-----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, Am6XYykLmmLIAAYyygdNqti/UGkuxZJCMd3PSeXtU97OGNs8OVK1KXS4sgAucYlR f6S9PHMXlxqspMVWHoOscQ== 0000790652-04-000035.txt : 20041108 0000790652-04-000035.hdr.sgml : 20041108 20041108170411 ACCESSION NUMBER: 0000790652-04-000035 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20040930 FILED AS OF DATE: 20041108 DATE AS OF CHANGE: 20041108 FILER: COMPANY DATA: COMPANY CONFORMED NAME: IMAGING DIAGNOSTIC SYSTEMS INC /FL/ CENTRAL INDEX KEY: 0000790652 STANDARD INDUSTRIAL CLASSIFICATION: ELECTROMEDICAL & ELECTROTHERAPEUTIC APPARATUS [3845] IRS NUMBER: 222671269 STATE OF INCORPORATION: FL FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-26028 FILM NUMBER: 041126496 BUSINESS ADDRESS: STREET 1: 6531 NW 18TH COURT CITY: PLANTATION STATE: FL ZIP: 33313-4520 BUSINESS PHONE: 3057460500 MAIL ADDRESS: STREET 1: 6531 NW 18TH COURT CITY: PLANTATION STATE: FL ZIP: 33313-4520 FORMER COMPANY: FORMER CONFORMED NAME: ALKAN CORP DATE OF NAME CHANGE: 19940623 10-Q 1 a10-q093004.txt QUARTERLY REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [Mark One] [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2004 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____to______ Commission file number: 0-26028 IMAGING DIAGNOSTIC SYSTEMS, INC. (Name of small business issuer in its charter) Florida 22-2671269 (State of incorporation) (IRS employer Ident. No.) 6531 N.W. 18th Court, Plantation, FL 33313 (address of principal office) (Zip Code) Registrant's telephone number: (954) 581-9800 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 is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes [ X ] No [ ] The number of shares outstanding of each of the issuer's classes of equity as of September 30, 2004: 180,229,694 shares of common stock, no par value. As of September 30, 2004, the issuer had no shares of preferred stock outstanding. IMAGING DIAGNOSTIC SYSTEMS, INC. (A Development Stage Company) Part I - Financial Information Item 1. Financial Statements Page Condensed Balance Sheet - September 30, 2004 and June 30, 2004 3 Condensed Statement of Operations - Three months ended September 30, 2004 and 2003, and December 10, 1993(date of inception) to September 30, 2004 4 Condensed Statement of Cash Flows - Three months ended September 30, 2004 and 2003, and December 10, 1993(date of inception) to September 30, 2004 5 Notes to Condensed Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Financial Condition and Results 8 Item 3. Quantitative and Qualitative Disclosures About Market Risk 10 Item 4. Controls and Procedures 10 Part II - Other Information Item 1. Legal Proceedings 12 Item 2. Changes in Securities 12 Item 3. Defaults Upon Senior Securities 12 Item 4. Submission of Matters to a Vote of Security Holders 12 Item 5. Other Information 12 Item 6. Exhibits and Reports on Form 8-K 20 Signatures 21 2 IMAGING DIAGNOSTIC SYSTEMS, INC. (A Development Stage Company) Condensed Balance Sheet Assets Sept. 30, 2004 Jun. 30, 2004 -------------- ------------- Current Assets: Unaudited * Cash $ 766,614 $ 554,354 Accounts Receivable 22,072 28,925 Inventory 2,319,505 2,357,864 Prepaid expenses 146,391 64,579 Other current assets 370 570 ------------ ------------ Total Current Assets 3,254,952 3,006,292 ------------ ------------ Property and Equipment, net 2,266,280 2,301,095 Other Assets 797,699 806,244 ------------ ------------ $ 6,318,931 $ 6,113,631 ============ ============ Liabilities and Stockholders' Equity Current Liabilities: Accounts Payable and Accrued Expenses $ 1,054,649 $ 1,172,527 Customer Deposits 40,000 40,000 Short term debt 300,407 300,407 Other current liabilities 1,014,486 1,014,486 ------------ ------------ Total Current Liabilities 2,409,542 2,527,420 ------------ ------------ Stockholders Equity: Common Stock 81,396,232 79,235,712 Additional paid-in capital 1,597,780 1,597,780 Deficit accumulated during development stage (79,084,623) (77,247,281) ------------ ------------ Total stockholders' equity 3,909,389 3,586,211 ------------ ------------ $ 6,318,931 $ 6,113,631 ============ ============ * Condensed from audited financial statements. The accompanying notes are an integral part of these condensed financial statements. 3 IMAGING DIAGNOSTIC SYSTEMS, INC. A Development Stage Company (Unaudited) Condensed Statement of Operations
3 Months Ended Since Inception September 30, (12/10/93) to 2004 2003 Sept. 30, 2004 ------------- ------------- ---------------- Net Sales $ - $ - $ 917,296 Cost of Sales - - 363,871 ------------- ------------- ------------- Gross Profit - - 553,425 ------------- ------------- ------------- Operating Expenses: General and administrative $ 710,520 $ 1,192,445 $ 42,296,949 Research and development 533,091 91,007 12,230,371 Sales and marketing 248,127 58,281 3,261,399 Inventory valuation adjustments 122,236 - 3,357,237 Depreciation and amortization 47,832 38,165 2,281,401 Amortization of deferred compensation - - 4,064,250 ------------- ------------- ------------- 1,661,806 1,379,898 67,491,607 ------------- ------------- ------------- Operating Loss (1,661,806) (1,379,898) (66,938,182) Gain on sale of fixed assets - - 5,585 Interest income 1,021 5,106 269,858 Interest expense (176,558) (312,122) (5,574,124) ------------- ------------- ------------- Net Loss (1,837,343) (1,686,914) (72,236,863) Dividends on cumulative Pfd. stock: From discount at issuance - - (5,402,713) Earned - - (1,445,047) ------------- ------------- ------------- Net loss applicable to common shareholders $(1,837,343) $ (1,686,914) $(79,084,623) ============= ============== ============== Net Loss per common share: Basic and Diluted: Net loss per common share $ (0.01) $ (0.01) $ (1.05) ============ ============= ============ Weighted avg. no. of common shares 176,855,811 165,289,775 75,097,204 ============ ============ ============
The accompanying notes are an integral part of these condensed financial statements. 4 IMAGING DIAGNOSTIC SYSTEMS, INC. (A Development Stage Company) Condensed Statement of Cash Flows
Three Months Since Inception Ended September 30, (12/10/93) to 2004 2003 Sept. 30, 2004 --------------- -------------- ------------------- Cash provided by (used for) Operations: Net loss $ (1,837,343) $ (1,686,914) $(72,236,864) Changes in assets and liabilities 103,568 (497,630) 25,782,672 ------------ ------------ ------------ Net cash used by operations (1,733,775) (2,184,544) (46,454,192) ------------ ------------ ------------ Investments Proceeds from sale of property & equipment - - 29,857 Capital expenditures (4,473) (198,132) (7,210,004) ------------ ------------ ------------ Cash used for investments (4,473) (198,132) (7,180,147) ------------ ------------ ------------ Cash flows from financing activities: Repayment of capital lease obligation - - (50,289) Other financing activities - NET - - 5,835,029 Proceeds from issuance of preferred stock - - 18,039,500 Net proceeds from issuance of common stock 1,950,508 2,674,989 30,576,713 ------------ ------------ ------------ Net cash provided by financing activities 1,950,508 2,674,989 54,400,953 ------------ ------------ ------------ Net increase (decrease) in cash 212,260 292,313 766,614 Cash, beginning of period 554,354 1,361,507 - ------------ ------------ ------------ Cash, end of period $ 766,614 $ 1,653,820 $ 766,614 ============ ============ ============
The accompanying notes are an intergral part of these condensed financial statements. 5 IMAGING DIAGNOSTIC SYSTEMS, INC. NOTES TO CONDENSED FINANCIAL STATEMENTS (Unaudited) NOTE 1 - BASIS OF PRESENTATION The financial information included has been condensed from financial statements prepared as of September 30, 2004. The results of operations for the three-month period ended September 30, 2004, are not necessarily indicative of the results to be expected for the full year. NOTE 2 - GOING CONCERN Imaging Diagnostic Systems, Inc. (IDSI) is currently a development stage company and our continued existence is dependent upon our ability to resolve our liquidity problems, principally by obtaining additional debt and/or equity financing. IDSI has yet to generate a positive internal cash flow, and until significant sales of our product occur, we are mostly dependent upon debt and equity funding. See Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations". In the event that we are unable to obtain debt or equity financing or we are unable to obtain such financing on terms and conditions acceptable to us, we may have to cease or severely curtail our operations. This would materially impact our ability to continue as a going concern. In the event that we are unable to draw on our private equity line, alternative financing would be required to continue operations. Management has been able to raise the capital necessary to reach this stage of product development and has been able to obtain funding for capital requirements to date. There is no assurance that, if and when FDA marketing clearance is obtained, the CTLM(R) will achieve market acceptance or that we will achieve a profitable level of operations. NOTE 3 - INVENTORY Inventory consists primarily of raw materials and work-in-process and amounted to $2,319,505 as of September 30, 2004, compared to $2,357,864 as of June 30, 2004. NOTE 4 - REVENUE RECOGNITION Revenue from sales of medical imaging products is recorded for international sales upon the passing of title and risks of ownership, which occurs upon the shipment of goods. In the U.S. market, when PMA approval is received, revenue will be recorded upon installation of the CTLM(R) System and acceptance by the customer. NOTE 5 - NEW ACCOUNTING PRONOUNCEMENTS In December 2002, the FASB issued Statement No. 148, "Accounting for Stock-Based Compensation--Transition and Disclosure--an amendment of FASB Statement No. 123" ("SFAS 148"). SFAS 148 amends FASB Statement No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), to provide alternative methods of transition for an entity that voluntarily changes to the fair value based method of accounting for stock-based employee compensation. It also amends the disclosure provisions of SFAS 123 to require prominent disclosures about the effects on reported net income of an entity's accounting policy decisions with respect to stock-based employee compensation. SFAS 148 also amends Accounting Principles Board Opinion No. 28, "Interim Financial Reporting," to require disclosures about those effects in interim financial information. The amendments to SFAS 123 in paragraphs 2(a)-2(e) of the statement are effective for financial statements for fiscal years ending after December 15, 2002. The amendment to SFAS 123 in paragraph 2(f) of the statement and the amendment to Opinion 28 in paragraph 3 are effective for financial reports containing condensed financial statements for interim periods beginning after December 15, 2002. The Company currently accounts for its stock-based compensation awards to employees and directors under the accounting prescribed by Accounting Principles Board Opinion 6 No. 25 and provides the disclosures required by SFAS 123. The Company adopted the additional disclosure provisions of SFAS 148 during the quarter ended September 30, 2003. NOTE 6 - STOCK BASED COMPENSATION The Company accounts for stock-based compensation issued to its employees using the intrinsic value method. Accordingly, compensation cost for stock options issued is measured as the excess, if any, of the fair value of the Company's common stock at the date of grant over the exercise price of the options. The pro forma net earnings per share amounts as if the fair value method had been used are presented below. For purposes of the following pro forma disclosures, the weighted-average fair value of options has been estimated on the date of grant using the Black-Scholes options-pricing model with the following weighted-average assumptions used for grants for the three months ended September 30, 2004 and 2003: no dividend yield; expected volatility of 119%; risk-free interest rate of 4%; and an expected five-year term for options granted. Had the compensation cost been determined based on the fair value at the grant, the Company's net income (loss) and basic and diluted earnings (loss) per share would have been reduced to the pro forma amounts indicated below:
Three Months Ended September 30 2004 2003 ---- ---- Net income (loss) - as reported (1,837,343) (1,686,914) Less: stock-based employee compensation determined under the Fair value method, net of income tax effect (158,511) 189,857 ----------- ---------- Net income (loss) - proforma (1,995,854) (1,497,057) =========== =========== Basic and Diluted earnings (loss) per share-as reported $ (0.01) $ (0.01) Basic and Diluted earnings (loss) per share-proforma $ (0.01) $ (0.01)
7 THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS. ACTUAL RESULTS AND EVENTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED AS A RESULT OF THE RISKS AND UNCERTAINTIES SET FORTH UNDER THE CAPTION "CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS", IN OUR FORM 10-K FOR THE FISCAL YEAR ENDED JUNE 30, 2004. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Imaging Diagnostic Systems, Inc. is a development stage company, which, since inception, has been engaged in research and development of its Computed Tomography Laser Mammography System (CTLM(R)). The CTLM(R) is a breast-imaging device for the detection of cancer which utilizes laser technology and proprietary computer algorithms to produce three dimensional cross section slice images of the breast. As of the date of this report we have had no substantial revenues from our operations. We have incurred net losses applicable to common shareholders since inception through September 30, 2004 of approximately $79,084,623 after discounts and dividends on preferred stock. We anticipate that losses from operations will continue for at least the next 12 months, primarily due to an anticipated increase in marketing and manufacturing expenses associated with the commercialization of the CTLM(R), expenses associated with our FDA PMA process, and the costs associated with advanced product development activities. There can be no assurances that the CTLM(R) will achieve market acceptance or that sufficient revenues will be generated from sales of the CTLM(R) to allow us to operate profitably. RESULTS OF OPERATIONS There were no revenues for the three months ended September 30, 2004. As we transition from a development stage company to an operating company we are now reporting expenses under three categories; General and administrative, Research and development, and Sales and marketing. This new format of reporting will better reflect the focus of our expenses as we commercialize the Company. General and administrative expenses during the three months ended September 30, 2004, were $710,520 representing a decrease of $481,925 or 40% from $1,192,445 when compared to the corresponding period in 2003. Of the $710,520, compensation and related benefits comprised $461,901 (65%). Research and development expenses during the three months ended September 30, 2004, were $533,091 representing an increase of $442,084 or 486% from $91,007 when compared to the corresponding period in 2003. Of the $533,091, compensation and related benefits comprised $357,519 (67%). Sales and marketing expenses during the three months ended September 30, 2004, were $248,127 representing an increase of $189,846 or 326% from $58,281 when compared to the corresponding period in 2003. Of the $248,127, compensation and related benefits comprised $62,346 (25%). Interest expense during the three months ended September 30, 2004, was $176,558 representing a decrease of $135,564 or 43% from $312,122 for the corresponding period for 2003. The decrease is due primarily to the reduction from 9% to 7% of the discount taken on our equity credit line with Charlton Avenue, LLC ("Charlton"). See Item 5. Other Information - "Financing/Equity Line of Credit" 8 BALANCE SHEET DATA Our combined cash and cash equivalents totaled $766,614 as of September 30, 2004. This is an increase of $212,260 from $554,354 as of June 30, 2004. During the quarter ending September 30, 2004, we received $1,950,508 from the sale of common stock through our private equity agreement with Charlton and the exercise of employee stock options. See - "Financing/Equity Line of Credit". We do not expect to generate a positive internal cash flow for at least the next 12 months due to the expected costs of commercializing our initial product, the CTLM(R), and the time required for homologations from certain countries. Property and Equipment was valued at $2,266,280 net as of September 30, 2004. The overall decrease of $34,815 from June 30, 2004 is due primarily to depreciation recorded for the first quarter ended September 30, 2004. LIQUIDITY AND CAPITAL RESOURCES We are currently a development stage company and our continued existence is dependent upon our ability to resolve our liquidity problems, principally by obtaining additional debt and/or equity financing. We have yet to generate a positive internal cash flow, and until significant sales of our product occur, we are mostly dependent upon debt and equity funding from outside investors. In the event that we are unable to obtain debt or equity financing or are unable to obtain such financing on terms and conditions acceptable to us, we may have to cease or severely curtail our operations. This would materially impact our ability to continue as a going concern. Since inception we have financed our operating and research and product development activities through several Regulation S and Regulation D private placement transactions and with loans from unaffiliated third parties. Net cash used for operating and product development expenses during the first quarter ending September 30, 2004, was $1,733,775 primarily due to the costs of wages and related benefits, legal and consulting expenses, research and development expenses, clinical expenses, and travel expenses associated with clinical and sales and marketing activities, compared to $2,184,544 in the same quarter ending September 30, 2003. At September 30, 2004, we had working capital of $845,410 compared to working capital of $1,980,270 at September 30, 2003, and $478,872 at June 30, 2004. During the first quarter ending September 30, 2004, we were able to raise a total of $1,950,000 less expenses through the sale of common stock to Charlton. We do not expect to generate a positive internal cash flow for at least the next 12 months due to the expected costs of commercializing our initial product, the CTLM(R), and the expense of our continuing product development program. We will require additional funds for operating expenses, FDA regulatory processes, manufacturing and marketing programs and to continue our product development program. Accordingly, we plan to utilize the Fourth Private Equity Credit Agreement to raise the funds required prior to the end of fiscal year 2005 in order to continue operations. In the event that we are unable to utilize the Fourth Private Equity Credit Agreement, we would have to raise the additional funds required by either equity or debt financing, including entering into a transaction(s) to privately place equity, either common or preferred stock, or debt securities, or combinations of both; or by placing equity into the public market through an underwritten secondary offering. If additional funds are raised by issuing equity securities, dilution to existing stockholders will result, and future investors may be granted rights superior to those of existing stockholders. Capital expenditures for the first quarter ending September 30, 2004, were $4,473 as compared to approximately $198,132 for the first quarter ending September 30, 2003. These expenditures were a direct result of purchases of computer and miscellaneous office equipment. We anticipate that the balance of our capital needs for the fiscal year ending June 30, 2005, will be approximately $70,000. There were no other changes in our existing debt agreements other than extensions, and we had no outstanding bank loans as of September 30, 2004. Our fixed commitments, including salaries and fees for current employees and consultants, rent, payments under license agreements and other contractual commitments are substantial and are likely to increase as additional agreements are entered into and additional personnel are retained. We will require 9 substantial additional funds for our product development programs, operating expenses, regulatory processes, and manufacturing and marketing programs. Our future capital requirements will depend on many factors, including the following: 1) The progress of our ongoing product development projects; 2) The time and cost involved in obtaining regulatory approvals; 3) The cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; 4) Competing technological and market developments; 5) Changes and developments in our existing collaborative, licensing and other relationships and the terms of any new collaborative, licensing and other arrangements that we may establish; 6) The development of commercialization activities and arrangements; and 7) The costs associated with compliance to SEC regulations. We now have issued and outstanding 183,369,662 shares of common stock out of 200,000,000 authorized shares. In addition, we have reserved 8,779,017 shares to cover outstanding options (after waivers by some of our executive officers and directors of the reserve requirement for options to purchase 3,800,000 shares held by them which are unvested, unexercisable and/or out of the money). Therefore, given our ongoing need to issue substantial amounts of new shares to raise capital under our Fourth Private Equity Credit Agreement with Charlton, we will need to soon obtain shareholder approval of an amendment to our articles of incorporation approving a substantial increase in our authorized common stock. There can be no assurance that our shareholders will approve such an increase. If they do not, then we will have to seek alternative sources of funding, which may not be available on commercially reasonable terms. Consequently, a failure to obtain such shareholder approval could have a material adverse impact on IDSI. We do not expect to generate a positive internal cash flow for at least 12 months as substantial costs and expenses continue due principally to the commercialization of the CTLM(R), activities related to our FDA PMA process, and advanced product development activities. We intend to use the Fourth Private Equity Credit Agreement as our principal source of additional capital. There can be no assurance that this financing will continue to be available on acceptable terms. We plan to continue our policy of investing excess funds, if any, in a High Performance Money Market account at Wachovia Bank N.A. ISSUANCE OF STOCK FOR SERVICES/DILUTIVE IMPACT TO SHAREHOLDERS We, from time to time, have issued and may continue to issue stock for services rendered by consultants, all of whom have been unaffiliated. Since we have generated no significant revenues to date, our ability to obtain and retain consultants may be dependent on our ability to issue stock for services. Since July 1, 1996, we have issued an aggregate of 2,306,500 shares of common stock according to registration statements on Form S-8. The aggregate fair market value of the shares when issued was $2,437,151. The issuance of large amounts of our common stock, sometimes at prices well below market price, for services rendered or to be rendered and the subsequent sale of these shares may further depress the price of our common stock and dilute the holdings of our shareholders. In addition, because of the possible dilution to existing shareholders, the issuance of substantial additional shares may cause a change-in-control. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As of the date of this report, we believe that we do not have any material quantitative and qualitative market risks. ITEM 4. CONTROLS AND PROCEDURES The term "disclosure controls and procedures" is defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934 (the "Exchange Act"). These rules refer to the controls and other procedures of a company that are designed to ensure that the information required to be disclosed by a company in the reports that it files under the Exchange Act is recorded, processed, summarized 10 and reported within required time periods. Our Chief Executive Officer and our Principal Financial Officer have evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by the report (the "Evaluation Date"), and have concluded that, as of the Evaluation Date, our disclosure controls and procedures are effective in providing them with material information relating to the Corporation known to others within the Corporation which is required to be included in our periodic reports filed under the Exchange Act. There have been no changes in the Corporation's internal controls over financial reporting that occurred during the period this Form 10-Q was being prepared that has materially affected, or is reasonably likely to materially affect, the Corporation's internal control over financial reporting. 11 PART II OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None ITEM 2. CHANGES IN SECURITIES. See Item 5. "Other Information" - FINANCING/EQUITY LINE OF CREDIT. ITEM 3. DEFAULTS UPON SENIOR SECURITIES. None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS. None. ITEM 5. OTHER INFORMATION Recent Developments Regulatory Matters In order to sell the CTLM(R) commercially in the United States, we must obtain marketing clearance from the Food and Drug Administration. A PreMarket Approval application (PMA) must be supported by extensive data, including pre-clinical and clinical trial data, as well as extensive literature to prove the safety and effectiveness of the device. Under the Food, Drug, and Cosmetic Act, the FDA has 180 days to review a PMA application, although in certain cases the FDA may increase that time period through requests for additional information or clarification of existing information. We are following the guidelines of the "Standardized Shell for Modular Submission" for the FDA approval process. The FDA assigned a Modular Shell Control Number and a general description of items required for the submission. Below is a table indicating the status of our FDA Modular Submission:
Module # Description of Module Submission Date Filed Date Accepted - ------- -------------------------------- ---------- ------------- Module 1 General Information & Safety 9/27/2000 1/7/2002 Module 2 Software 4/17/2001 6/12/2001 Module 3 Non-Pivotal Clinical 5/1/2001 8/13/2001 Module 4 Manufacturing & Quality Systems 1/2/2001 9/25/2001 PMA PMA Submission 4/29/2003 Voluntarily Withdrawn on 9/24/2004 PMA* PMA Re-Submission* Pending
* See "On October 15, 2004,..." below for further information regarding the PMA Re-Submission. On April 29, 2003, we announced that we submitted our Premarket Approval Application (PMA) with the U.S. Food and Drug Administration (FDA) seeking marketing approval for our Computed Tomography Laser Mammography System, the CTLM(R). 12 On June 18, 2003, we announced that we received notification from the Food and Drug Administration that an initial review of our Premarket Approval Application (PMA) has been conducted and is sufficiently complete to permit a substantive review and is, therefore, suitable for filing. An in-depth evaluation of the safety and effectiveness of the device will be conducted to determine the final approval of the PMA application. We filed a new application with Health Canada in June 2003 because of new clinical data. On June 18, 2003 we received notification from the Medical Device Bureau of Health Canada that our application had been accepted for review. On November 14, 2003 we announced that we received notification from the Medical Device Bureau of Health Canada that our application for a "New Medical Device" license was approved. The license was issued in accordance with the Medical Device Regulations, Section 36. Furthermore, we possess the CAN/CSA ISO 13485-1998 certification, which is an additional regulatory requirement that is evidence of compliance to the quality system of the medical device. On August 27, 2003, we announced in an 8-K filing that we received a letter from the FDA stating that it had completed its review of our PMA. The FDA, in its letter, outlined deficiencies in the PMA submission, which must be resolved before the FDA's review could be completed. The FDA stated that until these deficiencies are resolved, the PMA application is not approvable in its current form. The FDA identified measures to make the PMA approvable and we will amend our PMA application to address the deficiencies in the letter. We are working with our FDA counsel and consultants to correct these deficiencies. On February 2, 2004, we announced in an 8-K filing that we received a warning letter from the FDA specifically regarding the biomonitoring section of an inspection conducted August 13th through August 18th, 2003 at our facility. We submitted our response to this letter to the FDA on February 9, 2004. We are continuing to prepare supplementary information to support our PMA application. On February 10, 2004, we announced in an 8-K filing that we had submitted our response to the warning letter and on March 29, 2004, we announced in an 8-K filing that our responses to the FDA's warning letter regarding the bio-monitoring inspection addressed each of the issues and no further response to the FDA is required at this time. On March 25, 2004, we announced in an 8-K filing that the FDA agreed with our request for an extension of time to respond to the FDA's August 22, 2003 letter regarding our pre-market approval application. We are seeking PreMarket approval from the FDA for this intended use: "The Imaging Diagnostic's Computed Tomography Laser Mammography (CTLM(R)) scanner is intended for use as an adjunct to mammography in patients who have equivocal mammographic findings within ACR BI-RADS categories 3 or 4. In particular, it is not intended for use in cases with clear mammographic or non-mammographic indications for biopsy. This device provides the radiologist with additional information to guide a biopsy recommendation". We are continuing to work closely with the FDA and our new regulatory consultants to address the deficiencies and to submit an amendment to our PMA application. On September 27, 2004, we announced that our CT Laser Mammography System, CTLM(R), had received Chinese State Food and Drug Administration (SFDA) marketing approval. The People's Republic of China SFDA issued the registration "Certificate for Medical Device". The medical device registration number is 20043241646. On September 29, 2004 we filed an 8-K report announcing this press release and attached it as an exhibit. On October 15, 2004, we issued a press release of a shareholder letter written by our new CEO, Tim Hansen, detailing the steps he has taken in FDA and other corporate development matters during his first three months as CEO of the Company. In the letter he stated the following: "the PMA involves a process which has, unfortunately, taken far longer than expected. We have been working on amending the PMA application at the request of the FDA. Our team recommended rephrasing the Computed Tomography Laser Mammography System (CTLM(R)) intended use statement and modifying the patient study protocols. They also recommended adding more clinical cases. Meanwhile the PMA clock was ticking and these well advised changes would have taken more time to complete. Also, as we earlier reported, our PMA amendment and processes were briefly interrupted by a biomonitoring inspection audit of our clinical trials and subsequent warning letter and, although that matter was resolved, the sum of these influences caused serious delays in our filings. 13 These are complex matters, but after conferring with the FDA and our outside consultants, I recently made the decision to simply withdraw our current PMA application and resubmit the entire package in a simpler and more clinically and technically robust filing. Consequently, IDSI will submit a new PMA application with a rephrased intended use statement better supported by our data, the inclusion of new clinical cases to improve the biometrics, and with a new clinical protocol to fully support the adjunctive use of CTLM(R) in clinical mammography settings. The key factor in my decision was the belief that re-filing should not additionally delay our previous schedule. The schedule should remain unchanged because the FDA indicated that Modules 1 through 4 would be `grandfathered' so to speak, and because our clinical case read program will continue in its current form. We are not starting over in any sense of the word. We will, however, submit a fresh and concise PMA application without amendments or extensions. Of course, this approach requires another filing fee but we believe it yields a higher confidence scenario. So, to be very clear, we will submit a new PMA application and there should be no additional delays in our overall schedule. You have all waited patiently for CTLM(R) to become a US market reality, and I would appreciate your continuing support through this next important phase. I am very satisfied with this new approach." On October 18, 2004 we filed an 8-K report announcing this press release and attached it as an exhibit. Clinical Update Patients are continuing to be scanned at our various collaboration sites, including the University of Vienna, Allgemeines Hospital, the Humboldt University of Berlin, Charite Hospital and at Policlinico Paolo Giancone Hospital in Palermo, Italy. We have completed all of the clinical studies required for our PMA application. In this regard we have removed CTLM(R) Systems used in the studies from the following locations: o University of Virginia Health System in Charlottesville, Virginia o The Women's Center for Radiology in Orlando, Florida o The Don and Sybil Harrington Cancer Center ("Harrington") in Amarillo, Texas o The Instituto Nacional de Cancerologia (National Cancer Institute) in Mexico City, Mexico o Elizabeth Wende Breast Clinic in Rochester, New York Other Recent Events In June 2004, we announced that we were granted a Chinese Patent for "DIAGNOSTIC TOMOGRAPHIC LASER IMAGING APPARATUS" as Chinese Patent No. ZL95197940X. The patent was issued in the name of Richard J. Grable for a period of 20 years from the date of filing until July 10, 2015 and is exclusively licensed to Imaging Diagnostic Systems, Inc. See "Patent Licensing Agreement". In July 2004, we announced that Tim Hansen was appointed by the Board of Directors to serve as the new Chief Executive Officer and Board member. Mr. Hansen has served in top-level executive positions in the medical imaging industry over a 30-year period and was notably President of Picker Medical Systems, a leading company in the diagnostic imaging market. Most recently, Mr. Hansen was with Cardinal Health, Inc. as the general manager of the Radiation Management Services, a leading provider of medical imaging quality assurance instruments and solutions. On July 14, 2004 we filed an 8-K report announcing this press release and attached it as an exhibit. In August 2004, we announced that we were granted a European Patent for "APPARATUS FOR DETERMINING THE PERIMETER OF THE SURFACE OF AN OBJECT BEING SCANNED" as European Patent No. 1003419. This is the European equivalent of U.S. Patent No. 6,044,288, which protects a key element in the optical technique used to determine the perimeter of an object being scanned. In September 2004, we announced that Janusz Ostrowski has joined IDSI as Vice President, International Sales. He will be responsible for implementing and 14 managing the distribution network outside of the U.S. Mr. Ostrowski has over 20 years of experience as an imaging equipment industry executive who has spent his career introducing new products and services to global markets. In September 2004, we announced that we have installed a third CT Laser Mammography System, CTLM(R), as part of Schering AG's Phase 1 clinical study of the fluorescent imaging compound SF64. The third system was installed in the prestigious Charite Hospital in Berlin. We had previously announced that CTLM(R) Systems were installed at the Robert-Rossle Clinic and at the University of Muenster. In September 2004, we announced that we signed a multi-year agreement with China Far East International Trading Corporation (CFETC) for the exclusive sale of our CTLM(R) in the People's Republic of China. The new agreement also includes clinical research and collaboration programs and supersedes our previous distribution contract with CFETC. On September 29, 2004 we filed an 8-K report announcing this press release and attached it as an exhibit. In October 2004, we issued a press release entitled "Shareholder Letter from Imaging Diagnostic Systems, Inc." written by our new CEO, Tim Hansen. The letter stated Mr. Hansen's three top priorities: first, get the U.S. FDA Pre Market Approval (PMA) completed; second, launch a global commercialization program; and third, lay out a roadmap to enhance the long-term growth of the Company. On October 18, 2004 we filed an 8-K report announcing this press release and attached it as an exhibit. 15 FINANCING/EQUITY LINE OF CREDIT We will require substantial additional funds for working capital, including operating expenses, clinical testing, regulatory processes and manufacturing and marketing programs and our continuing product development programs. Our capital requirements will depend on numerous factors, including the progress of our product development programs, results of pre-clinical and clinical testing, the time and cost involved in obtaining regulatory approvals, the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights, competing technological and market developments and changes in our existing research, licensing and other relationships and the terms of any new collaborative, licensing and other arrangements that we may establish. Moreover, our fixed commitments, including salaries and fees for current employees and consultants, and other contractual agreements are likely to increase as additional agreements are entered into and additional personnel are retained. On July 17, 2000 we sold to Charlton in a private placement 400 shares of our Series K convertible preferred stock for $4 million. We issued an additional 95 Series K shares to Charlton for $950,000 on November 7, 2000. The total of $4,950,000 was designed to serve as bridge financing pending draws on the Charlton private equity line (described below). We paid Spinneret Financial Systems Ltd. ("Spinneret"), an independent financial consulting firm unaffiliated with us and, according to Spinneret and Charlton, unaffiliated with Charlton, $200,000 as a consulting fee for the first tranche of Series K shares and five Series K shares as a consulting fee for the second tranche. We were obligated to pay a 9% dividend on the Series K convertible preferred in cash or common stock at our option semi-annually on June 30 and December 31 of each calendar year or upon the conversion date. Under the Series K Certificate of Designations, we had the option of redeeming the remaining convertible preferred (except for the Spinneret shares) solely through the use of the private equity line by paying cash with the following redemption premiums. Days from closing 0-120 121-180 180 Redemption price As a % of Principal 105% 107.5% 110% In the event that, for whatever reason, we did not redeem the convertible preferred according to the above schedule, the holder had the right to convert the convertible preferred into common stock at a per share price equal to the lower of $1.29 (115% of the closing bid price on the day prior to the initial issuance) or 87.5% of the average of the three lowest closing bid prices (which need not be consecutive) of the 20 consecutive trading days prior to the conversion date. In November 2000, Charlton converted 25 Series K shares plus accrued dividends into 197,349 restricted shares of common stock. In January 2001, Charlton converted $3,950,000 (395 shares) of Series K convertible preferred stock into an aggregate of 4,935,412 common shares and Spinneret converted $50,000 (5 shares) of Series K convertible preferred stock into an aggregate of 63,996 common shares. On December 12, 2000, we registered 5,720,605 common shares underlying the 500 shares of Series K convertible preferred stock. The shares registered included only 58,140 shares underlying the Spinneret Series K preferred so we had to issue 5,856 common shares with a restrictive legend. Those shares were registered in February 2001. Of the remaining 100 shares of Series K preferred stock, 50 shares were converted into 664,659 shares of common stock in April 2001 and 50 shares were redeemed for $550,000 using proceeds from the Charlton private equity line in April 2001. On August 17, 2000, we entered into a $25 million private equity credit agreement with Charlton. On November 29, 2000, prior to any draws under the initial private equity agreement, we terminated that agreement and the initial agreement was replaced by an Amended Private Equity Credit Agreement dated November 30, 2000 (the "Private Equity Agreement"). The Private Equity Agreement committed Charlton to purchase up to $25 million of common stock subject to certain conditions pursuant to Regulation D over the course of a commitment period extending 12 months after the effective date of a registration statement covering the Private Equity Agreement common shares. The timing and amounts of the purchase by the investor were at our sole discretion. We were required to draw down a minimum of $10 million from the credit line over the initial 12-month period. If the minimum amount was not sold, Charlton was entitled to 16 receive a payment equal to 9% of the difference between the $10,000,000 and the amount drawn by us (the "Shortfall Payment"). The purchase price of the shares of common stock was set at 91% of the market price. The market price, as defined in the agreement, was the average of the three lowest closing bid prices of the common stock over the ten day trading period beginning on the put date and ending on the trading day prior to the relevant closing date of the particular tranche. If, subsequent to effectiveness, the registration statement was suspended at any time, we would be obligated to pay liquidated damages of 1.5% of the cost of all common stock then held by the investor for each 15-day period or portion thereof, beginning on the date of the suspension. If such suspension was cured within the first 15 days, the damages would not apply. The only fee associated with the private equity financing was a 5% consulting fee payable to Spinneret. In September 2001 Spinneret proposed to lower the consulting fee to 4% provided that we pay their consulting fee in advance. We reached an agreement and paid them $250,000 out of proceeds from a put. On December 13, 2000 we registered 7,089,685 shares of common stock underlying $10 million out of the $25 million available in the Private Equity Agreement. Because of the decline in our stock price, we did not have sufficient common shares registered to fulfill our obligation under the Private Equity Agreement. To satisfy our obligation to provide registered common shares to cover the $10 million minimum, we registered 9,875,000 additional shares on October 23, 2001. We paid Spinneret an additional $186,235 in consulting fees relating to the Private Equity Agreement from January to September 2001. The New Private Equity Agreement Because the average bid price of our common stock fell below the contractually required $.50 during the 15-day period prior to puts and/or put closings from time to time in the period beginning November 15, 2001, Charlton orally agreed to waive the minimum price requirement. Further, because we drew only $5,825,000 of the $10,000,000 minimum by December 13, 2001, Charlton orally agreed to extend the commitment period and thereby waived its right to receive a Shortfall Payment based on our failure to timely draw the $10,000,000 minimum. On May 7, 2002, we and Charlton entered into a written amendment to the Private Equity Agreement as of November 15, 2001, which (i) reduced the minimum stock price requirement from $.50 to $.25, (ii) reduced the minimum average daily trading volume to $50,000, and (iii) extended the commitment period to December 13, 2003. Between November 15, 2001, and April 24, 2002, Charlton accepted two puts totaling $625,000 and 1,410,240 shares despite the relevant average bid price having fallen below $.50. From December 14, 2001, to April 24, 2002, Charlton accepted eight puts totaling $2,600,000 and 5,897,827 shares. Charlton has not accepted any puts under the prior Private Equity Agreement since April 24, 2002. Charlton agreed to the waivers sought by us in connection with the prior Private Equity Agreement because of our good working relationship and the mutually beneficial nature of the relationship. During the initial one-year commitment period, we drew only $5,825,000 of the $10,000,000 minimum because we did not require all of the funds and wanted to avoid unnecessary dilution of our shareholders and unnecessary sales of our stock, which could have depressed its market price. Charlton has never rejected any of our puts. From January 25, 2001 to April 9, 2002 we drew $8,425,000 and issued 15,015,479 shares to Charlton under the prior Private Equity Agreement. On May 15, 2002, we and Charlton entered into a new private equity agreement, which replaced the prior Private Equity Agreement (the "New Private Equity Agreement"). The terms of the New Private Equity Agreement are substantially equivalent to the terms of the prior agreement, except that (i) the commitment period is three years from the effective date of a registration statement covering the New Private Equity Agreement shares, (ii) the minimum amount we must draw through the end of the commitment period is $2,500,000, (iii) the minimum stock price requirement has been reduced to $.20, and (iv) the minimum average trading volume has been reduced to $40,000. The conditions to our ability to draw under the Charlton private equity line, as described above, may materially limit the draws available to us. Since we did not yet have an effective registration statement covering shares to be sold pursuant to the New Private Equity Agreement, in May 2002, Charlton loaned us $350,000 in order to partially cover our short-term working capital needs. This loan was evidenced by a promissory note dated May 29, 2002, due August 1, 2002, and bearing interest at a rate of 2% per month. The loan was secured by a pledge of 1,000,000 shares of our common stock, 500,000 each by our Chief Executive Officer, Linda Grable, and by our Executive Vice President and 17 Chief Financial Officer, Allan Schwartz, and was personally guaranteed by Ms. Grable and Mr. Schwartz. Charlton orally agreed to extend the due date of the note, and we have paid it back in full with proceeds of puts under the New Private Equity Agreement between July and December 2002. On May 17, 2002 we filed a registration statement on Form S-2 to register 10,000,000 shares underlying the New Private Equity Agreement, which was declared effective by the SEC on July 24, 2002. We intend to make sales under the New Private Equity Agreement from time to time in order to raise working capital on an "as needed" basis. We may sell additional shares pursuant to the New Private Equity Agreement through subsequent registration statement(s), provided that our stock price remains above that agreement's minimum. As of the date of this report under the New Private Equity Agreement we have drawn down $2,076,000 and issued 9,989,319 shares of common stock. The Third Private Equity Credit Agreement On October 29, 2002, we and Charlton entered into a new "Third Private Equity Credit Agreement" with which we intend to supplement the prior New Private Equity Agreement. The terms of the Third Private Equity Credit Agreement are substantially equivalent to the terms of the prior agreement, except that (i) the commitment period is three years from the effective date of a registration statement covering the Third Private Equity Credit Agreement shares, (ii) the maximum commitment is $15,000,000, (iii) the minimum amount we must draw through the end of the commitment period is $2,500,000, (iv) the minimum stock price requirement has been reduced to $.10, and (v) the minimum average trading volume in dollars has been reduced to $20,000. The conditions to our ability to draw under this private equity line, as described above, may materially limit the draws available to us. We intend to make sales under the new Third Private Equity Credit Agreement from time to time in order to raise working capital on an "as needed" basis. Based on our current assessment of our financing needs, we intend to draw in excess of the $2,500,000 minimum but substantially less than the $15,000,000 maximum under the new Third Private Equity Credit Agreement; however, if those needs change we may draw up to the $15,000,000 maximum. As of the date of this report under the Third Private Equity Credit Agreement we have drawn down $7,805,000 and issued 21,756,177 shares of common stock. The Fourth Private Equity Credit Agreement On January 9, 2004, we and Charlton entered into a new "Fourth Private Equity Credit Agreement" which replaces our prior private equity agreements. The terms of the Fourth Private Equity Credit Agreement are more favorable to us than the terms of the prior Third Private Equity Credit Agreement. The new, more favorable terms are: (i) the put option price is 93% of the three lowest closing bid prices in the ten day trading period beginning on the put date and ending on the trading day prior to the relevant closing date of the particular tranche, while the prior Third Private Equity Credit Agreement provided for 91%, ii) the commitment period is two years from the effective date of a registration statement covering the Fourth Private Equity Credit Agreement shares, while the prior Third Private Equity Credit Agreement was for three years, (iii) the maximum commitment is $15,000,000, (iv) the minimum amount we must draw through the end of the commitment period is $1,000,000, while the prior Third Private Equity Credit Agreement minimum amount was $2,500,000, (v) the minimum stock price requirement is now controlled by us as we have the option of setting a floor price for each put transaction (the previous minimum stock price in the Third Private Equity Credit Agreement was fixed at $.10), (vi) there are no fees associated with the Fourth Private Equity Credit Agreement; the prior private equity agreements required the payment of a 5% consulting fee, which was subsequently lowered to 4% by mutual agreement in September 2001, and (vii) the elimination of the requirement of a minimum average daily trading volume in dollars. The previous trading volume requirement in the Third Private Equity Credit Agreement was $20,000. The conditions to our ability to draw under this private equity line, as described above, may materially limit the draws available to us. On January 30, 2004, we filed a registration statement with respect to 5,000,000 shares of our common stock to be issued pursuant to the Fourth Private Equity Credit Agreement. This registration statement became effective March 4, 2004, at which time the Third Private Equity Credit Agreement was terminated and we began drawing under the Fourth Private Equity Credit Agreement. On June 21, 2004 we 18 filed a registration statement with respect to 9,800,000 shares of our common stock to be issued pursuant to the Fourth Private Equity Credit Agreement. This registration statement became effective June 29, 2004. We intend to make sales under the new Fourth Private Equity Credit Agreement from time to time in order to raise working capital on an "as needed" basis. Based on our current assessment of our financing needs, we intend to draw in excess of the $1,000,000 minimum but substantially less than the $15,000,000 maximum under the new Fourth Private Equity Credit Agreement; however, if those needs change we may draw up to the $15,000,000 maximum. As of the date of this report, under the Fourth Private Equity Credit Agreement we have drawn down $4,862,500 and issued 13,654,093 shares of common stock. As of the date of this report, since January 2001, we have drawn an aggregate of $25,106,000 in gross proceeds from our equity credit lines with Charlton and have issued 62,263,932 shares as a result of those draws. There can be no assurance that adequate financing will be available when needed, or if available, will be available on acceptable terms. Insufficient funds may prevent us from implementing our business plan or may require us to delay, scale back, or eliminate certain of our research and product development programs or to license to third parties rights to commercialize products or technologies that we would otherwise seek to develop ourselves. If we utilize the new Fourth Private Equity Credit Agreement or additional funds are raised by issuing equity securities, especially convertible preferred stock and convertible debentures, dilution to existing shareholders will result and future investors may be granted rights superior to those of existing shareholders. Moreover, substantial dilution may result in a change in our control. 19 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits 31.1 Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2 Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 32.1 Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2 Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (b) Reports on Form 8-K A Form 8-K was filed on July 13, 2004, stating that Tim Hansen was appointed by the Board of Directors to serve as the new Chief Executive Officer and Board member. Mr. Hansen has served in top-level executive positions in the medical imaging industry over a 30-year period and was notably President of Picker Medical Systems, a leading company in the diagnostic imaging market. Most recently, Mr. Hansen was with Cardinal Health, Inc. as the general manager of the Radiation Management Services, a leading provider of medical imaging quality assurance instruments and solutions. A Form 8-K was filed on September 28, 2004, announcing that our CT Laser Mammography System (CTLM(R)) had received Chinese State Food and Drug Administration (SFDA) marketing approval. The Peoples Republic of China SFDA issued the registration "Certificate for Medical Device". The medical device registration number is 20043241646. A Form 8-K was filed on September 29, 2004, announcing that we signed a multi-year agreement with China Far East International Trading Corporation (CFETC) for the exclusive sale of our CT Laser Mammography System (CTLM(R)) in the People's Republic of China. The new agreement also includes clinical research and collaboration programs and supersedes our previous distribution contract with CFETC. A Form 8-K was filed on October 18, 2004 announcing the issuance of a press release entitled, "Shareholder Letter From Imaging Diagnostic Systems, Inc." written by Tim Hansen, CEO. The letter detailed the three top priorities chosen by Mr. Hansen and the Board of Directors. First, get the U.S. FDA Pre Market Approval (PMA) completed; second, launch a global commercialization program; and third, lay out a roadmap to enhance the long-term growth of the Company. 20 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Dated: November 8, 2004 Imaging Diagnostic Systems, Inc. By: /s/ Timothy B. Hansen ----------------- Timothy B. Hansen Chief Executive Officer By: /s/ Allan L. Schwartz --------------------- Allan L. Schwartz, Executive Vice-President and Chief Financial Officer (PRINCIPAL ACCOUNTING OFFICER) 21 EX-31 2 exhibit31-1.txt CEO CERTIFICATION EXHIBIT 31.1 CERTIFCATION BY CHIEF EXECUTIVE OFFICER PURSUANT TO EXCHANGE ACT SECTIONS 13(a) & 15(d) AS REQUIRED BY SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Timothy B. Hansen, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Imaging Diagnostic Systems, Inc.; 2. Based on my knowledge, this quarterly 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 quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures 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 quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5) The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 8, 2004 /s/ Timothy B. Hansen --------------------- Timothy B. Hansen Chief Executive Officer EX-31 3 exhibit31-2.txt CFO CERTIFICATION EXHIBIT 31.2 CERTIFCATION BY CHIEF FINANCIAL OFFICER PURSUANT TO EXCHANGE ACT SECTIONS 13(a) & 15(d) AS REQUIRED BY SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002 I, Allan L. Schwartz, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Imaging Diagnostic Systems, Inc.; 2. Based on my knowledge, this quarterly 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 quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures 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 quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5) The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 8, 2004 /s/ Allan L. Schwartz --------------------- Allan L. Schwartz Executive Vice President and Chief Financial Officer EX-32 4 exhibit32-1.txt CEO CERTIFICATION EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. ss. 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Imaging Diagnostic Systems, Inc. (the "Company") on Form 10-Q for the period ending September 30, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Timothy B. Hansen, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. ss. 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 result of operations of the Company. /s/ Timothy B. Hansen --------------------- Timothy B. Hansen Chief Executive Officer November 8, 2004 EX-32 5 exhibit32-2.txt CFO CERTIFICATION EXHIBIT 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. ss. 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Imaging Diagnostic Systems, Inc. (the "Company") on Form 10-Q for the period ending September 30, 2004, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Allan L. Schwartz, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. ss. 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 result of operations of the Company. /s/ Allan L. Schwartz --------------------- Allan L. Schwartz Executive Vice President and Chief Financial Officer November 8, 2004 -----END PRIVACY-ENHANCED MESSAGE-----