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 MARCH 31, 2001
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)
(845) 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 March 31, 2001 was
10,964,112.
PART I
Item 1. Financial Statements.
Image Technology Laboratories, Inc.
(A Development Stage Company)
INDEX TO FINANCIAL STATEMENTS
-----------------------------
PAGE
----
Condensed Balance Sheets
March 31, 2001 and December 31, 2000 (Unaudited) F-2
Condensed Statements of Operations
Three Months Ended March 31, 2001 and 2000 and
Period from January 1, 1998 (Date of Inception)
to March 31, 2001 (Unaudited) F-3
Condensed Statement of Stockholders' Equity
Three Months Ended March 31, 2001 and Period from January
1, 1998 (Date of Inception) to March 31, 2001 (Unaudited) F-4
Condensed Statements of Cash Flows
Three Months Ended March 31, 2001 and 2000 and Period
from January 1, 1998 (Date of Inception)
to March 31, 2001 (Unaudited) F-5
Notes to Condensed Financial Statements (Unaudited) F-6/7
* * *
Image Technology Laboratories, Inc.
(A Development Stage Company)
Condensed Balance Sheets
March 31, 2001 and December 31, 2000
March December
ASSETS 31, 2001 31, 2000
------ ---------- --------
(Unaudited)
Current assets - cash and cash equivalents $ 606,659 $ 725,105
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 8,665 $ 20,663
Accrued compensation payable to stockholders 326,435 297,945
Notes payable to stockholders 5,200 5,200
----------- -----------
Total liabilities 340,300 323,808
----------- -----------
Stockholders' equity:
Preferred stock, par value $.01 per share; 5,000,000 shares
authorized; 1,500,000 shares issued and outstanding 15,000 15,000
Common stock, par value $.01 per share; 50,000,000 shares
authorized; 10,964,112 and 10,962,862 shares issued and
outstanding 109,641 109,628
Additional paid-in capital 1,452,016 1,451,404
Common stock subscription receivable (10,000) (10,000)
Unearned compensation (262,500) (300,000)
Deficit accumulated in the development stage (1,037,798) (864,735)
----------- -----------
Total stockholders' equity 266,359 401,297
----------- -----------
Totals $ 606,659 $ 725,105
=========== ===========
F-2
See Notes to Condensed Financial Statements.
Image Technology Laboratories, Inc.
(A Development Stage Company)
Condensed Statements of Operations
Three Months Ended March 31, 2001 and 2000
and Period From January 1, 1998
(Date of Inception) to March 31, 2001
(Unaudited)
PERIOD
FROM
JANUARY
THREE MONTHS 1, 1998
ENDED MARCH 31, TO MARCH
------------------------
2001 2000 31, 2001
----------- ----------- --------------
Revenues $ - $ - $ -
Research and development expenses 151,764 150,000 785,562
General and administrative expenses 21,299 80,728 252,236
---------- ----------- ----------
Net loss $ (173,063) $ (230,728) $(1,037,798)
========== ========== ===========
Basic net loss per share $(.01) $(.03)
========== ==========
Basic weighted average shares outstanding 12,462,973 9,207,340
========== ==========
F-3
See Notes to Condensed Financial Statements.
Image Technology Laboratories, Inc.
(A Development Stage Company)
Condensed Statement of Changes in Stockholders' Equity
Three Months Ended March 31, 2001
and Period from January 1, 1998
(Date of Inception) to March 31, 2001
(Unaudited)
PREFERRED STOCK COMMON STOCK ADDI- COMMON
NUMBER NUMBER TIONAL STOCK
OF OF PAID-IN SUBSCRIPTION
SHARES AMOUNT SHARES AMOUNT CAPITAL RECEIVABLE
---------- ------ ----------- ------ ------- ------------
Issuance of shares effective as of January
1, 1998 to founders 7,288,750 $ 72,887 $ (51,637)
Net loss
----------- ---------- ------------
Balance, December 31, 1998 7,288,750 72,887 (51,637)
Net loss
----------- ---------- ------------
Balance, December 31, 1999 7,288,750 72,887 (51,637)
Issuance of preferred stock in exchange for
services 1,500,000 $15,000 435,000
Issuance of common stock in exchange for
services 250,000 2,500 72,500
Sales of units of common stock and warrants
through private placement, net of expenses,
in February 2000 799,729 7,997 171,923
Subscription for units of common stock and
warrants through private placement 33,333 333 9,667 $(10,000)
Sales of units of common stock and warrants
through public offering completed in October
2000, net of expenses 2,591,050 25,911 813,951
Amortization of unearned compensation
Net loss
--------- ------- ---------- -------- ---------- --------
Balance, December 31, 2000 1,500,000 15,000 10,962,862 109,628 1,451,404 (10,000)
Issuance of common stock upon exercise
of warrants 1,250 13 612
Amortization of unearned compensation
Net loss
--------- ------- ---------- -------- ---------- --------
Balance, March 31, 2001 1,500,000 $15,000 10,964,112 $109,641 $1,452,016 $(10,000)
========= ======= ========== ======== ========== ========
DEFICIT
ACCUMU-
LATED
IN THE TOTAL
UNEARNED DEVELOP - STOCK-
COMPEN- MENT HOLDERS'
SATION STAGE EQUITY
---------- --------- -------
Issuance of shares effective as of January
1, 1998 to founders $ 21,250
Net loss $ (18,407) (18,407)
------------- ----------
Balance, December 31, 1998 (18,407) 2,843
Net loss (733) (733)
------------- ------------
Balance, December 31, 1999 (19,140) 2,110
Issuance of preferred stock in exchange for
services $(450,000)
Issuance of common stock in exchange for
services 75,000
Sales of units of common stock and warrants
through private placement, net of expenses,
in February 2000 179,920
Subscription for units of common stock and
warrants through private placement
Sales of units of common stock and warrants
through public offering completed in October
2000, net of expenses 839,862
Amortization of unearned compensation 150,000 150,000
Net loss (845,595) (845,595)
--------- ----------- ---------
Balance, December 31, 2000 (300,000) (864,735) 401,297
Issuance of common stock upon exercise
of warrants 625
Amortization of unearned compensation 37,500 37,500
Net loss (173,063) (173,063)
--------- ----------- ---------
Balance, March 31, 2001 $(262,500) $(1,037,798) $ 266,359
========= =========== =========
See Notes to Condensed Financial Statements.
F-4
Image Technology Laboratories, Inc.
(A Development Stage Company)
Condensed Statements of Cash Flows
Three Months Ended March 31, 2001 and 2000
and Period from January 1, 1998
(Date of Inception) to March 31, 2001
(Unaudited)
PERIOD
FROM
JANUARY
THREE MONTHS 1, 1998
ENDED MARCH 31, TO MARCH
----------------------
2001 2000 31, 2001
---------- --------- -----------
Operating activities:
Net loss $(173,063) $ (230,728) $(1,037,798)
Adjustments to reconcile net loss to
net cash used in operating activities:
Amortization of unearned compensation 37,500 37,500 187,500
Common stock issued for services 75,000 75,000
Amortization of capitalized software costs 2,186
Changes in operating assets and liabilities:
Prepaid professional fees (60,000)
Accrued compensation payable to stockholders 28,490 112,500 326,435
Accounts payable and accrued expenses (11,998) 8,665
--------- ----------- -----------
Net cash used in operating activities (119,071) (65,728) (438,012)
--------- ----------- -----------
Investing activities - software costs capitalized (2,186)
-----------
Financing activities:
Proceeds from issuance of notes payable to
stockholders 100 5,200
Proceeds from issuance of common stock 625 21,875
Net proceeds from private placement and public
offering of units of common stock and warrants 185,000 1,024,782
Payments of deferred private placement costs (5,000)
--------- ----------- -----------
Net cash provided by financing activities 625 185,100 1,046,857
--------- ----------- -----------
Net increase (decrease) in cash (118,446) 119,372 606,659
Cash, beginning of period 725,105 24 --
--------- ----------- -----------
Cash, end of period $ 606,659 $ 119,396 $ 606,659
========= =========== ===========
See Notes to Condensed Financial Statements.
F-5
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 March 31, 2001, its results of
operations for the three months ended March 31, 2001 and 2000,
changes in stockholders' equity for the three months ended
March 31, 2001 and cash flows for the three months ended March
31, 2001 and 2000 and the related cumulative amounts for the
period from January 1, 1998 (date of inception) to March 31,
2001. Certain terms used herein are defined in the audited
financial statements of the Company as of December 31, 2000 and
for the years ended December 31, 2000 and 1999 and period from
January 1, 1998 (date of inception) to December 31, 2000 (the
"Audited Financial Statements") included in the Company's
Annual Report on Form 10-KSB previously filed with the
Securities and Exchange Commission (the "SEC"). Pursuant to
rules and regulations of the SEC, certain information and
disclosures normally included in financial statements prepared
in accordance with accounting principles generally accepted in
the United States of America 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
Form 10-KSB.
The results of operations for the three months ended March 31,
2001 are not necessarily indicative of the results of
operations for the full year ending December 31, 2001.
Note 2 - Earnings (loss) per share:
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").
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 three months ended
March 31, 2001 and 2000 in accordance with the "two class"
method of computing earnings (loss) per share set forth in SFAS
128.
Since the Company had a loss for the three months ended March
31, 2001, the assumed effects of the exercise of 3,000,000
options and 3,672,862 and 1,083,062 warrants outstanding at
March 31, 2001 and 2000, respectively, would have been
anti-dilutive.
F-6
Note 3 - Exercise of warrants:
During the three months ended March 31, 2001, warrantholders
redeemed 1,250 warrants and received 1,250 shares of common
stock at a redemption price of $.50 per share or $625. As of
March 31, 2001, 3,672,862 warrants are outstanding.
F-7
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 THREE MONTHS ENDED MARCH 31,2001
COMPARED TO THE THREE MONTHS ENDED MARCH31, 2000
As of March 31, 2001, 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 third
quarter of 2001.
RESEARCH AND DEVELOPMENT EXPENSES:
During the three months ended March 31, 2001 , the Company incurred
research and development expenses of $151,764, as compared with $150,000 in the
comparable prior period.
These expenses, of which $28,490 were accrued during the three months ended
March 31, 2001, were primarily compensation to the Company's three founders
under their employment contracts. In addition, $37,500 of these expenses in both
periods were attributable to compensation associated with the issuance to them
of the preferred stock, a non cash charge.
GENERAL AND ADMINISTRATION EXPENSES:
During the three months March 31, 2001 , the Company incurred general
and administrative expenses of $21,299 as compared to $80,728 in the comparable
prior period. The decrease was mainly attributable to professional fees whereby
during the three months ended March 31, 2000, the company incurred a charge for
legal fees of $75,000 associated with the issuance of common stock for services,
a non cash charge.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 2001, we had cash and working capital of
approximately $607,000 and $266,000, 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
approximately $180,000. In addition, on October 15, 2000, we completed an
initial public offering whereby we sold 2,591,050 units at $.40 per unit and
received net proceeds of approximately $840,000. 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
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 approximately 2,500,000 warrants at an exercise price of
$.50, and approximately 800,000 warrants at an exercise price of $.40. 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.
CAUTIONARY STATEMENT FOR THE PURPOSES OF THE SAFE HARBOR PROVISIONS
OF THE PRIVATE SECURITIES REFORM ACT OF 1995
The statements contained in the section captioned Management's Disscussion
and Analysis of Financial Condition and Results of Operations which are not
historical are "forward-looking statements" within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended. These forward-looking statements represent the
Company's present expectations or beliefs concerning future events. The Company
cautions that such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company to be materially different from any future
results, performance, or achievements expressed or implied by such
forward-looking statements. Such factors include, among other things, the
uncertainty as to the Company's future profitability, the uncertainty as to the
demand for the Internet virtual communities; increasing competition; the ability
to hire, train, and retain sufficient qualified personnel; the ability to obtain
financing on acceptable terms to finance the Company's growth.
3
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
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: May 10, 2001 /S/ DAVID RYON
--------------
David Ryon, CEO and President
5