IMAGE TECHNOLOGY LABORATORIES, INC.
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended MARCH 31, 2005 or
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from _______________ to ____________________
Commission File Number: 34-00031307
IMAGE TECHNOLOGY LABORATORIES, INC.
--------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
Delaware 22-53531373
--------------------------------- ------------------
(State or Other Jurisdiction (IRS Employer
of Incorporation or Organization) Identification No.)
602 Enterprise Drive
Kingston, New York 12401
---------------------------------
(Address of Principal Executive Offices)
(845) 338-3366
----------------
(Registrant's Telephone Number)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant as
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. YES NO
As of May 15, 2005, there were 14,638,778 shares of the registrant's common
stock outstanding.
IMAGE TECHNOLOGY LABORATORIES, INC.
INDEX
PAGE NO.
PART I - FINANCIAL INFORMATION 3
Item 1 - Financial Statements 3
Condensed Balance Sheets 3
Condensed Statements of Operations 4
Condensed Statement of Changes in Stockholders' Equity (Deficiency) 5
Condensed Statements of Cash Flows 6
Notes to Condensed Financial Statements 7
Item 2 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 12
Item 3 - Controls and Procedures 16
PART II - OTHER INFORMATION 17
Item 1 - Legal Proceedings 17
Item 2 - Changes in Securities 17
Item 3 - Defaults Upon Senior Securities 17
Item 4 - Submission of Matters to a Vote of Security Holders 17
Item 5 - Other Information 17
Item 6 - Exhibits and Reports on Form 8-K 17
SIGNATURES 18
EXHIBIT 31.1 - CERTIFICATION 19
EXHIBIT 32.1 - ADDITIONAL CERTIFICATION 20
IMAGE TECHNOLOGY LABORATORIES, INC.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
CONDENSED BALANCE SHEETS
MARCH 31, DECEMBER 31,
2005 2004
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 19,777 $ 4,212
Accounts receivable 61,129 61,048
Prepaid expenses and other current assets 26,044 17,067
----------- -----------
TOTAL CURRENT ASSETS 106,950 82,327
Equipment and improvements, net of accumulated
depreciation and amortization of $98,703 and $85,963 185,839 196,233
----------- -----------
TOTAL ASSETS $ 292,789 $ 278,560
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 260,870 $ 223,695
Current portion of long-term debt 92,450 93,633
Notes payable 63,252 65,407
Current portion of notes payable to stockholders 16,525 3,400
----------- -----------
TOTAL CURRENT LIABILITIES 433,097 385,135
Long-term debt, less current maturities 88,310 107,130
Notes payable to stockholders, less current portion 91,875 105,000
Accrued compensation payable to stockholders 27,072 27,072
----------- -----------
TOTAL LIABILITIES $ 640,354 625,337
----------- -----------
STOCKHOLDERS' EQUITY (DEFICIENCY):
Preferred stock, par value $.01 per share; 5,000,000 shares authorized;
1,500,000 shares issued and outstanding 15,000 15,000
Common stock, par value $.01 per share; 50,000,000 shares authorized;
14,388,778 and 13,863,778 shares issued and outstanding 143,888 138,638
Additional paid-in capital 2,966,047 2,866,297
Accumulated deficit (3,472,500) (3,366,712)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY (DEFICIENCY) (347,565) (346,777)
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY) $ 292,789 $ 278,560
=========== ===========
See Notes to Condensed Financial Statements.
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IMAGE TECHNOLOGY LABORATORIES, INC.
CONDENSED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 2005 AND 2004
(UNAUDITED)
THREE MONTHS
ENDED MARCH 31,
2005 2004
------------ ------------
REVENUE:
Service income -- $ 137,435
Systems / software: license fees and sales $ 98,048 138,717
------------ ------------
TOTAL REVENUE 98,048 276,152
COST OF REVENUE: -- 27,500
------------ ------------
GROSS PROFIT
98,048 248,652
------------ ------------
COSTS AND EXPENSES:
Research and development 78,869 79,830
Sales and marketing 25,942 55,474
General and administrative 99,025 118,101
------------ ------------
TOTAL COSTS AND EXPENSES 203,836 253,405
------------ ------------
$ (105,788) $ (4,753)
============ ============
NET LOSS PER COMMON SHARE:
Basic $ (0.01) $ (0.00)
Diluted $ (0.01) $ (0.00)
============ ============
AVERAGE NUMBER OF SHARES USED IN COMPUTATION:
Basic 15,608,778 15,265,564
Diluted 15,608,778 15,265,564
============ ============
See Notes to Condensed Financial Statements.
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IMAGE TECHNOLOGY LABORATORIES, INC.
CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
THREE MONTHS ENDED MARCH 31, 2005
(UNAUDITED)
TOTAL
PREFERRED STOCK COMMON STOCK ADDI- STOCK-
NUMBER NUMBER TIONAL ACCUMU- HOLDERS'
OF OF PAID-IN LATED EQUITY
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT (DEFICIENCY)
------ ------ ------ ------ ------- ------- ------------
Balance, January 1, 2005 1,500,000 $ 15,000 13,863,778 $ 138,638 $ 2,866,297 $(3,366,712) $ (346,777)
Issuance of common stock
in private placement 525,000 5,250 99,750 105,000
Issuance of common stock and
options for compensation
Accrued compensation
contributed to capital
Net loss (105,788) (105,788)
--------- ----------- ---------- ----------- ----------- ----------- -----------
Balance, March 31, 2005 1,500,000 $ 15,000 14,388,778 $ 143,888 $ 2,966,047 $(3,472,500) $ (347,565)
========= =========== ========== =========== =========== =========== ===========
See Notes to Condensed Financial Statements.
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IMAGE TECHNOLOGY LABORATORIES, INC.
CONDENSED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 2005 AND 2004
(UNAUDITED)
2005 2004
OPERATING ACTIVITIES:
Net loss $(105,788) $ (4,753)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization of equipment
and improvements 12,743 10,908
Common stock and options issued for services -- --
Changes in operating assets and liabilities:
Accounts receivable (81) 3,073
Prepaid expenses and other current assets (8,977) 59
Accounts payable and accrued expenses 37,175 (46,687)
Deferred revenues -- (35,000)
Accrued compensation payable to stockholders -- 17,692
--------- ---------
NET CASH USED IN OPERATING ACTIVITIES (64,928) (54,708)
--------- ---------
INVESTING ACTIVITIES - purchase of equipment and improvements (2,349) (48,302)
--------- ---------
FINANCING ACTIVITIES:
Proceeds from exercise of warrants
Proceeds from private placement of common stock 105,000 50,000
Proceeds from notes payable and long-term debt 9,787 263,998
Repayments of notes payable and long-term debt (31,945) (3,376)
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 82,842 310,622
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 15,565 207,612
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 4,212 195,257
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 19,777 $ 402,869
========= =========
SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
Contribution of accrued compensation payable to
stockholders to capital $ 0 $ 159,692
========= =========
See Notes to Condensed Financial Statements.
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IMAGE TECHNOLOGY LABORATORIES, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION:
In the opinion of management, the accompanying unaudited condensed
financial statements reflect all adjustments, consisting of normal
recurring accruals, necessary to present fairly the financial position of
Image Technology Laboratories, Inc. (the "Company") as of March 31, 2005,
its results of operations for the three months ended March 31, 2005 and
2004, changes in stockholders' equity (deficiency) for the three months
ended March 31, 2005 and cash flows for the three months ended March 31,
2005 and 2004. Certain terms used herein are defined in the audited
financial statements of the Company as of December 31, 2004 and for the
years ended December 31, 2003 and 2002 (the "Audited Financial
Statements") included in the Company's Annual Report on Form 10-KSB
previously filed with the Securities and Exchange Commission (the "SEC").
Pursuant to rules and regulations of the SEC, certain information and
disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United
States of America have been condensed in or omitted from these financial
statements unless significant changes have taken place since the end of
the most recent fiscal year. Accordingly, the accompanying unaudited
condensed financial statements should be read in conjunction with the
Audited Financial Statements and the other information included in the
Form 10-KSB.
The results of operations for the three months ended March 31, 2005 are
not necessarily indicative of the results of operations to be expected for
the full year ending December 31, 2005.
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") as explained in Note 1 to the financial statements in the Form
10-KSB.
The rights of the Company's preferred and common stockholders are
substantially equivalent. The Company has included the 1,500,000
outstanding preferred shares from the date of their issuance in the
weighted average number of shares outstanding in the computation of basic
loss per share for the three months ended March 31, 2005 and 2004, 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 three months ended March 31, 2005
and 2004, the assumed effects of the exercise of options to purchase
2,650,000 and 2,000,000 common shares outstanding at March 31, 2005 and
2004, respectively, would be anti-dilutive and, therefore, they have not
been considered in the calculations of diluted per share amounts in the
accompanying condensed statements of operations for those periods.
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IMAGE TECHNOLOGY LABORATORIES, INC.
NOTE 3 - WORKING CAPITAL LOAN AGREEMENT:
During September 2002, the Company entered into a one-year working capital
loan agreement with a financial institution for borrowings of up to
$75,000. The agreement automatically renews annually unless one of the
parties gives appropriate notice for cancellation. Outstanding borrowings
bear interest payable monthly at 1% above the prime rate, and are
guaranteed by the Estate of the Company's principal stockholder, Dr. David
Ryon. At March 31, 2005, there was $63,252 outstanding under this
agreement.
NOTE 4 - NOTES PAYABLE TO VALLEY COMMERCIAL CAPITAL LLC:
In February 2004, the Company borrowed $125,000 from Valley Commercial
Capital, LLC ("Valley"). This loan is evidenced by a promissory note,
which provides for interest at 8% per annum and calls for monthly payments
of principal and interest of $3,917 through February 2, 2007. In March
2004, the Company borrowed an additional $138,997 from Valley, also
evidenced by a promissory note, which provides for interest at 8% per
annum and calls for monthly payments of principal and interest of $4,356
through March 29, 2007. As of March 31, 2005, the outstanding balances on
these loans aggregated $179,825.71. These loans are secured by the
personal guarantee of the estate of Dr. David Ryon.
NOTE 5 - NOTES PAYABLE TO STOCKHOLDERS:
During November and December 2004, Dr. David Ryon, the Company's principal
stockholder, President, and Chief Executive Officer, until his death in
December 2004, loaned the Company an aggregate of $105,000. In December
2004, to memorialize this loan, he executed, as President and Chief
Executive Officer, on behalf of the Company, a demand promissory note
payable to himself and bearing interest at 10% per annum. He also executed
a security agreement, for himself on behalf of the Company, granting to
himself a security interest in all of the Company's assets not previously
encumbered as security for full payment under the note. Prior to April 12,
2005, the Company negotiated with the Estate of Dr. David Ryon a 24 month
payment schedule, beginning in January 2006. The Company's Board of
Directors approved the revised terms of the promissory note on April 12,
2005. The entire principal amount of $105,000 was outstanding at March 31,
2005. Principal payments of $52,500 are required in both 2006 and 2007,
and the Company is accruing interest payments during 2005.
NOTE 6 - COMMON STOCK:
In February 2005, the Company concluded a private placement of its common
stock with each member of its Board of Directors and two key employees.
Pursuant to such transaction, the Company sold an aggregate of 525,000
shares at $.20 per share, the approximate fair value on the date of
closing, resulting in aggregate proceeds to the Company of $105,000.
-8-
IMAGE TECHNOLOGY LABORATORIES, INC.
NOTE 7 - OPTIONS
On January 24, 2005, the Company granted options under the Company's
option plan to several key employees, for the purchase of 550,000 shares
of its common stock at $.20 per share, its fair market value on the date
of grant, which are exercisable through January 24, 2015.
The Company continues to measure compensation cost related to stock
options issued to em-ployees using the intrinsic value method of
accounting prescribed by Accounting Principles Board Opinion No. 25 ("APB
25"), "Accounting For Stock Issued To Employees". The Company has adopted
the disclosure-only provisions of Statement of Financial Accounting
Standards No. 123 ("SFAS 123"), "Accounting For Stock-Based Compensation."
Accordingly, no earned or unearned compensation cost was recognized in the
accompanying condensed financial statements for the stock options granted
by the Company to these employees, since all of those options have been
granted at exercise prices that equaled or exceeded the market value at
the date of grant. The Company's historical net loss and loss per share
and pro forma net loss and loss per share, assuming compensation cost had
been determined in 2005 and 2004 based on the fair value at the grant date
for all awards by the Company consistent with the provisions of SFAS 123,
are set forth below:
THREE MONTHS ENDED
MARCH 31, MARCH 31,
2005 2004
--------------------------
Net loss, as reported $(105,788) $ (4,753)
Deduct total stock-based employee
compensation expense determined
under a fair value based method
for all awards (102,734) --
--------------------------
Net loss - pro forma $(208,522) $ (-)
==========================
Net loss per share
Basic - as reported $ (0.01) $ (0.00)
==========================
Basic - pro forma $ (0.01) $ (0.00)
==========================
The fair value of options granted were determined using a Black-Scholes
pricing model in accordance with SFAS 123, with the following assumptions
used during the three months ended March 31, 2005 and 2004:
March 31, March 31,
2005 2004
---- ----
Risk-free interest rate 4.22% -
Expected Volatility 110% -
Expected Years of option term 10 -
Expected Dividends 0% -
As a result of amendments to SFAS 123, the Company will be required to
expense the fair value of employee stock options over the vesting period
beginning with its fiscal quarter ending March 31, 2006.
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IMAGE TECHNOLOGY LABORATORIES, INC.
The following table summarizes information about stock options outstanding
at March 31, 2005.
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------ ------------------------------
WEIGHTED
NUMBER AVERAGE WEIGHTED NUMBER WEIGHTED
EXERCISE OUTSTANDING REMAINING AVERAGE OUTSTANDING AVERAGE
PRICE AT MARCH CONTRACTUAL EXERCISE AT MARCH EXERCISE
RANGE 31, 2005 LIFE (YEARS) PRICE 31, 2005 PRICE
----- -------- ------------ ----- -------- -----
$ 0.33 2,000,000 5.3 $ 0.33 2,000,000 $ 0.33
$ 0.75 100,000 9.1 $ 0.75 -- $ 0.75
$ 0.20 550,000 9.9 $ 0.20 550,000 $ 0.20
--------- ----- ------ --------- --------
2,650,000 6.4 $ 0.32 2,550,000 $ 0.30
========= ===== ====== ========= ========
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IMAGE TECHNOLOGY LABORATORIES, INC.
NOTE 8 - SUBSEQUENT EVENTS:
In April 2005, the Company concluded a private placement of its common
stock with Mr. Edwards, its Chairman of the Board of Directors. Pursuant
to such transaction, the Company sold an aggregate of 250,000 shares at
$.20 per share, the approximate fair valuation on the date of closing,
resulting in aggregate proceeds to the Company of $50,000.
On April 1, 2005, the Company granted options under the Company's option
plan to Mr. Muradian, its Chief Executive Officer, for the purchase of
700,000 shares of its common stock at $.20 per share, its fair market
value on the date of grant, which are exercisable through April 1, 2015.
The options vest 25% on April 1, 2006, 25% on April 1, 2007, 25% on April
1, 2008 and 25% on April 1, 2009.
On April 14, 2005, the Company granted options under the Company's options
plan to Mr. Edwards, its Chairman of the Board of Directors, for the
purchase of 800,000 shares of its common stock at $.22 per share, 110% of
its the fair market value on the date of grant, which are exercisable
through April 14, 2015. The options vest 25% on January 1, 2006, 25% on
January 1, 2007, 25% on January 1, 2008 and 25% on January 1, 2009.
-11-
IMAGE TECHNOLOGY LABORATORIES, INC.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The following is a discussion of certain factors affecting Image Technology
Laboratories, Inc.'s results of operations, assets, liquidity and capital
resources. You should read the following discussion and analysis in conjunction
with Image Technology Laboratories, Inc.'s unaudited condensed financial
statements and related notes, which are included elsewhere in this filing.
Image Technology Laboratories, Inc. ("we", "our" or the "Company") is a medical
image and information management company in the healthcare information systems
market. We were incorporated in Delaware on December 5, 1997. The Company has
developed a single database "Radiology Information System and Picture Archiving
and Communications System" known as RIS/PACS for use in the secure management of
patient information and diagnostic images. Our lead product is the WarpSpeed
system. Through its unique, modular architecture the Company has created a total
radiology business solution that is readily scaled and easily upgraded. These
features will allow the Company to provide products tailored to the size of its
customers and to keep its customers at the forefront of future technological
advances by enabling the Company to easily update existing systems.
We expect that we will derive our future revenues primarily from sales of our
WarpSpeed system and associated maintenance charges along with Application
Service Provider (ASP) usage fees. We obtained our first contract for the sale
of WarpSpeed and related hardware and maintenance services in August 2002.
Accordingly, we are no longer in the development stage for accounting purposes,
but we continue to refine and enhance the capabilities of our WarpSpeed system.
We have had recurring losses and negative cash flows from our operating
activities since inception. We have cash of approximately $19,777 and a working
capital deficiency of approximately $326,147 as of March 31, 2005. In February
and April 2005, in private placements of its common stock, all of the individual
members of our Board of Directors and certain key employees purchased an
aggregate of 775,000 shares of our common stock at $.20 per share, resulting in
proceeds to the Company of $155,000.
.
-12-
IMAGE TECHNOLOGY LABORATORIES, INC.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2005
COMPARED WITH THE THREE MONTHS ENDED MARCH 31, 2004
REVENUE:
For the three months ended March 31, 2005, our total revenue was $98,048, a
decrease of $178,104 from the $276,152 in the prior year's comparable period.
This decrease is in large part attributable to elimination of service revenue
provided by Dr. David Ryon, our former Chief Executive Officer, pursuant to his
employment agreement. Additionally, during the quarter ended March 31, 2004,
revenues included $66,000 from the sale of our initial unit recognized ratably,
completed during fourth quarter of 2004.
COST OF REVENUE:
Our cost of revenue has been recognized as the direct expense incurred in
revenue generation. In 2004 this included the direct expense associated with the
service revenue of Dr. David Ryon, our former Chief Executive Officer. Cost of
revenue decreased by $27,500 for the quarter ended March 31, 2005 from the same
quarter 2004.
RESEARCH AND DEVELOPMENT EXPENSES:
During the three months ended March 31, 2005, we incurred research and
development expenses of $78,869, approximately equal to research and development
expenses of $79,830 during the same period of 2004.
GENERAL AND ADMINISTRATIVE EXPENSES:
During the three months ended March 31, 2005, we incurred general and
administrative expenses of $99,025, as compared with general and administrative
expenses of $118,101 during the same period of 2004, a decrease of $19,076, or
16%.
SALES AND MARKETING EXPENSES:
During the three months ended March 31, 2005 we incurred sales and marketing
expenses of $25,942, as compared with sales and marketing expenses of $55,474
during the same period of 2004, a decrease of $29,532. The Company has focused
its efforts on controlling costs while identifying appropriate sales personnel
and resources. These costs are expected to grow as the company executes its
business plan.
NET LOSS:
We incurred a loss of approximately $105,788 ($.01 per share) for the three
months ended March 31, 2005 as compared with a loss of $4,753 (less than $.01
per share) for the three months ended March 31, 2004. The majority of the
increased loss can be attributable to the elimination of service revenue
provided by Dr. David Ryon, offset by a reduction in operating expenses, mainly
General & Administrative and Sales & Marketing expenses.
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IMAGE TECHNOLOGY LABORATORIES, INC.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2005, our total assets were $292,789, an increase of $14,229 from
total assets of $278,560 on December 31, 2004.
As of March 31, 2005, we had cash and cash equivalents and a working capital
deficiency of $19,777 and $326,147, respectively. The capital deficiency was
mostly due to $130,000 owed to a former officer and Director of the Company as a
result of an arbitration proceeding, $92,450 for the current portion of two bank
loans and $63,252 for a revolving line of credit with a bank.
Net cash used in our operating activities for the 3 months ending March 31, 2005
of $64,928 was substantially attributable to our net loss of $105,788, offset
mostly by an increase in accounts payable and accrued expenses of $37,175. This
net cash used in our operating activities was financed with $105,000 resulting
from a private placement of our common stock, offset by approximately $23,000 in
net repayments of bank debt. Investing activities (purchase of equipment and
improvements) for the quarter ending March 31, 2005 totaled only $2,349.
The foregoing activities, i.e., operating, investing and financing, resulted in
our net cash increase of $15,565 for the three months ended March 31, 2005.
During September 2002, we obtained a $75,000 working capital loan from a
financial institution. As of March 31, 2005, we have approximately $63,252
outstanding under that loan. Additionally, in February and March 2004, we
obtained two loans from a different financial institution that provided us with
an aggregate principal amount of approximately $264,000. As of March 31, 2005,
we had approximately $179,825 outstanding under these arrangements. In December
2004, we borrowed $105,000 from our former Chief Executive Officer, which will
be repaid over 24 months, beginning in January 2006. Principal payments are
$52,500 in 2006 and 2007.
In January 2004, we closed a five-year contract for the WarpSpeed system with
St. Anthony Community Hospital, Warwick, NY. St. Anthony Community Hospital is a
member of Bon Secours Charity Health System, which owns and operates 32 health
care facilities.
In March 2005, the Company signed a contract for the sale of three of its
WarpSpeed RIS/PACS systems to InMed Diagnostic Services, LLC, at multi-modality
imaging centers. In addition to implementing our solution at the largest InMed
site in Columbia, SC, we are installing at two Massachusetts sites specializing
in women's health care.
We require cash to fund our working capital needs and capital expenditures, as
well as to meet existing commitments. Such commitments include payments to our
officers who have employment contracts, payments of existing loans including our
line of credit, two notes payable which call for aggregate monthly payments of
approximately $8,300 through March 2007, one note with monthly payments of
approximately $4800 through December 2007, and $800 per month pursuant to a
five-year lease commitment ending in October 2007 for our operations center in
Kingston, New York. At times, in order to help in maximizing our working
capital, our directors, officers and employees have contributed to capital or
deferred compensation due under their agreements. It is anticipated, but not
assured, that, should the need arise, such contributions or deferrals might be
available to us in the future. Additionally, we are considering outside sources
of equity funds and other types of financing in order to help support our
anticipated growth. There can be no assurance that such efforts will be
successful.
-14-
IMAGE TECHNOLOGY LABORATORIES, INC.
Management believes that as a result of the proceeds from financing activities,
as well as anticipated cash flow generated by sales of its RIS/PACS solution (in
addition to the current cash flow resulting from our installed ASP base), the
Company will be able to continue to meet its obligations as they become due
through at least December 31, 2005. Management also believes, that if needed,
the Company will be able to obtain additional capital resources from financing
through financial institutions and other unrelated sources and/or through
additional related party loans and private placements. However, there can be no
assurance that the Company will become profitable or that financing will be
available. Accordingly, the accompanying financial statements do not include any
adjustments to reflect the possible future effects on the recoverability and
classification of assets or the amount and classification of liabilities that
may result from the outcome of this uncertainty.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In February 2005, the Company concluded a private placement of its common stock
with each member of its Board of Directors and two key employees. Pursuant to
such transaction, the Company sold an aggregate of 525,000 shares at $.20 per
share, the approximate and fair value on the date of closing, resulting in
aggregate proceeds to the Company of $105,000.
In April 2005, the Company concluded a private placement of its common stock
with the Chairman of its Board of Directors. Pursuant to such transaction, the
Company sold an aggregate of 250,000 shares at $.20 per share, the approximate
fair value on the date of closing, resulting in aggregate proceeds to the
company of $50,000.
FORWARD-LOOKING STATEMENTS
When used in the Quarterly Report on Form 10-QSB, the words "may", "will",
"should", "expect", "believe", "anticipate", "continue", "estimate", "project",
"intend" and similar expressions are intended to identify forward-looking
statements within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act regarding events, conditions and financial trends that
may affect our future plans of operations, business strategy, results of
operations and financial condition. We wish to ensure that such statements are
accompanied by meaningful cautionary statements pursuant to the safe harbor
established in the Private Securities Litigation Reform Act of 1995. Prospective
investors are cautioned that any forward-looking statements are not guarantees
of future performance and are subject to risks and uncertainties and that actual
results may differ materially from those included within the forward-looking
statements as a result of various factors including our ability to consummate,
and the terms of, acquisitions, if any. Such forward-looking statements should,
therefore, be considered in light of various important factors, including those
set forth herein and others set forth from time to time in our reports and
registration statements filed with the Securities and Exchange Commission (the
"Commission"). We disclaim any intent or obligation to update such
forward-looking statements.
-15-
IMAGE TECHNOLOGY LABORATORIES, INC.
ITEM 3 - CONTROLS AND PROCEDURES
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
Our Chief Executive Officer who is our Principal Accounting Officer, after
evaluating the effectiveness of the Company's disclosure controls and procedures
(as defined in the Securities Exchange Act of 1934 Rules 13a-14(c) and 15d-14(c)
as of the end of the period covered by this report (the "Evaluation Date")),
have concluded that as of the Evaluation Date, our disclosure controls and
procedures were adequate and effective to ensure that material information
relating to the Company would be made known to them by others within the
Company, particularly during the period in which this quarterly report on Form
10-QSB was being prepared.
CHANGES IN INTERNAL CONTROLS
There were no significant changes in our internal controls or in other factors
that could significantly affect our disclosure controls and procedures
subsequent to the Evaluation Date, nor any significant deficiencies or material
weaknesses in such disclosure controls and procedures requiring corrective
actions. As a result, no corrective actions were taken.
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IMAGE TECHNOLOGY LABORATORIES, INC.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
During the quarter, there were no significant developments in our legal
proceedings. For a detailed discussion of our legal proceedings, please refer to
our Annual Report on Form 10-KSB for the fiscal year ended December 31, 2004.
ITEM 2 - CHANGES IN SECURITIES
During the quarter, we issued 525,000 shares of our common stock in a private
placement exempt from registration pursuant to Section 4(2) of the Securities
Act of 1933, as amended, for $.20 per share, resulting in aggregate proceeds of
$105,000 to be used for working capital purposes.
Subsequently, in April 2005 we issued 250,000 shares of our common stock in a
private placement exempt from registration purposes pursuant to Section 4(2) of
the Securities Act of 1933, as amended, for $.20 per share, resulting in
aggregate proceeds of $50,000 to be used for working capital purposes.
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS
None
ITEM 5 - OTHER INFORMATION
None.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS.
31.1 Certification of Chief Executive Officer and Principal Accounting
Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification of Chief Executive Officer and Principal Accounting
Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(b) REPORTS ON FORM 8-K.
None.
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IMAGE TECHNOLOGY LABORATORIES, INC.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
/S/ BARRY C. MURADIAN
-----------------------
BARRY C. MURADIAN, CHIEF EXECUTIVE OFFICER
AND PRINCIPAL ACCOUNTING OFFICER
JUNE 13, 2005
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