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<SEC-DOCUMENT>0001065949-10-000213.txt : 20101117
<SEC-HEADER>0001065949-10-000213.hdr.sgml : 20101117
<ACCEPTANCE-DATETIME>20101116193409
ACCESSION NUMBER: 0001065949-10-000213
CONFORMED SUBMISSION TYPE: 10-Q/A
PUBLIC DOCUMENT COUNT: 5
CONFORMED PERIOD OF REPORT: 20100930
FILED AS OF DATE: 20101117
DATE AS OF CHANGE: 20101116
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: IMAGING3 INC
CENTRAL INDEX KEY: 0001205181
STANDARD INDUSTRIAL CLASSIFICATION: X-RAY APPARATUS & TUBES & RELATED IRRADIATION APPARATUS [3844]
IRS NUMBER: 954451059
STATE OF INCORPORATION: CA
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-Q/A
SEC ACT: 1934 Act
SEC FILE NUMBER: 000-50099
FILM NUMBER: 101197916
BUSINESS ADDRESS:
STREET 1: 3200 W. VALHALLA DRIVE
CITY: BURBANK
STATE: CA
ZIP: 91505
BUSINESS PHONE: 8182600930
MAIL ADDRESS:
STREET 1: 3200 W. VALHALLA DRIVE
CITY: BURBANK
STATE: CA
ZIP: 91505
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-Q/A
<SEQUENCE>1
<FILENAME>i310qamendsept2010vfinal.txt
<TEXT>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
Amendment No. 1
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For Quarterly Period Ended September 30, 2010
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: 000-50099
----------------------------------------------------------------
IMAGING3, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA 95-4451059
- --------------------------------- ------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
3200 WEST VALHALLA DRIVE, BURBANK, CALIFORNIA 91505
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(818) 260-0930
- --------------------------------------------------------------------------------
Registrant's telephone number, including area code
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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[_X_] No[__]
Indicate by check mark whether the registrant has submitted electronically and
posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of
this chapter) during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files).
Yes[__] No[_X_]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definitions of "large accelerated filer," "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act. (Check One).
Large accelerated filer [___] Accelerated filer [_X_]
Non-accelerated filer [___] Smaller reporting company [___]
(Do not check if a smaller
reporting company)
<PAGE>
Indicate by check mark whether the Registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
Yes[__] No[_X_]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
As of October 25, 2010, the number of shares outstanding of the registrant's
class of common stock was 380,520,723.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C> <C>
PAGE
----
PART I. FINANCIAL INFORMATION...................................................................1
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)........................................................1
BALANCE SHEETS AT SEPTEMBER 30, 2010 (UNAUDITED) AND DECEMBER 31, 2009.................2
STATEMENTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED
SEPTEMBER 30, 2010 AND SEPTEMBER 30, 2009 (UNAUDITED)...................................3
STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 AND
SEPTEMBER 30, 2009 (UNAUDITED)..........................................................4
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)...............................................5
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS..12
ITEM 4. CONTROLS AND PROCEDURES................................................................17
PART II. OTHER INFORMATION......................................................................18
ITEM 1. LEGAL PROCEEDINGS......................................................................18
ITEM 1A. RISK FACTORS...........................................................................22
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS............................22
ITEM 3. DEFAULTS UPON SENIOR SECURITIES........................................................22
ITEM 4. REMOVED AND RESERVED...................................................................22
ITEM 5. OTHER INFORMATION......................................................................22
ITEM 6. EXHIBITS...............................................................................22
SIGNATURES .......................................................................................24
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
- ----------------------------------------
-1-
<PAGE>
<TABLE>
<CAPTION>
IMAGING3, INC.
BALANCE SHEETS
AT SEPTEMBER 30, 2010 (UNAUDITED) AND DECEMBER 31, 2009
ASSETS
9/30/2010 12/31/2009
------------------- -----------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 7,993 $ 633,443
Accounts receivable, net 78,419 220,938
Inventory, net 234,709 249,996
Prepaid expenses 29,122 30,277
------------------- -----------------
Total current assets 350,244 1,134,654
PROPERTY AND EQUIPMENT, NET 23,404 26,852
OTHER ASSETS 31,024 31,024
------------------- -----------------
Total assets $ 404,671 $ 1,192,530
=================== =================
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable $ 223,365 $ 137,145
Accounts payable-related party - 16,092
Accrued expenses 2,217,011 2,253,079
Deferred revenue 232,234 144,408
Equipment deposits 64,720 201,637
Due to an officer 431,443 50,766
------------------- -----------------
Total current liabilities 3,168,773 2,803,127
STOCKHOLDERS' DEFICIT:
Common stock, no par value; authorized shares 500,000,000;
375,833,566 and 375,709,898 issued and outstanding
at September 30, 2010 and December 31, 2009, respectively 11,025,072 10,988,573
Accumulated deficit (13,789,174) (12,599,170)
------------------- -----------------
Total stockholders' deficit (2,764,102) (1,610,597)
------------------- -----------------
Total liabilities and stockholders' deficit $ 404,671 $ 1,192,530
=================== =================
</TABLE>
The accompanying notes form an integral part of
these unaudited financial statements
-2-
<PAGE>
<TABLE>
<CAPTION>
IMAGING3, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
FOR THE THREE MONTH PERIOD ENDED FOR THE NINE MONTH PERIOD ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------------------------ -----------------------------------
2010 2009 2010 2009
--------------- ----------------- --------------- ----------------
<S> <C> <C> <C> <C>
NET REVENUES $ 366,661 $ 224,747 $ 973,945 $ 799,243
COST OF GOODS SOLD 196,380 80,115 489,178 337,483
--------------- ----------------- --------------- ----------------
GROSS PROFIT 170,281 144,632 461,760
484,767
OPERATING EXPENSES:
General and administrative expenses 532,180 509,226 1,641,040 1,629,546
--------------- ----------------- --------------- ----------------
Total operating expenses 532,180 509,226 1,641,040 1,629,546
--------------- ----------------- --------------- ----------------
LOSS FROM OPERATIONS (361,899) (364,594) (1,156,273) (1,167,786)
OTHER INCOME (EXPENSE):
Interest expense (9,287) (11,746) (38,769) (41,021)
Gain on litigation settlement - 39,000 - 39,000
Other income - 4,682 5,837 4,710
--------------- ----------------- --------------- ----------------
Total other income (expense) (9,287) (250,935) (32,932) (280,182)
--------------- ----------------- --------------- ----------------
LOSS BEFORE INCOME TAX (371,186) (615,529) (1,189,205) (1,447,968)
PROVISION FOR INCOME TAXES - - 800 800
--------------- ----------------- --------------- ----------------
NET LOSS $ (371,186) $ (615,529) $ (1,190,005) $ (1,448,768)
=============== ================= =============== ================
BASIC AND DILUTED NET LOSS PER SHARE (0.00) $ (0.00) (0.00) $ (0.01)
=============== ================= =============== ================
WEIGHTED AVERAGE COMMON STOCK OUTSTANDING 375,765,976 285,397,317 375,728,796 267,148,101
=============== ================= =============== ================
</TABLE>
The accompanying notes form an integral part of
these unaudited financial statements
-3-
<PAGE>
<TABLE>
<CAPTION>
IMAGING3, INC.
STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2010 AND SEPTEMBER 30, 2009 (UNAUDITED)
2010 2009
---------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,190,005) $ (1,448,768)
Adjustments to reconcile net loss to net cash used for
operating activities:
Depreciation and amortization 3,448 6,511
Common stock issued for services and R&D - 34,375
Gain on settlement of debt - (39,000)
Loss on conversion of debt - 6,571
(Increase) / decrease in current assets:
Accounts receivable 142,519 8,882
Inventory 15,287 (3,274)
Prepaid expenses and other assets 1,155 (10,092)
Increase / (decrease) in current liabilities:
Accounts payable 70,129 (44,191)
Accrued expenses (36,068) 75,455
Deferred revenue 87,826 76,794
Equipment deposits (136,917) 106,992
---------------- ---------------
Net cash used for operating activities (1,042,626) (1,229,745)
---------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant, and equipment - -
---------------- ---------------
Net cash used for investing activities - -
---------------- ---------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Receipts from / (payments to) officer, net 380,677 (1,773,144)
Proceeds from issuance of common stock, net 36,499 3,083,854
---------------- ---------------
Net cash provided by financing activities 417,176 1,310,710
---------------- ---------------
NET INCREASE (DECREASE) IN CASH & CASH EQUIVALENTS (625,450) 80,965
CASH & CASH EQUIVALENTS, BEGINNING BALANCE 633,443 73,447
---------------- ---------------
CASH & CASH EQUIVALENTS, ENDING BALANCE $ 7,993 $ 154,412
================ ===============
</TABLE>
The accompanying notes form an integral part of
these unaudited financial statements
-4-
<PAGE>
Imaging3, Inc.
Notes to Financial Statements
(Unaudited)
1. ORGANIZATION AND DESCRIPTION OF BUSINESS
----------------------------------------
Imaging3, Inc. (the "Company") is a California corporation incorporated
on October 29, 1993, as Imaging Services, Inc. The Company filed a certificate
of amendment of articles of incorporation to change its name to Imaging3, Inc.
on August 20, 2002.
The Company's primary business is production and sale of medical
equipment and parts, and services to hospitals, surgery centers, research labs,
physician offices, and veterinarians. Equipment sales include new c-arms, c-arm
tables, remanufactured c-arms, used c-arm, and surgical tables. Sales of parts
consist of new or renewed replacement parts for c-arms.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
A summary of the Company's significant accounting policies consistently
applied in the preparation of the accompanying financial statements follows:
The accompanying unaudited interim financial statements have been
prepared in accordance with the rules and regulations of the Securities and
Exchange Commission for the presentation of interim financial information, but
do not include all the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments considered necessary for a fair presentation have
been included. It is suggested that these condensed financial statements be read
in conjunction with the financial statements and notes thereto included in the
Company's annual report on Form 10-K for the fiscal year ended December 31,
2009. The Company follows the same accounting policies in preparation of interim
reports. Results of operations for the interim periods are not indicative of
annual results.
USE OF ESTIMATES
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
DUE TO OFFICER
At September 30, 2010 and December 31, 2009, the Company had a balance
due to the Chief Executive Officer of the Company amounting to $431,443 and
$50,766, respectively, for accrued consulting fees and amounts borrowed. The
amount is due on demand, is interest free and secured by the assets of the
Company.
EQUIPMENT DEPOSITS
Equipment deposits represent amounts received from customers against
future sales of goods since the Company recognizes revenue upon shipment of
goods. These deposits are applied to the invoices when the equipment is shipped
to the customers. The balance at September 30, 2010 and December 31, 2009, was
$64,720 and $201,637, respectively.
-5-
<PAGE>
Imaging3, Inc.
Notes to Financial Statements
(Unaudited)
REVENUE RECOGNITION
The Company recognizes its revenue in accordance with the Securities
and Exchange Commission's ("SEC") Staff Accounting Bulletin No. 104, "Revenue
Recognition in Financial Statements" ("SAB 104"). SAB 104 revises or rescinds
portions of the interpretative guidance included in Topic 13 of the codification
of staff accounting bulletins in order to make this interpretive guidance
consistent with current authoritative accounting and auditing guidance and SEC
rules and regulations. Revenue is recognized upon shipment, provided that
evidence of an arrangement exists, title and risk of loss have passed to the
customer, fees are fixed or determinable and collection of the related
receivable is reasonably assured. Revenue is recorded net of estimated product
returns, which is based upon the Company's return policy, sales agreements,
management estimates of potential future product returns related to current
period revenue, current economic trends, changes in customer composition and
historical experience. The Company accrues for warranty costs, sales returns,
and other allowances based on its experience. Generally, the Company extends
credit to its customers and does not require collateral. The Company performs
ongoing credit evaluations of its customers and historic credit losses have been
within management's expectations. The Company sells warranties and recognizes
warranty revenue over the term of the warranty period. Deferred revenue is
recognized at the time of warranty sales.
INCOME TAXES
The Company accounts for income taxes using the liability method.
Deferred tax assets are recognized for deductible temporary differences and
deferred tax liabilities are recognized for taxable temporary differences.
Temporary differences are the differences between the reported amounts of assets
and liabilities and their tax bases. Deferred tax assets are reduced by a
valuation allowance when, in the opinion of management, it is more likely than
not that some portion or all of the deferred tax assets will not be realized.
Deferred tax assets and liabilities are adjusted for the effects of changes in
tax laws and rates on the date of enactment.
BASIC AND DILUTED NET LOSS PER SHARE
Basic net loss per share is based upon the weighted average number of
common shares outstanding. Diluted net loss per share is based on the assumption
that all dilutive convertible shares and stock options were converted or
exercised. Dilution is computed by applying the treasury stock method. Under
this method, options and warrants are assumed to be exercised at the beginning
of the period (or at the time of issuance, if later), and as if funds obtained
thereby were used to purchase common stock at the average market price during
the period. The Company had no common stock equivalents or other potentially
dilutive securities at September 30, 2010 or December 31, 2009.
RECENT PRONOUNCEMENTS
On January 1, 2009, the Company adopted a new accounting standard
issued by the FASB related to accounting for business combinations using the
acquisition method of accounting (previously referred to as the purchase
method). Among the significant changes, this standard requires a redefining of
the measurement date of a business combination, expensing direct transaction
costs as incurred, capitalizing in-process research and development costs as an
intangible asset and recording a liability for contingent consideration at the
measurement date with subsequent re-measurements recorded in the results of
operations. This standard also requires costs for business restructuring and
exit activities related to the acquired company to be included in the
post-combination financial results of operations and also provides new guidance
for the recognition and measurement of contingent assets and liabilities in a
business combination. In addition, this standard requires several new
disclosures, including the reasons for the business combination, the factors
that contribute to the recognition of goodwill, the amount of acquisition
-6-
<PAGE>
Imaging3, Inc.
Notes to Financial Statements
(Unaudited)
related third-party expenses incurred, the nature and amount of contingent
consideration, and a discussion of pre-existing relationships between the
parties.
The application of this standard was not material for 2009, however, it
is likely to have a significant impact on how the Company allocates the purchase
price of certain future business combinations, including the recognition and
measurement of assets acquired and liabilities assumed and the expensing of
direct transaction costs and costs to integrate the acquired business.
On January 1, 2009, the Company adopted a new accounting standard
issued by the FASB related to the disclosure of derivative instruments and
hedging activities. This standard expanded the disclosure requirements about an
entity's derivative financial instruments and hedging activities, including
qualitative disclosures about objectives and strategies for using derivatives,
quantitative disclosures about fair value amounts of and gains and losses on
derivative instruments, and disclosures about credit-risk-related contingent
features in derivative instruments.
Effective June 30, 2009, the Company adopted a newly issued accounting
standard related to accounting for and disclosure of subsequent events in its
consolidated financial statements. This standard provides the authoritative
guidance for subsequent events that was previously addressed only in United
States auditing standards. This standard establishes general accounting for and
disclosure of events that occur after the balance sheet date but before
financial statements are issued or are available to be issued and requires the
Company to disclose the date through which it has evaluated subsequent events
and whether that was the date the financial statements were issued or available
to be issued. This standard does not apply to subsequent events or transactions
that are within the scope of other applicable GAAP that provide different
guidance on the accounting treatment for subsequent events or transactions. The
adoption of this standard did not have a material impact on the Company's
financial statements.
In June 2009, the FASB issued an amendment to the accounting standards
related to the consolidation of variable interest entities ("VIE"). This
standard provides a new approach for determining which entity should consolidate
a VIE, how and when to reconsider the consolidation or deconsolidation of a VIE
and requires disclosures about an entity's significant judgments and assumptions
used in its decision to consolidate or not consolidate a VIE. Under this
standard, the new consolidation model is a more qualitative assessment of power
and economics that considers which entity has the power to direct the activities
that "most significantly impact" the VIE's economic performance and has the
obligation to absorb losses or the right to receive benefits that could be
potentially significant to the VIE. This standard is effective for the Company
as of January 1, 2010 and the Company does not expect the impact of its adoption
to be material to its financial statements.
In October 2009, the FASB issued an amendment to the accounting
standards related to the accounting for revenue in arrangements with multiple
deliverables including how the arrangement consideration is allocated among
delivered and undelivered items of the arrangement. Among the amendments, this
standard eliminates the use of the residual method for allocating arrangement
consideration and requires an entity to allocate the overall consideration to
each deliverable based on an estimated selling price of each individual
deliverable in the arrangement in the absence of having vendor-specific
objective evidence or other third party evidence of fair value of the
undelivered items. This standard also provides further guidance on how to
determine a separate unit of accounting in a multiple-deliverable revenue
arrangement and expands the disclosure requirements about the judgments made in
applying the estimated selling price method and how those judgments affect the
timing or amount of revenue recognition. This standard, for which the Company is
currently assessing the impact, will become effective for the Company on January
1, 2011.
-7-
<PAGE>
Imaging3, Inc.
Notes to Financial Statements
(Unaudited)
In October 2009, the FASB issued an amendment to the accounting
standards related to certain revenue arrangements that include software
elements. This standard clarifies the existing accounting guidance such that
tangible products that contain both software and non-software components that
function together to deliver the product's essential functionality, shall be
excluded from the scope of the software revenue recognition accounting
standards. Accordingly, sales of these products may fall within the scope of
other revenue recognition accounting standards or may now be within the scope of
this standard and may require an allocation of the arrangement consideration for
each element of the arrangement. This standard, for which the Company is
currently assessing the impact, will become effective for the Company on January
1, 2011.
In January 2010, the FASB issued an amendment to the accounting
standards related to the disclosures about an entity's use of fair value
measurements. Among these amendments, entities will be required to provide
enhanced disclosures about transfers into and out of the Level 1 (fair value
determined based on quoted prices in active markets for identical assets and
liabilities) and Level 2 (fair value determined based on significant other
observable inputs) classifications, provide separate disclosures about
purchases, sales, issuances and settlements relating to the tabular
reconciliation of beginning and ending balances of the Level 3 (fair value
determined based on significant unobservable inputs) classification and provide
greater disaggregation for each class of assets and liabilities that use fair
value measurements. Except for the detailed Level 3 roll-forward disclosures,
the new standard is effective for the Company for interim and annual reporting
periods beginning after December 31, 2009. The requirement to provide detailed
disclosures about the purchases, sales, issuances and settlements in the
roll-forward activity for Level 3 fair value measurements is effective for the
Company for interim and annual reporting periods beginning after December 31,
2010. The Company does not expect that the adoption of this new standard will
have a material impact to its financial statements.
3. ACCOUNTS RECEIVABLE
-------------------
All accounts receivable are trade related. These receivables are
current and management believes are collectible except for those for which a
reserve has been provided. The balance of accounts receivable as of September
30, 2010 was $78,419 as compared to $220,938 as of December 31, 2009. The
reserve amount for uncollectible accounts was $1,375 as of September 30, 2010
and December 31, 2009, respectively.
-8-
<PAGE>
Imaging3, Inc.
Notes to Financial Statements
(Unaudited)
4. INVENTORIES
-----------
Inventory consisted of the following:
09/30/10 12/31/09
------------ ------------
Parts inventory $ 161,697 $ 174,756
Finished goods 302,984 305,212
Inventory reserve (229,972) (229,972)
------------ ------------
Total, net $ 234,709 $ 249,996
============ ============
5. PROPERTIES AND EQUIPMENT
------------------------
Property and equipment consisted of the following:
09/30/10 12/31/09
------------- -------------
Furniture and office equipment $ 78,695 $ 78,695
Tools and shop equipment 54,183 54,183
Vehicles 105,871 105,871
------------- -------------
238,749 238,749
Less Accumulated depreciation (215,345) (211,897)
------------- -------------
Total, net $ 23,404 $ 26,852
============== =============
Depreciation expenses were $1,150 and $3,402 for the three months ended
September 30, 2010 and 2009 and $3,448 and $6,511 for the nine months ended
September 30, 2010 and 2009, respectively.
6. ACCRUED EXPENSES
----------------
Accrued expenses consisted of the following:
09/30/10 12/31/09
-------------- --------------
Accrued payroll taxes $ 145,000 $ 14,557
Other accrued expenses 39,851 174,442
Accrued legal fees 401,109 401,109
Accrued ongoing litigation 1,631,051 1,662,971
-------------- --------------
Total $ 2,217,011 $ 2,253,079
============== ==============
7. STOCKHOLDERS' EQUITY
--------------------
COMMON STOCK
During the nine month period ended September 30, 2010, the Company
issued 123,668 shares of common stock for services rendered for a total of
$36,500. These shares were issued at the fair market value on the day the
transaction occurred.
During the nine month period ended September 30, 2009, the Company
issued 119,934,027 shares of common stock for cash proceeds of $3,083,854 net of
offering costs of $113,622 as part of its private placement.
-9-
<PAGE>
Imaging3, Inc.
Notes to Financial Statements
(Unaudited)
During the nine month period ended September 30, 2009, the Company
issued 5,164,319 shares of common stock for the conversation of $100,000 in debt
owed. Per the terms of the conversion feature of the note, the principal balance
was convertible into 5,000,000 shares. The excess of the shares issued was
recorded as a loss on conversion of debt of $6,571.
During the nine month period ended September 30, 2009, the Company
issued 687,500 shares of common stock for services rendered for a total of
$34,375. These shares were issued at the fair market value of the day the
transaction occurred.
8. SUPPLEMENTAL DISCLOSURE OF CASH FLOWS
-------------------------------------
The Company paid income taxes of $800 and interest of $38,769 during
the period ended September 30, 2010. The Company paid income taxes of $800 and
interest of $41,021 during the period ended September 30, 2009.
9. GOING CONCERN
-------------
The Company's financial statements are prepared using the generally
accepted accounting principles applicable to a going concern, which contemplates
the realization of assets and liquidation of liabilities in the normal course of
business. In the nine month periods ended September 30, 2010 and 2009, the
Company incurred losses of $1,190,005 and $1,448,768, respectively. The Company
has an accumulated deficit of $13,789,174 and $12,599,170 as of September 30,
2010 and December 31, 2009, respectively. The continuing losses have adversely
affected the liquidity of the Company.
In view of the matters described in the preceding paragraph,
recoverability of a major portion of the recorded asset amounts shown in the
accompanying balance sheets is dependent upon continued operations of the
Company, which in turn is dependent upon the Company's ability to raise
additional capital, obtain financing and to succeed in its future operations.
The financial statements do not include any adjustments relating to the
recoverability and classification of recorded asset amounts or amounts and
classification of liabilities that might be necessary should the Company be
unable to continue as a going concern. During the start of the fourth quarter,
the Company closed a transaction with two institutional investors for a total of
$1,000,000 of invested capital which is not reflected on the Company's third
quarter financial statements.
Management has taken the following steps to meet its operating and
financial requirements, which it believes are sufficient to provide the Company
with the ability to continue as a going concern: Management devoted considerable
effort during the three month period ended September 30, 2010, towards (i)
obtaining approval from the Food and Drug Administration for its proprietary
medical imaging device so that the Company can commence marketing and selling
it, (ii) controlling salaries and general and administrative expenses, (iii)
management of accounts payable, (iv) evaluation of its distribution and
marketing methods in order to increase sales of existing products and services,
and (v) increasing marketing and sales of its products and services. In order to
control general and administrative expenses, the Company has established
internal financial controls in all areas, specifically in hiring and overhead
cost. The Company has also established a hiring policy under which the Company
will refrain from hiring additional employees unless approved by the Chief
Executive Officer and Chief Financial Officer. Accounts payable are reviewed and
approved or challenged on a daily basis and the sales staff is questioned as to
the validity of any expense on a monthly basis. Senior management reviews the
annual budget to ascertain and question any variance from plan, on a quarterly
basis, and to anticipate and make adjustments as may be feasible.
-10-
<PAGE>
Imaging3, Inc.
Notes to Financial Statements
(Unaudited)
10. RELATED PARTY TRANSACTION
-------------------------
The Company has a consulting agreement with the Chief Executive Officer
of the Company for compensation of $12,000 per month. The Chief Executive
Officer provides services to the Company for management, administrative,
marketing, and financial matters pursuant to the consulting agreement terminable
on 30 days notice by either party. The consulting agreement commenced on January
1, 2002, and will continue until such time as the Company withdraws the
agreement or the Chief Executive Officer resigns. The accrued compensation has
been included in amounts due to officer and is payable by the Company on demand.
During the normal course of business from time to time, the Chief
Executive Officer advances funds to the Company or defers the payment of his
consulting fees from the Company. These transactions are recorded as due to
officer.
The balance of due to officer amounts to $431,443 as of September 30,
2010 and $50,766 as of December 31, 2009, payable on demand. The outstanding
balance does not bear interest.
11. CONCENTRATIONS
--------------
One customer represents 12.5% of the Company's accounts receivable, as
of September 30, 2010.
Three customers represented 27%, 25%, and 11% of the Company's accounts
receivable, respectively, as of December 31, 2009.
12. SUBSEQUENT EVENTS
-----------------
On October 15, 2010, the Company issued to two investors pursuant to a
private placement (the "Private Placement") a total of (i) 4,587,157 shares of
common stock at a purchase price of $0.218 per share, (ii) 4,587,157 Series A
Warrants to purchase up to 4,587,157 shares of common stock at an exercise price
of $0.2725 per share exercisable for a period of five years from the date of
issuance, (iii) 4,587,157 Series B Warrants to purchase up to 4,587,157 shares
of common stock at an exercise price of $0.218 per share exercisable for a
period of 18 months from the date of issuance, and (iv) 4,587,157 Series C
Warrants to purchase up to 4,587,157 shares of common stock at an exercise price
of $0.2725 per share exercisable for a period of five years from the date of
issuance only if the investors invest an additional $1,000,000.22 through the
exercise of the Series B Warrants.
In October 2010, in conjunction with the Private Placement, the Company
issued to the investment banking firm which acted as the Company's placement
agent 229,358 warrants to purchase up to 229,358 shares of common stock at an
exercise price of $0.31 per share exercisable for a period of five years from
the date of issuance.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
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CAUTIONARY STATEMENTS
This Form 10-Q/A may contain "forward-looking statements," as that term
is used in federal securities laws, about Imaging3, Inc.'s financial condition,
results of operations and business. These statements include, among others:
o statements concerning the potential benefits that Imaging3,
Inc. ("I3," "Imaging3," "we," or the "Company") may experience
from its business activities and certain transactions it
contemplates or has completed; and
o statements of our expectations, beliefs, future plans and
strategies, anticipated developments and other matters that
are not historical facts. These statements may be made
expressly in this Form 10-Q/A. You can find many of these
statements by looking for words such as "believes," "expects,"
"anticipates," "estimates," "opines," or similar expressions
used in this Form 10-Q/A. These forward-looking statements are
subject to numerous assumptions, risks and uncertainties that
may cause our actual results to be materially different from
any future results expressed or implied by us in those
statements. The most important facts that could prevent us
from achieving our stated goals include, but are not limited
to, the following:
(a) volatility or decline of Imaging3's stock price;
(b) potential fluctuation in quarterly results;
(c) failure of Imaging3 to earn revenues or profits;
(d) inadequate capital to continue or expand its
business, inability to raise additional capital or
financing to implement its business plans;
(e) failure to commercialize Imaging3's technology or to
make sales;
(f) changes in demand for Imaging3's products and
services;
(g) rapid and significant changes in markets;
(h) litigation with or legal claims and allegations by
outside parties;
(i) insufficient revenues to cover operating costs,
resulting in persistent losses; and
(j) our failure to obtain approval of our proprietary
medical imaging technology and device from the
Federal Food and Drug Administration ("FDA").
We cannot assure that Imaging3 will be profitable. Imaging3 may not be
able to successfully develop, manage or market its products and services. We may
not be able to attract or retain qualified executives and technology personnel.
We may not be able to obtain customers for our products or services. Our
products and services may become obsolete. Government regulation may hinder our
business. We may not be able to obtain the required approvals from the FDA for
our products and services. The FDA has not approved our proprietary 3D medical
imaging device. Additional dilution in outstanding stock ownership may be
incurred due to the issuance of more shares, warrants and stock options, or the
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exercise of outstanding warrants and stock options. We are exposed to other
risks inherent in our businesses.
Because the statements are subject to risks and uncertainties, actual
results may differ materially from those expressed or implied by the
forward-looking statements. We caution you not to place undue reliance on the
statements, which speak only as of the date of this Form 10-Q/A. The cautionary
statements contained or referred to in this section should be considered in
connection with any subsequent written or oral forward-looking statements that
Imaging3 or persons acting on our behalf may issue. We do not undertake any
obligation to review or confirm analysts' expectations or estimates or to
release publicly any revisions to any forward-looking statements to reflect
events or circumstances after the date of this Form 10-Q/A, or to reflect the
occurrence of unanticipated events.
CURRENT OVERVIEW
Though our efforts have been to market our refurbished equipment, a
significant portion of our sales and revenues derive from services and the sale
of parts, either from extended warranty purchases at the time of purchase of the
refurbished equipment, or service contracts and time and material revenue
realized upon warranty expiration, the majority of which is realized one year
from equipment purchase as warranties expire.
Our sales effort through direct mail, broadcast facsimile and broadcast
email to thousands of potential customers throughout the United States generates
leads of potential customers desiring to purchase equipment either immediately
or in the course of one year. This lead generation through direct mail,
broadcast facsimile and email will continue on a quarterly basis with the goal
of increasing the total number of our leads for our sales staff. Management
expects that the marketing program will also eventually help stabilize the
amount of refurbished equipment sold on a monthly basis, since the carry-over of
leads not looking for immediate purchase will overlap with the immediate sales
leads. The greater the number of leads generated, whether immediate or long
term, the greater the opportunity to eventually create a consistent number of
sales.
CRITICAL ACCOUNTING POLICIES
Our discussion and analysis of our financial condition and results of
operations are based upon our financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States of
America. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities,
revenues and expenses, and related disclosure of contingent assets and
liabilities. We monitor our estimates on an on-going basis for changes in facts
and circumstances, and material changes in these estimates could occur in the
future. Changes in estimates are recorded in the period in which they become
known. We base our estimates on historical experience and other assumptions that
we believe to be reasonable under the circumstances. Actual results may differ
from our estimates if past experience or other assumptions do not turn out to be
substantially accurate.
We have identified the policies below as critical to our business
operations and the understanding of our results of operations.
REVENUE RECOGNITION. We recognize revenue in accordance with the
Securities and Exchange Commission's ("SEC") Staff Accounting Bulletin No. 104,
"Revenue Recognition in Financial Statements" ("SAB 104"). We recognize revenue
upon shipment, provided that evidence of an arrangement exists, title and risk
of loss have passed to the customer, fees are fixed or determinable, and
collection of the related receivable is reasonably assured. We record revenue
net of estimated product returns, which is based upon our return policy, sales
agreements, management estimates of potential future product returns related to
current period revenue, current economic trends, changes in customer composition
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<PAGE>
and historical experience. We accrue for warranty costs, sales returns, and
other allowances based on our experience. Generally, we extend credit to our
customers and do not require collateral. We perform ongoing credit evaluations
of our customers and historic credit losses have been within our expectations.
We do not ship a product until we have either a purchase agreement or rental
agreement signed by the customer with a payment arrangement. This is a critical
policy, because we want our accounting to show only sales which are "final" with
a payment arrangement. We do not make consignment sales, nor inventory sales
subject to a "buy back" or return arrangement from customers.
PROVISION FOR SALES RETURNS, ALLOWANCES AND BAD DEBTS. We maintain a
provision for sales allowances, returns and bad debts. Sales returns and
allowances result from equipment damaged in delivery or customer
dissatisfaction, as provided by agreement. The provision is provided for by
reducing gross revenue by a portion of the amount invoiced during the relevant
period. The amount of the reduction is estimated based on historical experience.
RESERVE FOR OBSOLETE/EXCESS INVENTORY. Inventories are stated at the
lower of cost or market. We regularly review our inventories and, when required,
will record a provision for excess and obsolete inventory based on factors that
may impact the realizable value of our inventory including, but not limited to,
technological changes, market demand, regulatory requirements and significant
changes in our cost structure. If ultimate usage varies significantly from
expected usage, or other factors arise that are significantly different than
those anticipated by management, inventory write-downs or increases in reserves
may be required.
A fire in 2002 incinerated our inventory, so we have not had to deal
with significant amounts of obsolete inventory since that time. Our procedure is
now to maintain only limited inventory, based on our experience in service and
repair, necessary for current service and repair contracts or orders anticipated
within the following 60 days. We have supply relationships with long term
suppliers to provide additional parts on an as needed, prompt basis for the vast
majority of repair and service parts, so obsolescence is no longer a factor in
our business. We have not recorded any material amounts as charges to
obsolescence since the fire in 2002 destroyed our warehouse.
Rental income is recognized when earned and expenses are recognized
when incurred. The rental periods vary based on customer's needs ranging from
five days to six months. An operating lease agreement is utilized. The rental
revenues were insignificant in the nine month periods ended September 30, 2010
and 2009. Written rental agreements are used in all instances.
OTHER ACCOUNTING FACTORS
The effects of inflation have not had a material impact on our
operation, nor are they expected to in the immediate future.
Although we are unaware of any major seasonal aspect that would have a
material effect on the financial condition or results of operations, the second
quarter of each fiscal year is always a financial concern due to slow
collections during the summer.
The deposits that are shown in the financials are for pending sales of
existing products and not any new patented product. These are deposits received
from our customers for sales of equipment and services and are only removed as
deposits upon completion of the sale. If for whatever reason a customer order is
cancelled the deposit would be returned as stated in the terms of sale, minus a
restocking fee. No depositor is a related party of any officer or employee of
Imaging3. Our terms of deposit typically are 50% down with the balance of the
sale price due upon delivery.
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<PAGE>
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2010 COMPARED TO
THE THREE MONTHS ENDED SEPTEMBER 30, 2009
We had revenues in the third quarter of 2010 of $366,661, compared to
$224,747 in the third quarter of 2009, which represents a 63% increase. The
increase in revenue is due to increased sales. Historically, our equipment sales
are cyclical in nature. The Company has been experiencing increases during the
third quarter. The Company also intensified its focus on the marketing, sale,
and provision of its historic products and services, as well as on obtaining FDA
approval for its new proprietary medical device. Our equipment sales were
$244,000 in the third quarter of 2010, compared to $85,283 for the same period
in 2009, representing an increase in equipment sales of $158,717 for the same
period in 2010 or 186%. Our service and parts sales for the third quarter of
2010 were $64,675, compared to $68,790 in the third quarter of 2009. The slight
decrease was due to decreased direct parts sales. We will continue to focus on
increasing our revenue in this area, as well.
Our cost of revenue was $196,380 in the third quarter of 2010, compared
to $80,115 for the same period of 2009, which represents an increase of $116,265
or 145%. This increase is due in large part to the fact that the cost for some
of the equipment was higher in the third quarter of 2010 as a result of the sale
of newer models, which cost more. We had an increase in gross profit margin in
the third quarter of 2010 of $170,281, compared to $144,632 for the same period
of 2009. Our operating expenses increased from $509,226 in the third quarter of
2009 to $532,180 for the same period in 2010, a 5% increase mostly due to a
slight increase in expenses during the same period. Our loss on operations
decreased slightly to $361,899 in the third quarter of 2010, compared to
$364,594 for the same period in 2009, a 1% decrease. This decrease is attributed
to the overall increase in revenue for this same period. Our net loss was
$371,186 in the third quarter of 2010, compared to $615,529 for the same period
in 2009, a 40% decrease, again as a result of an increased revenue stream and
lower additional expenses as compared to 2009.
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2010 COMPARED TO
THE NINE MONTHS ENDED SEPTEMBER 30, 2009
We had revenues for the nine months ended September 30, 2010 of
$973,945, compared to $799,243 for the nine months ended September 30, 2009,
representing a 22% increase. The increase in revenue is due to increased sales.
Historically, our equipment sales are cyclical in nature. The Company continues
to experience increases during the third quarter of each year. The Company also
intensified its focus on the marketing, sale and provision of our historic
products and services, as well as on obtaining FDA approval on its new
proprietary medical device. Our equipment sales were $649,727 in the first nine
months of 2010, compared to $375,264 for the same period in 2009, representing
an increase in equipment sales of $274,463 for the same period in 2010 or a 73%
increase. Our service and parts sales for the nine month period of 2010 were
$181,287, compared to $250,751 for the same period of 2009. The decrease was due
to decreased direct parts sales as well as direct service parts. We will
continue to focus on increasing our revenue in this area, as well.
Our cost of revenue was $489,178 in the first nine months of 2010,
compared to $337,483 for the same period of 2009, which represents an increase
of $151,695 or 44%. This is due in large part to the fact that the cost for some
of the equipment was higher as a result of the sale of newer models, which cost
more. We expect to see a pattern of added cost as older equipment costing less
is less in demand. We experienced a gross profit margin in the first nine months
of 2010 of $484,767, compared to $461,760 for the same period of 2009. Our
operating expenses slightly increased from $1,629,546 in the first nine months
of 2009, compared to $1,641,040 for the same period in 2010, a 1% increase
mostly due to a slight increase in expenses during the period. Our loss on
operations decreased to $(1,156,273) in the first nine months of 2010, compared
to $(1,167,786) for the same period in 2009, a 1% decrease. This decrease is
attributed to the overall increase in revenue for this same period. Our net loss
was $(1,190,005) in the first nine months of 2010, compared to $(1,448,768) for
the same period in 2009, an 18% decrease, again as a result of an increased
revenue stream and decrease in other expensed for the same period.
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<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Our cash position was $7,993 at September 30, 2010, compared to
$633,443 at December 31, 2009. The reason for the decrease in cash at the end of
the third quarter of 2010 as compared to December 31, 2009 is primarily due to
repayment of indebtedness and utilizing capital for normal operations. Gross
sales on normal operations have not kept up to replace the capital realized from
the sale of Company shares that were attributed to the large cash position on
December 31, 2009.
As of September 30, 2010, we had current assets of $350,244,
non-current assets of $54,428, and current liabilities of $3,168,773, and as of
December 31, 2009, current assets of $1,134,654, non-current assets of $57,876,
and current liabilities of $2,803,127. The reason for the decrease in current
assets at the end of the third quarter of 2010 as compared to December 31, 2009
is primarily due to repayment of indebtedness, decreased cash, and decreased
account receivables.
Net cash used in operating activities amounted to $(1,042,626) for the
nine month period ended September 30, 2010, compared to net cash used by
operating activities of $(1,229,745) for the same period in 2009. The decrease
in 2010 as compared to 2009 resulted from a decreased net loss and increased
deferred revenue for the period.
Net cash provided by financing activities amounted to $417,176 and
$1,310,710 for the nine month periods ended September 30, 2010 and 2009,
respectively. The decrease in 2010, compared to the same period in 2009 resulted
from the payment of money owed to the Chief Executive Officer of the Company
made in 2009 as well as the proceeds from issuance of common stock during the
same period in 2009.
We do not have sufficient capital to meet our current cash needs, which
include the costs of compliance with the continuing reporting requirements of
the Securities Exchange Act of 1934, as amended. We intend to seek additional
capital and long term debt financing to attempt to overcome our working capital
deficit and did close a $1,000,000 capital infusion during the first few weeks
of October 2009 from institutional investors. We will need between $50,000 and
$100,000 annually to maintain our reporting obligations. We may attempt to do
more private placements of our stock in the future to raise capital, but we
cannot assure that we can raise sufficient capital or obtain sufficient
financing to enable us to obtain approval of our prototype from the FDA and to
sustain monthly operations. In order to address our working capital deficit, we
also intend to endeavor to (i) reduce operating costs, (ii) reduce general,
administrative and selling costs, (iii) increase sales of our existing products
and services, and (iv) obtain the approval of the FDA to 'our proprietary
medical imaging device so that we can commence marketing, licensing and selling
it. There may not be sufficient funds available to us to enable us to remain in
business and our needs for additional financing are likely to persist.
GOING CONCERN QUALIFICATION
We have incurred significant losses from operations, and such losses
are expected to continue. Our auditors have included a "Going Concern
Qualification" in their report for the year ended December 31, 2009. In
addition, the Company has limited working capital. The foregoing raises
substantial doubt about the Company's ability to continue as a going concern.
Management's plans include seeking additional capital and/or debt financing.
There is no guarantee that additional capital and/or debt financing will be
available when and to the extent required, or that if available, it will be on
terms acceptable to us. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty. The "Going Concern
Qualification" might make it substantially more difficult to raise capital.
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ITEM 4. CONTROLS AND PROCEDURES
- -------------------------------
Our management is responsible for establishing and maintaining
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in our reports under the Securities Exchange Act of
1934 (the "Exchange Act") is recorded, processed, summarized and reported within
the time periods specified in the rules and forms of the Securities and Exchange
Commission (the "SEC"), and that such information is accumulated and
communicated to our management, including our Chief Executive Officer and Chief
Financial Officer, as appropriate, to allow timely decisions regarding required
disclosure based closely on the definition of "disclosure controls and
procedures" in Rule 15d-15(e) under the Exchange Act. In designing and
evaluating the disclosure controls and procedures, management recognized that
any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired control objectives,
and management necessarily was required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures.
At the end of the period covered by this Quarterly Report, we carried
out an evaluation, under the supervision and with the participation of our
management, including our Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of our disclosure controls and
procedures. Based upon the foregoing, our Chief Executive Officer and Chief
Financial Officer concluded that, as of September 30, 2010, the disclosure
controls and procedures of our Company were not effective to ensure that the
information required to be disclosed in our Exchange Act reports was recorded,
processed, summarized and reported on a timely basis.
Imaging 3 is undertaking to improve its internal control over financial
reporting and improve its disclosure controls and procedures. As of December 31,
2009, we had identified the following material weaknesses which still exist as
of September 30, 2010 and through the date of this report:
1. As of December 31, 2009 and as of the date of this report, we did
not maintain effective controls over the control environment. Specifically, the
Board of Directors does not currently have any independent members and no
director qualifies as an audit committee financial expert as defined in Item
407(d)(5)(ii) of Regulation S-B. Since these entity level programs have a
pervasive effect across the organization, management has determined that these
circumstances constitute a material weakness.
2. As of December 31, 2009 and as of the date of this report, we did
not maintain effective controls over financial statement disclosure.
Specifically, controls were not designed and in place to ensure that all
disclosures required were originally addressed in our financial statements.
Accordingly, management has determined that this control deficiency constitutes
a material weakness.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no changes in internal controls over financial reporting
that occurred during the period ended September 30, 2010, that have materially
affected, or are reasonably likely to materially affect, our internal control
over financial reporting.
This report does not include an attestation report of our registered
public accounting firm regarding internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
- -------------------------
Imaging3, Inc. ("I3," "Imaging3," "we," or the "Company") may be
involved in legal actions and claims arising in the ordinary course of business
from time to time, none of which at this time is considered to be material to
'our business or financial condition.
ITEM 1A. RISK FACTORS
- ----------------------
Purchasing shares of common stock in Imaging3 entails substantial risk.
You should be able to bear a complete loss of your investment. You should
carefully consider the following factors, among others.
FORWARD-LOOKING STATEMENTS
The discussions and information in the Company's public reports with
the Securities and Exchange Commission (collectively, the "Reports"), including
the documents incorporated by reference may contain both historical and
forward-looking statements. To the extent that the Reports contain
forward-looking statements regarding the financial condition, operating results,
I3's business prospects or any other aspect of I3's business, please be advised
that I3's actual financial condition, operating results and business performance
may differ materially from that projected or estimated by management in
forward-looking statements. I3 has attempted to identify, in context, certain of
the factors that management currently believes may cause actual future
experience and results to differ from I3's current expectations. The differences
may be caused by a variety of factors, including but not limited to adverse
economic conditions, decrease in demand for medical imaging and other equipment,
intense competition, including entry of new competitors, increased or adverse
federal, state and local government regulation, failure by I3 to obtain the
approval of the Federal Food and Drug Administration ("FDA") for its proprietary
3D medical imaging device currently in the prototype phase and subject to patent
applications filed and pending, inadequate capital, unexpected costs, lower
revenues and net income than forecast, failure to complete the development of
I3's proprietary products currently under development, technological obscelence
of I3's products, failure to commercialize or sell any new or existing products
developed by I3, price increases for supplies, inability to raise prices,
failure to obtain customers, the risk of litigation and administrative
proceedings involving I3 and its employees, higher than anticipated labor costs,
the possible fluctuation and volatility of operating results and financial
condition, failure to make planned business acquisitions, failure of new
businesses, if acquired, to be economically successful, decline in I3's stock
price, adverse publicity and news coverage, inability to carry out marketing and
sales plans, loss of key executives, changes in interest rates, inflationary
factors, and other specific risks that may be alluded to in Reports filed by I3.
WE HAVE INCURRED SUBSTANTIAL OPERATING DEFICITS SINCE INCEPTION AND MAY
CONTINUE TO INCUR LOSSES IN THE FUTURE. To date, our revenue from component and
equipment sales has not been adequate to cover research and development costs
for proprietary products under development, marketing costs, operating and
overhead costs, and substantial costs incurred in ongoing litigation. Revenue
from our old business model of selling nonproprietary medical equipment and
components has declined in recent fiscal quarters, and no sales of I3's
proprietary 3D medical imaging product currently under development have yet been
made, since it is still in the prototype phase. We do not have sufficient cash
flow from our current operations to enable us to maintain or grow our business.
We must raise additional capital in the future to continue to operate our
businesses. Failure to secure adequate capital will hinder 'our growth and may
jeopardize I3 as a going concern.
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IF WE DO NOT GENERATE SIGNIFICANT ADDITIONAL REVENUE WE WILL CONTINUE
TO RECEIVE A GOING CONCERN QUALIFICATION IN OUR AUDIT. The financial statements
of I3 have been prepared on a going concern basis of accounting, which
contemplates continuity of operations, realization of assets and liabilities and
commitments in the normal course of business. The financial statements do not
reflect any adjustments that might result if we are unable to continue as a
going concern. I3 does not generate significant revenue, and has negative cash
flows from operations, which raise substantial doubt about the I3's ability to
continue as a going concern. The ability of I3 to continue as a going concern
and appropriateness of using the going concern basis is dependent upon, among
other things, an additional cash infusion. I3 is actively seeking new investors.
WE HAVE NOT COMPLETED THE DEVELOPMENT OF OUR PROPRIETARY 3D MEDICAL
IMAGING TECHNOLOGY. Research and development projects are inherently speculative
and subject to cost overruns. We cannot assure that we will be able to complete
the development of our real time 3D diagnostic medical imaging technology, that
it will be approved by the FDA for sale and use, or that, once developed, our
diagnostic medical imaging devices can be sold profitably. We may not develop
any new products or services for sale from our research and development efforts.
OUR BUSINESS MAY BE ADVERSELY AFFECTED BY COMPETITION. The diagnostic
medical imaging industry is characterized by intense competition. I3 is subject
to competition from other firms, many of which have greater financial resources,
more recognition, more management experience, and longer operating histories
than I3. We cannot assure that we will be able to compete successfully or
profitably in the diagnostic medical imaging business.
WE MAY NOT ACHIEVE THE REVENUE PREDICTED BY US IN OUR BUSINESS MODEL.
We plan to implement a business model that calls for us to sell medical
diagnostic imaging devices, based on our proprietary technology. I3 will incur
substantial operating losses until such time as it is able to generate revenues
from the sale of these products. We cannot assure that businesses and customers
will adopt our products and technology in the volume that we project, or that
businesses and prospective customers will agree to pay the prices that we
proposes to charge. In the event I3's customers resist paying prices at the rate
I3 proposes, I3's financial conditions and results of operations will be
materially and adversely affected.
IF PRODUCTS UTILIZING OUR MEDICAL DIAGNOSTIC IMAGING TECHNOLOGY ARE
DETERMINED TO BE UNSAFE, OUR BUSINESS WILL BE ADVERSELY AFFECTED. As medical
diagnostic imaging has become an ever-more important and prominent part of
everyday life, dramatic growth in the use of medical diagnostic imaging devices
has given rise to occasional questions about safety. In the event that our
products are deemed unsafe, we could face substantial liability and our
financial conditions and results of operations will be materially and adversely
affected.
OUR FAILURE TO ACHIEVE BRAND RECOGNITION COULD HAVE AN ADVERSE AFFECT
ON OUR BUSINESS. We believe that establishing and maintaining brand recognition
for our medical diagnostic imaging technology will be a critical aspect of our
efforts to attract and expand our customer base. Promotion and enhancement of
the Imaging3 brand will depend largely on our success in providing high quality
products and services. In order to attract and retain customers and to promote
the Imaging3 brand in response to competitive pressures, we may find it
necessary to increase substantially our financial commitment to creating and
maintaining the Imaging3 brand. We cannot assure that we will obtain brand
recognition for Imaging3. Our failure to provide high quality products and
services or to obtain and maintain brand recognition could have a material
adverse effect on our business, results of operations, and financial condition.
WE MUST ADAPT QUICKLY TO CHANGES IN TECHNOLOGY. Medical diagnostic
imaging is a rapidly evolving technology. I3 must keep abreast of this
technological evolution. To do so, we must continually improve the performance,
features and reliability of our medical imaging equipment and related products.
If we fail to maintain a competitive level of technological expertise, then we
will not be able to compete in our market.
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OUR INABILITY TO RESPOND TIMELY TO TECHNOLOGICAL ADVANCES COULD HAVE AN
ADVERSE AFFECT ON OUR BUSINESS. I3 must be able to respond to technological
advances and emerging industry standards and practices on a cost-effective and
timely basis. I3 can offer no assurance that it will be able to successfully use
new technologies effectively or adapt I3's products in a timely manner to a
competitive standard. If I3 is unable to adapt in a timely manner to changing
technology, market conditions or customer requirements, then I3 may not be able
to successfully compete in its market.
WE MAY NOT BE ABLE TO REPAY OUR INDEBTEDNESS. I3 has substantial
indebtedness to related parties and to unaffiliated third parties, as disclosed
in more detail in its reports, financial statements and notes to financial
statements filed with the Securities and Exchange Commission. The indebtedness
includes outstanding indebtedness owed by us to our Chief Executive Officer,
payable on demand. We cannot assure that we will be able to repay all or any of
our indebtedness, or that the indebtedness does not and will not continue to
have a material adverse impact on our financial condition, operating results and
business performance, including but not limited to our ability to continue as a
going concern.
THERE IS NO ASSURANCE THAT WE WILL ACHIEVE PROFITABILITY. We cannot
assure that I3 will be able operate profitability in the future. Profitability,
if any, will depend in part upon I3's ability to successfully develop, obtain
FDA approval, and market its proprietary medical diagnostic imaging technology,
and other products and services. We may not be able to successfully transition
from our current stage of business to a stabilized operation having sufficient
revenues to cover expenses. While attempting to make this transition, we will be
subject to all the risks inherent in a small business, including the needs to
adequately service and expand our customer base and to maintain and enhance our
current services. I3's future profitability will be affected by all the risk
factors described herein.
WE ARE EXPOSED TO VARIOUS POSSIBLE CLAIMS RELATING TO OUR BUSINESS AND
OUR INSURANCE MAY NOT FULLY PROTECT US. We cannot assure that we will not incur
uninsured liabilities and losses as a result of the conduct of our business. I3
generally does not maintain theft or casualty insurance and has modest liability
and property insurance coverage, along with workmen's compensation and related
insurance. However, should uninsured losses occur, I3's shareholders could lose
their invested capital.
WE MAY FACE ADDITIONAL LITIGATION IN THE FUTURE. I3 has had a
substantial amount of litigation. The adverse resolution of such litigation to
I3 could impair our ability to continue in business if judgment holders were to
seek to liquidate our business through levy and execution. We have incurred and
may continue to incur substantial legal fees and costs in connection with past
and possibly future litigation. If we fail in our payment schedule, or fail in
our defense to future pending actions, or become subject to a levy and execution
on our assets and business, we could be forced to liquidate or to file for
bankruptcy and be unable to continue in our business. Investors who purchase
shares of I3 common stock will be subject to the risk of total loss if the risks
described herein are realized, because there may be insufficient assets with
which to pay our debts, which would leave shareholders with no recovery.
WE DO NOT HAVE ANY INDEPENDENT DIRECTORS. Currently, the only members
of the Board of Directors are Dean Janes and Xavier Aguilera. Neither of these
directors is considered an "independent director," as defined under FINRA
listing standards and the Nasdaq Marketplace Rules. Therefore, all decisions of
the Board of Directors will be made by persons who are not considered
independent directors.
THE LOSS OF THE SERVICES OF ANY OR OUR MANAGEMENT OR KEY EXECUTIVES
COULD ADVERSELY AFFECT OUR BUSINESS. Our success is substantially dependent on
the performance of our executive officers and key employees. The loss of an
officer or director of I3 would have a material adverse impact on I3. I3 will
generally be dependent upon its executive officers, Dean Janes, Christopher Sohn
and Xavier Aguilera, for the direction, management and daily supervision of I3's
operations.
-20-
<PAGE>
THE RELATIONSHIP OF OUR MANAGEMENT TEAM TO US COULD CREATE CONFLICTS OF
INTEREST. The relationship of management to us creates conflicts of interest. We
lease our executive offices from our Chief Executive Officer pursuant to a lease
that was not determined at arms length. Management's compensation from I3 has
not been determined pursuant to arm's-length negotiation. Management believes
that it will have the resources necessary to fulfill its management obligations
to all entities for which it is responsible.
OUR ABILITY TO PROTECT OUR INTELLECTUAL PROPERTY IS UNCERTAIN. I3 has
applied to the U.S. Patent and Trademark Office to register "Imaging3" as a
service mark and as a trademark. There are no assurances that these applications
will be approved and the registrations granted or that any other person will not
challenge the registration or attempt to infringe upon I3's marks. If I3 is
unable to protect its rights to its trademarks or if such marks infringe on the
rights of others, I3's business would be materially adversely affected.
WE MAY NOT BE ABLE TO WITHSTAND FLUCTUATIONS IN OUR INDUSTRY BECAUSE
OUR BUSINESS IS NOT DIVERSE. Because of the limited financial resources that we
have, it is unlikely that we will be able to diversify our operations. Our
probable inability to diversify our activities into more than one area will
subject us to economic fluctuations within a particular business or industry and
therefore increase the risks associated with our operations.
OUR MEDICAL DIAGNOSTIC IMAGING DEVICES ARE SUBJECT TO GOVERNMENT
REGULATION. Under the Medical Device Amendments of 1976 to the Federal Food,
Drug and Cosmetic Act, all medical devices are classified by the Food and Drug
Administration ("FDA") into one of three classes. A Class I device is subject
only to certain controls, such as labeling requirements and manufacturing
practices; a Class II device must comply with certain performance standards
established by the FDA; and a Class III device must obtain pre-market approval
from the FDA prior to commercial marketing. I3 must receive Class II approval to
market its real time 3D medical diagnostic imaging devices. We cannot be certain
when, if ever, we will receive this approval. In the absence of FDA approval, we
will not be able to market or sell our proprietary diagnostic medical imaging
device, resulting in a material adverse impact to 'our potential operating
results and financial condition. Other laws and regulations may be adopted in
the future that address the manufacture, sale and use of medical diagnostic
imaging devices that could adversely affect our business.
OUR BUSINESS IS GENERALLY SUBJECT TO GOVERNMENT REGULATION. We are
subject to regulations applicable to businesses generally. The adoption of any
additional laws or regulations may decrease the growth of our business, decrease
the demand for services and increase our cost of doing business. Changes in tax
laws also could have a significant adverse effect on our operating results and
financial condition.
IF OUR STOCK PRICE CONTINUES TO BE VOLATILE THERE IS A RISK OUR STOCK
PRICE COULD DECLINE. Our stock price has been volatile. The stock market in
general has been extremely vulnerable and management cannot promise that the
price of our common stock on the OTC Bulletin Board will not decline. We may
register more shares of its stock in the future, potentially increasing the
supply of free trading shares and possibly exerting downward pressure on our
stock price.
SHAREHOLDERS WILL EXPERIENCE DILUTION IN THEIR OWNERSHIP OF US AND WE
MAY NOT RECEIVE PROCEEDS FROM THE EXERCISE OF WARRANTS ISSUED BY US IN
CONJUNCTION WITH OUR RECENT PRIVATE PLACEMENT. We recently completed a private
placement with two institutional investors for the sale of common stock and
warrants (the "Warrants") for $1,000,000.22. The investment banking firm which
acted as the placement agent for us in the transaction also received warrants
with terms similar to those issued to the investors (the "Placement Warrants").
Pursuant to the terms of the placement we agreed to file a registration
statement under the Securities Act of 1933, as amended (the "Securities Act"),
with the Securities and Exchange Commission (the "SEC") covering the resale of
the common stock and the common stock underlying the Warrants. If the
-21-
<PAGE>
registration statement is not declared effective within 90 days of the closing
(or 120 days in the event that the registration statement is subject to review
by the SEC), the Warrants and the Placement Warrants will become subject to
cashless exercise and we will likely not receive any proceeds from the exercise
of the Warrants or the Placement Warrants. Furthermore, if the Warrants and
Placement Warrants are not exercised we will not receive any proceeds from them.
If all of the Warrants and the Placement Warrants are exercised, the issuance of
additional shares of common stock would dilute shareholders' ownership in us.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
- -------------------------------------------------------------------
During the three month period ended September 30, 2010, the Company
issued 123,668 shares of common stock for services rendered for a total of
$36,500. These shares were issued at the fair market value on the day the
transaction occurred.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
- ---------------------------------------
None.
ITEM 4. REMOVED AND RESERVED
- ----------------------------
ITEM 5. OTHER INFORMATION
- -------------------------
None.
ITEM 6. EXHIBITS
- ----------------
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------------------------------------
<S> <C>
3.1 Articles of Incorporation (1)
3.2 Articles of Amendment dated October 25, 2001, June 24, 2002, and August 13, 2002(1)
3.3 Bylaws (1)
3.4 Certificate of Amendment dated September 30, 2003(2)
3.5 Certificate of Amendment dated October 25, 2001(3)
3.6 Certificate of Amendment June 24, 2002(3)
3.7 Certificate of Amendment August 13, 2002(3)
4.1 Securities Purchase Agreement by and between Imaging3, Inc. and Cranshire Capital,
L.P., dated October 4, 2010 (4)
4.2 Series A Warrant, dated October 15, 2010 for Cranshire Capital, L.P.(5)
4.3 Series A Warrant, dated October 15, 2010 for Freestone Advantage Partners, L.P. (5)
4.4 Series B Warrant, dated October 15, 2010 for Cranshire Capital, L.P.(5)
4.5 Series B Warrant, dated October 15, 2010 for Freestone Advantage Partners, L.P. (5)
4.6 Series C Warrant, dated October 15, 2010 for Cranshire Capital, L.P.(5)
4.7 Series C Warrant, dated October 15, 2010 for Freestone Advantage Partners, L.P.(5)
4.8 Registration Rights Agreement entered into by Imaging3, Inc., Cranshire Capital, L.P.
and Freestone Advantage Partners, L.P., dated October 15, 2010(5)
10.1 Patent #6,754,297(3)
10.2 Consulting Agreement(3)
10.3 Assignment(3)
-22-
<PAGE>
10.6 Commercial Promissory Note dated August 4, 2004(6)
10.7 Security Agreement(6)
10.8 Commercial Promissory Note dated April 24, 2005(7)
10.9 Lease entered into May 24, 2001 by and between Dean M. Janes and Imaging Services, Inc.(8)
10.10 IR Commercial Real Estate Association Standard Industrial/Commercial Single-Tenant Lease - Net,
dated June 21, 2004 by and between Four T's, Bryan Tashjan, Ed Jr. Tashjan, Bruce Tashjan, Greg
Tashjan and Dean Janes DBA Imaging Services, Inc.(8)
31.1 Section 302 Certification of Chief Executive Officer
31.2 Section 302 Certification of Chief Financial Officer
32.1 Section 906 Certification
32.2 Section 906 Certification
- ------------------
(1) Incorporated by reference to the Form 10-SB/A Registration
Statement filed with the Securities and Exchange Commissioner
on December 9, 2002.
(2) Incorporated by reference to Amendment #2 to Form SB-2
Registration Statement filed with the Securities and Exchange
Commission on October 6, 2004.
(3) Incorporated by reference to Amendment #3 to Form SB-2
Registration Statement filed with the Securities and Exchange
Commission on October 21, 2004.
(4) Incorporated by reference from the exhibits included with our
Report on Form 8K filed with the SEC on October 5, 2010.
(5) Incorporated by reference from the exhibits included with our
Report on Form 8K filed with the SEC on October 21, 2010.
(6) Incorporated by reference to Amendment #5 to Form SB-2
Registration Statement filed with the Securities and Exchange
Commission on April 18, 2005.
(7) Incorporated by reference to Amendment #6 to Form SB-2
Registration Statement filed with the Securities and Exchange
Commission on July 7, 2005.
(8) Incorporated by reference to Amendment #8 to Form SB-2
Registration Statement filed with the Securities and Exchange
Commission on September 9, 2005.
</TABLE>
-23-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
Dated: November 16, 2010 IMAGING3, INC.
By: /s/ Dean Janes
------------------------------------------
Dean Janes, Chief Executive Officer
and Chairman (Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
By: /s/Dean Janes Dated: November 16, 2010
----------------------------------------------
Dean Janes, Chief Executive Officer
and Chairman (Principal Executive Officer)
By: /s/Christopher Sohn Dated: November 16, 2010
----------------------------------------------
Christopher Sohn, Director, President
and Chief Operating Officer
By: /s/Xavier Aguilera Dated: November 16, 2010
----------------------------------------------
Xavier Aguilera, Chief Financial Officer,
Secretary, and Executive Vice President
(Principal Financial/Accounting Officer)
-24-
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.1
<SEQUENCE>2
<FILENAME>ex311.txt
<TEXT>
EXHIBIT 31.1
CERTIFICATION
I, Dean Janes, certify that:
1. I have reviewed this report on Form 10-Q/A of Imaging3, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
d. Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting.
5. The registrant's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (of persons performing the equivalent
functions):
a. All significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report
financial information; and
b. Any fraud, whether or not material, that involves management
or other employees who have a significant role in the small
business issuer's internal control over financial reporting.
Date: November 16, 2010
/s/Dean Janes
-----------------------------------------------------
Dean Janes, Chief Executive Officer
(Principal Executive Officer)
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-31.2
<SEQUENCE>3
<FILENAME>ex312.txt
<TEXT>
EXHIBIT 31.2
CERTIFICATION
I, Xavier Aguilera, certify that:
1. I have reviewed this report on Form 10-Q/A of Imaging3, Inc.;
2. Based on my knowledge, this report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal
control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
a. Designed such disclosure controls and procedures, or caused
such disclosure controls and procedures to be designed under
our supervision, to ensure that material information relating
to the registrant, including its consolidated subsidiaries, is
made known to us by others within those entities, particularly
during the period in which this report is being prepared;
b. Designed such internal control over financial reporting, or
caused such internal control over financial reporting to be
designed under our supervision, to provide reasonable
assurance regarding the reliability of financial reporting and
the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles;
c. Evaluated the effectiveness of the registrant's disclosure
controls and procedures and presented in this report our
conclusions about the effectiveness of the disclosure controls
and procedures, as of the end of the period covered by this
report based on such evaluation; and
d. Disclosed in this report any change in the registrant's
internal control over financial reporting that occurred during
the registrant's most recent fiscal quarter (the registrant's
fourth fiscal quarter in the case of an annual report) that
has materially affected, or is reasonably likely to materially
affect, the registrant's internal control over financial
reporting.
5. The registrant's other certifying officer(s) and I have disclosed,
based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the
registrant's board of directors (of persons performing the equivalent
functions):
a. All significant deficiencies and material weaknesses in the
design or operation of internal control over financial
reporting which are reasonably likely to adversely affect the
registrant's ability to record, process, summarize and report
financial information; and
b. Any fraud, whether or not material, that involves management
or other employees who have a significant role in the small
business issuer's internal control over financial reporting.
Date: November 16, 2010
/s/Xavier Aguilera
----------------------------------------
Xavier Aguilera, Chief Financial Officer
(Principal Financial/Accounting Officer)
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.1
<SEQUENCE>4
<FILENAME>ex321.txt
<TEXT>
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Imaging3, Inc. (the
"Company") on Form 10-Q/A for the period ending September 30, 2010 (the
"Report") I, Dean Janes, Chief Executive Officer of the Company, certify,
pursuant to 18 USC Section 1350, as adopted pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002, that to the best of my knowledge and belief:
(1) The Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in
all material respects, the financial condition and results of
operations of the Company.
/s/Dean Janes Date: November 16, 2010
- -----------------------------------------------------
Dean Janes, Chief Executive Officer
(Principal Executive Officer)
This certification accompanies the Report pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by
the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-32.2
<SEQUENCE>5
<FILENAME>ex322.txt
<TEXT>
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Imaging3, Inc. (the
"Company") on Form 10-Q/A for the period ending September 30, 2010 (the
"Report") I, Xavier Aguilera, Chief Financial Officer (Principal
Financial/Accounting Officer) of the Company, certify, pursuant to 18 USC
Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002, that to the best of my knowledge and belief:
(1) The Report fully complies with the requirements of Section
13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in
all material respects, the financial condition and results of
operations of the Company.
/s/Xavier Aguilera Date: November 16, 2010
- -----------------------------------------------------
Xavier Aguilera, Chief Financial Officer
(Principal Financial/Accounting Officer)
This certification accompanies the Report pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002 and shall not, except to the extent required by
the Sarbanes-Oxley Act of 2002, be deemed filed by the Company for purposes of
Section 18 of the Securities Exchange Act of 1934, as amended.
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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