UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
[Mark One]
For the quarterly period ended
or
For the transition period from _____to______
Commission file number:
(Exact name of registrant as specified in its charter)
| (State of Incorporation) | (IRS Employer Ident. No.) | |
| (Address of Principal Executive Offices) | (Zip Code) |
Registrant’s telephone number:
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
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 was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Yes ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non- accelerated filer, a smaller reporting company, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ | Smaller reporting company |
| Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)
Yes
The number of shares outstanding of the issuer’s common stock
as of November 14, 2024:
IMAGING DIAGNOSTIC SYSTEMS, INC.
i
Item 1. Financial Statements
IMAGING DIAGNOSTIC SYSTEMS, INC.
Balance Sheets
| (unaudited) | ||||||||
| September 30, 2024 | June 30, 2024 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash | $ | $ | ||||||
| Royalty receivable | ||||||||
| Due from related party, net of allowance | ||||||||
| Prepaid expenses and deposits | ||||||||
| Total current assets | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Deficit | ||||||||
| Current liabilities: | ||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||
| Accrued payroll taxes and penalties | ||||||||
| Promissory notes, related parties | ||||||||
| Accrued interest, related parties | ||||||||
| PPP loan payable | ||||||||
| Total current liabilities | ||||||||
| Total liabilities | ||||||||
| Commitment and Contingencies (Note 14) | ||||||||
| Temporary equity | ||||||||
| Convertible Preferred Series L | ||||||||
| Total temporary equity | ||||||||
| Stockholders’ Deficit: | ||||||||
| Preferred stock, par, | ||||||||
| Common stock, par value, | ||||||||
| Accumulated Deficit | ( | ) | ( | ) | ||||
| Total stockholders’ deficit | ( | ) | ( | ) | ||||
| Total liabilities and stockholders’ deficit | $ | $ | ||||||
See accompanying notes to the unaudited financial statements
1
IMAGING DIAGNOSTIC SYSTEMS, INC.
Statements of Operations
(unaudited)
| Three Months Ended | Three Months Ended | |||||||
| September 30, 2024 | September 30, 2023 | |||||||
| Total Revenue | $ | $ | ||||||
| Cost of Sales | ||||||||
| Gross Profit | ||||||||
| Operating Expenses: | ||||||||
| General and administrative | ||||||||
| Sales and marketing | ||||||||
| Consulting expenses | ||||||||
| Total Operating Expenses | ||||||||
| Operating Loss | ( | ) | ( | ) | ||||
| Other Expense | ||||||||
| Interest expense | ( | ) | ( | ) | ||||
| Total Other Expense | ( | ) | ( | ) | ||||
| Net Loss | ( | ) | ( | ) | ||||
| Preferred Stock Dividends | ( | ) | ( | ) | ||||
| Net Loss Available to Common Stockholders | $ | ( | ) | $ | ( | ) | ||
| Net Loss per common share: | ||||||||
| Basic and diluted | $ | ( | ) | $ | ( | ) | ||
| Weighted average number of common shares outstanding: | ||||||||
| Basic and diluted | ||||||||
See accompanying notes to the unaudited financial statements
2
IMAGING DIAGNOSTIC SYSTEMS, INC.
Statements of Changes in Stockholders’ Deficit
For the three months ended September 30, 2024 and 2023
(unaudited)
| Common Stock | Total | |||||||||||||||
| Number of | Accumulated | Stockholders’ | ||||||||||||||
| Shares | Amount | Deficit | Deficit | |||||||||||||
| Balance at June 30, 2024 | $ | $ | ( | ) | $ | ( | ) | |||||||||
| Cumulative Dividend on Series L CV Preferred | - | ( | ) | ( | ) | |||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||
| Balance at September 30, 2024 | $ | $ | ( | ) | $ | ( | ) | |||||||||
| Balance at June 30, 2023 | $ | $ | ( | ) | $ | ( | ) | |||||||||
| Cumulative Dividend on Series L CV Preferred | - | ( | ) | ( | ) | |||||||||||
| Net loss | - | ( | ) | ( | ) | |||||||||||
| Balance at September 30, 2023 | $ | $ | ( | ) | $ | ( | ) | |||||||||
See accompanying notes to the unaudited financial statements
3
IMAGING DIAGNOSTIC SYSTEMS, INC.
Statements of Cash Flows
(unaudited)
| Three Months Ended | Three Months Ended | |||||||
| September 30, 2024 | September 30, 2023 | |||||||
| Net loss | $ | ( | ) | $ | ( | ) | ||
| Changes in assets and liabilities: | ||||||||
| Decrease (increase) in royalty receivable | ( | ) | ||||||
| Decrease (increase) in due from related parties | ( | ) | ||||||
| Increase in accrued related parties interest | ||||||||
| Increase in accounts payable and accrued expenses | ( | ) | ||||||
| Total adjustments | ||||||||
| Net cash used in operating activities | ( | ) | ( | ) | ||||
| Cash flows from financing activities: | ||||||||
| Proceeds from promissory notes, related party | ||||||||
| Net cash provided by financing activities | ||||||||
| Net Increase (decrease) in cash and cash equivalents | ( | ) | ||||||
| Cash at the beginning of period | ||||||||
| Cash at the end of the period | $ | $ | ||||||
| Supplemental Disclosure of cash flow information: | ||||||||
| Cash paid for interest | $ | $ | ||||||
| Cash paid for taxes | $ | $ | ||||||
See accompanying notes to the unaudited financial statements
4
IMAGING DIAGNOSTIC SYSTEMS, INC.
Notes to Unaudited Financial Statements
September 30, 2024
(1) ORGANIZATION AND NATURE OF BUSINESS
Imaging Diagnostic Systems, Inc. (the “Company” or “IDSI”) was a medical technology company that developed a new, non-invasive CT scanner called CTLM® that used a laser beam in place of ionizing X-ray for breast imaging. This technology is called Diffuse Optical Tomography. The CTLM® provided an adjunctive imaging modality to other methods of imaging the breast such as X-ray mammography, MRI and ultrasound.
In the fourth quarter of fiscal 2023, the Company terminated its CTLM® business due to the lack of financing and the absence of a realistic prospect of achieving profitability after accumulating substantial operating losses for many years. Since the beginning of fiscal 2024 the Company has been focused on seeking new business opportunities to replace its failed legacy business through a reverse merger transaction. While the Company has considered several opportunities, it has yet to enter into any definitive agreement and remains a shell company.
Since inception in December 1993 as a Florida corporation and subsequently its reverse merger with Alkan Corp., a New Jersey Corporation on April 14, 1994, we continued operations and changed our state of incorporation from New Jersey to Florida, effective July 1, 1995.
(2) GOING CONCERN AND MANAGEMENT’S PLANS
The accompanying financial statements are prepared assuming the Company
will continue as a going concern. As of September 30, 2024, the Company had an accumulated deficit of $
The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty.
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Basis of presentation and use of estimates
The financial statements are prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“U.S. GAAP”). The unaudited interim financial information furnished herein reflects all adjustments, consisting only of normal recurring items, which in the opinion of management are necessary to fairly state the Company’s financial position, results of operations and cash flows for the dates and periods presented and to make such information not misleading. The preparation of financial statements in conformity with Generally Accepted Accounting Principles in the United States requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates and assumptions also include the valuations of certain financial instruments, stock-based compensation, deferred tax assets, the outcome of litigation and tax matters, and other matters that affect the statements of financial condition and related disclosures. Actual results could differ materially from these estimates.
5
IMAGING DIAGNOSTIC SYSTEMS, INC.
Notes to Unaudited Financial Statements
September 30, 2024
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
These unaudited financial statements should be read in conjunction with the Company’s audited financial statements for the fiscal year ended June 30, 2024, contained in our Annual Report on Form 10-K as filed with the Securities and Exchange Commission (the “Commission”) on September 30, 2024. The results of operations for the three months ended September 30, 2024, are not necessarily indicative of results to be expected for any other interim period or the fiscal year ending June 30, 2025.
(b) Revenue recognition
The Company follows Revenue from Contracts with Customers (Topic 606) (“ASC 606”). The Company sells medical imaging products, parts, and services where permitted to independent distributors and in certain unrepresented territories directly to end-users. The Company recognizes revenue when obligations under the terms of a contract with the customer are satisfied. Product sales occur once control is transferred upon delivery to the customer. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods. The amount of consideration the Company receives and revenue the Company recognizes varies with changes in customer incentives the Company offers to its customers and their customers. Any discounts, sales incentives or similar arrangements with the customer are estimated at time of sale and deducted from revenue. Sales taxes and other similar taxes are excluded from revenue.
The Company also receives royalties pursuant to
a licensing relationship with Trifoil Imaging. Revenue is recognized in the reporting periods in which royalties are due to the Company.
During the three months ended September 30, 2024 and 2023, the Company recognized revenues from royalties of $
(c) Allowance for doubtful accounts
In the event that management determines that a receivable becomes uncollectible, or events or circumstances change, which result in a temporary cessation of payments from the distributor, we will make our best estimate of probable or potential losses in our accounts receivable balance using the allowance method for each quarterly period. Management will review the receivables at the end of each fiscal year and the appropriate allowance will be made based on current available evidence and historical experience.
Our allowance for doubtful accounts was $
(d) Cash and cash equivalents
Holdings of highly liquid investments with original maturities of three months or less and investment in money market funds are considered to be cash equivalents by the Company. There were no cash equivalents at September 30, 2024 and June 30, 2024.
(e) Concentration of Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable.
The Company places its cash and cash equivalents with high-quality
financial institutions. At times, balances in the Company’s cash accounts may exceed the Federal Deposit Insurance Corporation limit
of $
The Company recorded revenues of $
6
IMAGING DIAGNOSTIC SYSTEMS, INC.
Notes to Unaudited Financial Statements
September 30, 2024
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
(f) Inventory
Inventories, consisting principally of raw materials, work-in-process (including completed units under testing), finished goods and units placed on consignment, are carried at the lower of cost and net realizable value. Cost is determined using the first-in, first-out (FIFO) method. Raw materials consist of purchased parts, components and supplies. Work-in-process includes completed units undergoing final inspection and testing. The Company periodically reviews the value of items in inventory and records write-downs or write-offs based on its assessment of obsolete inventory. The Company maintains an allowance for obsolete inventory and generally makes inventory value adjustments against the allowance.
(g) Property and equipment
Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization are computed using straight-line methods over the estimated useful lives of the related assets. Expenditures for renewals and betterments which increase the estimated useful life or capacity of the asset are capitalized; expenditures for repairs and maintenance are expensed when incurred.
(h) Research and development
Research and development expenses consist principally of expenditures for equipment and outside third-party consultants, raw materials which are used in testing and the development of the Company’s CTLM® device or other products and product software. The non-payroll related expenses include testing at outside laboratories, parts associated with the design of initial components and tooling costs, and other costs which do not remain with the developed CTLM® device.
(i) Net loss per share
The Company relies on the guidance provided by ASC 260, (“Earnings per Share”), which requires the reporting of both basic and diluted earnings per share. Basic net loss per share is determined by dividing loss available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted loss per share reflects the potential dilution that could occur if options or other contracts to issue common stock were exercised or converted into common stock, as long as the effect of their inclusion is not anti-dilutive.
The Company had
The Company had
(j) Stock-based compensation
We follow ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.
The Company has elected to use the Black-Scholes-Merton, or BSM, option-pricing model to estimate the fair value of its options and similar awards, which incorporates various subjective assumptions including volatility, risk-free interest rate, expected life, and dividend yield to calculate the fair value of outstanding and vested stock option awards. Compensation expense recognized in the statements of operations is based on awards ultimately expected to vest and reflects estimated forfeitures. ASC 718 requires forfeitures to be estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.
7
IMAGING DIAGNOSTIC SYSTEMS, INC.
Notes to Unaudited Financial Statements
September 30, 2024
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and the Company uses different assumptions, the Company’s stock-based compensation expense could be materially different in the future. In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. In estimating the Company’s forfeiture rate, the Company analyzed its historical forfeiture rate, the remaining lives of unvested options, and the amount of vested options as a percentage of total options outstanding. If the Company’s actual forfeiture rate is materially different from its estimate, or if the Company reevaluates the forfeiture rate in the future, the stock-based compensation expense could be significantly different from what we have recorded in the current period. No stock options were granted during three months ended September 30, 2024 and 2023. Stock options are being expensed pursuant to ASC 718.
The fair value concepts were not changed significantly in ASC 718; however, in adopting this Standard, companies were given the option to choose among alternative valuation models and amortization assumptions. We elected to continue to use the Black-Scholes option pricing model and expense the options as compensation over the requisite vesting period of the grant. We will reconsider use of the Black-Scholes model if additional information becomes available in the future that indicates another model would be more appropriate, or if grants issued in future periods have characteristics that cannot be reasonably estimated using this model. See Note (13) Stock Options.
(k) Long-lived assets
The Company relies on the guidance provided by ASC 360 (“Property, Plant & Equipment”). ASC 360 requires companies to write down to estimated fair value long-lived assets that are impaired. The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. In performing the review of recoverability, the Company estimates the future cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future cash flows is less than the carrying amount of the assets, an impairment loss is recognized.
The Company has determined that no impairment losses need to be recognized through the three months ended September 30, 2024 and 2023.
(l) Income taxes
The Company accounts for income taxes pursuant to the provisions of ASC 740-10, “Accounting for Income Taxes,” which requires, among other things, an asset and liability approach to calculating deferred income taxes. The asset and liability approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the carrying amounts and the tax bases of assets and liabilities. A valuation allowance is provided to offset any net deferred tax assets for which management believes it is more likely than not that the net deferred asset will not be realized.
The Company follows the provisions of the ASC 740 -10 related to, Accounting for Uncertain Income Tax Positions. When tax returns are filed, it is highly certain that some positions taken would be sustained upon examination by the taxing authorities, while others are subject to uncertainty about the merits of the position taken or the amount of the position that would be ultimately sustained. In accordance with the guidance of ASC 740-10, the benefit of a tax position is recognized in the financial statements in the period during which, based on all available evidence, management believes it is more likely than not that the position will be sustained upon examination, including the resolution of appeals or litigation processes, if any.
8
IMAGING DIAGNOSTIC SYSTEMS, INC.
Notes to Unaudited Financial Statements
September 30, 2024
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Tax positions taken are not offset or aggregated with other positions. Tax positions that meet the more-likely-than-not recognition threshold are measured as the largest amount of tax benefit that is more than 50 percent likely of being realized upon settlement with the applicable taxing authority. The portion of the benefits associated with tax positions taken that exceeds the amount measured as described above should be reflected as a liability for uncertain tax benefits in the accompanying balance sheet along with any associated interest and penalties that would be payable to the taxing authorities upon examination. The Company believes its tax positions are all highly certain of being upheld upon examination. As such, the Company has not recorded a liability for uncertain tax positions.
The Company has adopted ASC 740-10-25 Definition of Settlement, which provides guidance on how an entity should determine whether a tax position is effectively settled for the purpose of recognizing previously unrecognized tax benefits and provides that a tax position can be effectively settled upon the completion of an examination by a taxing authority without being legally extinguished. For tax positions considered effectively settled, an entity would recognize the full amount of tax benefit, even if the tax position is not considered more likely than not to be sustained based solely on the basis of its technical merits and the statute of limitations remains open. As of the date these financials were available to be issued, tax years ended June 30, 2021 to 2024 are still potentially subject to audit by the taxing authorities.
(m) Allowance for Warranties
The Company warrants all products and parts supplied for a period of 12 months from the date of installation or 15 months from the date the products were shipped from IDSI, whichever occurs first. Although the Company tests its product in accordance with its quality programs and processes, its warranty obligation is affected by product failure rates and service delivery costs incurred in correcting a product failure. Based on the Company’s experience, the allowance for warranties was estimated based on the replacement cost of the laser and certain electronic parts. Should actual product failure rates or service costs differ from the Company’s estimates, which are based on limited historical data, where applicable, revisions to the estimated warranty liability would be required. The Company had no allowance for warranties balance as of September 30, 2024 or June 30, 2024.
(n) Impact of recently issued accounting pronouncements
Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our financial statements upon adoption.
(o) Fair Value of Financial Instruments
The carrying values of cash and cash equivalents, receivables, accounts payable, short-term debt and accrued liabilities approximated their fair values due to the short maturity of these instruments. After a review of our accounts receivable, the Company has not recorded an allowance for doubtful accounts. The fair value of the Company’s debt obligations is estimated based on the quoted market prices for the same or similar issues or on current rates offered to the Company for debt of the same remaining maturities. At September 30, 2024 and June 30, 2024, the aggregate fair value of the Company’s debt obligations approximated its carrying value. The Company relies upon the guidance of ASC 820 (“Fair Value Measurements and Disclosures”). ASC 820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly, transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions and risk of nonperformance. ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes three levels of inputs that may be used to measure fair value:
Level 1 - Quoted prices in active markets for identical assets or liabilities
9
IMAGING DIAGNOSTIC SYSTEMS, INC.
Notes to Unaudited Financial Statements
September 30, 2024
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.
To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement.
(4) RELATED PARTIES TRANSACTIONS
Related party revenues
On March 22,
2018, the Board of Directors approved the execution of two agreements with Xi’an of China, an affiliated Company of IDSI. The agreements
are a Know How Transfer Contract and a CTLM® Know How Confidentiality
Agreement. The contract, having a term of
Related party fees
Erhfort, LLC earned consulting fees of $
David Fong, who served as the Company’s
CFO through August 10, 2022 and as a consultant on an as needed basis thereafter, earned consulting fees of $
Related party payables and accrued expenses
As of September 30, 2024 and June 30, 2024, the amount of interest
on related party notes due to Erhfort, LLC, which is included in accrued interest, related parties, is $
As of September 30, 2024 and June 30, 2024, the
amount of consulting fees due to Erhfort, LLC, which is included in accounts payable, is $
As September 30, 2024 and June 30, 2024, the amount of consulting fees
due to Fong & Associates, LLC, which is included in accounts payable, is $
10
IMAGING DIAGNOSTIC SYSTEMS, INC.
Notes to Unaudited Financial Statements
September 30, 2024
(4) RELATED PARTIES TRANSACTIONS (Continued)
As of September 30, 2024 and June 30, 2024, the
amount of reimbursable expenses due to Fong & Associates, LLC, which is included in accounts payable, is $
As of September 30, 2024 and June 30, 2024, the amount of interest
on related party notes due to JM One Holdings, LLC, which is included in accrued interest, related parties, is $
Related party debt
As of September 30, 2024 and June 30, 2024, the
amount in promissory notes due to related parties are $
(5) ROYALTY RECEIVABLE
On June 16, 2006, the Company entered into a Royalty Agreement with
Bioscan Inc. whereby the Company established a licensing relationship with Bioscan which granted Bioscan an exclusive sublicensable, royalty-bearing
license to make, use, offer for sale, import and otherwise develop and commercialize products in its territory. Bioscan Inc. was subsequently
purchased by TriFoil Imaging. For the three months ended September 30, 2024 and 2023, the Company recorded $
(6) PREPAID EXPENSES AND DEPOSITS
| September 30, 2024 | June 30, 2024 | |||||||
| Rent Security Deposits | $ | $ | ||||||
| Total Prepaid expenses and Deposits | $ | | $ | |||||
(7) ACCOUNTS PAYABLE AND ACCRUED EXPENSES
As of September 30, 2024 and June 30, 2024, accounts payable and accrued
expenses totaled $
(8) ACCRUED PAYROLL TAXES AND PENALTIES
As of September 30, 2024 and June 30, 2024, the Company owed the IRS
$
11
IMAGING DIAGNOSTIC SYSTEMS, INC.
Notes to Unaudited Financial Statements
September 30, 2024
(9) PROMISSORY NOTES – RELATED PARTIES
| Noteholder | Interest Rate | Maturity Date | September 30, 2024 | June 30, 2024 | ||||||||||
| Related Party Notes: | ||||||||||||||
| Erhfort, LLC | | % | $ | $ | ||||||||||
| Erhfort, LLC | % | |||||||||||||
| JM One Holdings, LLC | % | |||||||||||||
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| Viable International Investments, LLC | % | |||||||||||||
| Viable International Investments, LLC | % | |||||||||||||
| Xi’an IDI | % | |||||||||||||
| Total Related Party Notes | $ | $ | ||||||||||||
12
IMAGING DIAGNOSTIC SYSTEMS, INC.
Notes to Unaudited Financial Statements
September 30, 2024
(9) PROMISSORY NOTES – RELATED PARTIES (Continued)
Erhfort, LLC and Viable International Investments, LLC own Company common stock directly and indirectly. JM One Holdings, LLC is an entity affiliated with the Company’s former CFO. Hence, these debts are considered related party debt. Xi’an IDI is affiliated with IDSI due to a licensing agreement.
During the three months ended September 30, 2024,
the Company received loan proceeds of $
(10) PPP LOAN
Noteholder | Interest Rate | Maturity Date | September 30, 2024 | June 30, 2024 | ||||||||||
| Truist Bank | | % | $ | $ | ||||||||||
| Total | ||||||||||||||
| Current Portion of Loan | ( | ) | ( | ) | ||||||||||
| Total Long-term Loan | $ | $ | ||||||||||||
On May 9, 2020, the Company entered into a loan
with Truist Bank, a lender pursuant to the Paycheck Protection Program of the CARES Act as administered by the SBA in the amount of $
13
IMAGING DIAGNOSTIC SYSTEMS, INC.
Notes to Unaudited Financial Statements
September 30, 2024
(11) CONVERTIBLE PREFERRED STOCK
Security | Date Issued | No. of Shares | Amount | Date of Conversion | No. of Shares Converted | Amount Converted | Balance 9/30/2024 | |||||||||||||||||
| Series L Cv Pfd | 2/10/2010 | $ | 1/6/2011 | $ | $ | |||||||||||||||||||
| Dividends | ||||||||||||||||||||||||
| Total redemption value | $ | |||||||||||||||||||||||
| Total Series M Cv Pfd | Various | $ | Various | $ | $ | - | ||||||||||||||||||
| Dividends | - | |||||||||||||||||||||||
| Total redemption value | $ | - | ||||||||||||||||||||||
Series L Convertible Preferred Stock
On March 31, 2010, a private investor converted a $
Series M Convertible Preferred Stock
The Company had previously sold
(12) COMMON STOCK
The Company has
The Company did not issue any shares of common or preferred stock during the three months ended September 30, 2024 and 2023.
14
IMAGING DIAGNOSTIC SYSTEMS, INC.
Notes to Unaudited Financial Statements
September 30, 2024
(13) STOCK OPTIONS
On December 4, 2016, the Board of Directors adopted the Company’s 2016 Equity Incentive Plan (the “2016 Plan”) which was subsequently approved and adopted by majority written consent in lieu of an annual meeting. The purpose of the 2016 Plan is to encourage and enable the officers, employees, directors and other key persons (including consultants) of the Company, upon whose judgment, initiative and efforts the Company largely depends for the successful conduct of its business, to acquire a proprietary interest in the Company. It is anticipated that providing such persons with a direct stake in the Company’s welfare will assure a closer identification of their interests with those of the Company and its stockholders, thereby stimulating their efforts on the Company’s behalf and strengthening their desire to remain with the Company.
In computing the impact of stock option grants, the fair value of each option is estimated on the date of grant based on the Black-Scholes options-pricing model utilizing certain assumptions for a risk-free interest rate; volatility of a comparable company; and expected remaining lives of the awards. The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and the Company uses different assumptions, the Company’s stock-based compensation expense could be materially different in the future.
In addition, the Company is required to estimate the expected forfeiture
rate and only recognize expense for those shares expected to vest.
| As of September 30, 2024 |
As of June 30, 2024 |
|||||||
| Expected volatility | - | % | ||||||
| Expected term | - | |||||||
| Risk-Free interest rate | - | % | ||||||
| Forfeiture rate | - | % | ||||||
| Expected dividend rate | - | % | ||||||
15
IMAGING DIAGNOSTIC SYSTEMS, INC.
Notes to Unaudited Financial Statements
September 30, 2024
(13) STOCK OPTIONS (Continued)
At September 30, 2024, the Company has unvested and vested options
under the 2016 Plan with exercise prices of $
Employees/Consultants | Options | Wtd. Avg. Exercise Price | Wtd. Avg. Remaining Term | Aggregate Intrinsic Value | ||||||||||||
| Outstanding at June 30, 2023 | $ | $ | ||||||||||||||
| Granted | $ | |||||||||||||||
| Expired | ( | ) | $ | ( | ) | |||||||||||
| Exercised | $ | |||||||||||||||
| Cancelled | $ | |||||||||||||||
| Outstanding at June 30, 2024 | $ | $ | ||||||||||||||
| Granted | $ | |||||||||||||||
| Expired | $ | |||||||||||||||
| Exercised | $ | |||||||||||||||
| Cancelled | $ | |||||||||||||||
| Outstanding at September 30, 2024 | $ | $ | ||||||||||||||
The following table summarizes information about vested and unvested
options under the 2016 Plan at September 30, 2024 and June 30, 2024.
| Employees/Consultants | Unvested | Vested and Exercisable | Total | |||||||||
| Outstanding at June 30, 2023 | ||||||||||||
| Granted | ||||||||||||
| Vested and Exercisable | ( | ) | ||||||||||
| Cancelled | ||||||||||||
| Expired | ( | ) | ( | ) | ||||||||
| Outstanding at June 30, 2024 | ||||||||||||
| Granted | ||||||||||||
| Vested and Exercisable | ||||||||||||
| Cancelled | ||||||||||||
| Expired | ||||||||||||
| Outstanding at September 30, 2024 | ||||||||||||
Unvested options will be expensed under the Black-Scholes options-pricing
model when they vest. As September 30, 2024 remaining options to be expensed, when vested, are estimated to be $
16
IMAGING DIAGNOSTIC SYSTEMS, INC.
Notes to Unaudited Financial Statements
September 30, 2024
(13) STOCK OPTIONS (Continued)
| Outstanding Options | Vested Options | ||||||||||||||||||||||||
| Range of Exercise price | Number Outstanding at September 30, 2024 | Weighted Averaged Exercise Price | Weighted Averaged Remaining Life (Years) | Number Exercisable at September 30, 2024 | Weighted Averaged Exercise Price | Weighted Averaged Remaining Life (Years) | |||||||||||||||||||
| $0.51 | $ | $ | |||||||||||||||||||||||
| Total Outstanding options | $ | $ | |||||||||||||||||||||||
The Company’s common stock, symbol IMDS, was quoted on OTCmarkets.com
Pink until September 25, 2014 at which time IDSI’s registration was revoked by the Securities and Exchange Commission (SEC) for
failure to timely file its Quarterly and Annual Reports. The last quoted price was $
(14) COMMITMENTS AND CONTINGENCIES
From May 2010 to June 2012, claims were made by the IRS for payment
of the Company’s accrued payroll taxes, interest and penalties, which as of June 30, 2012 was $
During fiscal 2018, as part of new management’s restructuring
plan, the Company received funds from an accredited investor to pay off the payroll tax portion of the amount owed to the IRS. The Company
engaged tax counsel to manage the settlement and payment. On June 27, 2018, the IRS provided counsel with a payoff calculation table indicating
that the balance of taxes due was $
17
IMAGING DIAGNOSTIC SYSTEMS, INC.
Notes to Unaudited Financial Statements
September 30, 2024
(14) COMMITMENTS AND CONTINGENCIES (Continued)
On October 23, 2019, the Company entered into a consulting agreement (“the Agreement”) effective as of November 1, 2019, with Dr. Huabei Jiang to serve as IDSI’s Chief Scientific Consultant. Pursuant to the Agreement, Dr. Jiang agreed to focus on improving the technical performance and image quality of IDSI’s CTLM® breast imaging device. Per the Agreement, the goal of the initial project was to complete image quality improvement by
November 1, 2020. A payment of $
(15) SUBSEQUENT EVENTS
On October 8, 2024, the Company received loan
proceeds of $
On November 9, 2024, the Company received loan
proceeds of $
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q for the period ended September 30, 2024, contains “forward-looking statements” within the meaning of the federal securities laws and use terminology such as “may,” “will,” “expects,” “plans,” “anticipates,” “estimates,” “projects”, “potential,” or “continue,” or the negative or other comparable terminology regarding beliefs, plans, expectations, or intentions regarding the future. These forward-looking statements involve substantial risks and uncertainties, and actual results could differ materially from those discussed and anticipated in such statements These forward-looking statements represent our expectations, beliefs, plans, intentions or strategies concerning future events, including, but not limited to: our ability to consummate a merger transaction to bring a new business into the Company; our future financial performance; the continuation of historical trends; the sufficiency of our resources in funding our operations; our intention to engage in mergers and acquisitions; and our liquidity and capital needs. Our forward-looking statements are based on assumptions that may be incorrect, and there can be no assurance that any projections or other expectations included in any forward-looking statements will come to pass. Moreover, our forward-looking statements are subject to various known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by any forward-looking statements. These risks, uncertainties and other factors include but are not limited to: the risks of limited management, labor and financial resources; technological changes and competition; our ability to establish and maintain adequate internal controls; changes in general economic conditions; legal claims and regulatory changes; our ability to develop and maintain a market in our securities; and our ability to obtain financing, if and when needed, on terms that are acceptable. There are also many known and unknown risks, uncertainties and other factors, including, but not limited to, the risk factors detailed from time to time in our Securities and Exchange Commission filings that may cause these assumptions to prove incorrect and may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. These risks and uncertainties include, but are not limited to, those described above and in our Annual Report on Form 10-K for the fiscal year ended June 30, 2024, filed on September 30, 2024. All forward-looking statements and risk factors included in this Form 10-Q report and in the Form 10-K report are made as of the date of the relevant disclosure document based on information available to us as of the date thereof, and we assume no obligation to update any forward-looking statements or risk factors. The occurrence of any of the events described as risk factors or other future events could have a material adverse effect on our business, results of operations and financial position. Since our common stock is considered a “penny stock,” we are ineligible to rely on the safe harbor for forward-looking statements provided in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities and Exchange Act of 1934, as amended (the “Exchange Act”). You are cautioned not to place undue reliance on these forward-looking statements.
OVERVIEW
We are currently a “shell company” with no meaningful assets or operations other than our efforts to identify and merge with an operating company. We were incorporated in the State of Florida in December 1993. Our current business office is located at 618 E South St, Suite 500, Orlando, FL 32801. Our Internet website address is www.imds.com. The information contained in, or that can be accessed through, our website is not part of this Form 10-Q quarterly report.
HISTORICAL ACTIVITES
Imaging Diagnostic Systems, Inc. (the “Company” or “IDSI”) was a medical technology company that developed a new, non-invasive CT scanner called Computed Tomography Laser Mammography (CTLM®) that used a laser beam in place of ionizing X-ray for breast imaging. This technology is called Diffuse Optical Tomography. The CTLM® provided an adjunctive imaging modality to other methods of imaging the breast such as X-ray mammography, MRI and ultrasound.
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In the fourth quarter of fiscal 2023, the Company terminated its CTLM® business due to the lack of financing and the absence of a realistic prospect of achieving profitability after accumulating huge operating losses for many years. Since the beginning of fiscal 2024 the Company has been focused on seeking new business opportunities to replace its failed legacy business through a reverse merger transaction. Entering into a reverse merger transaction would likely involve very substantial dilution to the existing shareholders. It would, however, provide an opportunity to return some value to our shareholders. While the Company has considered several opportunities, it has yet to enter into any definitive agreement and remains a shell company.
Since inception in December 1993 as a Florida corporation and subsequently its reverse merger with Alkan Corp., a New Jersey Corporation on April 14, 1994, we continued operations and changed our state of incorporation from New Jersey to Florida, effective July 1, 1995. On August 28, 2018, we filed a Form 10 registration statement to register issued and outstanding shares held by our shareholders and to become a fully reporting company under the Securities Exchange Act of 1934 (the “Exchange Act”). Our registration became effective on October 29, 2018.
As of the date of this quarterly report on Form 10-Q for the three months ended September 30, 2024, we had recorded revenues of $10,648 from our operations and have incurred net losses applicable to common shareholders since inception through September 30, 2024 of $136,214,684 after discounts and dividends on preferred stock. We incurred net losses applicable to common shareholders of $164,221 for the three months ended September 30, 2024.
Since 2016, we have financed our operations through loans by Viable International Investments LLC (“Viable”), a subsidiary of Sanya Wanbo (Viable) Investments, Ltd. Co. and its affiliates and the private placement of common stock to Viable affiliates and independent Chinese investors. We do not have any formal financing arrangements with Viable and its affiliates and there can be no assurance that we will continue to receive funding from Viable or another source.
Our financial statements have been prepared assuming that we will continue as a going concern. For the quarter ended September 30, 2024, we have incurred recurring operating losses and will have to obtain additional capital to sustain operations. These conditions raise substantial doubt about our ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 2 “Going Concern and Management’s Plans”, in the Notes to the Financial Statements. The accompanying financial statements for the quarter ended September 30, 2024, do not include any adjustments to reflect the possible effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.
CURRENT BUSINESS
We have had no material business operations since July 1, 2023. We are currently seeking potential assets, property, or businesses to acquire, in a business combination, by reorganization, merger, or acquisition. As of the date of this Annual Report, we have not entered into any binding agreement with any party regarding acquisition opportunities for us. We hope to continue to engage in discussions with other operating businesses regarding potential acquisition opportunities. There is no assurance that any nonbinding term sheet will result in a definitive purchase transaction nor can we assure you that we will be able to successfully acquire any company or business in the near future.
We are not currently engaged in any substantive business activity except the search for potential assets, property or businesses to acquire, and we have no current plans to engage in any other activity in the foreseeable future unless and until we complete any such acquisition. In our present form, we are deemed to be a “shell company” seeking to acquire or merge with a business or company. We do not intend to restrict our search for business opportunities to any particular business or industry, and the areas in which we will seek out business opportunities may include all lawful businesses. We recognize that the number of suitable potential business ventures that may be available to us will be extremely limited, and may be restricted to businesses or entities that desire to become a publicly-held company while avoiding what many may deem to be the adverse factors related to an initial public offering (“IPO”) as a method of “going public.” The most prevalent of these factors include the substantial time requirements, legal and accounting costs, the inability to obtain an underwriter who is willing to publicly offer and sell securities on behalf of the particular entity, the lack of or the inability to obtain the required financial statements for such an undertaking, state limitations on the amount of dilution to public investors in comparison to the stockholders of any such entity, along with other conditions or requirements imposed by various federal and state securities laws, rules and regulations and federal and state agencies that implement them.
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The analysis of new business opportunities will be undertaken by or under the supervision of the Company’s officers and directors. We have unrestricted flexibility in seeking, analyzing, and participating in potential business opportunities. In its efforts to analyze potential acquisition targets, we will consider the following kinds of factors:
| ● | Potential for growth, indicated by new technology, anticipated market expansion, or new products; |
| ● | Competitive position as compared to other firms of similar size and experience within the industry segment as well as within the industry as a whole; |
| ● | Strength and diversity of management, either in place or scheduled for recruitment; |
| ● | Capital requirements and anticipated availability of required funds from operations, through the sale of additional securities, through joint ventures or similar arrangements, or from other sources; |
| ● | The extent to which the business opportunity can be advanced; |
| ● | The accessibility of required management expertise, personnel, raw materials, services, professional assistance and other required items; and |
| ● | Other relevant factors. |
In applying the foregoing criteria, no one of which will be controlling, management will attempt to analyze all factors and circumstances and make a determination based upon reasonable investigative measures and available data. Potentially available acquisition opportunities may occur in many different industries, and at various stages of development, all of which will make the task of comparative investigation and analysis of such business opportunities extremely difficult and complex. We may not discover or adequately evaluate adverse facts about the business to be acquired. In evaluating a prospective business combination, we will conduct as extensive a due diligence review of potential targets as possible given the lack of information that may be available regarding private companies, our limited personnel, and financial resources.
We expect that our due diligence will encompass, among other things, meetings with the target business’s incumbent management and inspection of its facilities, as necessary, as well as a review of financial and other information, which is made available to us. This due diligence review will be conducted either by our management or by unaffiliated third parties we may engage. Our lack of funds and the lack of full-time management will likely make it impracticable to conduct a complete and exhaustive investigation and analysis of a target business before we consummate a business combination. Management decisions, therefore, will likely be made without detailed feasibility studies, independent analysis, market surveys and the like which, if we had more funds available to us, would be desirable. We will be particularly dependent in making decisions upon information provided by the promoters, owners, sponsors, or others associated with the target business seeking our participation.
The time and costs required to select and evaluate a target business and to structure and complete a business combination cannot presently be ascertained with any degree of certainty. Any costs incurred with respect to the indemnification and evaluation of a prospective business combination that is not ultimately completed will result in a loss to us.
Additionally, we are in a highly competitive market for a small number of business opportunities, which could reduce the likelihood of consummating a successful business combination. We are, and will continue to be, an insignificant participant in the business of seeking mergers with, joint ventures with and acquisitions of small private and public entities. A large number of established and well-financed entities, including small public companies and venture capital firms, are active in mergers and acquisitions of companies that may be desirable target candidates for us. Nearly all these entities have significantly greater financial resources, technical expertise, and managerial capabilities than we do; consequently, we will be at a competitive disadvantage in identifying possible business opportunities and successfully completing a business combination. These competitive factors may reduce the likelihood of our identifying and consummating a successful business combination.
21
CRITICAL ACCOUNTING POLICIES
The financial statements are prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Such estimates and assumptions also include the valuations of certain financial instruments, stock-based compensation, deferred tax assets, the outcome of litigation and tax matters, and other matters that affect the statements of financial condition and related disclosures. Actual results could differ materially from these estimates.
We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our financial statements:
Stock-Based Compensation
We rely on the guidance provided by ASC 718, (“Share Based Payments”). ASC 718 requires companies to expense the value of employee stock options and similar awards and applies to all outstanding and vested stock-based awards.
In computing the impact, the fair value of each option is estimated on the date of grant based on the Black-Scholes options-pricing model utilizing certain assumptions for a risk-free interest rate; volatility; and expected remaining lives of the awards. The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and we use different assumptions, the Company’s stock-based compensation expense could be materially different in the future. In addition, we are required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. In estimating the Company’s forfeiture rate, we analyzed its historical forfeiture rate, the remaining lives of unvested options, and the amount of vested options as a percentage of total options outstanding. If our actual forfeiture rate is materially different from its estimate, or if the Company reevaluates the forfeiture rate in the future, the stock-based compensation expense could be significantly different from what we have recorded in the current period. During the three months ended September 30, 2024 and 2023, no stock options were granted to employees or consultants. Those options are being expensed pursuant to ASC 718.
The fair value concepts were not changed significantly in ASC 718; however, in adopting this Standard, companies were given the option to choose among alternative valuation models and amortization assumptions. We elected to continue to use the Black-Scholes option pricing model and expense the options as compensation over the requisite service period of the grant. We will reconsider use of the Black-Scholes model if additional information becomes available in the future that indicates another model would be more appropriate, or if grants issued in future periods have characteristics that cannot be reasonably estimated using this model.
RESULTS OF OPERATIONS
Sales and Cost of Sales
Revenues during the three months ended September 30, 2024, were $10,648, representing an increase of $10,648 from $0 during the three months ended September 30, 2023.
The Cost of Sales during the three months ended September 30, 2024 and 2023 was $0.
During the three months ended September 30, 2024 and 2023, the Company did not engage in any operational activities aimed at generating revenue. The Company did, however, recognize royalty revenues of $10,648 during the three months ended September 30, 2024.
22
GENERAL AND ADMINISTRATIVE
Our general and administrative expenses include travel/subsistence related to general and administrative activities, property and casualty insurance, professional fees associated with our corporate and securities attorneys and independent auditors, corporate governance expenses, stockholder expenses, utilities, maintenance, telephones, office supplies and sales and property taxes.
General and administrative expenses during the three months ended September 30, 2024, were $107,664, representing an increase of $104,277 or 3,079% from $3,387 during the three months ended September 30, 2023.
The general and administrative increase of $104,277 is due to the accounting, legal, and filing fees related to the filing of the fiscal 2023 and 2024 Forms 10-K and the three fiscal 2024 Forms 10-Q during the three months ended September 30, 2024, as well as work relating to potential new business opportunities.
SALARIES AND WAGES
Our salaries and wages expenses include compensation, related benefits, payroll taxes and other payroll fees for all employees.
Salaries and wages expense during the three months ended September 30, 2024 and 2023 was $0.
The lack of salaries and wages is due to the Company’s decision to furlough all employees on May 1, 2020 in response to the COVID-19 crisis. Some of these individuals have worked as independent contractors on an as-needed basis. Payments made to contractors are included in consulting expenses.
RESEARCH AND DEVELOPMENT
Until the fourth quarter of fiscal 2023, we incurred research and development expenses to develop significant enhancements to our sole product, the CTLM®. These expenses consisted primarily of clinical costs, costs of materials and components to make product enhancements, new product research costs, and costs associated with servicing clinical collaboration sites.
Research and development expenses were $0 for the three months ended September 30, 2024 and 2023.
The lack of any substantial research and development expenses during the three months ended September 30, 2024 and 2023 was due to the Company’s lack of operational activities.
SALES AND MARKETING
Our sales and marketing expenses consist primarily of expenses associated with advertising and promotion, representative office expense, trade shows, conferences, promotional and training costs related to marketing the CTLM®, commissions, travel/subsistence, patent maintenance fees, consulting, certification expenses, and product liability insurance.
Sales and marketing expenses during the three months ended September 30, 2024, were $252, representing a decrease of $203 or 45% from $455 during the three months ended September 30, 2023.
All sales and marketing expenses during both the three months ended September 30, 2024 and 2023 were related to fees for maintaining our website. The difference relates to variations in website related fees between the two periods.
23
CONSULTING EXPENSES
Our consulting expenses consists of all consulting fees paid as well as share-based compensation issued to our consultants. Our share-based compensation expense consists of vested stock options expensed under the Black-Scholes options pricing model.
Consulting expenses for the three months ended September 30, 2024, were $41,825, representing an increase of $40,425 or 2,888% from $1,400 during the three months ended September 30, 2023.
The increase in consulting expenses of $40,425 is due to fees paid to consultants to assist with the filing of the fiscal 2023 and 2024 Forms 10-K and the three fiscal 2024 Forms 10-Q during the three months ended September 30, 2024, as well as work relating to potential new business opportunities.
AGGREGATE OPERATING EXPENSES
Total operating expenses (general and administrative, salaries and wages, research and development, sales and marketing, depreciation and amortization, and stock options) and cost of sales during the three months ended September 30, 2024, were $149,741, representing an increase of $144,499 or 2,757% from $5,242 when compared to the operating expenses and cost of sales during the three months ended September 30, 2023. The increase in operating expenses is due primarily to fees related to the filing of the fiscal 2023 and 2024 Forms 10-K and the three fiscal 2024 Forms 10-Q during the three months ended September 30, 2024, as well as work relating to potential new business opportunities.
Depreciation and amortization during the three months ended September 30, 2024 and 2023, was $0. All fixed assets are fully depreciated and no additions were made during either fiscal quarter. Furthermore, all fixed assets were disposed of on October 16, 2023.
Interest expense for both of the three months ended September 30, 2024 and 2023 was $20,603. Although the amount of outstanding debt at September 30, 2024 was higher than at September 30, 2023, the additional debt consisted of 0% interest loans, which is why the amount of interest expense was the same.
BALANCE SHEET DATA
Our combined cash and cash equivalents totaled $5,005 at September 30, 2024 and $66 at June 30, 2024.
Our current liabilities, which consist of accounts payable, accrued payroll taxes and penalties, short term debt, current portion of long-term debt, and related party promissory notes and accrued interest totaled $2,358,800 at September 30, 2024 and $2,183,639 at June 30, 2024. Accounts payable and accrued expenses totaled $714,630 at September 30, 2024 and $686,497 at June 30, 2024. Accrued payroll taxes and penalties totaled $314,019 at September 30, 2024 and June 30, 2024. Related party promissory notes totaled $904,462 at September 30, 2024 and $777,852 at June 30, 2024. Related party accrued interest totaled $352,759 at September 30, 2024 and $332,341 at June 30, 2024. The PPP loan payable was $72,930 at September 30, 2024 and June 30, 2024. Current liabilities increased due to accounts payable and accrued expenses increasing by $28,133, related-party promissory notes increasing by $126,610, and related party accrued interest increasing by $20,418.
Our temporary equity, which consists of Convertible Preferred Series L (including accrued dividends), totaled $474,488 at September 30, 2024 and $469,963 at June 30, 2024. The increase of $4,525 is due to dividends for the three months ended September 30, 2024 that are being included in the total redemption value.
24
LIQUIDITY AND CAPITAL RESOURCES
Due to the failure of our legacy business, we are a shell company focused on seeking new business opportunities through a reverse merger transaction (a “Merger”). Our continued existence is dependent upon our ability to resolve our liquidity problems, principally by obtaining additional debt and/or equity financing and entering into a Merger. While Viable has financed our operations since 2016, we do not have any formal financing arrangements with Viable and its affiliates and there can be no assurance that we will continue to receive funding from Viable or another source. In the event that we are unable to obtain adequate debt or equity financing or are unable to obtain such financing on terms and conditions acceptable to us, we may have to cease or severely curtail our operations. This would materially impact our ability to continue as a going concern.
We have financed our operating and research and development activities through multiple private placements of common stock as well as short term loans from related parties. During the three months ended September 30, 2024, we received $126,610 through short-term related party loans. During the nine months ended September 30, 2023, we received $411 through short-term related party loans.
Net cash used in operating activities was $121,671 for the three months ended September 30, 2024, compared to net cash used in operating activities and product development of the CTLM® and related software development of 1,315 during the three months ended September 30, 2023. At September 30, 2024, we had negative working capital of $2,343,094 compared to negative working capital of $2,183,398 at June 30, 2024.
If additional funds are raised by issuing equity securities, including in connection with a Merger, dilution to existing stockholders will result and future investors may be granted rights superior to those of existing stockholders.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
Item 4. Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that the information required to be disclosed in the reports that we file under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosures.
Under the supervision and participation of our Chief Executive Officer and Chief Financial Officer, our management has evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2024. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer, or the persons performing similar functions, concluded that our disclosure controls and procedures were effective as of September 30, 2024.
There have been no changes in our internal controls over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during our most recent fiscal year that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.
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PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
At this time, there are no material pending legal proceedings to which the Company is a party or as to which any of its property is subject, and no such proceedings are known to the Company to be threatened or contemplated against it.
Item 1A. Risk Factors.
Our Annual Report on Form 10-K for the fiscal year ended June 30, 2024, filed on September 30, 2024, includes a detailed discussion of our risk factors. The risks described in our Form 10-K Report are not the only risks facing IDSI. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results. For the three months ended September 30, 2024, there were no material changes in risk factors as previously disclosed in our Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. (Mine Safety Disclosures)
Not Applicable
Item 5. Other Information
Item 6. Exhibits
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| Dated: November 14, 2024 | Imaging Diagnostic Systems, Inc. | |
| By: | /s/ Rongbin Wang | |
| Rongbin Wang | ||
| Chief Financial Officer | ||
(PRINCIPAL ACCOUNTING OFFICER) | ||
| /s/ Lun Li | ||
| Lun Li | ||
Chief Executive Officer (PRINCIPAL EXECUTIVE OFFICER) | ||
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