-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QXvkuBjyuVcpFWPaRCbM8SD6tUgOlulBqo9Z9gDptjrkwp9nvczfhIADbN8tCPd8 E2H0wavH84yS4V4QPs9TZg== 0000950116-99-001034.txt : 19990518 0000950116-99-001034.hdr.sgml : 19990518 ACCESSION NUMBER: 0000950116-99-001034 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990517 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IMATEC LTD CENTRAL INDEX KEY: 0001004913 STANDARD INDUSTRIAL CLASSIFICATION: PHOTOGRAPHIC EQUIPMENT & SUPPLIES [3861] IRS NUMBER: 113289398 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-21603 FILM NUMBER: 99625831 BUSINESS ADDRESS: STREET 1: 150 EAST 58TH ST STREET 2: 900 THIRD AVE CITY: NEW YORK STATE: NY ZIP: 10155 BUSINESS PHONE: 2122236700 MAIL ADDRESS: STREET 1: 150 EAST 58TH ST CITY: NEW YORK STATE: NY ZIP: 10155 10-Q 1 QUARTERLY REPORT FOR SMALL BUSINESS ISSUERS SUBJECT TO THE 1934 ACT REPORTING REQUIREMENTS U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ended March 31, 1999. [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the transition period from _______ to _________. . Commission File Number 0-21752 ------- IMATEC, LTD. -------------------------------------------- (Name of small business issuer in its charter) Delaware 11-3289398 - ---------------------------- ----------------------------------- (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation) 150 East 58th Street New York, New York 10155 - --------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (212) 826-0440 -------------------------- (Issuer's Telephone Number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes __X__ No ____ The number of shares outstanding of the Issuer's Common Stock, $.0001 par value, as of April 23, 1999 was 3,735,201. Transitional small business disclosure format: Yes ____ No __X__ IMATEC, LTD. (A DEVELOPMENT STAGE ENTERPRISE) FINANCIAL STATEMENTS INDEX PART 1. - FINANCIAL INFORMATION (UNAUDITED)
ITEM 1. - FINANCIAL STATEMENTS BALANCE SHEET - December 31, 1998 and March 31, 1999 3 STATEMENT OF OPERATIONS - November 17, 1988 (Inception) to March 31, 1999 (Cumulative) and Three months ended March 31, 1998 and 1999 4 STATEMENT OF STOCKHOLDERS' EQUITY - Three months ended March 31, 1999 5 STATEMENT OF CASH FLOWS - November 17, 1988 (Inception) to March 31, 1999 (Cumulative) and Three months ended March 31, 1998 and 1999 6 NOTES TO FINANCIAL STATEMENTS 7 ITEM 2. - PLAN OF OPERATION 7 PART II. - OTHER INFORMATION ITEM 1. - LEGAL PROCEEDINGS 9 ITEM 2. - CHANGES IN SECURITIES 9 ITEM 3. - DEFAULTS UPON SENIOR SECURITIES 9 ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 9 ITEM 5. - OTHER INFORMATION 9 ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K 9 SIGNATURES 9
2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENT (UNAUDITED) IMATEC, LTD. (A DEVELOPMENT STAGE ENTERPRISE) BALANCE SHEET
ASSETS March 31, 1999 December (UNAUDITED) 31, 1998 CURRENT ASSETS Cash $ 44,682 $ 13,086 Marketable Securities 2,793,421 3,039,372 Other Current Assets 28,534 50,272 ----------- ----------- TOTAL CURRENT ASSETS 2,866,637 3,102,730 FIXED ASSETS (net of accumulated depreciation of $ 57,050 and $61,629 at March 31, 1999 and December 31, 1998, respectively) 69,363 74,602 DEPOSIT 17,920 17,920 ----------- ----------- TOTAL ASSETS $ 2,953,920 $ 3,195,252 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts Payable and Accrued Expenses $ 86,039 $ 82,680 ----------- ----------- TOTAL LIABILITIES 86,039 82,680 ----------- ----------- STOCKHOLDERS' EQUITY Preferred Stock, $.0001 par value; authorized - 2,000,000 shares; issued and outstanding - none Common Stock, $.0001 par value; authorized - 20,000,000 shares; issued and outstanding - 3,735,201 at March 31, 1999 and December 31, 1998 373 373 Additional paid-in capital 8,749,185 8,749,185 Deficit accumulated during the development stage (5,881,677) (5,636,986) ----------- ----------- TOTAL STOCKHOLDERS' EQUITY 2,867,881 3,112,572 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,953,920 $ 3,195,252 =========== ===========
See notes to financial statements 3 IMATEC, LTD. (A DEVELOPMENT STAGE ENTERPRISE) STATEMENT OF OPERATIONS (UNAUDITED)
November 17, 1988 (Inception) to THREE MONTHS ENDED MARCH 31, March 31, 1999 1998 1999 (cumulative) ---- ---- --------------- INCOME - consulting fee $133,973 ----------- EXPENSES Royalties $ (38,588) $ (40,513) $ (913,481) Research and development (557,168) General and administrative (182,083) (236,641) (4,046,415) ----------- ----------- ----------- TOTAL EXPENSES (220,671) (277,154) (5,517,064) ----------- ----------- ----------- LOSS FROM OPERATIONS (220,671) (277,154) (5,383,091) INTEREST EXPENSE AND AMORTIZATION AND WRITE- OFF OF DISCOUNT AND DEBT ISSUANCE COSTS (2,211,400) INTEREST INCOME 46,608 32,463 548,102 ----------- ----------- ----------- LOSS BEFORE EXTRAORDINARY INCOME (174,063) (244,691) (7,046,389) EXTRAORDINARY INCOME FROM FORGIVENESS OF INDEBTEDNESS 1,164,712 ----------- ----------- ----------- NET LOSS $ (174,063) $ (244,691) $ 5,881,677 =========== =========== =========== AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 5,295,201 5,295,201 4,269,103 =========== =========== =========== LOSS PER COMMON SHARE Loss before extraordinary income ($0.03) ($.05) ($1.65) Extraordinary income .27 ----------- ----------- ----------- NET LOSS ($0.03) $(.05) ($1.38) =========== =========== ===========
See notes to financial statements 4 IMATEC, LTD. (A DEVELOPMENT STAGE ENTERPRISE) STATEMENT OF STOCKHOLDERS' EQUITY THREE MONTHS ENDED MARCH 31, 1999 (UNAUDITED)
Deficit Accumulated Additional During the Common Stock Paid-in Development Shares Amount Capital Stage Total --------- ------- ----------- ----------- ---------- Balance December 31, 1998 3,735,201 $ 373 $ 8,749,185 (5,636,986) 3,112,572 Net loss for the 3 months ended March 31, 1998 (244,691) (244,691) --------- ------- ----------- ----------- ---------- Balance March 31, 1998 3,735,201 $ 373 $ 8,749,185 $(5,881,677) $2,867,881 ========= ======= =========== =========== ==========
See notes to financial statements 5 IMATEC, LTD. (A DEVELOPMENT STAGE ENTERPRISE) STATEMENT OF CASH FLOWS (Unaudited)
THREE MONTHS ENDED MARCH 31, November 17,1988 1998 1999 (Inception) to ---- ---- March 31, 1999 (Cumulative) ---------------- CASH FLOWS FROM OPERATING ACTIVITIES Net loss $ (174,063) $ (244,691) $ (5,881,677) Adjustments to reconcile net loss to net cash used in operating activities Amortization and write-off of discount and debt issuance costs 1,914,490 Depreciation and other amortization 5,551 5,239 64,179 Net loss on disposal of fixed assets 5,932 Forgiveness of indebtedness (1,164,712) Increase (decrease) in cash flows from Other current assets 3,328 21,738 (28,534) Deposit (17,920) Accounts payable and accrued expenses (20,419) 3,359 376,422 ------------ ------------ ------------ NET CASH USED IN OPERATING ACTIVITIES (185,603) (214,355) (4,731,820) ------------ ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of marketable securities 130,927 245,951 7,682,717 Investments in marketable securities (10,476,139) Other 9,193 Purchases of fixed assets (148,422) ------------ ------------ ------------ NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 130,927 245,951 (2,932,651) ------------ ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from public offering (net of conversion of bridge notes payable and accrued interest of $1,960,671 and expenses of $ 1,367,163) 4,782,887 Proceeds from bridge financing (net of expenses of $305,434 and exchange of notes payable of $50,000) 3,211,177 Proceeds from issuance of common stock 615,334 Proceeds from other notes payable 175,000 Payment of organization expenses (245) Payments of notes payable (1,075,000) ------------ ------------ ------------ NET CASH PROVIDED BY FINANCING ACTIVITIES 7,709,153 ------------ ------------ ------------ INCREASE (DECREASE) IN CASH (54,676) 31,596 44,682 CASH - beginning 98,015 13,086 ------------ ------------ ------------ CASH - end $ 43,339 $ 44,682 $ 44,682 ============ ============ ============ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid for income taxes $ 9,686 $ 14,991 $ 48,468 ============ ============ ============ Cash paid for interest NONE NONE $ 16,818 ============ ============ ============
See notes to financial statements 6 IMATEC, LTD. (A DEVELOPMENT STAGE ENTERPRISE) NOTES TO FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION The accompanying unaudited financial statements, which are for interim periods, do not include all disclosures provided in the annual financial statements. These unaudited financial statements should be read in conjunction with the financial statements and the footnotes thereto included in Form 10-KSB for the year ended December 31, 1998 of Imatec, Ltd. (the "Company"), as filed with the Securities and Exchange Commission. The December 31, 1998 balance sheet was derived from audited financial statements, but does not include all disclosures required by generally accepted accounting principles. In the opinion of the Company, the accompanying unaudited financial statements contain all adjustments (which are of a normal recurring nature) necessary for a fair presentation of the financial statements. The results of operations for the three months ended March 31, 1999 are not necessarily indicative of the results to be expected for the full year. 2. LOSS PER SHARE Loss per share was computed based upon the weighted average number of common shares and common share equivalents outstanding during the three months ended March 31, 1999. Fully-dilutive loss per common share has not been presented because it was anti-dilutive. ITEM 2. PLAN OF OPERATION The Company was organized on November 17, 1998. The Company is currently involved in significant patent litigation against Apple Computer Corp. ("Apple"), as discussed in Item 1 of Part II herein. The Company believes, based upon its internal budgets, that its available cash resources will be sufficient for the Company to: (i) engage in licensing the Company's technology and Imatec 20/20 System developed for the medical diagnostic imaging field to manufacturers of medical diagnostic imaging products such as scanners, cameras and image reproduction systems, (ii) engage in marketing activities to facilitate the licensing of the Company's technology and its Imatec 20/20 Systems, and (iii) conduct its operations at least through the year ending March 31, 2000. Thus, although there can be no guarantee that the Company will not raise additional funds in the next twelve months, the Company currently has no plans to do so. The Company has no plans to pursue its business plan until the resolution of its patent litigation. The Company does not intend to utilize any cash resources towards research and development or the purchase and/or sale of any significant equipment. In addition, the Company does not anticipate any significant change in its number of employees. General and administrative expenses for the three months ended March 31, 1999 increased by $54,558 from $182,083 in 1998 to $236,641 in 1999. This increase results from an increase in litigation expenses net of decreases in other expenses. For the three months ended March 31, 1999, interest income decreased from $46,608 for 1998 to $32,463 for 1999. 7 YEAR 2000 COMPLIANCE Many currently installed computer systems and software products are unable to distinguish between twentieth century dates and twenty-first century dates. As a result, many companies' software and computer systems may need to be upgraded or replaced to comply with such "Year 2000" requirements. Imatec's business is dependent on the operations of numerous systems that could potentially be impacted by Year 2000 related problems. Those systems include, among others: The internal systems of Imatec's customers and suppliers The hardware and software systems used by Imatec in the management of its business Non-information technology systems and services used by Imatec in its business, such as telephone systems and building systems. Imatec has internally reviewed the proprietary software systems used in the management of its business. Although Imatec believes that its systems are designed to be Year 2000 compliant, Imatec uses third-party equipment and software that may not be Year 2000 compliant. Failure of such third-party or currently owned equipment or software to operate properly with regard to the Year 2000 and thereafter could require Imatec to incur unanticipated expenses to remedy any problems. Management does not believe that these expenses would have a material adverse impact on its business, prospects, financial condition and results of operations. Management does not believe that its expenditures to upgrade its internal systems and applications have been material to its business, prospects, financial condition or results of operations. Imatec does not presently have a contingency plan for handling Year 2000 problems that are not detected and corrected prior to their occurrence. Any failure of Imatec to address any unforeseen Year 2000 issues could adversely impact its business, prospects, financial condition or results of operations. LIQUIDITY AND CAPITAL RESOURCES The Company is in the development stage and, primarily as a consequence of expenses incurred in connection with research and development activities, at March 31, 1999, the Company had an accumulated stockholders' deficit of $5,881,677. The Company has continued to incur losses since March 31, 1999. The Company believes that the remaining balance from their initial public offering will be sufficient for the Company to sustain its business plan through at least March 31, 2000, although there can be no assurance that such balance will be sufficient to finance the Company's operations for such period. FORWARD LOOKING INFORMATION Statements contained in this report regarding the Company's future operations, strategy, future performance and results and the anticipated liquidity are forward looking and therefore are subject to certain risks and uncertainties, including those discussed herein. In addition, any forward-looking information regarding the operations of the Company will be affected by the outcome of the Company's patent infringement suit against "Apple" or the licensing of the Company's technology. There can be no assurance that the Company will be successful in its plan of operation. 8 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In February 1998 the Company filed a Patent Infringement Complaint for $1.1 billion against Apple Computer Corp. ("Apple") in the United States District Court, Southern District, New York. The suit alleges that "Apple" has infringed on three United States Letters Patent, issued to Dr. Hanoch Shalit, Chairman of the Board of Directors, President and Chief Executive Officer, and licensed to the Company, by making, using, and/or selling its "ColorSync" color management systems and inducing others to do so. The patents cited in the suit are exclusively licensed by Dr. Shalit to the Company and include: U.S. Letters Patent No. 4,939,581, entitled "Method and System in Video Image Hard Copy Reproduction; No. 5,115,229, entitled "Method and System in Video Image Reproduction"; and No. 5,345,315, entitled "Method and System for Improved Tone and Color Reproduction of Electronic Images on Hard Copy Using a Closed Loop Control". The complaint claims Apple's acts of infringement are being committed willfully and without the Company's consent and with full knowledge by them of the Company's rights thereunder. The Company is seeking a preliminary and permanent injunction enjoining Apple from infringing, inducing others or contributing to the infringement of the Company's patents. A trial by jury has been demanded on all issues. In March 1998, Apple filed a counterclaim, alleging that the patents-in-suit are invalid, not infringed and unenforceable. ITEM 2. CHANGES IN SECURITIES Not applicable. ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K None. SIGNATURES In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. IMATEC, LTD. By: /s/ Hanoch Shalit ------------------------------------- Chairman of the Board of Directors, President and Chief Executive Officer Dated: May 17, 1999 9 EX-27 2 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the balance sheet and statement of operations found on pages 3 and 4 of the Company's form 10-QSB for the quarter ended March 31, 1999 and is qualified in its entirety by reference to such financial statements 3-MOS DEC-31-1998 JAN-01-1999 MAR-31-1999 44,682 2,793,421 0 0 0 2,866,637 126,413 (57,050) 2,953,920 86,039 0 0 0 373 8,749,185 2,867,881 0 0 0 277,154 0 0 0 (244,691) 0 (244,691) 0 0 0 (244,691) (.05) (.05)
-----END PRIVACY-ENHANCED MESSAGE-----