AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 6, 2002
REGISTRATION NO. 333-
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
IMAGE TECHNOLOGY LABORATORIES, INC.
DELAWARE 8011 22-3531373
-------- ---- ----------
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
IDENTIFICATION OF INCORPORATION) CLASSIFICATION CODE NUMBER) OR ORGANIZATION
NUMBER)
167 SCHWENK DRIVE, KINGSTON, NEW YORK 12401 (845) 338-3366
(ADDRESS AND TELEPHONE NUMBER OF PRINCIPAL EXECUTIVE OFFICES)
DAVID RYON, MD, MS
CEO, PRESIDENT, CHAIRMAN OF THE BOARD
167 SCHWENK DRIVE, KINGSTON, NEW YORK 12401
(845) 338-3366
(NAME, ADDRESS AND TELEPHONE NUMBER FOR AGENT FOR SERVICE)
COPIES TO:
JEFFREY A. RINDE, ESQ.
BONDY & SCHLOSS, LLP
6 East 43rd Street, 25th Floor
New York, New York 10017
TELEPHONE (212) 661-3535
FACSIMILE (212) 972-1677
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
/ /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering.
/ /
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
Cover continued on next page
CALCULATION OF REGISTRATION FEE
============================== ====================== ======================== =================== ==============
Proposed
Maximum
Aggregate Amount of
Title of Each Class of Amount to be Proposed Maximum Offering Registration
Securities to be Registered Registered Offering Price (1) Price (1) Fee
------------------------------ ---------------------- ------------------------ -------------------- ---------------
Common Stock, 350,000 shares (1) $.25 $87,500 $8.05 (2)
par value $.01 per share
------------------------------ ---------------------- ------------------------ -------------------- ----------------
Total 350,000 shares $87,500 $8.05
============================== ====================== ======================== ================--== ================
(1) Represents 350,000 shares of Common Stock to be issued to a consultant as
compensation for services rendered pursuant to his consulting agreement.
(2) Estimated solely for purposes of calculating the filing fees and calculated
pursuant to Rule 457(c) under the Securities Act of 1933, as amended (the
"Securities Act")
Prospectus
IMAGE TECHNOLOGY LABORATORIES, INC.
350,000 shares of common stock to be issued pursuant to a consulting agreement
Net Proceeds to Image Technology............................................None
On January 21, 2002, our Board of Directors authorized the issuance of
350,000 free trading shares, valued at $.25 per share, pursuant to a consulting
agreement with MacCaughern Trade Development (the "Consultant") as compensation
for services rendered pursuant to a consulting agreement (the "Consulting
Agreement").
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 two
classes of warrants which are detachable from the shares.
Look carefully at the risk factors beginning on page 5 of this
prospectus.
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 , 2002
-1-
TABLE OF CONTENTS
Prospectus Summary........................................................... 3
Risk Factors................................................................. 5
Dividend Policy.............................................................. 12
Management's Discussion and Analysis or Plan of Operation.................... 12
Description of Business...................................................... 14
Management................................................................... 22
Executive Compensation....................................................... 24
Principal Security holders................................................... 27
Certain Relationships and Related Transactions............................... 27
Market for Our 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
-2-
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 hardware/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
Presently we have five employees including our founders, Drs. David
Ryon, Carlton Phelps and Mr. Lewis Edwards. They own 7,688,750 shares of common
stock, representing 66.% of our outstanding 11,602,112 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 a proprietary radiology
information system and picture archiving and communications software system, or
RIS/PACS, for use in the management of medical diagnostic images by hospitals
and medical centers. RIS/PACS inputs and stores diagnostic images in digital
format from original imaging sources such as CT scans, MRIs, ultrasound, nuclear
imaging and digital fluoroscopy.
We have developed software to manage the entire practice of radiology,
including the scheduling of patient examinations, display of images on
workstations, generation of worklists for all members of the enterprise,
production and distribution of illustrated radiologic reports, and billing for
the services provided.
-3-
At the heart of the system are software modules referred to as the
WorkLoadExecutive and WorkLoadRouter. This software equitably distributes the
work to be done, and ensures its timely completion. Images are displayed for the
radiologist on a proprietary, multimonitor workstation controlled with a unique
touchscreen interface. The combination of the back office software and the
versatile workstation increase the accuracy and efficiency of diagnosis. Such
software is applicable to any setting of a radiology practice, including
hospitals and free standing imaging centers.
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 ITL's RIS/PACS
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. ITL's RIS/PACS
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
ITL's RIS/PACS 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 $1,519,000 at September 30, 2001. We currently have no
sources of revenue and expect to incur additional losses for the foreseeable
future. Market acceptance of ITL's RIS/PACS, which we introduced in the fiscal
second quarter of 2001, is critical to our future success. We do not expect to
generate any significant revenues from planned operations prior to the third
fiscal quarter of 2002. For a discussion of these and other risks relating to an
investment in our common stock, see "Risk Factors" beginning on page 5.
-4-
The Offering
On January 21, 2002, our Board of Directors authorized the issuance of
350,000 free trading shares, valued at $.25 per share, pursuant to a consulting
agreement with the Consultant as compensation for services rendered pursuant to
the Consulting Agreement.
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 the 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.
-5-
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
significant revenue from product sales until at least the second fiscal quarter
of 2002. Image Technology has incurred losses of approximately $1,519,000 from
its inception through September 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 ITL's RIS/PACS 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, RIS/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 RIS/PACS to date. Although we believe ITL's
RIS/PACS offers unique features which will distinguish it in the market, larger
or more established RIS/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 RIS/PACS. In addition, a number of
large hospital radiology centers are presently developing their own proprietary
RIS/PACS for internal use. This trend may reduce
-6-
the market for ITL's RIS/PACS 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. ITL's RIS/PACS will continue to compete with
other older film-based diagnostic imaging systems. Although RIS/PACS offer
significant advantages over such older imaging systems and the market for
RIS/PACS is expected to grow quickly, there can be no assurance that hospitals,
HMOs and others will continue to invest in the newer RIS/PACS technology at
forecasted rates.
We may face competition from newer technologies based on different
imaging techniques. ITL's RIS/PACS 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 RIS/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 ITL's RIS/PACS will not become obsolete in some other
manner. Although we are not aware of any new technologies currently under
development which might replace RIS/PACS technology, new technologies may be
developed, or existing technologies refined, which could render ITL's RIS/PACS
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 ITL's RIS/PACS 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 ITL's RIS/PACS. In order to complete development of ITL's RIS/PACS
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 ITL's RIS/PACS 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:
-7-
- 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
- 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
RIS/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 ITL's RIS/PACS 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 ITL's RIS/PACS are hospitals and other health care organizations
which provide services to Medicare recipients. They may decide not to purchase
ITL's RIS/PACS if they are unable to be reimbursed for the use of the
teleradiology services which RIS/PACS support. Many private group practices
which might otherwise consider purchasing ITL's RIS/PACS may face similar
financial disincentives to invest in newer RIS/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 RIS/PACS product depends in part on its success
in protecting its proprietary interests in ITL's RIS/PACS 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
ITL's RIS/PACS 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.
-8-
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 ITL's RIS/PACS 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.
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 ITL's RIS/PACS, 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.
-9-
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 ITL's RIS/PACS 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 7,688,750 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
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:
-10-
- 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,
- 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.
-11-
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 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.
-12-
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN 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 have developed a radiological information
system and picture archiving and communications software which is being used to
input diagnostic images in digital format from original imaging sources and to
store, print and display those images. Such software is used in the management
of medical diagnostic images by hospitals, health maintenance organizations,
group medical practices and individual radiologists to increase accuracy, reduce
costs and boost productivity.
RESULTS OF OPERATIONS FOR 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 significant revenues from our planned
operations prior to the second quarter of 2002.
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 ADMINISTRATIVE 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.
-13-
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 COMPARED
TO THE NINE MONTHS ENDED SEPTEMBER 30, 2000
REVENUES:
As of September 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 substantial revenues from our planned operations before
the end of the second quarter of 2002.
RESEARCH AND DEVELOPMENT EXPENSES:
During the nine months ended September 30, 2001, the Company incurred
research and development expenses of $484,335 as compared to $493,663 in the
comparable prior period. These expenses consisted primarily of compensation
($337,500) to the Company's three founders under their employment contracts. In
addition, $112,500 of these expenses in the nine month period ending September
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 nine months ended September 30, 2001, General and
Administrative Expenses was approximately $170,000 as compared to $130,000
during the nine months ended September 30, 2000. General and Administrative
Expenses have increased primarily attributable to costs associated with the
Company building its infrastructure, primarily payroll. However, this increase
was partially offset by a $75,000 charge for legal services during the first
quarter of 2000, which was associated with the issuance of common stock for
services, a non-cash charge.
NET LOSS:
As a result of the aforementioned, the Company incurred a loss of
approximately $655,000 ($.05 per share) for the nine months ended September 30,
2001, as compared to approximately $623,000 ($.06 per share) for the nine months
ended September 30, 2000. The loss was based on the basic weighted average
shares outstanding of 12,539,975 for the nine months ended September 30, 2001 as
compared to 9,654,246 for the comparable prior period.
LIQUIDITY AND CAPITAL RESOURCES:
As of September 30, 2001, we had cash and working capital of
approximately $339,000 and $340,000 respectively. To date, the principal sources
of capital resources have been proceeds from the issuance of shares of common
stock to our founders of $21,250, the net proceeds from private placements of
approximately $180,000, the net proceeds from a public offering of approximately
$840,000 and proceeds of approximately $105,000 upon the exercise of warrants
and the issuance of shares of common stock. In addition, during January 2002 the
Company received net proceeds of $100,000 from the sale of 400,000 shares of
common stock to one of its founders.
-14-
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.
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 RIS/PACS for use in the
management of medical diagnostic images by hospitals. RIS/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 system, which we call ITL RIS/PACS, 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 RIS/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 RIS/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 RIS/PACS. By
late 1997, after more than a year of intensive research, the development team
had completed the specifications for the prototype ITL RIS/PACS 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 RIS/PACS design based on market research which
indicated a growing demand for RIS/PACS in general and an unmet need for a
RIS/PACS such as the prototype the founders had designed. Image Technology has
installed a beta-version of ITL's RIS/PACS at the Center. Image Technology began
to initiate marketing ITL's RIS/PACS to hospitals beginning in the Northeast
United States in the fiscal fourth quarter of 2001. ITL's RIS/PACS will be
manufactured, installed and serviced by Image Technology. We estimate that the
basic product development has been completed. The specification and system
design are finished leaving approximately 5% of the actual hard coding and the
bench testing yet to be performed, which represents an insignificant amountof
overall product development.
-15-
Products
Image Technology's lead product is ITL's RIS/PACS, a unique and
proprietary version of a RIS/PACS software system. ITL's RIS/PACS 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 ITL's RIS/PACS 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 ITL's RIS/PACS which may be used with any terminal hardware.
ITL's RIS/PACS 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 ITL's RIS/PACS, 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, 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 ITL's RIS/PACS permanently to replace more costly
and cumbersome image storage mediums such as film. ITL's RIS/PACS 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.
-16-
ITL's RIS/PACS 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 ITL's RIS/PACS 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 hope that through ITL's
RIS/PACS we can acquire a significant share of the U.S. market for RIS/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 RIS/PACS system. In addition,
ITL's RIS/PACS offers capabilities not found on even the most expensive
RIS/PACS, including a unique graphical interface.
Business Strategy
We have completed initial product development of ITL's RIS/PACS. 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 ITL's RIS/PACS, maximizing
sales of this product in the United States, and providing continuing customer
service and product upgrades.
Markets and Marketing Plan
The estimated market for PACS is $1.5 billion in 2001 and is expected
to reach $2.7 billion by 2010. (Concord Consulting Group PACS Opportunities:
2000-2010 - October 19, 2001). Market analysts have identified the PACS market
as an "emerging business opportunity with enormous growth potential". In August
2000, Technology Marketing Group released a PACS census study of more than 1,800
major hospitals and imaging centers. The study indicated expenditures for PACS
technology reached nearly $600 million in 1999, with 7 to 10% yearly growth
anticipated for the next 5 years. The study showed that few hospitals with PACS
technology are actually operating in a filmless mode, with 91% of the
respondents still using film for diagnosis.
A representative for Frost & Sullivan in an April 1998 article for the
magazine ADVANCE predicted a growth rate for PACS of 28% per year with the
market reaching $1.6 billion by 2004.
-17-
Image Technology plans to launch its ITL RIS/PACS 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 ITL's RIS/PACS 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 ITL's RIS/PACS throughout the United States. We plan to
distribute our RIS/PACS products via three channels:
- relationships with original equipment manufacturers,
- 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 RIS/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 RIS/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 RIS/PACS arena gradually.
Once we have secured a significant share of the RIS/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 ITL's RIS/PACS
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 ITL's
RIS/PACS.
However, we have no plan to institute hardware-only sales in
conjunction with ITL's RIS/PACS product launch and do not believe that supplying
the hardware needs of our software customers is necessary to the competitive
success of ITL's RIS/PACS.
-18-
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 RIS/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 RIS/PACS to their product line. To date no
single company has captured a predominant share of the current market for
RIS/PACS. In addition, a number of large hospital radiology centers are
presently developing their own RIS/PACS for internal use. This trend may reduce
the market for ITL's RIS/PACS 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
such products upon completion. Image Technology, together with all other
RIS/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 RIS/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 RIS/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 centraldatabase server. These networks also
lack the advanced workflow management capabilities of
hyper-PACS.
-19-
By contrast, vendors of hyperPACS systems, including Data General, GE
Medical Systems, Agfa, Kodak, Siemens, Rogan, and MarkCare Systems, build their
RIS/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 RIS/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 RIS/PACS have emerged and are growing
steadily in popularity. Several companies offer RIS/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.
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 RIS/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.
-20-
Protection of Proprietary Technology
Our ability to market a competitive RIS/PACS product depends in part on
our success in protecting our proprietary interest in ITL's RIS/PACS software so
that competitors cannot duplicate its innovative design. The principal forms of
protection available for software such as ITL's RIS/PACS 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 ITL's RIS/PACS software
developed prior to Image Technology's incorporation and therefore, believes it
owns the full rights to copyright ITL's RIS/PACS 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 ITL's RIS/PACS. We have not yet
retained any intellectual property counsel or filed any application for the
protection of our intellectual property.
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. ITL's RIS/PACS is immediately available for sale without
restriction.
Although Image Technology is aware that there is an international
market for products such as ITL's RIS/PACS, we have no present plans to market
ITL's RIS/PACS in other countries, largely due to limited resources. However,
should we decide to market ITL's RIS/PACS 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.
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.
-21-
Manufacturing
We do not expect to have any manufacturing operations for hardware or
software. We expect to be able to produce sufficient copies of ITL's RIS/PACS
software for licenses using the software duplication capabilities of our beta
site equipment. In the unlikely event that demand for copies of ITL's RIS/PACS
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 ITL's RIS/PACS 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,
- 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 ITL's RIS/PACS 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.
-22-
Through Dr. Ryon, Image Technology has access to Kingston's
state-of-the art computer system in return for a license to use ITL's RIS/PACS
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.
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 September 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
-23-
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 ITL's RIS/PACS. 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.
CARLTON T. PHELPS, M.D. is a founder and principal stockholder of Image
Technology and a co-developer of ITL's RIS/PACS. 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 ITL's RIS/PACS. 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.
-24-
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 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.
Ryon, 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 $.30 per share based on the
price of units that we were offering for sale through a private placement.
(3) See "Option Grants in Last Fiscal Year" below
-25-
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding stock
options granted to the Named Executive Officers during 2000. We have never
granted any stock appreciation rights.
INDIVIDUAL GRANTS (1)
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED IN EXERCISE
OPTIONS EMPLOYEES IN PRICE PER EXPIRATION
NAME GRANTED 2000 (2) SHARE ($) 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.
-26-
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.
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.
-27-
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 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
The 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 2,829,584 29% 2,829,584 25%
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 7,688,750 66% 7,688,750 69%
as a group Preferred Stock 1,500,000 100% 1,500,000 100%
-28-
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 ITL's RIS/PACS 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 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 ITL's RIS/PACS 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.
During January 2002, Image Technology received net proceeds of $100,000
from the sale of 400,000 shares of common stock to Kingston Diagnostic
Radiology, P.C. pension fund, the sole beneficiary of which is Dr. Ryon, our
president and chief executive officer.
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 September 30, 2001, the number of holders of record of Common Stock,
Warrant IMTLW and Warrant IMTLZ was 228, 26, and 191 respectively.
Between December 15, 2000 and June, 2001, Image Technology's Warrant and
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
transactions, retail markups, markdowns or commissions.
-29-
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
2001 3rd 0.64 0.42
--------------------------------------------------------------------------------
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 September 30, 2001, there
were outstanding 11,202,112 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.
-30-
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.
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.
-31-
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 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;
-32-
- 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
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.
-33-
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 shares offered by this prospectus may be sold from time to time by
the Consultants. The Consultants 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:
- 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.
-34-
In effecting sales, brokers or dealers engaged by the Consultants may
arrange for other brokers or dealers to participate. Brokers or dealers will
receive commissions or discounts from the Consultants in amounts to be
negotiated prior to the sale. The Consultants 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 Consultants.
SHARES ELIGIBLE FOR FUTURE SALE
Image Technology had outstanding 11,202,112 shares of common stock at
September 30, 2001. Of these shares, only approximately 3,551,500 are 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.
-35-
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 for the years ended December 31, 2000 and 1999 and for the
period from January 1, 1998 (date of 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.
-36-
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. 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.
-37-
Image Technology Laboratories, Inc.
(A Development Stage Company)
INDEX TO FINANCIAL STATEMENTS
PAGE
Report of Independent Public Accountants F-2
Balance Sheet
December 31, 2000 F-3
Statements of Operations
Years Ended December 31, 2000 and 1999 and Period from
January 1, 1998 (Date of Inception) to December 31, 2000 F-4
Statements of Changes in Stockholders' Equity
Years Ended December 31, 2000 and 1999 and Period from
January 1, 1998 (Date of Inception) to December 31, 2000 F-5
Statements of Cash Flows
Years Ended December 31, 2000 and 1999 and Period from
January 1, 1998 (Date of Inception) to December 31, 2000 F-6
Notes to Financial Statements F-7/13
Condensed Balance Sheet
September 30, 2001 (Unaudited) F-14
Condensed Statements of Operations
Nine Months Ended September 30, 2001 and 2000 and Period from
January 1, 1998 (Date of Inception) to September 30, 2001 (Unaudited) F-15
Condensed Statement of Changes in Stockholders' Equity
Nine Months Ended September 30, 2001 and Period from January 1, 1998
(Date of Inception) to September 30, 2001 (Unaudited) F-16
Condensed Statements of Cash Flows
Nine Months Ended September 30, 2001 and 2000 and Period from January 1,
1998 (Date of Inception) to September 30, 2001 (Unaudited) F-17
Notes to Condensed Financial Statements (Unaudited) F-18/19
* * *
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors and Stockholders
Image Technology Laboratories, Inc.
We have audited the accompanying balance sheet of Image Technology Laboratories,
Inc. (A Development Stage Company) as of December 31, 2000, and the related
statements of operations, changes in stockholders' equity and cash flows for the
years ended December 31, 2000 and 1999 and for the period from January 1, 1998
(date of inception) to December 31, 2000. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Image Technology Laboratories,
Inc. as of December 31, 2000 and 1999, and its results of operations and cash
flows for the years ended December 31, 2000 and 1999 and for the period from
January 1, 1998 (date of inception) to December 31, 2000, in conformity with
accounting principles generally accepted in the United States of America.
J.H. COHN LLP
Roseland, New Jersey
February 13, 2001
F-2
Image Technology Laboratories, Inc.
(A Development Stage Company)
Balance Sheet
December 31, 2000
ASSETS
------
Current assets - cash and cash equivalents $ 725,105
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 20,663
Accrued compensation payable to stockholders 297,945
Notes payable to stockholders 5,200
-----------
Total liabilities 323,808
-----------
Commitments
Stockholders' equity:
Preferred stock, par value $.01 per share; 5,000,000 shares
authorized; 1,500,000 shares issued and outstanding 15,000
Common stock, par value $.01 per share; 50,000,000 shares
authorized; 10,962,862 shares issued and outstanding 109,628
Additional paid-in capital 1,451,404
Common stock subscription receivable (10,000)
Unearned compensation (300,000)
Deficit accumulated in the development stage (864,735)
-----------
Total stockholders' equity 401,297
-----------
Totals $ 725,105
===========
See Notes to Financial Statements.
F-3
Image Technology Laboratories, Inc.
(A Development Stage Company)
Statements of Operations
Years Ended December 31, 2000 and 1999
and Period From January 1, 1998
(Date of Inception) to December 31, 2000
2000 1999 CUMULATIVE
---- ---- ----------
Revenues $ -- $ -- $ --
Research and development expenses 633,798 -- 633,798
General and administrative expenses 211,797 733 230,937
------------ ------------ ------------
Net loss $ (845,595) $ (733) $ (864,735)
============ ============ ============
Basic net loss per share $ (.08) $ --
============ ============
Basic weighted average shares outstanding 10,370,047 7,288,750
============ ============
See Notes to Financial Statements.
F-4
Image Technology Laboratories, Inc.
(A Development Stage Company)
Statement of Changes in Stockholders' Equity
Years Ended December 31, 2000 and 1999
and Period from January 1, 1998
(Date of Inception) to December 31, 2000
Preferred Stock Common Stock Common Deficit
------------------ ------------------ Stock Accumulated Total
Number Number Additional Sub- Unearned in the Stock-
of of Paid-in scription Compen- Development holders'
Shares Amount Shares Amount Capital Receivable tion Stage Equity
--------------------------------------------------------------------------------------------------
Issuance of shares
effective as of
January 1, 1998
to founders 7,288,750 $ 72,887 $ (51,637) $ 21,250
Net loss $ (18,407) (18,407)
--------- -------- ---------- --------- -------
Balance, December 31, 1998 7,288,750 72,887 (51,637) (18,407) 2,843
Net loss (733) (733)
--------- -------- ---------- --------- -------
Balance, December 31, 1999 7,288,750 72,887 (51,637) (19,140) 2,110
Issuance of preferred
stock in exchange for
services 1,500,000 $ 15,000 435,000 $(450,000)
Issuance of common stock
in exchange for services 250,000 2,500 72,500 75,000
Sales of units of common
stock and warrants through
private placement, net of
expenses, in February 2000 799,729 7,997 171,923 179,920
Subscription for units of
common stock and warrants
through private placement 33,333 333 9,667 $(10,000)
Sales of units of common
stock and warrants through
public offering completed in
October 2000, net of expenses 2,591,050 25,911 813,951 839,862
Amortization of unearned
compensation 150,000 150,000
Net loss (845,595) (845,595)
--------- --------- ---------- -------- ---------- -------- --------- --------- --------
Balance, December 31, 2000 1,500,000 $ 15,000 10,962,862 $109,628 $1,451,404 $(10,000) $(300,000) $(864,735) $401,297
========= ========= ========== ======== ========== ======== ========= ========= ========
See Notes to Financial Statements.
F-5
Image Technology Laboratories, Inc.
(A Development Stage Company)
Statements of Cash Flows
Years Ended December 31, 2000 and 1999
and Period from January 1, 1998
(Date of Inception) to December 31, 2000
2000 1999 CUMULATIVE
-------- ------- ----------
Operating activities:
Net loss $ (845,595) $ (733) $ (864,735)
Adjustments to reconcile net loss to
net cash used in operating activities:
Amortization of unearned compensation 150,000 150,000
Common stock issued for services 75,000 75,000
Amortization of capitalized software 2,186 2,186
Changes in operating assets and liabilities:
Accrued compensation payable to stockholders 20,663 20,663
Accounts payable and accrued expenses 297,945 297,945
----------- ----------- -----------
Net cash used in operating activities (299,801) (733) (318,941)
----------- ----------- -----------
Investing activities - software costs capitalized (2,186)
-----------
Financing activities:
Proceeds from issuance of notes payable to
stockholders 100 5,100 5,200
Proceeds from issuance of common stock 21,250
Net proceeds from private placement and public
offering of units of common stock and warrants 1,024,782 1,024,782
Payments of deferred private placement costs (5,000) (5,000)
----------- ----------- -----------
Net cash provided by financing activities 1,024,882 100 1,046,232
----------- ----------- -----------
Net increase (decrease) in cash 725,081 (633) 725,105
Cash, beginning of period 24 657 --
----------- ----------- -----------
Cash, end of period $ 725,105 $ 24 $ 725,105
=========== =========== ===========
See Notes to Financial Statements.
F-6
Image Technology Laboratories, Inc.
(A Development Stage Company)
Notes to Financial Statements
Note 1 - Business:
Image Technology Laboratories, Inc. (the "Company") was
incorporated on December 5, 1997 and commenced operations on
January 1, 1998. The Company is in the process of developing
picture archiving and communications software, known in the
medical industry as "PACS," 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.
As of December 31, 2000, the Company had not generated any
revenues from operations and was still in the "development
stage." Management does not expect the Company to generate any
revenues from its planned operations prior to the third quarter
of the year ending December 31, 2001.
Note 2 - Summary of significant accounting policies:
Use of estimates:
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions
that affect certain reported amounts and disclosures.
Accordingly, actual results could differ from those estimates.
Cash equivalents:
Cash equivalents include all highly liquid investments with an
original maturity of three months or less when acquired.
Concentrations of credit risk:
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of cash and cash
equivalents. The Company places its cash and cash equivalents
with high-quality financial institutions. At times, the Company's
cash and cash equivalent balances exceed the insured amount under
the Federal Deposit Insurance Corporation of $100,000. At
December 31, 2000, the Company had cash and cash equivalent
balances that exceed Federally insured limits by approximately
$556,000.
Software development costs:
Pursuant to Statement of Financial Accounting Standards No. 86,
"Accounting for the Costs of Computer Software to be Sold, Leased
or Otherwise Marketed," the Company is required to charge the
costs of creating a computer software product to research and
development expense as incurred until the technological
feasibility of the product has been established; thereafter, all
related software development and production costs are required to
be capitalized.
F-7
Image Technology Laboratories, Inc.
(A Development Stage Company)
Notes to Financial Statements
Note 2 - Summary of significant accounting policies (continued):
Software development costs (concluded):
Commencing upon the initial release of a product, capitalized
software develop-ment costs and any costs of related purchased
software are generally required to be amortized over the
estimated economic life of the product or based on current and
estimated future revenues. Thereafter, capitalized software
development costs and costs of purchased software are reported at
the lower of unamortized cost or estimated net realizable value.
Due to the inherent technological changes in the software
development industry, estimated net realizable values or economic
lives may decline and, accordingly, the amortization period may
have to be accelerated.
Charges to research and development expenses for software
development costs incurred prior to the establishment of
technological feasibility were not material prior to 2000.
The Company accounts for income taxes pursuant to the asset and
liability method which requires deferred income tax assets and
liabilities to be computed for temporary differences between the
financial statement and tax bases of assets and liabilities that
will result in taxable or deductible amounts in the future based
on enacted tax laws and rates applicable to the periods in which
the differences are expected to affect taxable income. Valuation
allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized. The income tax
provision or credit is the tax payable or refundable for the
period plus or minus the change during the period in deferred tax
assets and liabilities.
Net earnings (loss) per common share:
The Company presents "basic" earnings (loss) per common share
and, if applicable, "diluted" earnings per common share pursuant
to the provisions of Statement of Financial Accounting Standards
No. 128, "Earnings per Share" ("SFAS 128"). Basic earnings (loss)
per common share is calculated by dividing net income or loss
applicable to common stock by the weighted average number of
common shares outstanding during each period. The calculation of
diluted earnings per common share is similar to that of basic
earnings per common share, except that the denominator is
increased to include the number of additional common shares that
would have been outstanding if all potentially dilutive common
shares, such as those issuable upon the exercise of stock
options, were issued during the period. Since the Company had a
net loss in 2000, the assumed effects of the exercise of
3,000,000 options and 3,674,112 warrants outstanding at December
31, 2000 would have been anti-dilutive. The Company did not have
any potentially dilutive common shares outstanding during 1999.
The weighted average common shares outstanding shown in the
accompanying statements of operations have been retroactively
adjusted for a 388.733 for 1 stock split that was effected on
January 7, 2000 (see Note 4).
F-8
Image Technology Laboratories, Inc.
(A Development Stage Company)
Notes to Financial Statements
Note 2 - Summary of significant accounting policies (concluded):
Stock options:
In accordance with the provisions of Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB
25"), the Company will recognize compensation costs as a result
of the issuance of stock options to employees based on the
excess, if any, of the fair value of the underlying stock at the
date of grant or award (or at an appropriate subsequent
measurement date) over the amount the employee must pay to
acquire the stock. Therefore, the Company will not be required to
recognize compensation expense as a result of any grants of stock
options at an exercise price that is equivalent to or greater
than fair value. The Company will also make pro forma
disclosures, as required by Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation"
("SFAS 123"), of net income or loss as if a fair value based
method of accounting for stock options had been applied.
Note 3 - Notes payable to stockholders:
Notes payable to stockholders with a principal balance of $5,200
at December 31, 2000 were noninterest bearing and due on demand.
Note 4 - Stockholders' equity:
Preferred stock:
As of December 31, 2000, the Company was authorized to issue up
to 5,000,000 shares of preferred stock with a par value of $.01
per share. No shares of preferred stock had been issued as of
December 31, 1999. Under the Company's Articles of Incorporation,
the Board of Directors, within certain limitations and
restrictions, can fix or alter preferred stock dividend rights,
dividend rates, conversion rights, voting rights and terms of
redemption including price and liquidation preferences.
Issuance of preferred stock to founders:
On January 7, 2000, the Board of Directors authorized the
issuance of a total of 1,500,000 shares of preferred stock to the
three founders of the Company in conjunction with the
commencement of their employment agreements on January 1, 2000
(see Note 8). The preferred shares will have rights to dividends,
rights with respect to liquidation and other rights equivalent to
those of holders of the Company's common stock including one vote
for each share held on all matters to be voted on by the
Company's stockholders.
F-9
Image Technology Laboratories, Inc.
(A Development Stage Company)
Notes to Financial Statements
Note 4 - Stockholders' equity (continued):
Issuance of preferred stock to founders (concluded):
Since the rights of the Company's preferred and common
stockholders are substantially equivalent, the preferred shares
were valued at $.30 per share based on the price of units of
common stock and warrants that the Company sold through the
private placement that was completed on February 4, 2000. The
aggregate fair value of the preferred shares of $450,000 has been
recorded as unearned compensation and reflected as a reduction of
stockholders' equity, net of accumulated amortization, in the
accompanying balance sheet as of December 31, 2000. The unearned
compensation is being charged to the Company's operations over
the terms of the respective employment agreements.
Common stock:
As of December 31, 1999, the Company was also authorized to issue
up to 50,000,000 shares of common stock with a par value of $.01
per share. As of that date, it had issued 18,750 shares of common
stock, or the equivalent of 7,288,750 shares as adjusted for the
388.733 for 1 stock split that was effected on January 7, 2000,
to its founding stockholders for total cash consideration of
$21,250 in January 1998.
Private placement of units:
On February 4, 2000, the Company completed a private placement of
799,729 units, at $.30 per unit, that was exempt from
registration under the Securities Act of 1933 and received
proceeds of $239,920 before related expenses of $60,000. Each
unit was comprised of one share of common stock and one warrant.
Each warrant gives the holder the right to purchase one share of
common stock at the initial exercise price of $.40 per share and
expires on October 15, 2001.
Stock subscription receivable:
An investor subscribed to purchase 33,333 units, at $.30 per
unit, for a total subscription price of $10,000. Each unit was
comprised of one share of common stock and one warrant. Each
warrant gives the holder the right to purchase one share of
common stock at the initial exercise price of $.40 per share and
expires one year from the date of issuance.
Shares for services:
During March 2000, the Company issued 250,000 shares of common
stock for the payment of legal services. The common shares and
legal services were valued at a total of $75,000, or $.30 per
share based on the price of units sold through the private
placement that was completed on February 4, 2000.
F-10
Image Technology Laboratories, Inc.
(A Development Stage Company)
Notes to Financial Statements
Note 4 - Stockholders' equity (concluded):
Initial public offering:
During 2000, the Company filed a registration statement with the
Securities and Exchange Commission related to an initial public
offering of a minimum of 1,500,000 units, on a best-efforts,
all-or-none basis and an additional 1,500,000 units on a
best-efforts basis. Each unit offered consists of one share of
common stock and one warrant. Each warrant will give the holder
the right to purchase one share of common stock at the initial
exercise price of $.50 per share, expire one year from the date
of issuance and be redeemable by the Company at $.05 per warrant
if the closing bid price of the common stock exceeds $2.00 for
ten consecutive trading days. Management intends to use the
proceeds for working capital and general corporate purposes.
As of October 15, 2000, the date the offering closed, the Company
sold 2,591,050 units at $.40 per unit from which it received
proceeds of $839,862, net of related expenses of $196,558.
Note 5 - Income taxes:
As of December 31, 2000, the Company had net operating loss
carryforwards of approximately $567,000 available to reduce
future Federal and state taxable income which will expire at
various dates through 2020. The Company's only other material
temporary difference as of that date was approximately $298,000
of accrued officers' compensation. The Company had no other
material temporary differences as of that date. Due to the
uncertainties related to, among other things, the future changes
in the ownership of the Company, which could subject those loss
carryforwards to substantial annual limitations, and the extent
and timing of its future taxable income, the Company offset the
deferred tax assets attributable to the potential benefits of
approximately $346,000 related to the net operating loss
carryforwards ($227,000) and future deductibility of the
officers' compensation ($119,000) by an equivalent valuation
allowance as of December 31, 2000.
The Company had also offset the potential benefits from net
operating loss carryforwards of approximately $7,600 by an
equivalent valuation allowance as of December 31, 1999.
Note 6 - Fair value of financial statements:
The Company's financial instruments at December 31, 2000 for
which disclosure of estimated fair value is required by certain
accounting standards consisted of cash and cash equivalents,
accounts payable and accrued expenses, notes payable to
stockholders and accrued compensation - stockholders. In the
opinion of manage-ment, cash and cash equivalents and accounts
payable and accrued expenses were carried at fair value because
of its liquidity and short-term maturity. Because of the
relationship of the Company and its stockholders, there is no
practical method that can be used to determine the fair value of
the notes payable to stockholders and accrued compensation -
stockholders.
F-11
Image Technology Laboratories, Inc.
(A Development Stage Company)
Notes to Financial Statements
Note 7 - Stock option plan:
In January 1998, the Company's stockholders ratified the
Company's Stock Option Plan (the "Plan") whereby options for the
purchase of up to 5,000,000 shares of the Company's common stock
may be granted to key personnel in the form of incentive stock
options and nonqualified stock options, as defined under the
Internal Revenue Code. Key personnel eligible for these awards
include employees of the Company, consultants to the Company and
nonemployee directors of the Company. Under the Plan, the
exercise price of all options must be at least 100% of the fair
market value of the Company's common shares on the date of grant
(the exercise price of an incentive stock option granted to an
optionee that holds more than ten percent of the combined voting
power of all classes of stock of the Company must be at least
110% of the fair market value on the date of grant). The maximum
term of any stock option granted may not exceed ten years from
the date of grant and options generally vest over three years.
Since the Company has elected to use the provisions of APB 25 in
accounting for stock options, no earned or unearned compensation
cost will be recognized in the financial statements for stock
options granted to employees at exercise prices that are equal to
or greater than the fair market value of the Company's common
stock on the date of grant. Instead, the Company makes the pro
forma disclosures required by SFAS 123 of net loss as if a fair
value based method of accounting for stock options had been
applied.
On January 1, 2000, the Company granted options to its founders
for the purchase of a total of 3,000,000 shares of its common
stock at $.33 per share (approximately 110% of the fair market
value on the date of grant) that are exercisable through December
31, 2009.
The pro forma amounts computed as if the Company had elected to
recognize compensation cost for all stock options granted to
employees based on the fair value of the options at the date of
grant as prescribed by SFAS 123 and the related historical
amounts reported in the accompanying 2000 statement of operations
are set forth below:
Net loss - as reported $ (845,595)
Net loss - pro forma (1,005,595)
Basic loss per share - as reported $(.08)
Basic loss per share - pro forma $(.10)
F-12
Image Technology Laboratories, Inc.
(A Development Stage Company)
Notes to Financial Statements
Note 7 - Stock option plan (concluded)::
The fair value of each option granted was estimated as of the
date of grant using the Black-Scholes Option-Pricing-Model with
the following weighted average assump-tions:
Expected volatility 29%
Risk-free interest rate 6%
Expected years of option life 10
Expected dividends 0%
Note 8 - Employment agreements:
During December 1999, the Company entered into employment
agreements with its three founders that became effective on
January 1, 2000 and obligate the Company to make annual aggregate
payments of $450,000 in the years ending December 31, 2000, 2001
and 2002.
* * *
F-13
Image Technology Laboratories, Inc.
(A Development Stage Company)
Condensed Balance Sheets
September 30, 2001
(Unaudited)
ASSETS
------
Current assets:
Cash and cash equivalents $ 338,759
Other current assets 6,250
-----------
Total $ 345,009
===========
LIABILITIES AND STOCKHOLDERS' DEFICIENCY
----------------------------------------
Current liabilities:
Accounts payable and accrued expenses $ 280
Accrued compensation payable to stockholders
Notes payable to stockholders 5,200
-----------
Total current liabilities 5,480
Accrued compensation payable to stockholders 375,734
-----------
Total liabilities 381,214
-----------
Stockholders' deficiency:
Preferred stock, par value $.01 per share; 5,000,000 shares
authorized; 1,500,000 shares issued and outstanding 15,000
Common stock, par value $.01 per share; 50,000,000 shares
authorized; 11,202,112 shares issued and outstanding 112,021
Additional paid-in capital 1,553,524
Common stock subscription receivable (10,000)
Unearned compensation (187,500)
Deficit accumulated in the development stage (1,519,250)
-----------
Total stockholders' deficiency (36,205)
-----------
Total $ 345,009
===========
See Notes to Condensed Financial Statements.
F-14
Image Technology Laboratories, Inc.
(A Development Stage Company)
Condensed Statements of Operations
Nine Months Ended September 30, 2001 and 2000
and Period From January 1, 1998
(Date of Inception) to September 30, 2001
(Unaudited)
Nine Months
ENDED SEPTEMBER 30,
------------------------------
2001 2000 CUMULATIVE
------------ ------------- -----------
Revenues $ -- $ -- $ --
Research and development expenses 484,335 493,663 1,118,133
General and administrative expenses 170,180 129,538 401,117
------------ ------------ ------------
Net loss $ (654,515) $ (623,201) $ (1,519,250)
============ ============ ============
Basic net loss per share $ (.05) $ (.06)
============ ============
Basic weighted average shares outstanding 12,539,975 9,654,246
============ ============
See Notes to Condensed Financial Statements.
F-15
Image Technology Laboratories, Inc.
(A Development Stage Company)
Condensed Statement of Changes in Stockholders' Equity (Deficiency)
Nine Months Ended September 30, 2001
and Period from January 1, 1998
(Date of Inception) to September 30, 2001
(Unaudited)
Deficit
Preferred Stock Common Stock Common Deficit
------------------ ------------------ Stock Accumulated Total
Number Number Additional Sub- Unearned in the Stock-
of of Paid-in scription Compen- Development holders'
Shares Amount Shares Amount Capital Receivable tion Stage Equity
(Deficiency)
-------------------------------------------------------------------------------------------------
Issuance of shares effective
as of January 1, 1998
to founders 7,288,750 $ 72,887 $ (51,637) $ 21,250
Net loss $ (18,407) (18,407)
--------- --------- ---------- ------------ --------
Balance, December 31, 1998 7,288,750 72,887 (51,637) (18,407) 2,843
Net loss (733) (733)
--------- --------- ---------- ------------ --------
Balance, December 31, 1999 7,288,750 72,887 (51,637) (19,140) 2,110
Issuance of preferred stock
in exchange for services 1,500,000 $15,000 435,000 $(450,000)
Issuance of common stock in
exchange for services 250,000 2,500 72,500 75,000
Sales of units of common
stock and warrants through
private placement, net of
expenses, in February 2000 799,729 7,997 171,923 179,920
Subscription for units of
common stock and warrants
through private placement 33,333 333 9,667 $(10,000)
Sales of units of common stock
and warrants through public
offering completed in October
2000, net of expenses 2,591,050 25,911 813,951 839,862
Amortization of unearned
compensation 150,000 150,000
Net loss (845,595) (845,595)
-------------------------------------------------------------------------------------------------
Balance, December 31, 2000 1,500,000 15,000 10,962,862 109,628 1,451,404 (10,000) (300,000) (864,735) 401,297
Issuance of common stock
upon exercise of warrants 239,250 2,393 102,120 104,513
Amortization of unearned
compensation 112,500 112,500
Net loss (654,515) (654,515)
-------------------------------------------------------------------------------------------------
Balance, September 30, 2001 1,500,000 $ 15,000 11,202,112 $ 112,021 $1,553,524 $ (10,000) $(187,500) $(1,519,250) $(36,205)
========= ======== ========== ========= ========== ========= ========= =========== ========
See Notes to Condensed Financial Statements.
F-16
Image Technology Laboratories, Inc.
(A Development Stage Company)
Condensed Statements of Cash Flows
Nine Months Ended September 30, 2001 and 2000
and Period from January 1, 1998
(Date of Inception) to September 30, 2001
(Unaudited)
NINE MONTHS
ENDED SEPTEMBER 30,
2001 2000 CUMULATIVE
------------- ----------- ----------
Operating activities:
Net loss $ (654,515) $ (623,201) $(1,519,250)
Adjustments to reconcile net loss to
net cash used in operating activities:
Amortization of unearned compensation 112,500 112,500 262,500
Common stock issued for services 75,000 75,000
Amortization of capitalized software costs 2,186
Changes in operating assets and liabilities:
Other current assets (6,250) (6,250)
Accounts payable and accrued expenses (20,383) 280
Accrued compensation payable to stockholders 77,789 264,974 375,734
----------- ----------- -----------
Net cash used in operating activities (490,859) (170,727) (809,800)
----------- ----------- -----------
Investing activities - software costs capitalized (6,193) (2,186)
----------- -----------
Financing activities:
Proceeds from issuance of notes payable to
stockholders 100 5,200
Proceeds from issuance of common stock 104,513 125,763
Net proceeds from private placement of units
of common stock and warrants 808,824 1,024,782
Payments of deferred private placement costs (5,000)
----------- ----------- -----------
Net cash provided by financing activities 104,513 808,924 1,150,745
----------- ----------- -----------
Net increase (decrease) in cash (386,346) 632,004 338,759
Cash, beginning of period 725,105 24 --
----------- ----------- -----------
Cash, end of period $ 338,759 $ 632,028 $ 338,759
=========== =========== ===========
See Notes to Condensed Financial Statements.
Image Technology Laboratories, Inc.
(A Development Stage Company)
Notes to Condensed Financial Statements
(Unaudited)
Note 1 - Unaudited interim financial statements:
In the opinion of management, the accompanying unaudited
condensed financial statements reflect all adjustments,
consisting of normal recurring accruals, necessary to present
fairly the financial position of Image Technology Laboratories,
Inc. (the "Company") as of September 30, 2001, its results of
operations and cash flows for the nine months ended September 30,
2001 and 2000, changes in stockholders' equity (deficiency) for
the nine months ended September 30, 2001 and the related
cumulative amounts for the period from January 1, 1998 (date of
inception) to September 30, 2001. Certain terms used herein are
defined in the audited financial statements of the Company as of
December 31, 2000 and for the years ended December 31, 2000 and
1999 and period from January 1, 1998 (date of inception) to
December 31, 2000 (the "Audited Financial Statements") included
elsewhere in this registration statement. Pursuant to rules and
regulations of the Securities and Exchange Commission, 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 this registration statement.
The results of operations for the nine months ended September 30,
2001 are not necessarily indicative of the results of operations
for the full year ending December 31, 2001.
Since inception, the Company has incurred losses resulting in an
accumulated deficit of approximately $1,519,000 at September 30,
2001. The Company currently has no significant sources of revenue
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
revenue prior to the second quarter of the year ending December
31, 2001.
The Company will need additional financing, either by debt or
equity financing, to fund its planned operations beyond its
current level over the next twelve months. At the present time,
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. If the Company is unable to obtain
the required financing, it may have to curtail or terminate its
operations and liquidate its remaining assets and liabilities.
The accompanying condensed financial statements do not include
any adjustments related to the recoverability and classification
of assets or the amount and classification of liabilities that
might be necessary should the Company be unable to continue its
operations as a going concern.
F-17
Image Technology Laboratories, Inc.
(A Development Stage Company)
Notes to Condensed Financial Statements
(Unaudited)
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 nine months ended September 30, 2001 and
2000 in accordance with the "two class" method of computing
earnings (loss) per share set forth in SFAS 128.
Since the Company had net losses for the nine months ended
September 30, 2001, the assumed effects of the exercise of
3,000,000 options and 3,434,862 and 2,819,537 warrants
outstanding at September 30, 2001 and 2000, respectively, would
have been anti-dilutive.
Note 3 - Exercise of warrants:
During the nine months ended September 30, 2001, warrantholders
exercised 88,250 warrants and received 88,250 shares of common
stock at a price of $.50 per share or $44,113 and also exercised
151,000 warrants and received 151,000 shares of common stock at a
price of $.40 per share or $60,400. As of September 30, 2001,
3,434,862 warrants are outstanding and are exercisable at any
time until April 15, 2002.
Note 4 - Subsequent event:
During January 2002, the Company received from one of its
founders net proceeds of $100,000 from the sale of 400,000 shares
of its common stock. In addition, the Company entered into a
marketing/financing agreement with a consultant for the purpose
of generating market awareness of the Company's product and to
seek capital for the Company. The Company's obligation under the
aforementioned agreement will be the issuance of 450,000 shares
of common stock and 100,000 warrants having an exercise price of
$3 per share and a two-year term.
* * *
F-18
PART II
Item 24. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law affords a Delaware
corporation the power to indemnify its present and former directors and officers
under certain conditions. Article SEVENTH of the charter of Image Technology
provides that Image Technology shall indemnify each person who at any time is,
or shall have been, a director or officer of Image Technology, and is threatened
to be or is made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that he or she is, or was, a director or officer of Image
Technology, or is or was serving at the request of Image Technology as a
director, officer, employee, trustee, or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
incurred in connection with any such action, suit or proceeding to the maximum
extent permitted by the Delaware General Corporation Law.
Section 102(b)(7) of the Delaware General Corporation Law gives a
Delaware corporation the power to adopt a charter provision eliminating or
limiting the personal liability of directors to the corporation or its
stockholders for breach of fiduciary duty as directors, provided that such
provision may not eliminate or limit the liability of directors for (a) any
breach of the director's duty of loyalty to the 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
Corporation Law or (d) any transaction from which the director derived an
improper personal benefit. Article NINTH of Image Technology's charter provides
that to the maximum extent permitted by the Delaware General Corporation Law, no
director of Image Technology shall be personally liable to Image Technology or
to any of its stockholders for monetary damages arising out of such director's
breach of fiduciary duty as a director of Image Technology. No amendment to or
repeal of the provisions of Article NINTH shall apply to or have any effect of
the liability or the alleged liability of any director of Image Technology with
respect to any act or failure to act of such director occurring prior to such
amendment or repeal. A principal effect of such Article NINTH is to limit or
eliminate the potential liability of our directors for monetary damages arising
from breaches of their duty of care, unless the breach involves one of the four
exceptions described in (a) through (d) above.
Section 145 of the Delaware General Corporation Law also affords a
Delaware corporation the power to obtain insurance on behalf of its directors
and officers against liabilities incurred by them in those capacities. Image
Technology has procured a directors' and officers' liability and company
reimbursement liability insurance policy that (a) insures directors and officers
of Image Technology against losses (above a deductible amount) arising from
certain claims made against them by reason of certain acts done or attempted by
such directors or officers and (b) insures Image Technology against losses
(above a deductible amount) arising from any such claims, but only if Image
Technology is required or permitted to indemnify such directors or officers for
such losses under statutory or common law or under provisions of Image
Technology's charter or by-laws.
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Item 25. Other Expenses of Issuance and Distribution.
The following table sets forth the various expenses to be paid by Image
Technology in connection with the issuance and distribution of the securities
being registered, other than sales commissions. All amounts shown are estimates
except for amounts of filing and listing fees.
Filing fee of SEC............................................ $8.05
Accounting fees and expenses................................. 3,000
Legal fees and expenses...................................... 6,000
Printing and engraving expenses.............................. 2,000
Transfer Agent's fees ....................................... 1,000
Miscellaneous................................................ 91.95
-----
Total...................................................... $12,100
=======
Item 26. Recent Sales of Unregistered Securities
During the past three years, the Registrant has sold the securities
listed below pursuant to exemptions from registration under the Securities Act.
The information below is presented on a post-stock split basis.
In January 2000, Image Technology issued 500,000 shares of preferred
stock to each of its three founders 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 the Company was offering for sale through a
private placement. The aggregate fair value of the preferred shares of $450,000
is being charged to the Company's results of operations over the terms of the
respective employment contracts.
During March 2000, Image Technology completed an offering of units
for a total consideration of approximately $240,000. Each unit consisted of one
share of common stock and one, one-year warrant to purchase one share of common
stock at an exercise price of $0.40 per share, for an aggregate of 799,729
shares of common stock, to a limited number of accredited investors. The sales
were made in reliance upon exemptions from registration provided under Section
4(2) of the 1933 Act and Rule 506 of Regulation D. The purchasers of these units
acquired these securities for their own account and not with a view to any
distribution thereof to the public.
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During February 2000, Image Technology issued one-year warrants to
purchase 250,000 shares of common stock at an exercise price of $0.40 per share
to Robert Oakes in consideration for services rendered, valued at $60,000, in
reliance upon the exemptions from registration provided under Section 4(2) of
the 1933 Act.
During March 2000, Image Technology issued 250,000 shares of common
stock to Bondy & Schloss LLP in consideration for services rendered, valued at
$75,000, in reliance upon the exemptions from registration provided under
Section 4(2) of the 1933 Act.
During January 2002, Image Technology issued 400,000 shares of common
stock to Kingston Diagnostic Radiology, P.C. pension fund, the sole beneficiary
of which is Dr. Ryon, our president and chief executive officer upon receiving
consideration of $.25 per share or a total of $100,000.
The issuances described above were made in reliance upon the
exemptions from registration set forth in Section 4(2) of the Securities Act
relating to sales by an issuer not involving any public offering. None of the
foregoing transactions involved a distribution or public offering. No
underwriters were engaged in connection with the foregoing issuances of
securities, and no underwriting commissions or discounts were paid.
Item 27. Exhibits
(a) EXHIBITS
EXHIBIT NO. DESCRIPTION
----------- --------------------------------------------------
3.1* Certificate of Incorporation of Image Technology
3.2* Certificate of Amendment to Certificate of Incorporation of Image
Technology dated December 23, 1999
3.3* By-Laws of Image Technology
4.1* Specimen certificate for common stock of Image Technology
4.2* Specimen certificate for preferred stock of Image Technology
4.3* Form of Private Placement Warrant
4.4* Form of Investor Warrant
4.5* Form of Oakes Warrant
4.6** Form of Subscription Agreement
4.7**** Form of Amended Warrant
5.1 Opinion of Bondy & Schloss LLP
10.1* Image Technology 1998 Stock Option Plan
10.2* Stockholders Agreement dated January 16, 1998 among certain
investors and Image Technology
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10.3* Form of Registration Rights Agreement dated February 2000 among
certain stockholders of Image Technology and Image Technology
10.4* Assignment of Intellectual Property Agreement dated as of December
18, 1997 between Image Technology and David Ryon, M. D., Carlton T.
Phelps, M. D. and Lewis M. Edwards.
10.5* Form of Facility Usage and Equipment Lease Agreement by and between
Rockland Radiological Group, P.L.C. and Image Technology dated
January 12, 1998 II-3
10.6* Form of Employment Agreement dated December 21, 1999 between Image
Technology and David Ryon, M. D.
10.7* Form of Employment Agreement dated December 21, 1999 between Image
Technology and Carlton T. Phelps, M. D.
10.8* Form of Employment Agreement dated December 21, 1999 between Image
Technology and Lewis M. Edwards
10.9 Consulting Agreement dated January 16, 2002 between the Company and
MacCaughern Trade Development.
23.1 Consent of J.H. Cohn LLP
23.2 Consent of Bondy & Schloss LLP (included in Exhibit 5.1)
24.1* Power of Attorney (contained on page II-5 of the registration
statement)
*Filed with amendment no. 1 to registration statement on Form SB-2
(No.333-336787) filed on June 6, 2000.
** Filed with amendment no. 2 to registration statement on Form SB-2
(No.333-336787) filed (No. 333-336787) on July 27, 2000.
***Filed with amendment no. 3 to registration statement on Form SB-2
(No.333- 336787) filed (No. 333-336787) on August 6, 2000.
****Filed with post effective amendment no. 1 to registration statement
on Form SB-2 (No.333-336787) filed (No. 333-336787) on October 16, 2001.
(b) FINANCIAL STATEMENT SCHEDULES
All schedules are omitted because they are not applicable or
the required information is shown in the financial statements or the related
notes.
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ITEM 28. UNDERTAKINGS.
(a) The undersigned Registrant hereby undertakes to:
(1) File, during any period in which it offers or sells
securities, a post-effective amendment to this Registration
Statement to;
(i) Include any prospectus required by Section
10(a)(3) for the Securities Act of 1933, as amended
(the "Securities Act");
(ii) Reflect in the prospectus any facts or events
which, individually or together, represent a
fundamental change in the information set forth in
the Registration Statement; and
(iii) Include any additional changed material
information on the plan of distribution.
(2) For determining liability under the Securities Act, treat
each such post-effective amendment as a new registration
statement of the securities offered, and the offering of the
securities at that time to be the initial BONA FIDE offering
thereof.
(3) File a post-effective amendment to remove from
registration any of the securities which remain unsold at the
end of the offering.
(4) Provide to the transfer agent at the closing, certificates
in such denominations and registered in such names as are
required by the transfer agent to permit prompt delivery to
each purchaser.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the small
business issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the small business issuer of expenses incurred or paid by a director, officer or
controlling person of the small business issuer in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small business
issuer will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
-42-
SIGNATURES
In accordance with the requirements of the Securities Act of
1933, as amended, the registrant certifies that it has reasonable grounds to
believe that it meets all of the requirements of filing on Form SB-2 and
authorized this registration statement to be signed on its behalf by the
undersigned, in the City of Kingston, State of New York on February 6, 2002.
IMAGE TECHNOLOGY LABORATORIES, INC.
By /s/David Ryon
----------------
David Ryon, MD,
CEO, President, Chairman of the Board
By /s/ Carlton T. Phelps, M.D.
------------------------------
Carlton T. Phelps, MD,
Chief Financial Officer, Secretary,
Treasurer and Director
By /s/ Lewis M. Edwards
-----------------------
Lewis M. Edwards
Chief Technical Officer and Director
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POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each director and officer whose
signature appears below constitutes and appoints David Ryon, as such person's
true and lawful attorneys-in-fact and agents, will full powers of substitution
and re-substitution, for such person in name, place and stead, to sign in any
and all amendments (including post-effective amendments) to this Registration
Statement on Form SB-2, in any and all capacities, and to file the same, with
all exhibits thereto and all other documents in connection therewith, with the
Securities and Exchange Commission, granting unto such attorneys-in-fact and
agents, and every act and thing requisite and necessary to be done, as fully to
all intents and purposes as he might or could do in person, hereby ratifying and
confirming all that such attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities indicated on February 6, 2002.
SIGNATURE TITLE
/S/ DAVID RYON President, Chief Executive Officer, Director
--------------
David Ryon, M.D.
/S/ CARLTON T. PHELPS Chief Financial Officer, Secretary, Treasurer and
--------------------- Director
Carlton T. Phelps, M.D.
/S/ LEWIS M. EDWARDS Chief Technical Officer and Director
--------------------
Lewis M. Edwards
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