Prospectus
IMAGE TECHNOLOGY LABORATORIES, INC.
3,455,362 warrants previously issued and 3,455,362 shares of common stock
underlying such warrants to be sold separately by selling shareholders
Net Proceeds to Image Technology............................................None
Price of shares and warrants
offered by selling shareholders.........Prevailing market price at time of sale
On September 14, 2001, our Board of Directors authorized extending
the expiration dates of our Class A $.40 warrants and our Class B $.50 warrants
from October 15, 2001 to April 15, 2002 and changed the redemption strike price
from $2.00 to $1.00. This Prospectus is being delivered to existing
warrantholders in connection with such extension.
We trade on the OTC Bulletin Board under the symbol "IMTL" with
respect to our common stock and under the symbol "IMTLW and IMTLZ" with respect
to the warrants. The warrants are detachable from the shares.
Look carefully at the risk factors beginning on page 5 of this
prospectus.
Image Technology will receive none of the proceeds of previously
registered shares or warrants sold by selling shareholders.
This preliminary prospectus is not an offer to sell nor does it seek
an offer to buy these securities in any jurisdiction where the offer or sale is
not permitted.
Neither the SEC nor any other regulatory body has approved these
shares or determined that this prospectus is accurate or complete. It is illegal
for anyone to tell you otherwise.
THE DATE OF THIS PROSPECTUS IS OCTOBER 16, 2001
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TABLE OF CONTENTS
Prospectus Summary............................................................ 3
Risk Factors.................................................................. 5
Dividend Policy...............................................................12
Management Discussion and Analysis of Financial
Condition and Results of Operation.................................12
Description of Business.......................................................14
Management....................................................................22
Executive Compensation........................................................24
Principal Security holders....................................................27
Certain Relationships and Related Transactions................................27
Market for Securities.........................................................28
Description of Securities.....................................................29
Transfer Agent and Registrar..................................................32
Shares Eligible for Future Sale...............................................34
Legal Matters.................................................................34
Experts.......................................................................34
Where You Can Find More Information...........................................35
Index to Financial Statements ...............................................F-1
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PROSPECTUS SUMMARY
The following summary highlights information which we present more
fully elsewhere in this prospectus. You should read this entire prospectus
carefully.
Introduction
Image Technology is a software developmental stage company which has
entered the medical image management segment of the healthcare information
systems market. We were incorporated in Delaware on December 5, 1997. Our
principal executive offices are located at 167 Schwenk Drive, Kingston, New York
12401. Our phone number is (845) 338-3366.
Our Founders
Our founders, Drs. David Ryon, Carlton Phelps and Mr. Lewis Edwards,
own 7,288,750 shares of common stock, representing 70.67% of our outstanding
11,075,612 shares of common stock. In addition, they also own 1,500,000 shares
of preferred stock, or 100% of the outstanding shares.
Dr. Ryon is the founder of the Kingston Diagnostic Center in
Kingston, New York and operated the Kingston Diagnostic Center as a sole
proprietor from its inception in 1992 until the sale of the business to Rockland
Radiological Group, P.C. in 1997. Dr. Phelps was Chief of Radiology at the
Kingston Hospital where he served since May 1999. He is now employed full time
by Image Technology. From 1996 to 1999, Dr. Phelps was employed by Kingston
Diagnostic Radiology, P.C. and from 1995 to 1996, Dr. Phelps served as Director
of Radiology at Child's Hospital in Albany, New York. Mr. Edwards has served as
a senior technical staff member at IBM since 1993. He was an architect and lead
software designer for IBM's RS/6000 SP, a massive parallel processor. From 1982
to 1993 he served as the head of engineering for Graphic Systems Labs, a CAD/CAM
Independent Business Unit start-up company within IBM.
Our Company
Through our three founders, we have designed and are developing a
proprietary picture archiving and communications software system, or PACS, which
we call ITLPACS, for use in the management of medical diagnostic images by
hospitals and medical centers. A PACS inputs and stores diagnostic images in
digital format from original imaging sources such as CT scans, MRIs, ultrasound,
nuclear imaging and digital fluoroscopy.
ITLPACS routes, archives and displays digital images linked to
patient information from either radiology information systems or hospital
information systems. ITLPACS has been designed to interface with hospital
departments and radiology information systems so that patient data can be
integrated with diagnostic images for improved record retrieval and increased
accuracy of image interpretation. Using
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ITLPACS, radiologists can read and interpret the digitized versions of
diagnostic images from any terminal or computer to which they can be sent.
This facilitates:
- time-critical transfer of patient information between
hospital departments, such as from radiology to emergency
room,
- rapid off-site consultations by specialists at remote
locations, or
- convenient home viewing by individual radiologists.
Hospitals and other health organizations can use ITLPACS permanently
to replace more costly and cumbersome image storage mediums such as film. Image
Technology provides all support services, including:
- remote system,
- network, and
- database administration and management.
We are also developing a unique display station which allows
radiologists to simultaneously view multiple digitized images. ITLPACS has been
designed to run under the Windows 2000 operating system and includes no-cost
remote access to the imaging database via the Internet for on-call remote
diagnosis or referring physician consultations.
Our customers will include hospitals, medical centers and imaging
centers in the northeastern United States. Image Technology will distribute
ITLPACS through three channels:
- original equipment manufacturer relationships,
- partnerships, and
- direct distribution through its own sales
representatives.
Since inception, we have incurred losses, resulting in an accumulated
deficit of approximately $1,280,000 at June 30, 2001. We currently have no
sources of revenue and expect to incur additional losses for the foreseeable
future. Market acceptance of ITLPACS, which we introduced in the fiscal second
quarter of 2001, is critical to our future success. We completed the initial
phase of product development of ITLPACS in the third quarter of 2000. We do not
expect to generate any revenues from planned operations prior to the fourth
fiscal quarter of 2001. For a discussion of these and other risks relating to an
investment in our common stock, see "Risk Factors" beginning on page 5.
The Offering
On September 14, 2001, our Board of Directors authorized extending
the expiration dates of our Class A $.40 warrants and our Class B $.50 warrants
to April 15, 2002 and changed the redemption strike price from $2.00 to $1.00.
The warrants are redeemable by Image Technology at $.05 per warrant if the
common stock closing bid price exceeds $1.00 for 10 consecutive trading days.
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RISK FACTORS
Please consider the following risk facts together with the other
information presented in this prospectus including the financial statements and
the notes thereto before investing in our common stock. The trading price of our
common stock and warrants could decline due to any of the following risks, and
you might lose all or part of your investment.
Our limited operating history makes it difficult to evaluate our prospects. We
incorporated on December 5, 1997, and commenced operations January 1, 1998.
Accordingly, we have only a limited operating history on which to evaluate our
business. As a result of our limited operating history we may be unable to
accurately forecast our revenues. Our relative lack of experience means that our
business will have numerous personnel, operational, financial, regulatory and
other risks not faced by more experienced competitors. We are still in our
formative and development stage. As an investor, you should be aware of the
difficulties, delays and expenses normally encountered by an enterprise in its
development stage, many of which are beyond our control, including:
- unanticipated developmental expenses,
- inventory costs,
- employment costs, and
- advertising and marketing expenses.
We cannot assure our investors that our proposed business plans as described in
this prospectus will materialize or prove successful, or that we will ever be
able to operate profitably. If we cannot operate profitably, you could lose your
entire investment.
As a result of the start-up nature of our business we expect to sustain
substantial operating expenses without generating significant revenues.
Accordingly, a failure to meet our revenue projections will have an immediate
and negative impact on profitability. In addition, we cannot be certain that our
evolving business model will be successful, particularly in light of our limited
operating history. There can be no assurance that we will be able to
successfully remain in the medical image management market as currently planned.
Our survival in the medical image management industry will depend upon our
ability to:
- successfully develop and enhance our current product
- to develop or obtain from third-party suppliers new
products which keep pace with technological developments,
- respond to evolving end-user requirements, and
- achieve market acceptance.
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If we are unable to anticipate or respond adequately to technological
developments or end-user requirements or any delays in product development,
acquisition or introduction, we will be unable to become or remain profitable
which could cause our stock price to decline and cause you to lose your
investment.
We have a history of losses and an accumulated deficit and we expect future
losses. Image Technology is a developmental stage company which has generated no
revenues from product sales. We do not expect to generate revenue from product
sales until at least the fourth fiscal quarter of 2001. Image Technology has
incurred losses of approximately $1,280,000 from its inception through June 30,
2001 primarily as a result of legal and accounting expenses incurred in
connection with business formation, and after January 1, 2000 research and
developmental expenses consisting principally of cash and non cash compensation
of our founders. We may not be able to generate revenue or achieve or sustain
profitability in the future. Our revenue assumptions may be inaccurate since we
have no historical data on which to rely in estimating future revenue or
expenses. We expect to lose more money as we spend additional capital to develop
our systems, market our products and establish our infrastructure and
organization to support anticipated operations. We cannot be certain whether
Image Technology will ever earn a significant amount of revenues or profit, or,
if it does, that it will be able to continue earning such revenues or profit.
Image Technology is subject to numerous environmental, health, and workplace
safety laws and regulations which might adversely affect our financial condition
or ability to carry on our business. Even though ITLPACS is approved for
marketing we will be subject to continuing regulatory review. Later discovery of
previously unknown problems with a product or manufacturer, or an increase in
the incidence of previously unknown problems may result in restrictions on the
product and the manufacturer. The restrictions could include withdrawal of the
product from the market.
We will need additional financing to fund our planned operations beyond their
current level over the next twelve months. Image Technology intends to fund its
operations by raising significant additional funds through equity or debt
financing. At present, we have no commitments for additional or alternative
financing, and there is no assurance that we will be able to obtain such
financing on satisfactory terms, if at all. Image Technology's inability to
secure additional funds from such financing within twelve to eighteen months
could adversely affect Image Technology's ability to implement its business
plan. In addition, any subsequent offering of securities would, in all
likelihood dilute existing stockholders' percentage of ownership in Image
Technology.
We face intense competition in the medical imaging market on several different
fronts. At present, PACS are produced by a number of highly competitive, small
companies specializing in image management software and equipment and a smaller
number of substantially larger medical equipment and imaging software suppliers,
each of which has captured only a relatively small share of the current market
for PACS to date. Although we believe ITLPACS offers unique features which will
distinguish it in the market, larger or more established PACS suppliers have
substantially greater resources than we do. There can be no assurance Image
Technology will be able to compete successfully against them in the market for
PACS. In addition, a number of large hospital radiology centers are presently
developing their own proprietary PACS for internal use. This trend may reduce
the market for the ITLPACS among larger institutions. It may also result in the
introduction of additional competitive products in the market to the extent that
such proprietary systems are being developed in collaboration with computer
software and hardware vendors who may be given the opportunity to commercialize
these products upon completion. ITLPACS will continue to compete with other
older film-based diagnostic imaging systems. Although PACS offer significant
advantages over such older imaging systems and the market for PACS is expected
to grow quickly, there
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can be no assurance that hospitals, HMOs and others will continue to invest in
the newer PACS technology at forecasted rates.
We may face competition from newer technologies based on different imaging
techniques. ITLPACS has been designed to work with the Windows 2000 operating
system to permit easy upgrading and avoid product obsolescence. There can be no
assurance, however, that the basic technology of all PACS, and therefore the
market for such systems, will not be superceded by an altogether new form of
imaging technology or that the hardware and operating system components of the
ITLPACS will not become obsolete in some other manner. Although we are not aware
of any new technologies currently under development which might replace PACS
technology, new technologies may be developed, or existing technologies refined,
which could render ITLPACS technologically or economically obsolete. We may not
have the funds or the ability to develop or acquire any new or improved hardware
or software which we may need in order to remain competitive.
We are solely relying on one product to generate all of our initial revenue. We
have no product or service other than ITLPACS on which we may rely for future
revenue. There can be no assurance we will develop additional products which
will be commercially viable.
We are dependent on third parties for the equipment needed to develop and run
ITLPACS. In order to complete development of the ITLPACS system, we have entered
into an agreement to lease facilities and equipment from third parties
affiliated with our chairman and chief executive officer, Dr. David Ryon for a
three year period. The termination of Dr. Ryon's personal services agreement
with one of these third parties, which Image Technology cannot control, would
automatically terminate the facility usage and equipment lease agreement. If
this occurred, we would not have access to the facilities, office space or
equipment we need. If Image Technology were unable to access the equipment, we
estimate that we would have to purchase or otherwise acquire access to
approximately $400,000 of comparable equipment in order to complete product
development. Termination of the facility usage and equipment lease agreement
would most likely prevent us from using the facilities as our principal product
demonstration site as presently intended. We have no agreement with any other
facility to serve as a product demonstration site and may not be able to obtain
one in the future. See "Business - Material Contracts" on page 30.
Failure to market our products properly could severely limit our ability to earn
revenues or profits, and in turn cause the price of our common stock to decline.
We have limited marketing experience. Image Technology intends to market ITLPACS
to hospitals, HMOs, individual radiologists and group practices. Although we
intend to add management members who have experience in marketing medical
devices, Image Technology has no experience marketing its proposed products. We
have only very limited sales, marketing and distribution capabilities at this
time. To market any of our products directly, we must develop a marketing and
sales force with technical expertise and supporting product distribution
capability. Significant additional expenditures will be required for us to
develop a sales force or penetrate the markets for our products, assuming we are
able to make those expenditures. We may not be able to obtain enough capital to
establish an adequate in-house marketing and distribution capability in which
case we would have to establish marketing arrangements with third parties. We
will not be able to operate profitably if either:
- we fail to establish in-house sales and distribution
capabilities, or
- we are unable to enter into marketing arrangements with
third parties on favorable terms, or
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- we experience a delay in developing such capabilities or
arrangements.
Even if we enter into marketing distribution or other arrangements with third
parties, our business may be adversely affected if any such marketing partner
does not market a product successfully.
The impact of federal restrictions on reimbursement for the use of PACS may
adversely influence the medical device purchase decisions made by hospitals and
other potential customers. Federal regulations implemented by the Health Care
Financing Administration, or HCFA currently permit only limited reimbursement
for telepathology and teleradiology services under the Medicare program.
Medicare payments for emergency room x-rays are limited to the first physician
who interprets them. HCFA has refused to pay for other telemedicine
consultations because the health care provider and the patient are not, by
definition, face-to-face. Consequently, the use of ITLPACS to distribute
diagnostic images to remote locations for consultations or second reading by
specialists may not be reimbursable. A significant portion of the potential
purchasers of the ITLPACS are hospitals and other health care organizations
which provide services to Medicare recipients. They may decide not to purchase
ITLPACS if they are unable to be reimbursed for the use of the teleradiology
services which PACS support. Many private group practices which might otherwise
consider purchasing ITLPACS may face similar financial disincentives to invest
in newer PACS technology. Any such adverse impact on our intended market would
severely limit our ability to earn revenues or profits, and in turn cause the
price of our common stock to decline.
Our ability to compete successfully may depend on our ability to protect our
intellectual property and proprietary technology. Image Technology's ability to
market a competitive PACS product depends in part on its success in protecting
its proprietary interests in ITLPACS unique software so that competitors cannot
duplicate its innovations and design. We have secured from our three founders an
assignment of all their rights to and interest in the ITLPACS software developed
prior to Image Technology's incorporation. By licensing rather than selling our
software we hope to retain maximum trade secret protection for our product
technology. However, there can be no assurance that all elements of Image
Technology's software are sufficiently original to qualify for copyright
protection or that Image Technology will be successful in preventing the
unauthorized disclosure of its trade secrets. Image Technology currently plans
to pursue patent protection to the limited extent that patent protection is
available for any aspect of Image Technology's product. Others may independently
develop or acquire substantially equivalent proprietary technology or we may not
be able to protect our non-patented technology and trade secrets from
misappropriation. Such development, acquisition or misappropriation by others of
technology similar to ours could increase competition in our industry, subject
us to pricing pressure, and cause our revenues to decline significantly. This,
in turn, would cause the price of our common stock to decline.
The continued services and leadership of our three founders are critical to our
success and any loss of key personnel could adversely affect our business. We
are heavily dependent on the personal efforts and abilities of David Ryon, M.D.,
our president, chief executive officer, and chairman of the board of directors;
Carlton T. Phelps, M.D., our vice president - finance and administration, chief
financial officer, secretary and treasurer; and Mr. Lewis M. Edwards, our vice
president for research and development and chief technical officer. Each is a
founder, director and principal stockholder of Image Technology and a co-
developer of the ITLPACS product. If we were to lose the services of one or more
of them before a qualified replacement could be obtained, our business,
financial condition or results of operations could suffer significantly.
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We must attract and retain highly qualified marketing, scientific, technical,
and business personnel experienced in the medical device industry to complete
product development and implement the marketing and business strategy we have
planned. The success of our business depends in part upon our ability to
attract, motivate and retain sales marketing staff who possess the skills,
knowledge and attributes necessary to service the needs of our clients and grow
the business. Image Technology competes with other companies who are able to
attract and retain staff as a result of reputation, performance based
compensation systems and infrastructure support. Because we have been in
operation for only a short time, we have not had sufficient time to establish
our reputation in the industry. Also, our inability to offer substantial
compensation packages and/or comparable infrastructure support for our staff
could impair our ability to attract and retain staff. There is no guarantee,
particularly in the current competitive market for such skilled employees, that
we will be able to secure or retain the personnel necessary to implement our
business plan. Any such inability to attract and retain staff could have a
material adverse effect on our business, results of operations and financial
condition, and in turn, the value of your investment.
Our software products may contain undetected defects. Software developed by us
or developed by others and incorporated by us into our products may contain
significant undetected errors when first released or as new versions are
released. Although we test our software products before commercial release, we
cannot be certain that errors in the products will not be found after customers
begin to use the software. Any defects in ITLPACS, or any future products, may
result in significant decreases in revenue or increases in expenses because of:
- adverse publicity,
- reduced orders,
- product returns,
- uncollectible accounts receivable,
- delays in collecting accounts receivable, and
- additional and unexpected costs of further product
development to correct the defects.
We face exposure to product liability claims if the use of our products is
alleged to have caused harm to a patient. The claims might be made directly by
patients or by medical organizations and medical personnel who face liability
for care rendered in conjunction with the use of Image Technology's products.
There can be no assurance that such claims, if made, would not result in
monetary liability for damages or a recall of Image Technology's products or a
change in the diagnostic purposes for which they may be used. Prior to product
launch, Image Technology intends to obtain product liability insurance coverage
for claims arising from the use of its ITLPACS if it is available on reasonable
terms. There can be no assurance that this coverage, if obtained, will be
adequate to cover claims. Product liability insurance is becoming increasingly
expensive. We might not be able to maintain such insurance, obtain additional
insurance, or obtain insurance at a reasonable cost or in sufficient amounts to
protect us against losses due to liabilities which individually or in the
aggregate could have a material adverse effect on our business or financial
prospects.
Image Technology's executives, Dr. Ryon, Dr. Phelps and Mr. Edwards, own and
control an aggregate of 7,288,750 shares of our outstanding common stock
representing approximately 66% of our outstanding common stock and 70% of our
outstanding voting stock which includes 1,500,000 shares of preferred stock
owned by them. All shares owned by the executives are also subject to certain
restrictions on transfer, rights of first refusal and repurchase rights
contained in a stockholder's agreement which is intended to preserve ownership
of these shares by the founders of Image Technology. This concentration of stock
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ownership in a few persons together with the existence of the restrictions on
transfers makes it unlikely that any other holder of voting Common Stock will be
able to affect the management or direction of Image Technology.
Delaware law and our charter documents contain anti-takeover and indemnification
provisions which may adversely affect the market price of our stock. Section 203
of the Delaware General Corporation Laws and our charter and by-laws contain
provisions which might enable our management to resist a takeover of our
company. These provisions might discourage, delay or prevent a change in the
control of our company or a change in our management. These provisions could
also discourage proxy contests and make it more difficult for you and other
stockholders to elect directors and take other corporate actions. The existence
of these provisions could limit the price which investors might be willing to
pay in the future for shares of our common stock.
Our directors have the authority to designate one or more classes of preferred
stock having rights greater than our common stock. Our Certificate of
Incorporation authorizes us to issue up to 5,000,000 shares of preferred stock
in one or more classes or series. Immediately prior to this offering, we will
have outstanding 1,500,000 shares of preferred stock, all of which is owned by
our three founders. Our board of directors has the authority, without further
action by the holders of the outstanding common stock, to:
- issue additional preferred stock from time to time in one or
more classes or series,
- modify or fix the number of shares constituting any class or
series as well as their stated value, if different from the
par value, and
- modify or fix the terms of any such series or class,
including:
- dividend rates,
- conversion or exchange rights,
- voting rights and terms of redemption, including
sinking fund provisions,
- the redemption price and the liquidation preference
of such class or series.
We have no present plans to issue any additional preferred stock or
other series or class of preferred stock. The designations, rights and
preferences of any additional preferred stock which may be issued would be set
forth in a certificate of designation which would be filed with the Secretary of
State of the State of Delaware.
Broad market fluctuations may have a material adverse effect on the market price
of our common stock The following factors may cause the market price of our
common stock to fluctuate significantly:
- market acceptance of Image Technology's product,
- the timing of purchase orders,
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- announcements of technological innovations,
- the attainment of or failure to attain milestones in the
commercialization of our technology
- the introduction of new products,
- establishment of new collaborative arrangements by Image
Technology, its competitors or other third parties,
- claims of patent infringement or other material
litigation
- government regulations,
- investor perception of Image Technology,
- fluctuations in Image Technology's operating results, and
- general market conditions in the industry.
In addition, the stock market in general has recently experienced extreme price
and volume fluctuations, which have particularly affected the market prices of
technology companies for reasons frequently unrelated to the operating
performance of such companies. Furthermore, if selling stockholders in this
offering sell substantial amounts of common stock in the public market, the
market price of our common stock could fall.
A failure to pay dividends means you will receive no income on your
investment and such lack of dividends could have an adverse impact on the price
of our stock. We have never declared or paid any cash dividends on our common
stock, and we don't expect to pay dividends anytime soon. We expect to retain
our earnings, if any, and use them to finance the growth and development of our
business.
The so called "Penny Stock Rule" could make it cumbersome for brokers
and dealers to trade in the common stock, making the market for the common stock
less liquid which could cause the price of our stock to decline. Trading in our
securities will initially be conducted on the OTC Bulletin Board and/or the
"pink sheets." As long as the common stock is not quoted on Nasdaq or at any
time that we have less than $2,000,000 in net tangible assets, trading in the
common stock is covered by `Rule 15g-9 under the Securities Exchange Act of 1934
for non-Nasdaq and non-exchange listed securities. Under that rule,
broker-dealers who recommend covered securities to persons other than
established customers and accredited investors must make a special written
suitability determination for the purchaser and receive the purchaser's written
agreement to a transaction prior to sale. Securities are exempt from this rule
if the market price is at least $5.00 per share.
The SEC has adopted regulations which generally define a penny stock
to be any equity security which has a market price of less than $5.00 per share,
subject to certain exemptions. Such exemptions include an equity security listed
on Nasdaq and an equity security issued by an issuer which has (i) net tangible
assets of at least $2,000,000, if such issuer has been in continuous operation
for three (3) years; (ii) net tangible assets of at least $5,000,000, if such
issuer has been in continuous operation for less than
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three (3) years; or (iii) average revenue of at least $6,000,000 for the
proceeding three (3) years. Unless such an exemption is available, the
regulations require the delivery of a disclosure schedule explaining the penny
stock market and the risks associated therewith prior to any transaction
involving a penny stock. If our common stock becomes subject to the regulations
on penny stocks, that factor could have a severe adverse effect on the market
liquidity for the common stock due to these limitations on the ability of
broker-dealers to sell the common stock in the public market which could cause
the price of our stock to decline.
Forward Looking Statements. This prospectus and the information
incorporated into it by reference contains various "forward-looking statements"
within the meaning of federal and state securities laws, including those
identified or predicated by the words "believes," "anticipates," "expects,"
"plan" or similar expressions. Such statements are subject to a number of
uncertainties which could cause the actual results to differ materially from
those projected. Such factors include, but are not limited to, those described
under "Risk Factors." Given these uncertainties, prospective purchasers are
cautioned not to place undue reliance upon such statements.
DIVIDEND POLICY
We have never paid cash dividends and do not intend to pay any cash
dividends with respect to our common stock in the foreseeable future. We intend
to retain any earnings for use in the operation of our business. Our board of
directors will determine dividend policy in the future based upon, among other
things, our results of operations, financial condition, contractual restrictions
and other factors deemed relevant at the time. We intend to retain appropriate
levels of our earnings, if any, to support our business activities.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
Overview
The following is a discussion of certain factors affecting Image Technology's
results of operations, liquidity and capital resources. You should read the
following discussion and analysis in conjunction with Image Technology's audited
and unaudited financial statements and related notes which are included
elsewhere in this prospectus.
Image Technology 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.
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RESULTS OF OPERATIONS FOR YEAR ENDED DECEMBER 31, 2000 COMPARED TO
THE YEAR ENDED DECEMBER 31, 1999
As of December 31, 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 fourth quarter of 2001.
RESEARCH AND DEVELOPMENT EXPENSES:
During the year ended December 31, 2000, the Company incurred research
and development expenses of $633,798. These expenses were primarily compensation
to our three founders under their employment contracts. The employment
agreements require an annual compensation to our founders which aggregates
$450,000. The founders elected to defer approximately $298,000 of this amount.
In addition, research and development expenses includes $150,000 of amortization
of unearned compensation relative to the issuance of preferred stock to the
founders.
GENERAL AND ADMINISTRATION EXPENSES:
During the year ended December 31, 2000, the Company incurred general
and administrative expenses of $211,797 as compared to $733 in 1999. The
increase was primarily attributable to professional fees, of which $75,000 was
associated with the issuance of common stock, a non-cash charge, and a general
increase in the Company's infrastructure.
NET LOSS
As a result of the aforementioned, the Company incurred a loss of
approximately $846,000 ($.08 per share) for the year ended December 31, 2000, as
compared to $1,000 (less than $.01 per share) for the year ended December 31,
1999. The loss per share was based on the basic weighted average shares
outstanding of 10,370,047 and 7,288,750 for the years ended December 31, 2000
and 1999 respectively.
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2001 COMPARED TO THE SIX
MONTHS ENDED JUNE 30, 2000
REVENUES:
As of June 30, 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 before the end of
the fourth quarter of 2001.
RESEARCH AND DEVELOPMENT EXPENSES:
During the six months ended June 30, 2001, the Company incurred
research and development expenses of $319,908 as compared to $300,000 in the
comparable prior periods. These expenses consisted primarily of compensation to
the Company's three founders under their employment contracts. In addition,
$75,000 of these expenses in the six month period ending June 30, 2001 and 2000,
were attributable to compensation associated with the issuance of the shares of
preferred stock to the founders, a non-cash charge.
GENERAL AND ADMINISTRATIVE EXPENSES:
During the Six months ended June 30, 2001, General and Administrative
Expenses was approximately $94,000 as compared to $97,000 during the six months
ended June 30, 2000. Although the General and Administrative expenses are
comparable for the periods, the Company's spending has increased while it is
building its infrastructure. During the first quarter of 2000, the Company
incurred a $75,000 charge for legal services, which was associated with the
issuance of common stock for services, a non-cash charge.
-13-
NET LOSS:
As a result of the aforementioned, the Company incurred a loss of
approximately $414,000 ($.03 per share) for the six months ended June 30, 2001,
as compared to approximately $397,000 ($.04 per share) for the six months ended
June 30, 2000. The loss was based on the basic weighted average shares
outstanding of 12,450,823 for the six months ended June 30, 2001, respectively,
as compared to 9,522,816 for the comparable prior period.
LIQUIDITY AND CAPITAL RESOURCES:
To date, the Company has funded its accumulated deficit of approximately
$1,280,000, of which $300,000 was non-cash charges, by approximately $1,100,000
of net proceeds from the private placement and public sale of units of common
stock and warrants. In addition, the principal stockholders have deferred
receiving approximately $340,000 of compensation owing to them under their
employment contracts.
As of June 30, 2001, the Company has cash and cash equivalents of approximately
$467,000 and working capital of approximately $113,000.
DESCRIPTION OF BUSINESS
Image Technology Laboratories is a software development company which
has entered the medical image management segment of the healthcare information
systems market. We were incorporated in Delaware on December 5, 1997 and
commenced operations on January 1, 1998. Image Technology is developing picture
archiving and communications software known as PACS for use in the management of
medical diagnostic images by hospitals. PACS input and store diagnostic images
in digital format from original imaging sources such as:
- computerized tomography, or CT scans,
- magnetic resonance imaging, or MRIs,
- ultrasound, nuclear imaging,
- and digital fluoroscopy.
Dr. Ryon initially conceived Image Technology's picture archiving and
communications , which we call ITLPACS, in 1995 for the purpose of
electronically integrating all the diagnostic images and imaging modalities used
at the Kingston Diagnostic Center in Kingston, New York. His goal was to
implement a PACS system at the Center and then to create a wide area network to
provide over-reading services in the five hospital locations in the region. When
he discovered that no commercial vendor at the time had a product which could
provide a solution which met all of the Center's needs, Dr. Ryon assembled a
team to design a better PACS system. Dr. Ryon joined forces with Lewis Edwards,
an expert in networking and image management, and Carlton Phelps, M.D., a
radiologist with several years experience implementing commercial PACS. By late
1997, after more than a year of intensive research, the development team had
completed the specifications for the prototype ITLPACS system and had assembled
the hardware and software needed to develop the prototype at the Center. Drs.
Ryon, Phelps, and Mr. Edwards decided to form a company to commercialize their
novel PACS design based on market research which indicated a growing demand for
PACS in general and an unmet need for a PACS such as the prototype the founders
had designed. Image Technology is installing a beta-version of the ITLPACS at
the Center. Image Technology plans to initiate marketing the ITLPACS to
hospitals beginning in the Northeast United States in the fiscal fourth quarter
of 2001. The ITLPACS will be manufactured, installed
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and serviced by Image Technology. We estimate that the basic product development
has been completed. The specification and system design are finished leaving
approximately 95% of the actual hard coding and the bench testing yet to be
performed, which represents less than 5% of overall product development.
Products
Image Technology's lead product is ITLPACS, a unique and proprietary
version of a PACS software system. The ITLPACS features a unique and proprietary
modular architecture which permits the system to be readily scaled and easily
upgraded. We believe that this will allow us to provide products tailored to the
size of our customers and to keep our customers at the forefront of future
technological advances by enabling us to easily update existing systems. Other
special features of the ITLPACS include:
- automation of the total work flow,
- integration of patient data with digital images,
- a unique, radiologist designed user interface,
- quality review programs which analyze productivity and diagnostic
accuracy of individual radiologists or entire radiology centers, and
- use of Windows 2000 as the network operating system.
Image Technology has also developed a proprietary workstation which
permits the simultaneous viewing of multiple diagnostic images together with
relevant patient data for the purpose of replicating the viewing technique used
by radiologists using traditional view boxes for the display of multiple images.
Research has shown that simultaneous image display improves the speed and
accuracy of diagnostic interpretation. This workstation consists of software
integrated into ITLPACS which may be used with any terminal hardware.
ITLPACS can be used to create, store, reproduce and transmit digitized
images generated by any of the currently utilized diagnostic imaging modalities
including x-rays, ultrasound, nuclear medicine, digital fluoroscopy, CT scans,
and MRIs. Using ITLPACS, radiologists can read and interpret the digitized
versions of diagnostic images from any terminal or computer to which they can be
sent. This facilitates time-critical transfer of patient information between
hospitals departments, such as from radiology to emergency room, as well as
rapid off-site consultations by specialists at remote locations or convenient
home viewing by individual radiologists. Hospitals and other health
organizations can use ITLPACS permanently to replace more costly and cumbersome
image storage mediums such as film. ITLPACS has been designed to interface with
hospital and radiology information systems so that patient data can be
integrated with diagnostic images for improved record retrieval and increased
accuracy of image interpretation.
ITLPACS represents an alternative configuration model which has been
designed to provide a unique solution to many of the disadvantages of both
hyperPACS and miniPACS configurations of other companies. The architecture used
in ITLPACS is built on a foundation of innovative intelligent algorithms. These
algorithms reduce the network bandwidth and on-line storage requirements of the
Image Technology system; the two most important factors in the cost associated
with building the system. Consequently, we
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hope that through ITLPACS we can acquire a significant share of the U.S. market
for PACS. By making full use of the networking database management
infrastructure of Windows 2000, Image Technology has leveraged recent advances
in operating system design, software development, and networking tools to
produce a product which offers greater functional capability at lower costs
through scalable system architecture. Its truly modular architecture permits
capability to be distributed incrementally, so a client can start with one piece
of hardware which operates as a server, viewer and capture station, then expand
the system by distributing those capabilities among multiple PC's. Hardware and
software can be sized exactly to client needs. This enables Image Technology to
offer the lowest possible entry point purchase price for a PACS system. In
addition, ITLPACS offers capabilities not found on even the most expensive PACS,
including a unique graphical interface.
Business Strategy
We hope to complete initial product development of ITLPACS by the
fiscal fourth quarter of 2001 in order to begin northeast marketing. Our goal is
to become revenue producing at the earliest opportunity. Product sales will be
made in the form of:
- software licenses agreements,
- installation service agreements,
- continuing services and support agreement
- and as an Application Service Provider (ASP).
For the next two years, Image Technology expects to remain focused on
developing additional capabilities and enhancing ITLPACS, maximizing sales of
this product in the United States, and providing continuing customer service and
product upgrades.
Markets and Marketing Plan
February 1998 market research by Frost & Sullivan shows that the market
for PACS is growing rapidly and that the worldwide sales are increasing from 30%
to 155% per year. Frost & Sullivan estimates put the worldwide market at $1.1
billion annually by 2001. According to Frost & Sullivan data, the United States
presently accounts for 60% of such sales. They further estimate that PACS have
been installed in less than 12% of radiology centers in the U.S. although that
number is expected to grow to between 28% and 40% by 2002.
Image Technology plans to launch its ITLPACS in the northeastern United
States where the reputations of its founders and the product demonstration site
at the Kingston Diagnostic Center are expected to enhance interests in the
product and generate sales leads. Image Technology plans to market a fourth
generation medical information management system which we believe is more open,
usable and scalable than any currently available product. We plan to market
ITLPACS through an in-house sales force supported by product advertising and
promotion at industry trade shows. We will offer the product at a price point
which is well within the reach of even the smallest hospital or imaging
facility. We believe that we can offer systems with superior price/performance
characteristics because of their unique, proprietary architecture. Assuming
profitable regional sales, we intend to expand our sales force to market ITLPACS
throughout the United States. We plan to distribute our PACS products via three
channels:
- relationships with original equipment manufacturers,
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- partnerships, and
- direct distribution through our sales representatives
Relationships with Original Equipment Manufacturers: There are several
large multi-national companies such as General Electric and IBM who have
committed to entering the PACS market but have failed to either develop or
acquire the technology needed to gain market share. We plan to pursue
relationships with a large company whose in-house marketing, sales and support
resources can be leveraged to propel Image Technology's products into national
and international markets.
Partnerships: We have identified several companies whose interests are
complementary with our goals. Image Technology will pursue mutually advantageous
partnerships with firms which can provide access to markets, technology or
service and support.
Direct Distribution: We will maintain an in-house sales and marketing staff to
provide direct sales locally and nationally. They will advertise the product
through trade shows, print advertisements and through our site on the Web. Image
Technology will sell primarily to two target buyer groups; those who already
have a PACS system in place and want a cost effective way of growing their
system and small hospitals and imaging centers who want to start small and enter
the PACS arena gradually.
Once we have secured a significant share of the PACS market, we intend
to apply the same tools to capture other vertical markets. We intend to sustain
growth through constant innovation.
Image Technology will sell to customers a license to use the ITLPACS
software along with third party hardware preloaded with our proprietary
software, as a package, in order to eliminate the possibility of
incompatibilities. Image Technology eventually plans to sell third-party
hardware components, at a profit, to customers who wish to purchase system
hardware from Image Technology in conjunction with their purchase of an ITLPACS.
However, we, have no plan to institute hardware-only sales in
conjunction with the ITLPACS product launch and do not believe that supplying
the hardware needs of our software customers is necessary to the competitive
success of ITLPACS.
An alternative approach to marketing and sales will be to provide the
system to the customer as an Application Service Provider. Under this type of
arrangement, the customer would be charged a per use fee to view and archive
image studies. The hardware would essentially be provided and owned by ITL. This
type of contract would immediately provide recurring revenues. Combinations of
both the ASP model and the capital equipment model may be employed, depending on
the customer requirements.
Competition and Competitive Advantage
Image Technology will compete with a variety of companies in the United
States and abroad which are marketing or developing PACS for the medical
community. A number of highly competitive, smaller companies specialize in image
management software and equipment and a smaller number of larger medical and
computer equipment vendors have added PACS to their product line. To date no
single company has captured a predominant share of the current market for PACS.
In addition, a number of large hospital radiology centers are presently
developing their own PACS for internal use. This trend may reduce the market for
the ITLPACS among larger institutions. It may also result in the introduction of
-17-
additional competitive products in the market to the extent that such
proprietary systems are being developed in collaboration with computer software
and hardware vendors who may be given the opportunity to commercialize such
products upon completion. Image Technology, together with all other PACS
manufacturers, will also continue to compete for sales to some extent with
producers of older diagnostic imaging technologies such as film-based x-rays,
which remain the predominant medical imaging modalities.
Currently available PACS systems can be divided into three basic
configurations:
- MiniPACS, which are small, modular systems comprising image
viewstations, image capture stations and occasionally one or more small
central servers.
- HyperPACS that cluster capture and view station around a large central
enterprise server.
- Web-based PACS.
- MiniPACS systems, such as Line Imaging, Brit Systems, E-med,
Sectra-Imtec AB and DR systems products, bundle some database management
features into their viewstations, allowing them to hold images and
intercommunicate without a large central server. As a result, an
inexpensive entry-level solution can be assembled costing between
$100,000-$500,000, and the system can be "grown" by aggregating
viewstations and miniservers into a loose network. The communication is
inherently point-to-point, however, and the systems lack features of a
true client- server database management system such as protection of
database integrity through record locking. These systems are also
inherently more expensive to expand, since each "node" that is added
must support more functionality and thus the hardware for each node is
more expensive than it would be if it were supported by a large central
database server. These networks also lack the advanced workflow
management capabilities of hyper-PACS.
By contrast, vendors of hyperPACS systems, including Data General, GE
Medical Systems, Agfa, Kodak, Siemens, Rogan, and MarkCare Systems, build their
PACS systems around a large central enterprise server. These servers offer
superior data protection, internet services, and increased up time through
redundancy and fail- over protection. The entry level cost, however, is much
higher than for miniPACS; typically $800,000 - $2 million. While the view and
capture stations sold by these vendors support a variety of hardware/operating
system combinations, the servers are invariably UNIX based, requiring an
in-house systems administrator earning $60,000 - $80,000 annually to keep them
running. Finally, since these servers are "off-the shelf" enterprise servers,
not designed specifically for PACS, many of the services they provide, such as
automated work flow management through image routing and pre-fetching, must be
"hard coded" by software engineers, making changes expensive and time-
consuming.
In the last few years, Web-based PACS have emerged and are growing
steadily in popularity. Several companies offer PACS based on a central image
server that can be accessed through intranet or internet based viewers,
including Fuji, Eastman Kodak, Stentor, and Emageon. In addition, several
mini-PACS and hyper-PACS vendors also offer add-on web-based image distribution.
-18-
The primary advantage of web-based image management is scalability.
It is easy and inexpensive to offer image access via web browser to referring
physicians and on-call radiologists. The primary disadvantage is that most
web-based technologies are of the "pull" type, i.e. the user must request an
image before it can be sent to the client PC. Given the large size of diagnostic
images and the wide range of user web-access bandwidth, the response of a web
based system may be slower than a traditional mini or hyper-PACS which can
"push" the images onto the client machine BEFORE the user requests it - a
technique called "pre-fetching".
We believe that most available PACS systems have significant drawbacks
such as:
- poor user interfaces,
- limited capabilities,
- lack of scalability, and
- prohibitive entry point purchase prices.
We believe that such drawbacks account in part for the fact that none
of our competitors have been able to capture more than 30% of the market in
recent years.
Protection of Proprietary Technology
Our ability to market a competitive PACS product depends in part on our
success in protecting our proprietary interest in the ITLPACS software so that
competitors cannot duplicate its innovative design. The principal forms of
protection available for software such as ITLPACS are copyright laws and common
law trade secret protection. Image Technology has secured from its founders an
assignment of all their rights and titles to the ITLPACS software developed
prior to Image Technology's incorporation and therefore, believes it owns the
full rights to copyright the ITLPACS software. In addition, each founder is
employed under an agreement containing continuing obligations of
confidentiality, non-disclosure, assignment of work- product and
right-to-inventions as well as obligations of non- competition which continue
for a period of two years from termination of his employment. Image Technology
plans to require substantially similar obligations from all key employees hired
in the future. By licensing rather than selling our software, we expect to
retain maximum trade secret protection for our product technology. However,
there can be no assurance that all elements of our software are sufficiently
original to qualify for copyright protection or that we will be successful in
preventing the unauthorized disclosure of our trade secrets. As a result, we may
face competition from sales of products which are substantially similar to our
own from which we will not benefit or we may not be entirely able to prevent
such sales even though we may have the right to sue a person who makes
unauthorized disclosure of our trade secrets.
We plan to pursue patent protection to the limited extent that patent
protection is available and advisable for any element of our products. Patent
protection may be available for certain aspects of our terminal interface
technology and for certain limited components of our software, including certain
proprietary algorithms developed for use in ITLPACS. We have not yet retained
any intellectual property counsel or filed any application for the protection of
our intellectual property.
-19-
Product Approval Process
We registered with the FDA as a medical device manufacturer. Our
software products have been classified as exempt from the 510-K approval process
by the FDA. ITLPACS is immediately available for sale without restriction.
Although Image Technology is aware that there is an international
market for products such as ITLPACS, we have no present plans to market ITLPACS
in other countries, largely due to limited resources. However, should we decide
to market ITLPACS in other countries, we would have to comply with the laws of,
and meet the applicable regulatory procedures and standards in each jurisdiction
in which we sought to market our products. Approval in one jurisdiction does not
assure approval in another as the various federal, state, and local regulatory
authorities are independent of each other.
Image Technology and its employees have limited experience in filing
and pursuing the applications necessary to gain regulatory approvals. Regulatory
authorities have substantial discretion to approve or deny our applications to
market medical devices such as ITLPACS. In addition, the regulatory bodies may
change their standards or other regulations for approving new medical devices,
which may result in additional delays or prevent approval. Image Technology
currently has no product approved for marketing in the United States or
elsewhere.
A medical device and its manufacturer are subject to continuing
regulatory review even after a device is approved for marketing.
Later discovery of previously unknown problems with a product or
manufacturer, or an increase in the incidence of previously known problems, may
result in restrictions on the product and/or manufacturer. The restrictions
could include withdrawal of the product from the market.
Manufacturing
We do not expect to have any manufacturing operations for hardware or
software. We expect to be able to produce sufficient copies of ITLPACS software
for licenses using the software duplication capabilities of our beta site
equipment. In the unlikely event that demand for copies of ITLPACS exceeds our
capacity to produce them, we believe that we could quickly and inexpensively
obtain copies from a computer service bureau in our area. Any hardware we sell
will be purchased fully assembled from the original equipment manufacturer. We
intend to contract with third parties for any required customization of hardware
supplied to our customers.
Insurance
Prior to product launch, we intend to obtain product liability
insurance coverage for claims arising from the use of ITLPACS if this is
available on reasonable terms. We risk exposure to product liability claims if
the use of our products is alleged to have caused harm to a patient. The claims
might be made directly by patients or by medical organizations and medical
personnel who face liability for care rendered in conjunction with the use of
our products. There can be no assurance that the coverage obtained will be
adequate to cover claims. Product liability insurance is becoming increasingly
expensive. We may have problems:
- maintaining such insurance,
-20-
- obtaining additional insurance,
- obtaining additional insurance at a reasonable cost, or
- obtaining additional insurance in sufficient amounts to protect
against losses which individually or in the aggregate could have a
material adverse effect on our business.
Under the terms of our executive employment agreements we are obligated
to maintain term life insurance for the benefit of Drs. Ryon, and Phelps and Mr.
Edwards each in the amount of $300,000, if this can be obtained on commercially
reasonable terms.
Material Contracts
In order to complete development of the ITLPACS while minimizing
capital outlays, we have leased access to a sophisticated state-of- the-art
computer hardware system from Kingston Diagnostic Radiology, P.C. We have access
to this system, which is physically located in the Kingston Diagnostic Center
under the terms of a facility usage agreement with Rockland Radiology Group,
P.C., or Rockland, a privately-owned radiology practice which currently operates
Kingston Diagnostic Center. This agreement gives us the right to use
approximately 450 square feet of office space in the Center for access to
Kingston's computer system and other purposes during normal business hours for
so long as the agreement remains in effect. The owners of the Center have agreed
to permit Image Technology to use the Center as a beta test-site and product
demonstration site. We believe our need for office space will remain modest,
even when we are fully staffed for 2001. Therefore we believe that we could
replace our existing space in the Center quickly and inexpensively with no
material impact on our business in the unlikely event of early termination of
the agreement. The agreement has been approved by all the disinterested
directors of Image Technology.
Through Dr. Ryon, Image Technology has access to Kingston's
state-of-the art computer system in return for a license to use the ITLPACS
software in Kingston's practice. If Image Technology were unable to access
Kingston's equipment, Image Technology estimates that it would have to purchase
or otherwise acquire access to approximately $400,000 of comparable equipment in
order to complete product development.
Employees
We presently have five employees who essentially provide 100% of their
professional time to the company.
Facilities
Image Technology's principal executive office currently occupies
approximately 450 square feet of leased space located at 167 Schwenk Drive,
Kingston, NY 12401. Image Technology's telephone number is (845) 338-3366 and
its facsimile number is (845)338-8880.
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Image Technology believes that its current facilities will meet Image
Technology's office needs for the foreseeable future. Suitable facilities will
be available, if needed, to accommodate Image Technology's future operations at
reasonable commercial rates.
Legal Proceedings
We are aware of no legal proceedings against Image Technology.
MANAGEMENT
Executive Officers and Directors
Our executive officers and directors and their ages as of June 30, 2001 are
as follows:
NAME AGE TITLE
David Ryon 57 Director and Chairman of the Board of
Directors, President and Chief Executive
Officer
Carlton T. Phelps 47 Director, Vice President of Finance and
Administration, Chief Financial Officer,
Secretary and Treasurer
Lewis M. Edwards 46 Director, Vice President of Research and
Development, Chief Technical Officer
All directors of Image Technology hold office until the next annual meeting
of shareholders or until their successors are elected and qualified. At present,
Image Technology's Bylaws provide for not less than one director nor more than
fifteen. Currently, there are three directors of Image Technology. The Bylaws
permit the Board of Directors to fill any vacancy and such director may serve
until the next annual meting of shareholders or until his successor is elected
and qualified. Officers serve at the discretion of the Board of Directors. There
are no family relationships among any officers or directors of Image Technology.
DAVID RYON, MD, is a founder and principal stockholder of Image Technology
and a co-developer of ITLPACS. He was appointed to the Board of Directors and
appointed to serve as Image Technology's President and Chief Executive Officer
in December 1997. Dr. Ryon is the founder of the Kingston Diagnostic Center in
Kingston, New York. Dr. Ryon operated the Kingston Diagnostic Center as a sole
proprietor from its inception in 1992 until the sale of the business to Rockland
Radiological Group, P.C. in 1997. Dr. Ryon worked as a radiologist at the
Kingston Hospital for five years before founding the Center. Dr. Ryon graduated
as an M.D. cum laude from Albany Medical College in 1975 and served residencies
in surgery and radiology at Albany Center Hospital. Among other post-graduate
specialties, Dr. Ryon also trained as an Emergency Physician. Prior to becoming
a physician, Dr. Ryon earned a B.S. in physics with high honors and an M.S. in
engineering at the University of Rochester. He worked as an engineer at General
Electric in the medical systems division after graduation where he gained
experience in the patent process.
-22-
CARLTON T. PHELPS, M.D. is a founder and principal stockholder of Image
Technology and a co- developer of ITLPACS. He was appointed to the Board of
Directors and appointed by the Board to serve as Image Technology's
Vice-President of Finance and Administration, Chief Financial Officer,
Secretary, and Treasurer in December 1997. Dr. Phelps was Chief of Radiology at
the Kingston Hospital where he served since May 1999. He is now employed full
time by Image Technology. From 1996 to 1999 Dr. Phelps was employed by Kingston
Diagnostic Radiology, P.C. From 1995 to 1996, Dr. Phelps served as Director of
Radiology at Child's Hospital in Albany, New York. Prior to this time he served
as assistant professor and section chief of musculoskeletal and emergency
department radiology at Albany Medical College for thirteen years. Dr. Phelps
graduated with an M.D. from the University of Vermont in 1980 and received his
B.A. from Harvard University in 1976. He earned an executive MBA degree at
Rensselear Polytechnic Institute in 1999.
LEWIS M. EDWARDS is a founder and principal stockholder of Image
Technology and a co-developer of ITLPACS. He was appointed to the Board of
Directors and elected by the Board to serve as Image Technology's Vice President
of Research and Development and Chief Technical Officer in December 1997 and is
currently employed, full-time, by Image Technology. Mr. Edwards has served as a
senior technical staff member at IBM since 1993. He was an architect and lead
software designer for IBM's RS/6000 SP, a massive parallel processor until 2000.
From 1982 to 1993 he served as the head of engineering for Graphic Systems Labs,
a CAD/CAM Independent Business Unit start- up company within IBM. He is a member
of the IEEE and ACM professional societies and a charter member of the Microsoft
Developer Network. He has provided computer-consulting services to Boeing,
General Motors, Chrysler, Ford and the Federal government's FAA and ATC teams.
He holds a BSEE magna cum laude from Princeton University and an MSCE from
Syracuse University.
Limitation on Liability of Directors
As permitted by Delaware law, Image Technology's Certificate of
Incorporation includes a provision which provides that a director of Image
Technology shall not be personally liable to Image Technology or its
stockholders for monetary damages for a breach of fiduciary duty as a director,
except (i) for any breach of the director's duty of loyalty to Image Technology
or its stockholders, (ii) under Section 174 of the General Corporation Law of
the State of Delaware, which prohibits the unlawful payment of dividends or the
unlawful repurchase or redemption of stock, or (iii) for any transaction from
which the director derives an improper personal benefit. This provision is
intended to afford directors protection against and to limit their potential
liability for monetary damages resulting from suits alleging a breach of duty of
care by a director. As a consequence of this provision, stockholders of Image
Technology will be unable to
-23-
recover monetary damages against directors for action taken by them which may
constitute negligence or gross negligence in performance of their duties unless
such conduct falls within one of the foregoing exceptions . The provision,
however, does not alter the applicable standards governing a director's
fiduciary duty and does not eliminate or limit the right of Image Technology or
any stockholder to obtain an injunction or any other type of non-monetary relief
in the event of a breach of fiduciary duty. Image Technology believes this
provision will assist in securing and retaining qualified persons to serve as
directors.
EXECUTIVE COMPENSATION
Image Technology has not paid any compensation to its executive
officers from its inception through December 31, 1999.
The following table sets forth information for each of the Company's
fiscal years ended December 31, 2000, 1999, and 1998 concerning compensation of
(i) all individuals serving as the Company's Chief Executive Officer during the
fiscal year ended December 31, 2000 and (ii) each other executive officer of the
Company whose total annual salary and bonus equaled or exceeded $100,000 in the
fiscal year ended December 31, 2000:
Annual Compensation
-------------------------
Other All Other
Name and Principal Position Year Salary($) Bonus($)(2) ($)Annual Compensation($)
----------------------------- ---- ---------- ----------- --------- ------------------
David Ryon(1) 2000 $150,000 $150,000 0 (3)
Chairman, President and Chief 1999 0 0 0 0
Executive Officer 1998 0 0 0 0
Carlton Phelps(1) 2000 150,000 150,000 0 (3)
Vice President, Chief Financial 1999 0 0 0 0
Officer, Secretary, Treasurer 1998 0 0 0 0
and Director
Lewis Edwards(1) 2000 150,000 150,000 0 (3)
Vice President, Chief Technical 1999 0 0 0 0
Officer and Director 1998 0 0 0 0
(1) Messrs. Ryon, Phelps and Edwards waived their salaries from Image Technology
for the years ended December 31, 1999 and 1998. These salaries were not deemed
material during this period. During the year ended December 31, 2000, Messrs
Ryan , Phelps and Edwards deferred $136,407, $51,923 and $109,615, respectively.
(2) Messrs. Ryon, Phelps and Edwards were each issued 500,000 shares of
preferred stock in conjunction with the commencement of their employment
agreements. The preferred shares were valued at $.30 per share based on the
price of units that we were offering for sale through a private placement.
(3) See "Option Grants in Last Fiscal Year" below
-24-
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding stock
options granted to the Named Executive Officers during 2000. We have never
granted any stock appreciation rights.
INDIVIDUAL GRANTS (1)
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED IN EXERCISE
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION
NAME GRANTED 2000 (2) SHARE ($) DATE
------- ------------- ----------------- ------------ -------------
David Ryon 1,000,000 33.33% $.33 December 31, 2009
Carlton Phelps 1,000,000 33.33% $.33 December 31, 2009
Lewis Edwards 1,000,000 33.33% $.33 December 31, 2009
(1). Each option represents the right to purchase one share of common stock. The
options shown in this table were all granted under our Stock Option Plan.
(2). In the year ended December 31, 2000, we granted options to employees to
purchase an aggregate of 3,000,000 shares of common stock.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
No options were exercised by any of the Named Executive Officers during
the fiscal year ended December 31, 2000. The value of unexercised options held
by any such persons as of December 31, 2000 was as follows for each of Messrs.
Ryon, Phelps and Edwards (the only such option holders):
Total number of shares underlying unexercised options 1,000,000
Exercisable options 200,000
Unexercisable options 800,000
Value of in-the-money options $ 24,000
Compensation of Directors
Our directors were not compensated for their services in 2000. We
reimburse directors for their expenses of attending meetings of the Board of
Directors.
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Employment Agreements
On December 21, 1999, Image Technology entered into three-year
employment agreements which became effective on January 1, 2000, with each of
our three founders, David Ryon, Carlton T. Phelps and Lewis M. Edwards in an
effort to ensure Image Technology of the continued employment of each officer in
his current executive position with Image Technology.
David Ryon was engaged as President and Chief Executive Officer of
Image Technology, Carlton T. Phelps was engaged as Vice President, Chief
Financial Officer, Secretary and Treasurer and Lewis M. Edwards was engaged as
Vice President and Chief Technical Officer. Each has been signed to a three year
contract which provides them with the following:
- a minimum annual base salary of $150,000 payable in regular equal
installments in accordance with our general payroll practices.
- an annual performance bonus at the end of each calendar year as
determined in good faith by the Board based upon its annually
established goals.
- participation in all retirement plans, health and other group
insurance programs, stock option plans and other fringe benefit
plans which we may now or hereafter in the Board of Directors'
discretion make available generally to its executives or
employees.
- term life insurance in the amount of $300,000, short-term and
long-term disability insurance in the amount of not less than 60%
of base salary, unless such insurance is not available at
commercially reasonable rates.
- an automobile for business use in accordance with Image
Technology's standard policy for senior executive officers.
Stock Option Plan
In January 1998, Image Technology's stockholders ratified Image
Technology's Stock Option Plan (the "Plan") whereby options for the purchase of
up to 5,000,000 shares of Image Technology's common stock may be granted to key
personnel in the form of incentive stock options and nonstatutory stock options,
as defined under the Internal Revenue Code. Key personnel eligible for these
awards include our employees, consultants and nonemployee directors. Under the
Plan, the exercise price of all options must be at least 100% of the fair market
value of our common shares on the date of grant. The exercise price of an
incentive stock option granted to an optionee which holds more than ten percent
of the combined voting power of all classes of stock of Image Technology must be
at least 110% of the fair market value
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on the date of grant. The maximum term of any stock option granted may not
exceed ten years from the date of grant and generally vest over three years.
On January 1, 2000, we granted options under the plan to David Ryon,
Carlton T. Phelps and Lewis M. Edwards, our three 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, which are exercisable
through December 31, 2009.
No options were granted or exercised prior to January 1, 2000.
PRINCIPAL HOLDERS
Tthe table below sets forth certain information concerning the beneficial
ownership of our common stock as of the date of this prospectus, by (i) each
person known by us to be the beneficial owner of more than 5% of our common
stock, (ii) each of our named executive officers, (iii) each of our directors,
and (iv) all directors and executive officers as a group. Unless otherwise
indicated, each of the stockholders has sole voting and investment power with
respect to the shares beneficially owned.
Security Ownership of Management
Name, Title and Address Title of Class Shares Beneficially Shares Beneficially
----------------------- -------------- ------------------- -------------------
of beneficial owners Owned Prior to Offering Owned After Offering
-------------------- ----------------------- --------------------
Number Percent Number Percent
----------------------------------------------------------------------------------------------------------------------------
David Ryon, M.D. Common Stock 2,429,584 29% 2,429,584 22%
CEO, President
and Director Preferred Stock 500,000 33.33% 500,000 33.33 %
167 Schwenk Drive
Kingston, New York 12401
----------------------------------------------------------------------------------------------------------------------------
Carlton T. Phelps, M.D. Common Stock 2,429,583 22% 2,429,583 22%
CFO, Secretary, Treasurer
and Director Preferred Stock 500,000 33.33% 500,000 33.33 %
167 Schwenk Drive
Kingston, New York 12401
----------------------------------------------------------------------------------------------------------------------------
Lewis M. Edward Common Stock 2,429,583 22% 2,429,583 22%
Chief Technical Officer
and Director Preferred Stock 500,000 33.33% 500,000 33.33 %
167 Schwenk Drive
Kingston, New York 12401
----------------------------------------------------------------------------------------------------------------------------
All officers and directors Common Stock 7,288,750 66% 7,288,750 66%
as a group Preferred Stock 1,500,000 100% 1,500,000 100%
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Kingston Diagnostic Radiology, P.C., or Kingston, which is wholly owned by
Dr. Ryon, leases the use of its equipment to Image Technology on a non-exclusive
basis in exchange for a limited license to use ITLPACS at the Center. We are
party to a facility usage and equipment lease agreement with Rockland Radiology
Group, P.C., or Rockland, a privately-owned radiology facility operated by
Kingston. Mid- Rockland Imaging, the new owners of the Center have agreed to
allow the use of the Center as a
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demonstration site. Through Dr. Ryon, Image Technology has access to Kingston's
state-of-the art computer system in return for a license to use the ITLPACS
software in Kingston's practice. If Image Technology were unable to access
Kingston's equipment, Image Technology estimates that it would have to purchase
or otherwise acquire access to approximately $400,000 of comparable equipment in
order to complete product development. We believe that the terms of these
agreements are at least as favorable to us as any terms we could have obtained
from arms-length negotiations with unrelated third parties.
MARKET FOR OUR SECURITIES
Image Technology's Common Stock and Warrants currently trade on the
Over-the-Counter Bulletin Board ("OTCBB") under the symbols "IMTL," "IMTLW" and
"IMTLZ," respectively. These securities commenced trading on December 15, 2000.
As of June 30, 2001, the number of holders of record of Common Stock, Warrant
IMTLW and Warrant IMTLZ was 225, 44 and 220 respectively.
Between December 15, 2000 and June, 2001, Image Technology's Warrant
IMTLW traded consistently at $0.02 from December 15, 2000 through January 31,
2001, then rose to $0.25 on February 1, 2001 and has maintained that level
since. Warrant IMTLZ traded consistently at $0.02 from December 15, 2000 through
January 30, 2001, then rose to $0.25 on January 31, 2001 and has maintained that
level since. These prices were obtained from data supplied by Interactive Data,
a Financial Times Information Company, and do not necessarily reflect actual
transaction, retail markups, markdowns or commission.
The following table sets forth the range of the high and low closing
bid prices per share of our common stock during each of the calendar quarters
identified below. These bid prices were obtained from the OTC Bulletin Board
Quarterly Quote Summary Report received from Bloomberg Trading Market Services
and the Standard & Poor's Comstock, and do not necessarily reflect actual
transactions, retail markups, markdowns or commissions.
THE HIGH AND LOW BID SALES PRICES FOR THE EQUITY FOR EACH FULL
QUARTERLY PERIOD SINCE TRADING COMMENCED WITHIN THE TWO MOST RECENT FISCAL
YEARS AND ANY SUBSEQUENT INTERIM PERIOD FOR WHICH FINANCIAL STATEMENTS ARE
INCLUDED ARE AS FOLLOWS:
--------------------------------------------------------------------------------
Year Quarter High Bid Low Bid Year Quarter High Bid Low Bid
---- ------- -------- ------- ---- ------- -------- -------
2000 4th 0.75 0.59 2001 1st 0.90 0.30
2001 2nd 0.94 0.40
--------------------------------------------------------------------------------
We have not paid any cash dividends to date and do not anticipate or
contemplate paying dividends in the foreseeable future. It is the present
intention of management to utilize all available funds for the development of
Millennium's business.
DESCRIPTION OF SECURITIES
Our authorized capital stock consists of 50,000,000 shares of common
stock and 5,000,000 shares of preferred stock. As of June 30, 2001, there were
outstanding 11,075,612 shares of common stock and 1,500,000 shares of preferred
stock.
Common Stock
Holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of stockholders. Holders of the common
stock do not have cumulative voting rights, and therefore the holders of a
majority of the shares of common stock voting for the election of directors may
elect all of our directors standing for election. Subject to preferences which
may be applicable to the holders of any outstanding shares of preferred stock,
the holders of common stock are entitled to receive such lawful dividends as may
be declared by the Board of Directors. In the event of a liquidation,
dissolution or winding up of the affairs of Image Technology, whether voluntary
or involuntary, and subject to the rights of the holders of any outstanding
shares of preferred stock, the holders of shares of common stock shall be
entitled to receive pro rata all of our remaining assets available for
distribution to our stockholders. The common stock has no preemptive,
redemption, conversion or subscription rights. All outstanding shares of common
stock are, and the shares of common stock to be issued pursuant to this offering
will be, fully paid and non-assessable. The issuance of common stock or of
rights to purchase common stock could have the effect of making it more
difficult for a third party to acquire, or of discouraging a third party from
attempting to acquire, a majority of our outstanding voting stock.
Preferred Stock
The Board of Directors is authorized, subject to limitations prescribed by
Delaware law, to provide for the issuance of preferred stock in one or more
series, to establish from time to time the number of shares to be included in
each such series, to fix the voting powers, designations, preferences and
rights, and the restrictions of those preferences and rights, of the shares of
each such series and to increase, but not above the total number of authorized
shares of preferred stock, or decrease, but not below the number of shares of
such series then outstanding, the number of shares of any such series without
further vote or action by the stockholders.
The board is authorized to issue preferred stock with voting, conversion,
and other rights and preferences which could adversely affect the voting power
or other rights of the holders of common stock. On January 7, 2000 we issued
1,500,000 shares of preferred stock to our three founders in connection with the
commencement of their employment contracts on January 1, 2000. The preferred
shares have rights to dividends, rights with respect to liquidation and other
rights equivalent to those of holders of our common stock.
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Warrants
Each Class A $.40 Warrant entitles the holder to purchase one share of
common stock at an exercise price of $0.40 per share and each Class B $.50
Warrant entitles the holder to purchase one share of common stock at an exercise
price of $0.50 per share (collectively, the "Warrants"). Unless previously
redeemed, the Warrants are exercisable at any time commencing on the date of
this prospectus up until April 15, 2002. The Warrants are transferable
separately from the common stock. The Warrants are subject to redemption by
Image Technology at $.05 per warrant if the common stock closing bid price
exceeds $1.00 for 10 consecutive trading days ending within 15 days of the date
as of which the notice of redemption is given. Holders of the Warrants will
automatically forfeit their rights to purchase the shares of common stock
issuable under such warrants unless the warrants are exercised before the close
of business on the business day immediately prior to the date set for
redemption. All of the outstanding warrants of a class must be redeemed if any
of that class are redeemed. A notice of redemption shall be mailed to each
registered holder of Warrants by first class mail, postage prepaid, upon 30
days' notice before the date fixed for redemption. The notice of redemption
shall specify the redemption price, the date fixed for redemption, the place
where the Warrant certificates shall be delivered and the redemption price to be
paid, and that the right to exercise the Warrants shall terminate at 5:00 p.m.,
New York City time, on the business day immediately preceding the date fixed for
redemption.
The Warrants may be exercised upon surrender of the certificate(s) therefor
on or prior to the expiration or the redemption date at the offices of Image
Technology's warrant agent with the subscription form on the reverse side of the
certificate(s) completed and executed as indicated, accomplished by payment, in
the form of a certified check payable to the order of Image Technology
Laboratories, Inc., of the full exercise price for the number of Warrants being
exercised.
The Warrants contain provisions which protect the holders against dilution
by adjustment of the exercise price per share and the number of shares issuable
upon exercise upon the occurrence of certain events, including issuances of
common stock, or securities convertible, exchangeable or exercisable into common
stock, at less than market value, stock dividends, stock splits, mergers, sale
of substantially all of Image Technology's assets, and for other extraordinary
events; provided, however, that no such adjustment shall be made upon, among
other things (i) the issuance or exercise of options or other securities under
any stock option or other benefit plan offered to employee, officers or
directors of Image Technology, (ii) the sale or exercise of outstanding options
or warrants or the Warrants offered by this prospectus, or (iii) the conversion
of shares of Image Technology's preferred stock to common stock.
Image Technology is not required to issue fractional shares of common
stock, and instead will make a cash payment based upon the current market value
of such fractional shares. The holders of the Warrants will not possess any
rights as shareholders of Image Technology unless and until such warrants have
been exercised for shares of common stock.
Anti-takeover Effects of Provisions of Our Charter, Our By-laws and Delaware Law
Our charter and by-laws contain provisions which could discourage potential
takeover attempts and make more difficult the acquisition of a substantial block
of the common stock. Our charter authorizes the directors to issue, without
stockholder approval, shares of preferred stock in one or more series and to fix
the voting powers, designations, preferences and rights, and the restrictions of
those preferences and
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rights, of the shares of each such series. Our charter provides that
stockholders may act only at meetings of stockholders and not by written consent
in lieu of a stockholders' meeting. Our by-laws provide that nominations for
directors may not be made by stockholders at any annual or special meeting
thereof unless the stockholder intending to make a nomination notifies us of its
intentions a specified number of days in advance of the meeting and furnishes to
us information regarding itself and the intended nominee. Our by- laws also
provide that special meetings of our stockholders may be called only by the
president and must be called by the president or the secretary at the written
request of a majority of the directors. Our by-laws also require a stockholder
to provide to our Secretary advance notice of business to be brought by such
stockholder before any stockholder meeting as well as information regarding the
stockholder and others known to support the proposal and any material interest
they may have in the proposed business. These provisions could delay stockholder
actions which are favored by the holders of a majority of the outstanding stock
until the next stockholders' meeting. These provisions may also discourage
another person or entity from making a tender offer for our common stock,
because the person or entity, even after acquiring a majority of the outstanding
stock, could only take action at a duly called stockholders' meeting and not by
written consent.
We are subject to Section 203 of the Delaware General Corporation Law
which, subject to certain exceptions, prohibits a Delaware corporation from
engaging in any business combination with any interested stockholder for a
period of three years following the date that such stockholder became an
interested stockholder, unless;
- prior to such date, the board of directors of the corporation approved
either the business combination or the transaction which resulted in the
stockholder becoming an interested stockholder;
- upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding for purposes of determining the
number of shares outstanding those shares owned (a) by persons who are
directors and also officers and (b) by employee stock plans in which
employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer; or
- on or subsequent to such date, the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the affirmative vote of at
least two-thirds of the outstanding voting stock which is not owned by
the interested stockholder. The application of Section 203 may limit the
ability of stockholders to approve a transaction which they may deem to
be in their best interests.
Section 203 defines "business combination" to include (a) any merger or
consolidation involving the corporation and the interested stockholder; (b) any
sale, transfer, pledge or other disposition of 10% or more of the assets of the
corporation to or with the interested stockholder; (c) subject to certain
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exceptions, any transaction which results in the issuance or transfer by the
corporation of any stock of the corporation to the interested stockholder; (d)
any transaction involving the corporation which has the effect of increasing the
proportionate share of the stock of any class or series of the corporation
beneficially owned by the interested stockholder; or (e) the receipt by the
interested stockholder of the benefit of any loans, advances, guarantees,
pledges or other financial benefits provided by or through the corporation. In
general, Section 203 defines an "interested stockholder" as any entity or person
beneficially owning 15% or more of the outstanding voting stock of the
corporation and any entity or person associated with, affiliated with,
controlling or controlled by such entity or person.
Limitation of Liability and Indemnification
Our charter provides that no director shall be personally liable to us or
to any stockholder for monetary damages arising out of such director's breach of
fiduciary duty, except to the extent that the elimination or limitation of
liability is not permitted by Delaware law. The Delaware law, as currently in
effect, permits charter provisions eliminating the liability of directors for
breach of fiduciary duty, except that such provisions do not eliminate or limit
the liability of directors for (a) any breach of the director's duty of loyalty
to a corporation or its stockholders, (b) any acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law, (c)
any payment of a dividend or approval of a stock purchase which is illegal under
Section 174 of the Delaware General Corporation Law or (d) any transaction from
which the director derived an improper personal benefit. A principal effect of
this provision of our charter is to limit or eliminate the potential liability
of our directors for monetary damages arising from any breach of their duty of
care, unless the breach involves one of the four exceptions described in (a)
through (d) above.
Our charter and by-laws further provide for the indemnification of our
directors and officers to the fullest extent permitted by Section 145 of the
Delaware General Corporation Law, including circumstances in which
indemnification is otherwise discretionary. Insofar as indemnification for
liabilities arising under the Securities Act may be permitted to our directors,
officers and controlling persons pursuant to the foregoing provisions, or
otherwise, we have been advised that in the opinion of the SEC that
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the common stock is Continental Stock
Transfer & Trust Company.
The warrants and underlying shares offered by this prospectus may be
sold from time to time by selling stockholders. The selling stockholders may
sell the shares in the over-the-counter markets or otherwise, at market prices
or at negotiated prices. They may sell shares by one or a combination of the
following:
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- a block trade in which a broker or dealer so engaged will attempt to
sell the shares as agent, but may position and resell a portion of the
block as principal to facilitate the transaction;
- purchases by a broker or dealer as principal and resale by the
broker or dealer for its account pursuant to this prospectus; and
- ordinary brokerage transactions and transactions in which a broker
solicits purchasers.
In effecting sales, brokers or dealers engaged by the selling
stockholders may arrange for other brokers or dealers to participate. Brokers or
dealers will receive commissions or discounts from selling stockholders in
amounts to be negotiated prior to the sale. The selling stockholders and any
broker- dealers which participate in the distribution may be deemed to be
"underwriters" within the meaning of Section 2(11) of the Securities Act, and
any proceeds or commissions received by them, and any profits on the resale of
shares sold by broker-dealers, may be deemed to be underwriting discounts and
commissions.
If any selling stockholder notifies us that a material arrangement
has been entered into with a broker-dealer for the sale of shares through a
block trade, special offering, exchange distribution or secondary distribution
or a purchase by a broker or dealer, we will file, a prospectus supplement, if
required pursuant to the Securities Act, setting forth:
- the name of each of the participating broker-dealers,
- the number of shares involved,
- the price at which the shares were sold,
- the commissions paid or discounts or concessions allowed to the
broker-dealers, where applicable,
- a statement to the effect that the broker-dealers did not conduct
any investigation to verify the information set out or incorporated by
reference in this prospectus, and
- any other facts material to the transaction.
Image Technology will not receive any of the proceeds of shares sold by the
selling stockholders.
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SHARES ELIGIBLE FOR FUTURE SALE
Image Technology had outstanding 11,075,612 shares of common stock at
June 30, 2001. Of these shares, only 3,425,000 freely tradable without
restriction, except for restrictions imposed by certain state regulatory
authorities, or registration under the Securities Act, except that any shares
purchased by an "affiliate" of Image Technology, as defined in the rules and
regulations promulgated under the Securities Act, will be subject to the resale
limitations under Rule 144 under the Securities Act. The remaining shares of
outstanding common stock were issued and sold by Image Technology in private
transactions in reliance upon exemptions from registration under the Act. Such
shares may be sold only pursuant to an effective registration statement filed by
Image Technology or an applicable exemption, including the exemption contained
in Rule 144 promulgated under the Act.
In general, under Rule 144 as currently in effect, a shareholder,
including an affiliate of Image Technology may sell shares of common stock after
at least one year has elapsed since such shares were acquired from Image
Technology or an affiliate of Image Technology. The number of shares of common
stock which may be sold within any three-month period is limited to the greater
of: (i) one percent of the then outstanding common stock or (ii) the average
weekly trading volume in the common stock during the four calendar weeks
preceding the date on which notice of such sale was filed under Rule 144.
Certain other requirements of Rule 144 concerning availability of
public information, manner of sale and notice of sale must also be satisfied. In
addition, a shareholder who is not an affiliate of Image Technology (and who has
not been an affiliate of Image Technology for 90 days prior to the sale) and who
has beneficially owned shares acquired from Image Technology or an affiliate of
Image Technology for over two years may resell the shares of common stock
without compliance with the foregoing requirements under Rule 144.
No predictions can be made as to the effect, if any, that future
sales of shares, or the availability of shares for future sale, will have on the
market price of the common stock prevailing from time to time. Nevertheless,
sales of substantial amounts of common stock, or the perception that such sales
may occur, could have a material adverse effect on prevailing market prices.
LEGAL MATTERS
Bondy & Schloss LLP, New York, New York, has advised us with respect to
the validity of the securities offered by this prospectus. Bondy & Schloss LLP
owns 250,000 shares of common stock of the Company.
EXPERTS
The financial statements of Image Technology Laboratories, Inc. as of
December 31, 2000 and 1999 and for the years then ended and for the period from
January 1, 1998 (date of
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inception) to December 31, 2000 included in this prospectus have been audited by
J.H. Cohn LLP, independent public accountants, as stated in their report
appearing elsewhere in this prospectus, and have been so included in reliance
upon the report of such firm given upon their authority as experts in accounting
and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form SB-2 with the SEC for
our common stock offered hereby. This prospectus does not contain all of the
information set forth in the registration statement. You should refer to the
registration statement and its exhibits for additional information. Whenever we
make reference in this prospectus to any of our contracts, agreements or other
documents, the references are not necessarily complete and you should refer to
the exhibits attached to the registration statement or incorporated herein by
reference for the copies of the actual contract, agreement or other document.
Following this offering we will be required to file annual, quarterly and
special reports, proxy statements and other information with the SEC.
You can read our SEC filings, including the registration statement,
over the Internet at the SEC's Web site at HTTP://WWW.SEC.GOV. You may also read
and copy any document we file with the SEC at its public reference facilities at
Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and
Suite 1400, 500 West Madison Street, Chicago, Illinois 60661. You may also
obtain copies of the documents at prescribed rates by writing to the Public
Reference Section of the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the operation of the public reference facilities.
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