FORM 10-QSB
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2002
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER
IMAGE TECHNOLOGY LABORATORIES, INC.
(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
DELAWARE 22-53531373
------------------------------- -----------------------
(STATE OR OTHER JURISDICTION OF (IRS EMPLOYER I.D. NO.)
INCORPORATION OR ORGANIZATION)
167 SCHWENK DRIVE, KINGSTON, NEW YORK 12401
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(845) 338-3366
(ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)
CHECK WHETHER THE ISSUER: (1) FILED ALL REPORTS REQUIRED TO BE FILED BY SECTION
13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING THE
PAST 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES |X| NO |_|
APPLICABLE ONLY TO CORPORATE ISSUERS
THE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AS OF MARCH 31, 2002 WAS
11,706,212
Item 1. Financial Statements
Image Technology Laboratories, Inc.
(A Development Stage Company)
INDEX TO FINANCIAL STATEMENTS
PAGE
Condensed Balance Sheets
March 31, 2002 (Unaudited) and December 31, 2001 F-2
Condensed Statements of Operations
Three Months Ended March 31, 2002 and 2001 and Period from
January 1, 1998 (Date of Inception) to March 31, 2002 (Unaudited) F-3
Condensed Statement of Changes in Stockholders' Equity (Deficiency)
Three Months Ended March 31, 2002 and Period from January
1, 1998 (Date of Inception) to March 31, 2002 (Unaudited) F-4
Condensed Statements of Cash Flows
Three Months Ended March 31, 2002 and 2001 and Period from
January 1, 1998 (Date of Inception) to March 31, 2002 (Unaudited) F-5
Notes to Condensed Financial Statements (Unaudited) F-6/8
* * *
Image Technology Laboratories, Inc.
(A Development Stage Company)
Condensed Balance Sheets
March 31, 2002 and December 31, 2001
ASSETS
------
March December
31, 2002 31, 2001
------------ ------------
(Unaudited)
Current assets - cash and cash equivalents $ 118,798 $ 151,730
Equipment, net 40,649 42,948
----------- -----------
Totals $ 159,447 $ 194,678
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 26,332 $ 37,911
Notes payable to stockholders 5,200 5,200
----------- -----------
Total current liabilities 31,532 43,111
Accrued compensation payable to stockholders 460,926 420,541
----------- -----------
Total liabilities 492,458 463,652
----------- -----------
Commitment
Stockholders' deficiency:
Preferred stock, par value $.01 per share; 5,000,000 shares
authorized; 1,500,000 shares issued and outstanding 15,000 15,000
Common stock, par value $.01 per share; 50,000,000 shares
authorized; 11,706,212 and 11,272,712 shares issued and
outstanding 117,062 112,727
Additional paid-in capital 1,698,533 1,587,118
Unearned compensation (75,000) (150,000)
Deficit accumulated in the development stage (2,088,606) (1,833,819)
----------- -----------
Total stockholders' deficiency (333,011) (268,974)
----------- -----------
Totals $ 159,447 $ 194,678
=========== ===========
See Notes to Condensed Financial Statements.
F-2
Image Technology Laboratories, Inc.
(A Development Stage Company)
Condensed Statements of Operations
Three Months Ended March 31, 2002 and 2001
and Period From January 1, 1998
(Date of Inception) to March 31, 2002
(Unaudited)
Period
from
Three Months January
Ended March 31, 1, 1998
- --------------------------- to March
2002 2001 31, 2002
------------ ------------ ------------
Revenues - related party $ 7,300 $ -- $ 28,675
------------ ------------ ------------
Research and development expenses 178,750 151,764 1,448,242
General and administrative expenses 83,337 21,299 669,039
------------ ------------ ------------
Totals 262,087 173,063 2,117,281
------------ ------------ ------------
Net loss $ (254,787) $ (173,063) $ (2,088,606)
============ ============ ============
Basic net loss per share $ (.02) $ (.01)
============ ============
Basic weighted average shares outstanding 12,987,956 12,462,973
============ ============
See Notes to Condensed Financial Statements.
F-3
Image Technology Laboratories, Inc.
(A Development Stage Company)
Condensed Statement of Changes in Stockholders' Equity (Deficiency)
Three Months Ended March 31, 2002
and Period from January 1, 1998
(Date of Inception) to March 31, 2002
(Unaudited)
Preferred Stock Common Stock
--------------- ------------ Additional
Number of Number of Paid-In
Shares Amount Shares Amount Capital
------ ------ ------ ------ -------
Issuance of shares effective as of
January 1, 1998 to founders 7,288,750 $ 72,887 $ (51,637)
Net loss
-----------------------------------------------------------------------------
Balance, December 31, 1998 7,288,750 72,887 (51,637)
Net loss
-----------------------------------------------------------------------------
Balance, December 31, 1999 7,288,750 72,887 (51,637)
Issuance of preferred stock in exchange for
services 1,500,000 $ 15,000 435,000
Issuance of common stock in exchange for
services 250,000 2,500 72,500
Sales of units of common stock and warrants
through private placement, net of expenses,
in February 2000 799,729 7,997 171,923
Subscription for units of common stock and
warrants through private placement 33,333 333 9,667
Sales of units of common stock and warrants
through public offering completed in October
2000, net of expenses 2,591,050 25,911 813,951
Amortization of unearned compensation
Net loss
-----------------------------------------------------------------------------
Balance, December 31, 2000 1,500,000 15,000 10,962,862 109,628 1,451,404
Issuance of common stock upon exercise
of warrants 309,850 3,099 135,714
Amortization of unearned compensation
Receipt of subscription receivable
Net loss
Balance, December 31, 2001 1,500,000 $ 15,000 11,272,712 $ 112,727 $ 1,587,118
-----------------------------------------------------------------------------
Sales of shares of common stock through
private placement 400,000 $ 4,000 $ 96,000
Issuance of common stock upon exercise
of warrants 33,500 335 15,415
Amortization of unearned compensation
Net loss
----------------------------------------------------------------------------
Balance, March 31, 2002 1,500,000 $ 15,000 11,706,212 $ 117,062 $ 1,698,533
============ ============ ============ ============ ============
Deficit
Common Accumulated Total
Stock Unearned in the Stockholders'
Subscription Compensation Development Equity
Receivable Stage (Deficiency)
------------ ------------ ------------- -----------
Issuance of shares effective as of
January 1, 1998 to founders $ 21,250
Net loss $ (18,407) (18,407)
-------------------------------------------------
Balance, December 31, 1998 (18,407) 2,843
Net loss (733) (733)
-------------------------------------------------
Balance, December 31, 1999 (19,140) 2,110
Issuance of preferred stock in exchange for
services $ (450,000)
Issuance of common stock in exchange for
services 75,000
Sales of units of common stock and warrants
through private placement, net of expenses,
in February 2000 179,920
Subscription for units of common stock and
warrants through private placement $ (10,000)
Sales of units of common stock and warrants
through public offering completed in October
2000, net of expenses 839,862
Amortization of unearned compensation 150,000 150,000
Net loss (845,595) (845,595)
-------------------------------------------------------------
Balance, December 31, 2000 (10,000) (300,000) (864,735) 401,297
Issuance of common stock upon exercise
of warrants 138,813
Amortization of unearned compensation 150,000 150,000
Receipt of subscription receivable 10,000 10,000
Net loss (969,084) (969,084)
-------------------------------------------------------------
Balance, December 31, 2001 $ -- $ (150,000) $ (1,833,819) $ (268,974)
Sales of shares of common stock through
private placement $ 100,000
Issuance of common stock upon exercise
of warrants 15,750
Amortization of unearned compensation $ 75,000 75,000
Net loss $ (254,787) (254,787)
-------------------------------------------------------------
Balance, March 31, 2002 $ -- $ (75,000) $ (2,088,606) $ (333,011)
============ ============ ============ ============
See Notes to Condensed Financial Statements.
F-4
Image Technology Laboratories, Inc.
(A Development Stage Company)
Condensed Statements of Cash Flows
Three Months Ended March 31, 2002 and 2001
and Period from January 1, 1998
(Date of Inception) to March 31, 2002
(Unaudited)
Period
from
Three Months January
Ended March 31, 1, 1998
---------------------------- to March
2002 2001 31, 2002
------------- ------------ -------------
Operating activities:
Net loss $ (254,787) $ (173,063) $(2,088,606)
Adjustments to reconcile net loss to
net cash used in operating activities:
Amortization of unearned compensation 75,000 37,500 375,000
Depreciation 2,299 6,897
Common stock issued for services 75,000
Amortization of capitalized software costs 2,186
Changes in operating assets and liabilities:
Accounts payable and accrued expenses (11,579) (11,998) 26,332
Accrued compensation payable to stockholders 40,385 28,490 460,926
----------- ----------- -----------
Net cash used in operating activities (148,682) (119,071) (1,142,265)
----------- ----------- -----------
Investing activities:
Software costs capitalized (2,186)
Purchase of equipment (47,546)
-----------
Net cash used in investing activities (49,732)
-----------
Financing activities:
Proceeds from issuance of notes payable to
stockholders 5,200
Proceeds from issuance of common stock 15,750 625 185,813
Net proceeds from private placements and public
offering of units of common stock and warrants 100,000 1,124,782
Payments of deferred private placement costs (5,000)
----------- ----------- -----------
Net cash provided by financing activities 115,750 625 1,310,795
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents (32,932) (118,446) 118,798
Cash and cash equivalents, beginning of period 151,730 725,105 --
----------- ----------- -----------
Cash and cash equivalents, end of period $ 118,798 $ 606,659 $ 118,798
=========== =========== ===========
See Notes to Condensed Financial Statements.
F-5
Image Technology Laboratories, Inc.
(A Development Stage Company)
Notes to Condensed Financial Statements
(Unaudited)
Note 1 - Unaudited interim financial statements:
In the opinion of management, the accompanying unaudited
condensed financial statements reflect all adjustments,
consisting of normal recurring accruals, necessary to present
fairly the financial position of Image Technology Laboratories,
Inc. (the "Company") as of March 31, 2002, its results of
operations and cash flows for the three months ended March 31,
2002 and 2001, changes in stockholders' equity (deficiency) for
the three months ended March 31, 2002 and the related
cumulative amounts for the period from January 1, 1998 (date of
inception) to March 31, 2002. Certain terms used herein are
defined in the audited financial statements of the Company as
of December 31, 2001 and for the years ended December 31, 2001
and 2000 and period from January 1, 1998 (date of inception) to
December 31, 2001 (the "Audited Financial Statements") included
in the Company's Annual Report on Form 10-KSB previously filed
with the Securities and Exchange Commission (the "SEC").
Pursuant to rules and regulations of the SEC, certain
information and disclosures normally included in financial
statements prepared in accordance with accounting principles
generally accepted in the United States of America have been
condensed or omitted from these financial statements unless
significant changes have taken place since the end of the most
recent fiscal year. Accordingly, the accompanying unaudited
condensed financial statements should be read in conjunction
with the Audited Financial Statements and the other information
included in the Form 10-KSB.
The results of operations for the three months ended March 31,
2002 are not necessarily indicative of the results of
operations for the full year ending December 31, 2002.
As of March 31, 2002, the Company has cash and cash equivalents
of approximately $119,000 and working capital of approximately
$87,000. However, since inception, the Company has incurred
losses resulting in an accumulated deficit of approximately
$2,089,000 at March 31, 2002. The Company currently has no
significant sources of revenues and expects to incur additional
losses for the foreseeable future. In addition, the Company has
only recently introduced its product to market and does not
expect to generate any significant revenues prior to the second
quarter of the year ending December 31, 2002. Further, as of
March 31, 2002, the stockholders have deferred approximately
$461,000 of compensation due them under until 2003 their
employment agreements.
On April 4, 2002, the Company entered into a letter of intent
with a company for the purchase of one of the Company's systems
at fair market value and a service agreement. The Company is
anticipating generating approximately $700,000 in annual fees
under this agreement. The agreements are currently at the
contract stage and closing is anticipated to occur as soon as
administratively feasible. In addition, the Company is
currently negotiating similar agreements with other companies.
F-6
Image Technology Laboratories, Inc.
(A Development Stage Company)
Notes to Condensed Financial Statements
(Unaudited)
Note 1 - Unaudited interim financial statements (concluded):
If the aforementioned contract does not close, as anticipated,
the Company estimates that it will need additional financing of
$200,000, either by debt or equity, to fund its planned
operations beyond its current level over the next 12 months. At
the present time, except for the commitment of the Company's
principal stockholder to fund the $200,000, the Company has no
commitments for additional financing and there can be no
assurance that such financing will be available on satisfactory
terms, if at all. Management believes that even if the
aforementioned contract does not close, the funding by the
principal stockholder of $200,000 will enable the Company to
meet its obligations and fund its operations through at least
March 31, 2003.
Note 2 - Earnings (loss) per share:
The Company presents basic earnings (loss) per share and, if
appropriate, diluted earnings per share in accordance with the
provisions of Statement of Financial Accounting Standards No.
128, "Earnings per Share" ("SFAS 128").
The rights of the Company's preferred and common stockholders
are substantially equivalent. The Company has included the
1,500,000 preferred shares from the date of their issuance in
the weighted average number of shares outstanding in the
computation of basic loss per share for the three months ended
March 31, 2002 and 2001 in accordance with the "two class"
method of computing earnings (loss) per share set forth in SFAS
128.
Since the Company had a loss for the three months ended March
31, 2002, the assumed effects of the exercise of 3,000,000
options and 3,330,762 and 3,672,862 warrants outstanding at
March 31, 2002 and 2001, respectively, would have been
anti-dilutive.
Note 3 - Exercise of warrants:
During the three months ended March 31, 2002, warrantholders
redeemed 23,500 warrants and received 23,500 shares of common
stock at a redemption price of $.50 per share or $11,750 and
also exercised 10,000 warrants and received 10,000 shares of
common stock at a price of $.40 per share or $4,000. As of
March 31, 2002, 3,330,762 warrants are outstanding.
Note 4 - Private placement of shares:
During January 2002, the Company completed a private placement
of 400,000 shares of common stock to its principal stockholder
at $.25 per share, the approximate fair value, and received
proceeds of $100,000.
F-7
Image Technology Laboratories, Inc.
(A Development Stage Company)
Notes to Condensed Financial Statements
(Unaudited)
Note 5 - Commitment:
During January 2002, the Company entered into an agreement
with an investor relations firm. In exchange for marketing
services, the Company granted 450,000 shares of common stock
and 100,000 two-year warrants with a $3.00 exercise price.
The services will be valued at approximately $112,500 based on
the fair value of the shares of common stock on the date the
agreement was entered into. The services will commence upon
issuance of the shares of common stock, which are currently in
the process of being registered.
* * *
F-8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
OVERVIEW
The following is a discussion of certain factors affecting Image
Technology Laboratories, Inc.'s results of operations, liquidity, and capital
resources. You should read the following discussion and analysis in conjunction
with Image Technology Laboratories, Inc's unaudited condensed financial
statements and related notes which are included elsewhere in this filing.
Image Technology Laboratories, Inc. is a development stage company
that has entered the medical image management segment of the healthcare
information systems market. We were incorporated in Delaware on December 5,
1997. Image Technology has developed a fully integrated "radiology information
system/picture archiving and communications", known as RIS/PACS for use in the
management of medical diagnostic images and patient information by hospitals.
The PACS portion of the system inputs and stores diagnostic images in digital
format from original imaging sources such as:
Computerized tomography, or CT scans
Magnetic resonance imaging, or MRIs
Ultrasound, nuclear imaging
Digital fluoroscopy
The RIS portion of the system inputs and stores patient demographics,
along with the appropriate insurance, billing and scheduling information
required to complete the patient visit. All of the data is retained in standard
formats, including DICOM and HL-7 standards.
As of March 31, 2002, the Company's operations have been limited to
organizational activities and have not generated any significant revenues from
operations through that date. Accordingly, the Company is considered as a
"development stage company" for financial reporting purposes.
As of March 31, 2002, the Company has cash and cash equivalents of
approximately $119,000 and working capital of approximately $87,000. However,
since inception, the Company has incurred losses resulting in an accumulated
deficit of approximately $2,089,000 at March 31, 2002. The Company currently has
no significant sources of revenues and expects to incur additional losses for
the foreseeable future. In addition, the Company has only recently introduced
its product to market and does not expect to generate any significant revenues
prior to the second quarter of the year ending December 31, 2002. Further, as of
March 31, 2002, the stockholders have deferred until 2003 approximately $461,000
of compensation due them under their employment agreements.
On April 4, 2002, the Company entered into a letter of intent with a
company for the purchase of one of the Company's systems at fair market value
and a service agreement. The Company is anticipating to generate approximately
$700,000 in annual fees under this agreement. The agreements are currently at
the contract stage and closing is anticipated to occur as soon as
administratively feasible. In addition, the Company is currently negotiating
similar agreements with other companies.
If the aforementioned contract does not close, as anticipated, the
Company estimates that it will need additional financing of $200,000, either by
debt or equity financing to fund its planned operations beyond its current level
over the next 12 months. At the present time, except for the commitment of the
Company's principal stockholder to fund the $200,000, the Company has no
commitments for additional financing and there can be no assurance that such
financing will be available on satisfactory terms, if at all. Management
believes that even if the principal stockholder funds the additional working
capital of $200,000 it will enable the Company to meet its obligations and fund
its operations through at least March 31, 2003.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2002 COMPARED TO THE
THREE MONTHS ENDED MARCH 31, 2001
REVENUES:
As of March 31, 2002, we had not generated any significant revenues
from operations and, accordingly, we were still in the development stage. We do
not expect to generate any significant revenue from our planned operations prior
to the second quarter of 2002.
RESEARCH AND DEVELOPMENT EXPENSES:
During the three months ended March 31, 2002, the Company incurred
research and development expenses of $178,750, as compared with $151,764 in the
comparable prior period. These expenses consisted primarily of compensation to
the Company's three founders under their employment contracts. In addition,
$75,000 and $37,500 of these expenses during the three months period ended
March 31, 2002 and 2001 were attributable to compensation associated with the
issuance of the shares of preferred stock to the founders, a non-cash charge.
During the three months ended March 31, 2002, one of our founders was terminated
for cause for breach of his employment agreement; therefore, we accelerated the
remaining unamortized compensation ($37,500) associated with the issuance of the
Preferred Stock to that founder.
GENERAL AND ADMINISTRATION EXPENSES:
During the three months ended March 31, 2002, the Company incurred
general and administrative expenses of $83,337 as compared to $21,299 in the
comparable prior period. The increase was primarily attributable to an increase
in payroll and other overhead items as well as incurring additional costs as it
built up its infrastructure.
NET LOSS:
As a result of the aforementioned, the Company incurred a loss of
approximately $255,000 ($.02 per share) for the three months ended March 31,
2002, as compared to approximately $173,000 ($.01 per share) for the three
months ended March 31, 2001.The loss was based on the basic weighted average
shares outstanding of 12,987,956 and 12,462,973 for the three months ended March
31, 2002 and 2001, respectively.
LIQUIDITY AND CAPITAL RESOURCES:
As of March 31, 2002, we had cash and working capital of
approximately $119,000 and $87,000, respectively. To date, the principal sources
of capital resources have been proceeds from issuance of shares of common stock
to our founders of $21,250, the net proceeds from private placements of units of
common stock and warrants during 2000 of approximately $180,000. Then on October
15, 2002, we completed an initial public offering whereby we sold 2,591,050
units at $.40 per unit and received net proceeds of approximately $840,000. Each
unit consisted of one share of common stock and one warrant. The proceeds from
this offering were used for working capital and general corporate purposes. To
date, we received approximately $165,000 upon the exercise of warrants and the
issuance of shares of common stock. In addition, in January 2002, we sold
400,000 shares of our common stock to one of our principal stockholders for
$100,000 or $.25 per share, which approximates fair value.
CAUTIONARY STATEMENT FOR THE PURPOSES OF THE SAFE HARBOR PROVISIONS OF THE
PRIVATE SECURITIES ACT OF 1935
The Statements contained in the section captioned Management's
Discussion and Analysis of Financial Condition and Results of Operations which
are not historical are "forward-looking statements" within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. These forward-looking statements
represent the Company's present expectations or beliefs concerning future
events. The Company cautions that such forward-looking statements involve known
and unknown risks, uncertainties and other factors which may cause the actual
results, performance or achievements of the Company to be materially different
from any future results, performance, or achievements expressed or implied by
such forward-looking statements. Such factors include, among other things, the
uncertainty as to the Company's future profitability, the uncertainty as to the
demand for the Internet virtual communities; increasing competition; the ability
to hire, train, and retrain sufficient qualified personnel; the ability to
obtain financing on acceptable terms to finance the Company's growth.
PART II
Item 1. Legal Proceedings. None
Item 2. Changes in Securities. None.
Item 3. Defaults Upon Senior Securities. None.
Item 4. Submission of Matters to a Vote of Security Holders. There are no
reportable events relating to this item
..
Item 5. Other Information. There are no reportable events relating to this item
..
Item 6. Exhibits and Reports on Form 8-K.
(A) Not applicable.
(B) None
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
IMAGE TECHNOLOGY LABORATORIES,
INC.
Date: May 7, 2002 /S/ DAVID RYON
--------------
David Ryon, CEO, President and
Principal Accounting Officer