286,820
Interest expense 668,400 268,555 275,428 121,533 1,439,640
Loan placement expenses and fees 205,000 - 47,000 - 406,494
Depreciation and amortization 233,689 170,619 77,896 56,873 1,222,507
Amortization of deferred compensation - 1,132,829 - 377,610 4,064,250
Liquidated damages costs 31,000 - - - 291,000
Interest income (2,012) (964) (1,544) (268) (200,549)
3,785,451 4,502,671 1,253,802 1,335,303 33,307,171
---------- ---------- ---------- ---------- ----------
Net Loss $ (3,785,451) $ (4,502,671) $ (1,253,802) $ (1,335,303) $ (33,307,171)
Dividends on cumulative Pfd. stock:
From discount at issuance - (127,117) - (127,117) (4,694,583)
Earned (117,731) (56,953) (32,818) - (994,427)
--------- -------- -------- - ----------
Net loss applicable to
common shareholders $ (3,903,182) $ (4,686,741) $ (1,286,620) $ (1,462,420) $ (38,996,181)
------------- ------------- ------------- ------------- --------------
Net Loss per common share:
Basic:
Net loss per common share $ (0.05) $ (0.12) $ (0.01) $ (0.04) $ (1.28)
========= ========= ========= ========= =========
Weighted avg. no. of common shares 72,169,839 38,604,361 96,807,596 39,595,946 30,501,689
========== ========== ========== ========== ==========
Diluted:
Net loss per common share $ (0.05) $ (0.12) $ (0.01) $ (0.04) $ (1.28)
======== ========= ========= ========= =========
Weighted avg. no. of common shares 72,169,839 38,604,361 96,807,596 39,595,946 30,501,689
========== ========== ========== ========== ==========
</TABLE>
4
<PAGE>
IMAGING DIAGNOSTIC SYSTEMS, INC.
(A Developmental Stage Company)
Condensed Statement of Cash Flows
<TABLE>
<CAPTION>
Nine Months Since Inception
Ended March 31, (12/10/93) to
2000 1999 Mar. 31, 1999
<S> <C> <C> <C>
Cash provided by (used for) Operations:
Net loss $ (3,785,451) $ (4,502,671) $(33,307,171)
Changes in assets and liabilities 3,825,826 2,172,729 18,400,786
------------ ------------ ------------
Net cash used by operations 40,375 (2,329,942) (14,906,385)
------------ ------------ ------------
Investments
Capital expenditures (65,644) (113,430) (6,590,092)
------------ ------------ ------------
Cash used for investments (65,644) (113,430) (6,590,092)
------------ ------------ ------------
Cash flows from financing activities:
Repayment of capital lease obligation (10,036) (7,209) (34,192)
Other financing activities - NET 2,531,000 1,840,056 5,785,731
Proceeds from issuance of preferred stock -- 345,000 13,039,500
Net proceeds from issuance of common stock 477,552 82,964 5,748,722
------------ ------------ ------------
Net cash provided by financing activities 2,998,516 2,260,811 24,539,761
------------ ------------ ------------
Net increase (decrease) in cash 757,532 (182,561) 774,592
Cash, beginning of period 17,060 310,116 -
------------ ------------ ------------
Cash, end of period $ 774,592 $ 127,555 $ 774,592
============ ============ ============
</TABLE>
5
<PAGE>
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The financial information included has been condensed from financial statements
prepared as of March 31, 2000. The results of operations for the nine-month
period ended March 31, 2000, are not necessarily indicative of the results to be
expected for the full year.
NOTE 2 - GOING CONCERN
Imaging Diagnostic Systems, Inc. (IDSI) is currently a developmental stage
company and our continued existence is dependent upon our ability to resolve our
liquidity problems, principally by obtaining additional debt and/or equity
financing. IDSI has yet to generate an internal cash flow, and until the sales
of our product begin, we are totally dependent upon debt and equity funding. See
Item 2 "Management's Discussion and Analysis of Financial Condition and Results
of Operations".
In the event that we are unable to obtain debt or equity financing or we are
unable to obtain such financing on terms and conditions acceptable to us, we may
have to cease or severely curtail our operations. This would materially impact
our ability to continue as a going concern. However, our management is
continually negotiating with various outside entities for additional funding
necessary to complete the clinical testing phase of development required before
we can receive FDA marketing clearance. Management has been able to raise the
capital necessary to reach this stage of product development and has been able
to obtain funding for capital requirements to date. There is no assurance that
once development of the CTLMTM prototype is completed, and if and when FDA
marketing clearance is obtained, that the CTLM(TM) will achieve market
acceptance or that we will achieve a profitable level of operations.
NOTE 3 - INVENTORY
Inventory consisting primarily of raw materials, amounted to $3,944,886 as of
March 31, 2000, compared to $3,698,343 as of June 30, 1999.
6
<PAGE>
THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS. ACTUAL RESULTS AND EVENTS COULD
DIFFER MATERIALLY FROM THOSE PROJECTED AS A RESULT OF THE RISKS AND
UNCERTAINTIES SET FORTH UNDER THE CAPTION "CAUTIONARY STATEMENTS REGARDING
FORWARD-LOOKING STATEMENTS", IN OUR FORM 10-KSB FOR THE YEAR ENDED JUNE 30,
1999.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Imaging Diagnostic Systems, Inc. is a developmental stage company, which, since
inception, has been primarily engaged in research and development of its
Computed Tomography Laser Mammography (CTLM(TM)). The CTLM(TM) is a
breast-imaging device for the detection of cancer which utilizes laser
technology and proprietary computer algorithms to produce three dimensional
cross section slice images of the breast. Due to the fact that IDSI is in the
latter stages of the development of its breast cancer detection technology and
its CTLM(TM), it has not yet engaged in any marketing or distribution of its
products in the United States and therefore has had no revenue from its
operations.
We have incurred net losses applicable to common shareholders since inception
through March 31, 2000, of approximately $38,985,709 after discounts and
dividends on preferred stock. We anticipate that losses from operations will
continue for at least the next year, primarily due to an anticipated increase in
marketing and manufacturing expenses associated with the commercialization of
the CTLM(TM), the costs associated with the clinical trials and other research
and development activities. There can be no assurances that the CTLM(TM) will
achieve market acceptance or that sufficient revenues will be generated from
sales of the CTLM(TM) to allow us to operate profitably.
RESULTS OF OPERATIONS
General and administrative expenses during the three months and nine months
ended March 31, 2000, were $84,378 and $347,636 representing a decrease of
$66,098 and $153,702 when compared with the corresponding periods for 1999. The
decrease was primarily due to a decrease in administrative costs associated with
the development of the CTLM(TM) breast-imaging device.
Compensation and related benefits during the three months and nine months ended
March 31, 2000, were $532,221 and $1,634,295 representing a decrease of $63,560
and $14,638 when compared with the corresponding periods for 1999. The decrease
was primarily due to the normal hiring and terminations associated with the
employment cycle.
Research and development expenses during the three months and nine months ended
March 31, 2000, were $529 and $1,422 representing a decrease of $2,279 and
$75,357 when compared with the corresponding periods for 1999. The decrease is
due primarily to finalizing certain components of the CTLM(TM) device.
Advertising and promotion expenses during the three months and nine months ended
March 31, 2000, were $7,029 and $26,133 representing an increase of $4,846 and a
decrease of $7,628 when compared with the corresponding periods for 1999. The
increase is due primarily to advertising expenses associated with trade shows.
The decrease is due primarily to the overall reduction of advertising in
domestic and foreign medical imaging and medical device publications, and the
elimination of public relations and investor public relations expenses.
Clinical expenses during the three months and nine months ended March 31, 2000,
were $5,039 and $58,484 representing an increase of $3,931 and $43,583 when
compared with the corresponding periods for 1999. The increase is due primarily
to the cost of operating our Nassau County Medical Center clinical site and our
University of Virginia Health System clinical site.
7
<PAGE>
Consulting expenses during the three months and nine months ended March 31,
2000, were $19,000 and $32,276 representing an increase of $15,000 and a
decrease of $47,411 when compared with the corresponding periods for 1999. The
increase is due primarily to consultants hired for one-time projects and the
decrease is due primarily to the overall reduced use of outside consultants
needed for special non-recurring projects required prior to placing CTLM(TM)
units into clinical trials.
Insurance costs during the three months and nine months ended March 31, 2000,
were $41,453 and $128,383 representing an increase of $2,865 and $7,007 when
compared with the corresponding periods for 1999. The increase is due primarily
to additional premiums for Workers' Comp., Health Insurance, and Property and
Casualty Insurance.
Professional expenses during the three months and nine months ended March 31,
2000, were $41,788 and $118,330 representing an increase of $102,351 and a
decrease of $127,305 when compared with the corresponding periods for 1999. The
increase is due to legal costs associated with recent legal matters as further
described in Item I, of Part 2 Legal Proceedings. The decrease in professional
fees is a result of reduced use of outside counsel during the period.
Stockholder expenses during the three months and nine months ended March 31,
2000, were $0 and they were $0 for the corresponding periods for 1999. The
reason for no stockholder expenses is due to the fact that we did not have any
stockholder mailings in those quarters.
Trade show expenses during the three months and nine months ended March 31,
2000, were $71,408 and $153,809 representing an increase of $54,050 and of
$53,601 when compared with the corresponding periods for 1999. The increase is
due to additional trade shows we attended during the quarter along with our 1999
Radiological Society of North America's Scientific Assembly and Annual Meeting
in Chicago, IL.
Travel and subsistence costs during the three months and nine months ended March
31, 2000, were $49,100 and $138,055 representing an increase of $36,231 and
$63,996 when compared with the corresponding periods for 1999. The increase is
primarily due to travel and housing expenses for our clinical application
specialists at Nassau County Medical Center and University of Virginia Health
System.
Rent expense during the three months and nine months ended March 31, 2000, was
$3,077 and $10,551 representing a decrease of $3,981 and $16,515 when compared
with the corresponding periods for 1999. This decrease is primarily due to not
having to rent as much outside test equipment.
Interest expense during the three months and nine months ended March 31, 2000,
was $275,428 and $668,400 representing an increase of $153,895 and an increase
of $399,845 when compared with the corresponding periods for 1999. The increases
are due primarily to recording the interest on the loans that we entered into in
previous quarters and the discount on debt in the third quarter.
Amortization of deferred compensation during the three months and nine months
ended March 31, 2000, was $0 and $0 representing a decrease of $377,610 and
$1,132,829 when compared with the corresponding periods in 1999. The decrease is
a result of having no deferred compensation for the quarters.
Liquidated damage costs during the three months and nine months ended March 31,
2000, were $0 and $31,000 representing no change and an increase of $31,000 when
compared with the corresponding periods in 1999. The increase is a result of
having to pay liquidated damages to the Series H holders because our
registration statement for their common shares was not declared effective by the
date required in our subscription and registration rights agreement relating to
such shares.
Interest income during the three months and nine months ended March 31, 2000,
was $1,544 and $2,012 representing a increase of $1,276 and $1,048 when compared
with the corresponding periods for 1999. The increases in interest income are
results of having more cash in our interest bearing sweep account.
8
<PAGE>
Dividends earned on the cumulative preferred stock for the three months and nine
months ended March 31, 2000, were $32,818 and $117,731 representing an increase
of $32,818 and $60,778 when compared with the corresponding periods for 1999.
These increases were due to the accrued dividends associated with the Series B
convertible preferred and the accrued dividends associated with the issuance of
Series I convertible preferred which occurred April 6, 1999.
BALANCE SHEET DATA
Our combined cash and cash equivalents totaled $774,592 as of March 31, 2000.
This is an increase of $704,555 from $70,037 for the year ended June 30, 1999.
During the quarter ending March 31, 2000, the aggregate gross proceeds from
draws on the convertible debenture was $242,000. In connection with the draws on
the convertible debenture we paid $22,000 in placement fees. During the quarter
ending March 31, 2000, we received a $500,000 loan from Cycle of Life and a
$500,000 loan from Charlton Avenue LLC.
We do not expect to generate a positive internal cash flow for at least the next
twelve (12) months due to the expected increase in spending for research and
development, the costs associated with the clinical trials and the expected
costs of commercializing our initial product, the CTLM(TM) device.
Property and Equipment is valued at $2,557,037 net as of March 31, 2000. The
overall decrease of $150,957 from the year ended June 30, 1999 is due primarily
to depreciation recorded for the third quarter.
LIQUIDITY AND CAPITAL RESOURCES
We are currently a developmental stage company and our continued existence is
dependent upon our ability to resolve our liquidity problems, principally by
obtaining additional debt and/or equity financing. We have yet to generate an
internal cash flow, and until the sale of our product begins, we are totally
dependent upon debt and equity funding. In the event that we are unable to
obtain debt or equity financing or we are unable to obtain such financing on
terms and conditions acceptable to us, we may have to cease or severely curtail
our operations. This would materially impact our ability to continue as a going
concern.
We have financed our operating and research and development activities through
several Regulation S and Regulation D private placement transactions. We have
funded our operating and research and development expenses during the third
quarter ended March 31, 2000 with short-term loans and equity capital from the
proceeds of employee stock options. These expenses are primarily due to our
continued research and development of the CTLM(TM) device and preparations for
FDA clinical investigational trials including the manufacture of five (5)
CTLM(TM) Breast Imaging Systems. On March 31, 2000, we had a working capital of
$665,683 compared to a working capital of $(2,150,969) on March 31, 1999.
On May 27, 1998, we entered into an irrevocable commitment with a consortium of
prominent banking institutions to invest up to $15 million in IDSI over the next
three years. A formal Equity Line of Credit Agreement was to be drafted,
reviewed, and executed at a later date. The Equity Agreement was not finalized
until November 20, 1998. Although the equity line of credit is in place, we
choose not to utilize it at the present time due to;
(1) IDSI and our investors will have to amend the agreement to provide for a
draw down and issuance of the common stock according to Regulation D and
then registration of the shares; or
(2) We will have to file a shelf registration, if it is available to us at the
time that we intend to use the equity line of credit. See "Sale of
Unregistered Securities-Financing/Equity Line of Credit"
During the quarter ending March 31, 2000, there were no Regulation D private
placements. On April 6, 1999, we finalized a Convertible Debenture in the
initial amount of $1,100,000. Debentures totaling $242,000 were finalized during
the quarter ending March 31, 2000. We may continue to receive working capital
from the exercise of stock options, warrants, private placements and long-term
debt.
9
<PAGE>
If our working capital was insufficient to fund our operations, we would
have to explore additional sources of financing. No assurances can be given that
future financing would be available or if available, that it could be obtained
at terms satisfactory to us. We have already granted a mortgage on our corporate
property as security for the convertible debenture and therefore, in all
likelihood, would be unable to use such property to collateralize any additional
financing. Our ability to effectuate our plan and continue operations is
dependent on our ability to raise capital, structure a profitable business, and
generate revenues.
Capital expenditures for the third quarter ending March 31, 2000, were
approximately $29,817 as compared to approximately $53,682 for the third quarter
ending March 31, 1999. These expenditures were a direct result of purchases of
computer and other equipment, office, warehouse and manufacturing fixtures,
computer software, laboratory equipment, and other fixed assets. We anticipate
that the balance of our capital needs for the fiscal year ending June 30, 2000,
will be approximately $30,000.
There were no other changes in our existing debt agreements other than
extensions and we had no outstanding bank loans as of March 31, 2000. Our fixed
commitments, including salaries and fees for current employees and consultants,
rent, payments under license agreements and other contractual commitments are
substantial and are likely to increase as additional agreements are entered into
and additional personnel are retained. We will need substantial additional funds
for our research and development programs, pre-clinical and clinical testing,
operating expenses, regulatory processes, and manufacturing and marketing
programs. Our future capital requirements will depend on many factors, including
the following:
1) The progress of our research and development projects;
2) The progress of pre-clinical and clinical testing;
3) The time and cost involved in obtaining regulatory approvals;
4) The cost of filing, prosecuting, defending and enforcing any patent
claims and other intellectual property rights;
5) Competing technological and market developments;
6) Changes and developments in our existing collaborative, licensing and
other relationships and the terms of any new collaborative, licensing
and other arrangements that we may establish; and
7) The development of commercialization activities and arrangements.
We do not expect to generate a positive internal cash flow for at least the next
twelve (12) months due to expected increases in capital expenditures, working
capital and ongoing losses, including the expected cost of commercializing the
CTLM(TM) device. We do not have sufficient cash to fund our operations until the
end of the fiscal year ending June 30, 2000, requiring us to secure additional
funding through the private placement sale of debt or equity securities.
ISSUANCE OF STOCK FOR SERVICES/DILUTIVE IMPACT TO SHAREHOLDERS
We have and may continue to issue stock for services performed and to be
performed by consultants. Since we have generated no revenues to date, our
ability to obtain and retain consultants may be dependent on our ability to
issue stock for services. Since July 1, 1996, to the filing date of this Report,
we have issued an aggregate of 1,806,500 shares of common stock according to
Registration Statements on Form S-8. The aggregate fair market value of the
shares was $2,327,151. The issuance of large amounts of common stock for
services rendered or to be rendered and the subsequent sale of such shares may
depress the price of the common stock. In addition, since each new issuance of
common stock dilutes existing shareholders, the issuance of substantial
additional shares may effectuate a change in our control.
We are currently seeking additional capital to fund our future operations
through private debt or equity financing, or collaborative licensing or other
arrangements with strategic partners. There can be no assurance that this
financing can be obtained or, if it is obtained, that the terms will be
acceptable. We plan to continue our policy of investing excess funds, if any, in
a daily cash management account at First Union National Bank.
10
<PAGE>
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
On August 25, 1999, we were served with a civil lawsuit by Andrew Abraham
Skolnick with regard to certain employment matters which we believe to be
without merit. We are in the process of reviewing the depositions and other
information obtained for the case. We are contemplating a counter-claim.
On May 1, 2000, we commenced a civil lawsuit against DOE 1 a/k/a DEIGHTON et al
in the Circuit Court of the 17th Judicial Circuit in and for Broward County,
Florida, Case No. CACE 00-006881 (04). We have filed an Ex Parte Motion for
Expedited Discovery to learn the identities of DOE 1 and DOE 2.
We currently are not aware of any other material legal proceedings, pending or
contemplated, to which we are, or would be a party to or of, which any of our
property is, or would be, the subject. We may, from time to time, become
involved in litigation relating to claims arising out of our operations in the
normal course of business.
ITEM 2. CHANGES IN SECURITIES.
On January 19, 2000 we filed a registration statement on Form S-8 to register
500,000 shares for employee options in accordance with our 1995 Incentive Stock
Option Plan.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS.
On May 10, 2000 we held an annual meeting of stockholders at our corporate
offices at 6531 NW 18th Court, Plantation, Florida for the following purposes:
1. To elect six (6) directors to serve a one-year term expiring upon the 2001
Annual Meeting of Stockholders or until his/her successor is duly elected
and qualified;
2. To consider and act upon a proposal to amend the Company's Certificate of
Incorporation to increase the number of authorized shares of the Company's
common stock, no par value, from 100,000,000 to 150,000,000;
3. To consider and act upon a proposal to adopt the Company's 2000
Non-Statutory Stock Option Plan; and
4. To ratify the Board of Directors' action of its appointment of Margolies,
Fink and Wichrowski, CPA's as independent auditors for the Company for the
fiscal year ending June 30, 2000.
For proposal no. 1, the stockholders elected three incumbent directors, Richard
J. Grable, Linda B. Grable, and Allan L. Schwartz and three new directors, John
R. Liegey, Robert L. Kagan, M.D. and Irving H. Schwab with the voting as
follows: FOR 93,781,372 AGAINST 3,100 ABSTAIN 236,851
For proposal no. 2, the stockholders voted to amend the Company's Certificate of
Incorporation to increase the number of authorized shares of the Company's
common stock, no par value, from 100,000,000 to 150,000,000 with the following
votes: FOR 91,836,967 AGAINST 1,435,128 ABSTAIN 749,228
For proposal no. 3, the stockholders voted to adopt the Company's 2000
Non-Statutory Stock Option Plan with the following votes:
FOR 91,865,300 AGAINST 1,423,425 ABSTAIN 732,598
For proposal no. 4, the stockholders voted to ratify the Board of Directors'
action of its appointment of Margolies, Fink and Wichrowski, CPA's as
independent auditors for the Company for the fiscal year ending June 30, 2000
with the following votes:
FOR 93,604,097 AGAINST 266,792 ABSTAIN 150,434
11
<PAGE>
ITEM 5. OTHER INFORMATION
Recent Developments
On May 17, 2000 we announced the appointment of David M. Richter, M.D. as the
Medical Director of Clinical Trials. He will be responsible for assisting and
interpreting the clinical aspects of the images produced by the CTLM(TM) during
the continuation of our FDA clinical trials. Dr. Richter received his M.D.
Degree from Johns Hopkins School of Medicine, had residencies at New York
Hospital-Cornell Medical Center, and was a surgeon in the US Air Force. He has
been in private practice for 23 years and has considerable amount of experience
in breast surgery. "His expertise and knowledge will enable him to evaluate the
performance of the CTLM(TM) and will aid in comparing the results obtained from
the CTLM(TM) with those obtained from traditional mammography." "We welcome him
to our staff," stated Richard Grable, Chief Executive Officer.
Clinical Update
On Wednesday afternoon, May 10, 2000, we commenced clinical testing of the
fluorescent compound indocyanine green (ICG) at the University of Virginia
Health Systems. In this study the ICG will be used as a breast-imaging contrast
agent to determine if the sensitivity increases when used in conjunction with
the ICG and CTLM(TM) in addition to the existing clinical investigational
trials. Richard Grable, CEO stated, "Demonstrating that the CTLM(TM) scanner can
be used to stimulate and detect fluorescence from a compound inside the breast
is an important step in this feasibility study. The next step will be to
evaluate the increased detectability of lesion using ICG. The development of
cancer-specific fluorescent tags that are expected to aid in the early detection
of breast lesions would be a major advancement. In theory, if the specificity
and sensitivity of the tag is high enough, then the simple presence or absence
of fluorescence could be the only interpretation that would be necessary. The
presence of the fluorescence would indicate the presence of breast cancer."
On May 3, 2000 we filed a supplement to our investigational device exemptions
(IDE) application with the Food and Drug Administration (FDA) proposing an
expansion of our investigation to a total of 425 subjects (by the addition of
150 subjects). In a letter dated May 12, 2000, the FDA approved our supplement
for the two institutions currently conducting clinical investigation trials
under institutional review board (IRB) approvals, Nassau County Medical Center
and University of Virginia Health Systems for a total of 425 subjects.
Certain Transactions
At our Annual Meeting held on May 10, 2000, Irving H. Schwab was elected a
director of the Company. Mr. Schwab has an ownership interest of $200,000 in the
$500,000 Promissory Note dated February 1, 2000 held by Cycle of Life
Technologies, Inc., as the lender.
12
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibits Description
- -------- -----------
(a)
3.13 Amended Certificate of Amendment-Series G Designation*
3.14 Certificate of Amendment-Series I Designation*
3.15 Amended Certificate of Amendment-Series B Designation*
4.7 Instruments Defining the Rights of Security Holders - Amended Designation
of Series G Convertible Preferred Shares. (See Exhibit 3.13, above)*
4.8 Instruments Defining the Rights of Security Holders - Designation of Series
I Convertible Preferred Shares. (See Exhibit 3.14, above)*
4.9 Instruments Defining the Rights of Security Holders - Amended Designation
of Series B Convertible Preferred Shares. (See Exhibit 3.15, above)*
4.10 Convertible Debenture*
10.3 Incentive Stock Option Plan - is incorporated by reference to Exhibit 10(b)
of the Form 10-SB
10.16 Form of Series I Preferred Stock Subscription Documents*
10.17 Form of Debenture Subscription Documents*
10.18 Form of Mortgage*
10.19 Form of Series G Subscription Documents*
10.26 Promissory Note by and between IDSI and Cycle of Life Technologies, Inc.
dated February 1, 2000*
*Incorporated by reference to our Post-effective Amendment number 5 to
Registration on Form S-2, dated March 28, 2000. File Number 333-60405.
(b) Reports on Form 8-K
NONE
13
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, who is duly
authorized to sign as an officer and as the principal financial officer of the
registrant.
Dated: May 19, 2000 Imaging Diagnostic Systems, Inc.
By: /s/Allan L. Schwartz
--------------------
Allan L. Schwartz,
Executive Vice-President and
Chief Financial Officer
14
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 774,592
<SECURITIES> 0
<RECEIVABLES> 13,360
<ALLOWANCES> 0
<INVENTORY> 3,944,886
<CURRENT-ASSETS> 4,742,838
<PP&E> 2,634,933
<DEPRECIATION> 77,896
<TOTAL-ASSETS> 8,121,115
<CURRENT-LIABILITIES> 4,077,155
<BONDS> 0
0
1,347,117
<COMMON> 37,095,369
<OTHER-SE> (38,985,709)
<TOTAL-LIABILITY-AND-EQUITY> 8,121,115
<SALES> 0
<TOTAL-REVENUES> 1544
<CGS> 0
<TOTAL-COSTS> 1,286,620
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 275,428
<INCOME-PRETAX> (1,286,620)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,286,620)
<EPS-BASIC> (.01)
<EPS-DILUTED> (.01)
</TABLE>
