Attached files
FORM 10-K/A
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended: December 31, 2009
COMMISSION FILE NUMBER 000-50099
IMAGING3, INC.
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(Exact name of registrant as specified in its charter)
CALIFORNIA 95-4451059
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(State of Incorporation) (I.R.S. Employer Identification No.)
3200 W. VALHALLA DRIVE, BURBANK, CALIFORNIA 91505
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(Address of principal executive offices) (Zip Code)
(818) 260-0930
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Registrant's telephone number, including area code
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OR 12(G) OF THE ACT
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NONE
Securities covered by this report:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
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COMMON STOCK OTC
Indicate by check mark if the registrant is a well-known seasoned
issuer, as defined in Rule 405 of the Securities Act.
Yes |_| No |X|
Indicate by check mark if the registrant is not required to filed
reports pursuant to Section 13 or Section 15(d) of the Act.
Yes |_| No |X|
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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K/A or any
amendment to this Form 10-K/A.
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.
Large accelerated filer [___] Accelerated filer [_X_]
Non-accelerated filer [___] Smaller reporting company [_ _]
(Do not check if a smaller
reporting company)
Indicate by check mark whether the Registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).
Yes |_| No |X|
The aggregate market value of voting stock held by non-affiliates of
the registrant was approximately $194,295,690 as of March 29, 2010 (computed by
reference to the last sale price of a share of the registrant's Common Stock on
that date as reported by OTC Bulletin Board).
There were 375,709,898 shares outstanding of the registrant's Common
Stock as of March 29, 2010.
TABLE OF CONTENTS
PART 1
ITEM 1 Business 1
PART II
ITEM 5 Market for Registrant's Common Stock and Related
Stockholder Matters 15
ITEM 9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure 16
ITEM 9A Controls and Procedures 17
ITEM 9B Other Information 18
PART III
ITEM 10 Directors, Executive Officers, and Corporate Governance 18
ITEM 12 Security Ownership of Certain Beneficial Owners and Management 22
ITEM 15 Exhibits, Financial Statement Schedules 23
SIGNATURES 24
PART I
ITEM 1. BUSINESS
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GENERAL
Imaging3, Inc. (the "Company" or "Imaging3") has developed a
proprietary medical technology designed to produce 3D medical diagnostic images
in real time. In the future, healthcare workers using Imaging3 devices will
potentially be able to instantly view 3D, high-resolution images of virtually
any part of the human body.
HISTORY
The Company was founded as Imaging Services, Inc. ("ISI") on October
29, 1993, by Dean Janes. The Company initially served as a low cost, third party
service alternative for equipment made by Orthopedic Equipment Company Medical
Systems ("OEC"). OEC is the largest manufacturer of mobile surgical C-arms with
over a 60% market share in the United States. A C-arm is an integral component
of a fluoroscopic imaging system used for various types of surgery. Management
believes that prior to the Company's inception, no company existed solely
focused on providing third party service for OEC equipment.
In early 1994, Imaging3 began offering upgrades for OEC C-arms. The
most successful upgrade was a CCD (Charged Coupled Device) camera, which
improved the image quality of older systems to be comparable with that of brand
new products. This offering became so successful that the Company integrated
this upgrade with used OEC C-arms and built custom units for NASA, Harvard,
University of California at Irvine, University of California at Davis, Baylor
University, Baxter Healthcare and other prestigious healthcare organizations.
Later that year, Imaging3 applied for and received United States Food and Drug
Administration ("FDA") approval for this device, described as the NASA II CCD
C-arm.
In mid 1995, Imaging3 purchased the assets of ProMedCo. ProMedCo had an
exclusive agreement with OEC to remanufacture OEC C-arms for OEC Medical
Systems. Though the purchase did not transfer the agreement, it eliminated one
of the Company's competitors and provided a substantial inventory of replacement
parts. Access to these replacement parts allowed Imaging3 to increase
immediately its production levels and created the opportunity to remanufacture
OEC's complete product line, thereby increasing the models ISI could offer its
customers. Also, this purchase allowed the Company to enter the lucrative parts
sales business.
In 2000, the Company continued its expansion by purchasing a sales
company in San Diego, California. This asset purchase brought an extensive
database with the contact information for over 43,000 physicians, hospitals,
medical centers and surgery centers as well as a streamlined automated sales
force. Also, as part of this expansion, several key employees, most of whom were
former employees of OEC, were hired to increase the Company's service presence
in Arizona, Washington, Nevada, Florida and Hawaii with a national service
presence as the ultimate goal. In 2002, the Company closed the San Diego office
and consolidated operations in Burbank, California.
On February 19, 2002, a fire gutted the Company's principal operating
facility, causing an estimated $4.3 million in damage. The 10,800-square-foot
structure was subsequently rebuilt and the Company has reoccupied it. In the
interim, the Company leased temporary facilities. The damage to the building and
the loss of the Company's equipment were partially covered by liability
insurance. Nevertheless, the fire disrupted the Company's operations.
In order to better position the Company for its future direction away
from service and toward providing proprietary medical imaging products, the
Company changed its name Imaging Services, Inc. to Imaging3, Inc. on August 20,
2002.
On November 25, 2009, the Company filed with the FDA a 510(k)
application for approval of the Company's medical diagnostic imaging device for
sale in the United States. Assuming that the FDA grants approval, the Company
intends to follow up and apply to sell the product in the European and then
worldwide markets. The FDA is currently reviewing the application, and
management is not certain if or when FDA approval will be granted. The Company
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completed building its first prototype medical diagnostic imaging device in
April 2007.
BUSINESS OPERATIONS
Imaging3 technology has the potential to contribute to the improvement
of healthcare. The Company's technology is designed to cause 3D images to be
instantly constructed using high-resolution fluoroscopy. These images can be
used as real time references for any current or new medical procedures in which
multiple frames of reference are required to perform medical procedures on or in
the human body. Management believes that Imaging3 technology has extraordinary
market potential in an almost unlimited number of medical applications,
including:
o TRAUMA CENTER. Imaging3 technology would allow a surgeon to
immediately view exactly where a bullet is lodged in a gunshot
victim. At any point during the procedure, the surgeon could
continue to view 3D images in real-time.
o CARDIOLOGY. Imaging3 technology could provide a 3D view of a
heart and allow a cardiologist to record the heartbeat in
real-time. The entire heart would be visible, including veins
that are wrapped around the "back" side.
o PAIN MANAGEMENT. Imaging3 technology could provide a 3D view
of the spine, nerve endings, and injection points and help
guide the needle for spinal procedures. 3D images in real-time
could also be used to view disk compression.
o NEURO-VASCULAR. Imaging3 technology could provide a 3D view of
the skull and brain to diagnose neuro-vascular diseases. 3D
images in real-time could be used to view the rupture of
vessels or arterial blockages diminishing blood flow to the
brain.
o ORTHOPEDIC. Imaging3 technology could provide a 3D view of
bones and joints to help diagnose orthopedic conditions. An
orthopedic surgeon could view a 3D image in real-time to line
up a screw with the hole in a hip pinning.
o VASCULAR. Imaging3 technology could provide a 3D view of veins
throughout the body. After injecting dye, a 3D image in
real-time could pinpoint clots and occlusions and help
diagnose vascular diseases.
MULTI-FUNCTION DEVICE
A diagnostic medical imaging device built with Imaging3 technology can
perform several functions and can replace or supplement a number of exiting
devices, resulting in considerable cost savings for hospitals and healthcare
centers. These functions include:
o Perform real-time, 3D medical imaging;
o Emulate a computerized tomography ("CT") scanner (at a
fraction of the capital cost); and
o Perform standard fluoroscopy.
The Company's management believes that this multi-function capability
will be especially attractive in foreign markets, where the cost of a CT scanner
is beyond the means of most hospitals and healthcare centers.
EXISTING BASE OF BUSINESS TO LAUNCH A PROPRIETARY PRODUCT
Imaging3 is an established company with revenues and an industry
reputation. While the Company began as a service provider, it quickly expanded
to include equipment and parts sales, both new and renewed. Management believes
that Imaging3 is the largest remanufacturer of C-arms in the world. The Company
offers new, demonstration, remanufactured, refurbished and pre-owned systems in
all price ranges from every major manufacturer including OEC, General Electric
("GE"), ISI, Philips, Siemens, FluoroScan, XiScan and Ziehm. The Company
supplies full-size, compact and mini C-arms.
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Management believes that Imaging3 is also the largest distributor of
C-arm tables in the United States. The Company offers new, demonstration,
remanufactured, refurbished and pre-owned C-arm tables in all price ranges from
every major manufacturer. The Company also supplies pain management tables,
surgery tables, urology tables and vascular tables. Imaging3's management
intends to use the Company's base of operations and channels of distribution to
launch its new medical imaging devices business, based on its breakthrough
Imaging3 technology.
BUSINESS AND REVENUE MODELS
The Company's business strategy is straight-forward: (1) continue to
build the Company's base of C-arm remanufacturing and service business, (2)
develop medical diagnostic imaging devices, based on the Company's breakthrough
Imaging3 technology for the $5 billion medical imaging market, (3) sell the
Company's new medical diagnostic imaging devices directly to healthcare
providers, as well as through channel partners and distributors, and (4) license
the Company's breakthrough Imaging3 technology to other medical diagnostic
imaging device manufacturers.
The Company's management believes that most of the Company's future
revenues will come from the sale of medical imaging devices, based on the
Company's Imaging3 technology. Other revenues are expected to be derived from
the licensing of its proprietary technology to other medical diagnostic imaging
device manufacturers. The smallest portion of the Company's future revenue is
projected to come from the sale and service of C-arms.
PROPRIETARY TECHNOLOGY
PATENT
On June 23, 2004, U.S. Patent No. 6,754,297 was granted in the name of
Dean Janes, entitled Apparatus and Method for Three-Dimensional Real-Time
Imaging System. The rights to this patent have been assigned to the Company.
ABSTRACT OF THE PATENT DISCLOSURE
A computing device in a three-dimensional imaging system utilizes a
plurality of distance readings and reference readings from at least one subject
sensor to determine a subject location and a subject volume and establish a base
three-dimensional map of a subject. A plurality of two-dimensional image
exposures along with a plurality of associated reference locations are created
by rotating an image source and an image receptor around an inner circumference
of an imaging gantry. The plurality of two-dimensional image exposures is
digitized to create a plurality of digital two-dimensional image exposures. The
computing device receives the plurality of digital two-dimensional image
exposures and the plurality of associated reference locations. The overlaying,
interpolating and pasting of the plurality of digital two-dimensional image
exposures on the base three-dimensional map creates a base three-dimensional
image exposure, which is displayed on a display device.
GENERAL DESCRIPTION
Real-time 3D medical diagnostic imaging will be accomplished by
scanning the patient, either partially or completely in a 360-degree
circumference under fluoroscopy (or other type of image exposure), utilizing a
single or multiple x-ray source and image receptor. The information acquired
under fluoroscopy (or other type of image exposure) will be digitized at a frame
rate of between 30 to 60 frames per second. This information will be sent to a
computer system to be incorporated into a three-dimensional image to be
displayed on a computer monitor. The image created can then be manipulated
and/or rotated to view the scanned image of the patient's anatomy in any
direction or orientation desired by the user. The user could then choose a
specific area of the image to update. Once an area is selected, the computer
displaying the image would then "gang" or align the x-ray source(s) and image
receptor(s) to begin updating scans of new images to be overlaid upon the
existing three-dimensional model. This process would then be updated and/or
repeated as many times as necessary for the specific procedure to be completed.
At any time, a new reference area or scan could be selected or initiated.
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THE "O" DEVICE
Part of the Company's invention is based on an "O" device to create a
circular gantry similar to that used with CT to scan a patient a full 360
degrees with fluoroscopic radiation. This approach is expected to allow imaging
of the patient from any frame of reference or angulation (current medical
imaging devices are limited to 150 degrees to 360 degrees with mechanical
orientation or manipulation). 3D imaging requires an "O" device to scan the
patient in increments of 360 degrees to allow construction of a
three-dimensional image. By scanning the patient in 360 degrees and acquiring
images at 30 to 60 frames per second, management believes a three-dimensional
image can be constructed.
IMAGING3 TECHNOLOGY DIFFERS FROM OTHER APPROACHES
The "O" device approach is similar to that used in a CT scan. The
difference is CT is used to image a "slice" of the anatomy and not intended for
real-time fluoroscopic imaging. The slice is obtained by using a fulcrum
reference point and rotating the X-ray source and image receptor in reference to
that point. This basic geometry creates a 2D image in any depth desired, in any
region of the body. The "O" device would use a similar fulcrum point to
reference depth, but the scan would not create a slice but instead a real-time
image captured at 30 to 60 frames per second in 360 degrees. Further, management
believes that the "O" device would be used for conventional fluoroscopic imaging
with the advantage of positioning the X-ray source and receptor at any
angulation desired.
Currently, 3D imaging is used only for reconstructive post processing
reference images. Magnetic resonance imaging ("MRI"), CT and ultrasound
currently have this capability. The 3D images are created by multiple scans of
2D images that require a long period of time to process into a three-dimensional
image. The image created is then used only for reference, not real-time
manipulation in the body. The Company anticipates that it's 3D images will be
constructed almost instantly and will be available to be used as real-time
references whenever multiple frames of reference are required to perform medical
procedures on or in the human body.
THE MARKET
The Company competes in the medical diagnostic imaging market and this
market has never been healthier than it is today. This vitality is due primarily
to continual technological improvements that lead to faster and
better-resolution imaging, greater patient safety, and the provision of these
capabilities to a growing and aging population. The result has been a vigorous
competition to create the most cost-effective diagnostic imaging systems.
Diagnostic imaging is an evolving part of modern medicine and is now
entering a new era of digital imaging. The field has evolved from the early
X-rays by Roentgen over 100 years ago to imaging of organs by CT and MRI that
are 20 years old. Medical imaging is used for diagnosis in the leading causes of
death, heart attacks, strokes, and cancer. What was once called the radiology
department is now called the diagnostic imaging department because of the wealth
of new technologies available beyond x-rays. A trauma victim's internal injuries
are imaged with a CT scanner. Breast cancer, a leading cause of death in women,
is detected with mammography and ultrasound.
According to a Freedonia Group study, the medical imaging equipment
market in the U.S. will register gains of 7.6 percent per year through 2010 to
$9.5 billion, faster than projected growth in national health expenditures.
Growth will be stimulated by an increasing incidence of patient procedures
involving diagnostic imaging, partly the result of an aging population and
partly reflecting advances in noninvasive imaging technology.
The Company's management believes that opportunities exist not only for
new companies in imaging products but also software companies for image
processing and Picture Archiving and Communication Systems ("PACS") networks.
Technological developments continue, which consistently result in new products.
Diagnostic imaging is an important part of medical diagnosis. It ranges
from a dentist's X-ray to find tooth decay to angiograms done to aid a
cardiologist in performing an angioplasty. The aging baby boomer population will
need the new imaging capabilities for cancer and heart disease detection. The
revolution in medical imaging is being fueled not only by new medical imaging
technology, but also by advances in computer hardware and software. New systems
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such as spiral CT or multi-slice CT would not be possible without today's faster
processors. Better software algorithms for image analysis and compression make
the process more accurate and efficient. The growth of diagnostic imaging could
be an important source of revenue for computer manufacturers and software
companies specializing in diagnostic imaging.
INDUSTRY OVERVIEW
Diagnostic imaging services are noninvasive procedures that generate
representations of the internal anatomy and convert them to film or digital
media. Diagnostic imaging systems facilitate the early diagnosis of diseases and
disorders, often minimizing the cost and amount of care required and reducing
the need for costly and invasive diagnostic procedures.
MAGNETIC RESONANCE IMAGING ("MRI")
MRI involves the use of high-strength magnetic fields to produce
computer-processed cross-sectional images of the body. Due to its superior image
quality, MRI is the preferred imaging technology for evaluating soft tissue and
organs, including the brain, spinal cord and other internal anatomy. With
advances in MRI technology, MRI is increasingly being used for new applications
such as imaging of the heart, chest and abdomen. Conditions that can be detected
by MRI include multiple sclerosis, tumors, strokes, infections, and injuries to
the spine, joints, ligaments, and tendons. Unlike x-rays and computed
tomography, which are other diagnostic imaging technologies, MRI does not expose
patients to potentially harmful radiation.
MRI technology was first patented in 1974, and MRI systems first became
commercially available in 1983. Since then, manufacturers have offered
increasingly sophisticated MRI systems and related software to increase the
speed of each scan and improve image quality. Magnet strengths are measured in
tesla, and MRI systems typically use magnets with strengths ranging from 0.2 to
1.5 tesla. The 1.0 and 1.5 tesla strengths are generally considered optimal
because they are strong enough to produce relatively fast scans but are not so
strong as to create discomfort for most patients. Manufacturers have worked to
gradually enhance other components of the machines to make them more versatile.
Many of the hardware and software systems in recently manufactured machines are
modular and can be upgraded for much lower costs than purchasing new systems.
The MRI industry has experienced growth as a result of:
o Recognition of MRI as a cost-effective, noninvasive diagnostic
tool.
o Superior soft-tissue image quality of MRI versus that of other
diagnostic imaging technologies.
o Wider physician acceptance and availability of MRI technology.
o Growth in the number of MRI applications.
o MRI's safety when compared to other diagnostic imaging
technologies, because it does not use potentially harmful
radiation.
o Increased overall demand for healthcare services, including
diagnostic services, for the aging population.
POSITRON EMISSION TOMOGRAPHY ("PET")
PET is a nuclear medicine procedure that produces pictures of the
body's metabolic and biologic functions. PET can provide earlier detection of
certain cancers, coronary diseases or neurologic problems than other diagnostic
imaging systems. It is also useful for the monitoring of these conditions.
COMPUTED TOMOGRAPHY ("CT")
In CT imaging, a computer analyzes the information received from an
x-ray beam to produce multiple cross-sectional images of a particular organ or
area of the body. CT imaging is used to detect tumors and other conditions
affecting bones and internal organs.
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OTHER SERVICES
Other diagnostic imaging technologies include x-ray, single photon
emission computed tomography, and ultrasound.
DIGITAL IMAGING TECHNOLOGIES
New techniques for the digital capture, display, storage, and
transmission of x-ray images are poised to revolutionize the diagnostic imaging
market. Although digital technologies and techniques have been in use in other
diagnostic imaging areas (such as CT scans, MRI scans, and ultrasound),
technical problems have kept x-ray technologies in the era of film. However, new
methods of digitally capturing x-ray images are under development and promise to
revolutionize x-ray imaging.
The need to cut costs and improve services in healthcare delivery is
driving the move to digital systems. The requirement for hospitals to implement
electronic access to medical images and other types of information is now widely
accepted and regarded as inevitable. The trend toward storing, distributing and
viewing medical images in digital form is being fueled by both changes in the
economic structure of the healthcare system and by rapidly evolving
technologies. In particular, the new economics of health care will mandate a
shift from film-based radiology to the electronic delivery of digital images,
while new technology promises the additional benefit of vastly improved
diagnostic power.
USERS OF DIAGNOSTIC IMAGING
MRI and other imaging services are typically provided in one of the
following settings:
HOSPITALS AND CLINICS
Imaging systems are located in and owned and operated by a hospital or
clinic. These systems are primarily used for the patients of the hospital or
clinic, and the hospital or clinic bills third-party payors, such as health
insurers, Medicare or Medicaid.
INDEPENDENT IMAGING CENTERS
Imaging systems are located in permanent facilities not generally owned
by hospitals or clinics. These centers depend upon physician referrals for their
patients and generally do not maintain dedicated, contractual relationships with
hospitals or clinics. In fact, these centers may compete with hospitals or
clinics that have their own systems to provide Imaging3 to these patients. Like
hospitals and clinics, these centers bill third-party payors for their services.
OUTSOURCED
Imaging systems, largely located in mobile trailers but also provided
in fixed facilities, provide services to a hospital or clinic on a
shared-service or full-time basis. Generally, the hospital or clinic contracts
with the imaging service provider to perform scans of its patients, and the
imaging service provider is paid directly by that hospital or clinic instead of
by a third-party payor.
INDUSTRY CHALLENGES
In a recent report, U.S. MEDICAL IMAGING INDUSTRY OUTLOOK, Frost &
Sullivan identified several challenges facing the diagnostic imaging industry.
Low reimbursement rates have become a major challenge, not only for end users,
but for manufacturers as well. Imaging reimbursements for many procedures may be
inadequate given the expense of the equipment and the expertise required to
create and interpret results.
Lack of adequate compensation is a concern for all industry
participants, as many healthcare centers are delaying or canceling purchases of
high-priced items. Until the financial rewards for imaging are increased
substantially, and definitively, low reimbursement will be the foremost hurdle
for manufacturers.
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COMPETITION
COMPETITIVE LANDSCAPE
The healthcare industry in general and the market for imaging products
in particular is highly competitive. The Company competes with a number of
companies, many of which have substantially greater financial, marketing, and
other resources than the Company. The Company's competitors include large
companies such as GE, Philips, Siemens, Toshiba and Hitachi, which compete in
most medical diagnostic imaging modalities, including x-ray imaging.
A study by Theta Reports, DIAGNOSTIC IMAGING EQUIPMENT AND SYSTEMS
WORLD MARKET, identifies the following 17 key players in the medical diagnostic
imaging market:
o ADAC Laboratories
o Eastman Kodak Co.
o Fonar Corp.
o Fuji Medical Systems U.S.A., Inc.
o General Electric Medical Systems
o Hitachi Medical Systems America, Inc.
o Hologic, Inc.
o Imaging Diagnostic Systems, Inc.
o Imatron, Inc.
o Lumisys, Inc.
o Marconi Medical Systems
o Philips Medical Systems Nederland BV
o PhorMax Corp.
o Siemens Medical Engineering Group
o Sterling Diagnostic Imaging, Inc.
o Trex Medical Corp.
o Varian Medical Systems, Inc.
DIRECT COMPETITORS
At this time, the Company is not aware of any existing devices in the
marketplace that provide 3D, real-time diagnostic medical imaging, with the
exception of ultrasound.
Ultrasound is a real-time tomographic imaging modality. Not only does
it produce real-time tomograms of the position of reflecting surfaces (internal
organs and structures), but it can also be used to produce real-time images of
tissue and blood motion. However, ultrasound is a low-resolution imaging
modality that does not produce an image as precise and clear as fluoroscopy. The
Company's devices will rely instead on the use of fluoroscopy, a high-resolution
imaging modality, to produce "live" x-ray images of living patients in 3D.
MARKETING AND SALES PLAN
MARKETING STRATEGY
Imaging3's marketing strategy is to create a favorable environment to
sell its medical diagnostic imaging devices. The Company intends to enhance,
promote and support the fact that Imaging3 technology is the most complete and
comprehensive medical diagnostic imaging solution available in the marketplace.
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PRODUCT AND SERVICE DIFFERENTIATION
The differentiating attributes of Imaging3 technology include:
o The only 3D, real-time medical diagnostic imaging device in
the market that will produce high resolution images;
o Reasonably priced;
o Easy-to-install;
o Vast array of features; and
o Highly reliable.
The Imaging3 medical device will be reasonably priced because it will
cost considerably less than comparable MRI and CT Scan machines. It will be easy
to install because it is lighter and will be more mobile than the MRI and CT
Scan machines. It will have more features than MRI and CT Scan machines because
it will provide 3D instant real time images and real time CT emulation, which
the other machines do not provide. Management believes that the Imaging3 medical
device will be more reliable than competing MRI and CT Scan machines because it
needs less radiation to provide its 3D images, and its assembled components are
simpler, standard (i.e. "off-the-shelf") rather than customized, and more
efficient.
VALUE PROPOSITION
The Company's value proposition is simple: diagnostic imaging devices
with Imaging3 technology allow healthcare providers to easily produce 3D,
real-time, high resolution images at a reasonable cost.
POSITIONING
Management believes that Imaging3 can be positioned as offering the
superior solution for producing medical diagnostic images. Management believes
that the Company's unique advantage is that it can offer a diagnostic imaging
solution that will allow healthcare providers to view real-time references for
virtually any procedure. The Company plans to reposition its competitors by
demonstrating that their offerings are inadequate because they:
o Do not provide 3D images; o Do not provide images in real-time; o Do not
provide high resolution images; and o Are too costly.
SALES STRATEGY
After undertaking a marketing campaign, the Company intends to
aggressively sell its medical diagnostic imaging devices in the United States.
International sales efforts will follow after achieving market penetration in
the domestic marketplace.
SALES MARGIN STRUCTURE
The Company's management believes that the majority of its sales will
be derived from direct sales to customers, with the balance of sales derived
from dealers and manufacturer's representatives. As a result, the sales margin
structure must be attractive to these independent organizations.
o Direct Sales - Full suggested list price; o Dealers - 30% off suggested list
price; and o Manufacturer's Representatives - 10% commission.
TARGET MARKET SEGMENT
The Company's management has identified general medical and surgical
hospitals in the United States as its primary target market segment for Imaging3
technology. According to D&B/iMarket, there are 12,041 general medical and
surgical hospitals in the United States.
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DISTRIBUTION CHANNELS
The Company plans to sell its Imaging3 medical diagnostic imaging
devices through several channels of distribution, including:
DIRECT SALES TO END USERS
The Company's policy is to sell directly to end-users whenever
possible. The Company's management expects that direct sales will occur most
often with larger customers.
DEALERS AND MANUFACTURER'S REPRESENTATIVES
The Company has working relationships with a number of independent
organizations that help distribute the Company's current product line. The
Company expects to work with these independent organizations to help distribute
diagnostic medical imaging devices built with Imaging3 technology. These
organizations have well-established relationships with mid-size to large size
customers. Many also provide specific vertical market applications.
EXECUTIVE SALES
Because many of Imaging3's large customers will tend to be top
healthcare managers, it is important that its Company president and senior
managers present its products to its large customers.
FIELD SALES FORCE
Management anticipates that the majority of the Company's selling
efforts to large accounts will be handled internally through its field sales
force. Imaging3 has chosen to use a direct sales force because its large
accounts require considerable customer education and post-sales support directly
from the Company. Management believes that the Company's price points, pricing
structure and profits are such that its cost of sales warrants a
"person-to-person" selling strategy.
DEALERS AND MANUFACTURERS' REPRESENTATIVES
The Company plans to supplement its own field sales force by entering
into agreements with dealers and manufacturers' representatives. Because dealers
and manufacturers' representatives carry several product/service lines that are
compatible with the Company's products and services, Imaging3 plans to select
dealers and manufacturers representatives carrying complementary and compatible
products and services, as well as dealers and manufacturers' representatives
that sell dissimilar products and services yet are appropriate for their
customers' customer.
EMPLOYEES
The Company currently employs thirteen full-time individuals, all of
whom are working at the Company's offices at 3200 W. Valhalla Drive, Burbank,
California 91505. Eight of those thirteen full-time employees are employed in
administrative, marketing, and sales positions, and the remaining five are
technical employees employed in research, development and production positions.
The Company projects that during the next 12 months, the Company's workforce is
likely to increase.
To support the Company's need for technical staffing, the Company has
established relationships with technical staffing organizations that
continuously offer highly qualified personnel to meet the Company's needs, both
locally and from out of the area.
INTELLECTUAL PROPERTY MATTERS
All of the Company's employees have executed agreements that impose
nondisclosure obligations on the employee and in which the employee has assigned
to the Company (to the extent permitted by California law) all copyrights and
-9-
other inventions created by the employee during employment with the Company. The
rights underlying the application for the patent of the Imaging3 technology have
been assigned to the Company. The Company has in place a trade secret protection
policy that the Company's management believes to be adequate to protect the
Company's intellectual property and trade secrets.
GOVERNMENT REGULATORY APPROVAL PROCESS
All the Company's products are classified as Class II (Medium Risk)
devices by the FDA and clinical studies with the Company's products will be
considered to be Non-Significant Risk Studies ("NSR"). Imaging3's business is
governed by the FDA and all products typically require 510(k) market clearance
before they can be put in commercial distribution. The Company is also regulated
by the FDA's Quality Systems Regulation ("QSR"), which is similar to the ISO9000
and the European EN46000 quality control regulations. All of the Company's
products currently in production or manufactured by other vendors are approved
for marketing in the United States under the FDA's 510(k) regulations.
A 510(k) is a pre-marketing submission made to the FDA to demonstrate
that the device to be marketed is as safe and effective, that is, substantially
equivalent ("SE"), to a legally marketed device that is not subject to
pre-market approval ("PMA"). Applicants must compare their 510(k) device to one
or more similar devices currently on the U.S. market and make and support their
substantial equivalency claims. A legally marketed device is a device that was
legally marketed prior to May 28, 1976 (pre-amendments device), or a device
which has been reclassified from Class III to Class II or I, a device which has
been found to be substantially equivalent to such a device through the 510(k)
process, or one established through Evaluation of Automatic Class III
Definition. The legally marketed device(s) to which equivalence is drawn is
known as the "predicate" device(s).
Applicants must submit descriptive data and when necessary, performance
data to establish that their device is SE to a predicate device. The data in a
510(k) is to show comparability, that is, SE of a new device to a predicate
device.
Imaging3 has not sought or obtained a determination from the FDA
whether a 510(K) submission is required. The FDA does not offer an opinion or
determination of what submission is required. The FDA does provide a database of
devices, classifications and Regulation numbers. In the Company's research of
this database the Company determined several Class II devices meet the Company's
criteria for submission. These devices are listed in the table below.
PRODUCT CODE CLASS DESCRIPTION REGULATION
------------ ----- ----------- ----------
IZG II System, X-ray, Photofluorographic 892.1730
JAB II System, X-ray, Fluoroscopic, Non-Image-I 892.1660
JAK II System, X-ray, Tomography, Computed 892.175
This is a broad range of devices with which to compare the Company's
device functionality. The FDA requires the manufacturer to submit an
application, whether it is a 510(k) or PMA submission. Upon receipt of the
submission, the FDA will respond within 30 to 45 days with their determination
of acceptance of the submission, questions and/or comments to the submission or
requests for more information.
All of the Company's current used rebuilt products are Class II
devices, FDA approved through OEM for marketing. Once approved, the FDA will not
require the manufacturer to resubmit an application or change the
classification. They may, however, request further information about the
product(s), manufacturer and GMP requirements. The devices currently sold by the
Company are not manufactured by the Company. OEC Medical Systems is the original
device manufacturer and responsible for the FDA submission of their original
device(s). Imaging3 remanufactures OEC Medical Systems devices, thus the Company
is not required to submit any FDA submission for these devices. In some
instances, the Company has performed modifications to these devices to improve
the devices functionality, and in these instances Imaging3 has submitted 510(k)
applications. These modifications are to existing devices with existing
classifications listed in the FDA database and cannot be reclassified. The FDA
database listing for current products is listed below:
-10-
PRODUCT CODE CLASS DESCRIPTION REGULATION
------------ ----- ----------- ----------
IZL II System, X-ray, Mobile 892.1720
As to the Company's new product and its potential for classification,
the FDA requires the Company, as the manufacturer, to submit an application in
whichever classification the Company chooses in the submission form it chooses,
meaning 510(k) or PMA application. The FDA reviews the submission and determines
whether the application is appropriately filed and in the correct submission
format. The criteria they use for determination on a 510(k) is SE, which is a
comparative analysis of the manufacturer's device in the submission with
existing devices already approved by the FDA. This is the purpose of the FDA's
Device Classification Database, giving manufacturer's products with approved
submissions and categories of devices to compare new device submissions. A new
type of device may not be found in the product classification database. If the
device is a high risk device (supports or sustains human life, is of substantial
importance in preventing impairment of human health, or presents a potential,
unreasonable risk of illness or injury) and has been found to be not
substantially equivalent ("NSE") to a Class I, II, or III (Class III requiring
510(k)), then a PMA application will be required.
If the FDA determines the new device must be classified as a Class III
device, the FDA may still allow the device submission to be a 510(k) submission.
Class III devices, which are equivalent to devices legally marketed before May
28, 1976 may be marketed through the pre-market notification (510(k)) process
until the FDA has published a requirement for manufacturers of that generic type
of device to submit pre-market approval data.
Class III devices are usually those that support or sustain human life,
are of substantial importance in preventing impairment of human health, or which
present a potential, unreasonable risk of illness or injury. Examples of Class
III devices which require a pre-market approval include replacement heart
valves, silicone gel-filled breast implants, and implanted cerebella
stimulators.
The Company's new product, the "Real-time 3D Imaging Device" is
expected to be submitted as Product Code "IZG," Device Class II, "System, X-ray,
Photofluorographic," Regulation Number 892.1730, since this is the closest
device description. The FDA may at its own choosing and determination wish to
reclassify this device as a Class III, which the Company believes is unlikely,
since the majority of the Company's device functions are similar to existing
products currently being marketed and as classified above.
If the FDA determines to classify this device as a Class III device a
PMA application must be filed. The PMA application is the most stringent type of
device marketing application required by the FDA. The applicant must receive FDA
approval of its PMA application prior to marketing the device. PMA approval is
based on a determination by the FDA that the PMA contains sufficient valid
scientific evidence to assure that the device is safe and effective for its
intended use(s). An approved PMA application is, in effect, a private license
granting the applicant (or owner) permission to market the device. The PMA
owner, however, can authorize use of its data by another.
The PMA applicant is usually the person who owns the rights, or
otherwise has authorized access, to the data and other information to be
submitted in support of FDA approval. This person may be an individual,
partnership, corporation, association, scientific or academic establishment,
government agency or organizational unit, or other legal entity. The applicant
is often the inventor/developer and ultimately the manufacturer.
FDA regulations provide 180 days to review the PMA application and make
a determination. In reality, the review time is normally longer. Before
approving or denying a PMA application, the appropriate FDA advisory committee
may review the PMA application at a public meeting and provide the FDA with the
committee's recommendation on whether or not the FDA should approve the
submission. After the FDA notifies the applicant that the PMA application has
been approved or denied, a notice is published on the Internet (1) announcing
the data on which the decision is based, and (2) providing interested persons an
opportunity to petition the FDA within 30 days for reconsideration of the
decision.
A PMA application is a scientific, regulatory documentation to the FDA
to demonstrate the safety and effectiveness of the Class III device. There are
administrative elements of a PMA application, but good science and scientific
writing is a key to the approval of a PMA application. If a PMA application
lacks elements listed in the administrative checklist, the FDA will refuse to
accept a PMA application and will not proceed with the in-depth review of
-11-
scientific and clinical data. If a PMA application lacks valid clinical
information and scientific analysis based on sound scientific reasoning, it will
delay the FDA's review and approval. PMA applications that are incomplete,
inaccurate, inconsistent, omit critical information, and are poorly organized
have resulted in delays in consideration.
Three categories of the PMA application are very important:
TECHNICAL SECTIONS. The technical sections containing data and
information should allow the FDA to determine whether to approve or disapprove
the application. These sections are usually divided into non-clinical laboratory
studies and clinical investigations.
NON-CLINICAL LABORATORY STUDIES' SECTION. The non-clinical laboratory
studies' section includes information on microbiology, toxicology, immunology,
biocompatibility, stress, wear, shelf life, and other laboratory or animal
tests. Non-clinical studies for safety evaluation must be conducted in
compliance with 21CFR Part 58 (Good Laboratory Practice for Nonclinical
Laboratory Studies).
CLINICAL INVESTIGATIONS SECTION. The clinical investigations section
includes study protocols, safety and effectiveness data, adverse reactions and
complications, device failures and replacements, patient information, patient
complaints, tabulations of data from all individual subjects, results of
statistical analyses, and any other information from the clinical
investigations. Any investigation conducted under an Investigational Device
Exemption ("IDE") must be identified as such.
Imaging3, Inc. is listed with the FDA as a new device manufacturer, its
Registration Number is 20300565, and its Owner Operator Number is 9023393.
Though the Company does not currently manufacture new devices, the FDA requires
the Company's registration as a remanufacturer. Imaging3 is subject to the FDA's
Radiological Health Program, under the Center for Devices Radiological Health
("CDRH") division of the FDA.
The Company must be in compliance with Good Manufactures Practices
("GMP"), Quality Control ("QC") and Medical Device Reporting ("MDR"). The FDA
may from time to time, usually every 2 to 3 years, audit the Company for
compliance. In these audits the FDA reviews documents, interviews management and
reviews all procedures.
The current GMP requirements set forth in the Quality System ("QS")
regulation are promulgated under Section 520 of the Federal Food, Drug and
Cosmetic ("FFD&C") Act. They require that domestic or foreign manufacturers have
a quality system for the design, manufacture, packaging, labeling, storage,
installation, and servicing of finished medical devices intended for commercial
distribution in the United States. The regulation requires that various
specifications and controls be established for devices; that devices be designed
under a quality system to meet these specifications; that devices be
manufactured under a quality system; that finished devices meet these
specifications; that devices be correctly installed, checked and serviced; that
quality data be analyzed to identify and correct quality problems; and that
complaints be processed. Thus, the QS regulation helps assure that medical
devices are safe and effective for their intended use. The FDA monitors device
problem data and inspects the operations and records of device developers and
manufacturers to determine compliance with the GMP requirements in the QS
regulation.
The MDR regulation provides a mechanism for the FDA and manufacturers
to identify and monitor significant adverse events involving medical devices.
The goals of the regulation are to detect and correct problems in a timely
manner. Although the requirements of the regulation can be enforced through
legal sanctions authorized by the FFD&C Act, the FDA relies on the goodwill and
cooperation of all affected groups to accomplish the objectives of the
regulation.
The statutory authority for the MDR regulation is Section 519(a) of the
FFD&C Act as amended by the Safe Medical Devices Act ("SMDA") of 1990. The SMDA
requires user facilities to report:
o Device-related deaths to the FDA and the device manufacturer;
o Device-related serious injuries to the manufacturer, or to the
FDA if the manufacturer is not known; and
-12-
o Submit to the FDA on an annual basis a summary of all reports
submitted during that period.
When a problem arises with a product regulated by the FDA, the agency
can take a number of actions to protect the public health. Initially, the agency
works with the manufacturer to correct the problem voluntarily. If that fails,
legal remedies include asking the manufacturer to recall a product, having
federal marshals seize products if a voluntary recall is not done, and detaining
imports at the port of entry until problems are corrected. If warranted, the FDA
can ask the courts to issue injunctions or prosecute those that deliberately
violate the law. When warranted, criminal penalties including prison sentences
are sought.
Once on the market, there are post-market surveillance controls with
which a manufacturer must comply. These requirements include the Quality Systems
(also known as Good Manufacturing Practices), and Medical Device Reporting
regulations. The QS regulation is a quality assurance requirement that covers
the design, packaging, labeling and manufacturing of a medical device. The MDR
regulation is an adverse event reporting program.
The Company is also required to report under the MDR requirements,
which are for injuries and deaths, of which the Company has had none since its
registration.
For all devices manufactured or remanufactured by the Company, the FDA
may request updated information regarding any device with a previously approved
510(k) or PMA submission. If any substantial changes are made to existing
approved devices, the FDA may require a 510(k) supplement submission, which, in
most cases, does not require the manufacturer to delay production or marketing
of the modified device. As with all applications, this determination lies
entirely with the FDA.
Imaging3's last audit with the FDA was in 2000 and the Company expects
a new audit to take place shortly after its new device is submitted in a 510(k)
application.
In an audit performed by the FDA, the Company's records for service and
repair, quality control, device labeling and serial number tracking are
reviewed. If the FDA finds issues of non-compliance they issue a letter
requesting correction, giving the Company 30 days to correct the non-compliance.
Extensions can be requested to reply, but most issues, if any, can be handled in
a 30-day period.
Since the Company's registration with the FDA in 1995, it has had only
one audit. The Company did not receive any notice or correspondence of
non-compliance due to that audit. The Company received only one suggestion
regarding its record keeping process, which addressed preventive maintenance
forms being included in all customer files for which the Company provides
service. Imaging3, to its knowledge, has been in good standing with the FDA,
receiving no actions or correspondence.
The Company is also licensed with the State of California as a Device
Manufacturer, license number 63620. Both require annual renewal registration
updates, listing any new products being manufactured or marketed. The State of
California currently follows the FDA standards and requirements.
The Company has had no instances of non-compliance with either the FDA
or the State of California. The consequences of non-compliance range from a
letter stating non-compliance and a period to cure, suspension of manufacturing
and distribution, to fines and suspension of operations.
Imaging3 estimates it will obtain FDA approval this year, although
there is no assurance that this approval will be granted when expected. This
estimate for FDA approval is based on Mr. Janes' past experience with 510(k)
submissions. All of the Company's marketing efforts for the new device must
start from the date the FDA approves the device to be marketed. Since the
Company is already registered with the FDA as a new device manufacturer and has
been through an audit performed by the FDA, the FDA is already familiar with the
Company and its processes. The FDA may wish to obtain updated information about
the Company and may require more time to process this 510(k) submission than
estimated.
In two other 510(k) submissions by Mr. Janes, the process lasted
approximately 120 days, however, these systems were not as complex as the
Company's current submission. Management believes Mr. Janes' familiarity with
the process and experience with 510(k) submissions will help the Company.
-13-
Because of Mr. Janes experience and expertise, the Company does not have to seek
outside professional consulting services in this process as most companies must,
enabling the Company to avoid additional expense and delays. Management believes
that having a person in-house having the experience with the process,
understanding 510(k) submissions, and direct access to all engineering and
proprietary knowledge, is a distinct advantage and should allow the Company to
effectively navigate the FDA review process.
To enter the European market, the Company's products as well as its
quality assurance systems will have to be approved and certified by an
authorized certifying body such as Technischer Uberwachungsverein; English
translation: Technical Inspection Association ("TUV"), Underwriters Laboratories
("UL") or British Standards Institute ("BSI"). In the future, the Company may
plan to go through this process as a part of its overall enhancement of the
quality systems.
TUV, UL and BSI are all standards testing companies assisting
manufactures to comply with published standards, regulatory standards and laws
necessary for marketing devices throughout the world and the United States.
These three companies provide the UL and CE (the European equivalent of the UL
mark in the United States) marks, demonstrating compliance with the standards
and laws.
TUV is a Nationally Recognized Testing Laboratory ("NRTL") and Safety
Checklist Contractors ("SCC") certified, providing a full suite of services,
including CE Marking assistance, electromagnetic compatibility ("EMC"),
electrical & mechanical testing, and many additional global conformity
assessment services that help companies gain product compliance to enter
individual country markets.
UL is an independent, not-for-profit product-safety testing and
certification organization. They have tested products for public safety for more
than a century. Since their founding in 1894, they have held the undisputed
reputation as a leader in product- safety testing and certification within the
United States. Management believes that by building on their household name in
the United States, UL is becoming one of the most recognized, reputable
conformity assessment providers in the world. Today, their services extend to
helping companies achieve global acceptance, whether for an electrical device, a
programmable system, or an organization's quality process.
BSI exists to help industry develop new and better products and to make
sure that products meet current and future laws and regulations. It tests
products from medical devices to fire extinguishers to lamps for football
stadiums against published standards.
Far East, Middle East, Eastern European, and Latin American markets
have different regulatory requirements. The Company intends to comply with
applicable requirements if and when it decides to enter those markets.
OTHER GOVERNMENT REGULATIONS
The delivery of health care services has become one of the most highly
regulated of professional and business endeavors in the United States. Both the
federal government and individual state governments are responsible for
overseeing the activities of individuals and businesses engaged in the delivery
of health care services. Federal law and regulations are based primarily upon
the Medicare and Medicaid programs. Each of these programs is financed, at least
in part, with federal funds. State jurisdiction is based upon the state's
interest in regulating the quality of health care in the state, regardless of
the source of payment. The Company believes that it is materially complying with
applicable laws, however, the Company has not received or applied for a legal
opinion from counsel or from any federal or state judicial or regulatory
authority. Additionally, many aspects of the Company's business have not been
the subject of state or federal regulatory interpretation. The laws applicable
to the Company are subject to evolving interpretations. If the Company's
operations are reviewed by a government authority, it may receive a
determination that could be adverse to the Company. Furthermore, laws that are
applicable to the Company may be amended in a manner that could adversely affect
the Company.
Only a small portion of the Company's revenues come through a
government system. Virtually all of the Company's revenues are obtained from
sales and service to vendees who pay the Company directly. The Company is not
subject to Medicare, Medicaid, or any other federally funded health care
program.
-14-
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
----------------------------------------------------------------------------
COMMON STOCK
The Company's Common Stock trades on the OTC Bulletin Board Market
under the symbol "IMGG." The range of high and low bid quotations for each
fiscal quarter within the last two fiscal years was as follows:
YEAR ENDED DECEMBER 31, 2008 HIGH LOW
---------------------------------------- ---------- ----------
First Quarter ended March 31, 2008 $0.12 $0.12
Second Quarter ended June 30, 2008 $0.12 $0.10
Third Quarter ended September 30, 2008 $0.078 $0.078
Fourth Quarter ended December 31, 2008 $0.069 $0.055
YEAR ENDED DECEMBER 31, 2009 HIGH LOW
---------------------------------------- ---------- ----------
First Quarter ended March 31, 2009 $0.065 $0.055
Second Quarter ended June 30, 2009 $0.045 $0.04
Third Quarter ended September 30, 2009 $0.05799 $0.048
Fourth Quarter ended December 31, 2009 $0.76 $0.715
The above quotations reflect inter-dealer prices, without retail
markup, mark-down, or commission and may not necessarily represent actual
transactions.
As of March 29, 2010, there were approximately 790 record holders of
the Company's Common Stock, not including shares held in "street name" in
brokerage accounts which is unknown. As of March 29, 2010, there were
approximately 375,709,898 shares of Common Stock outstanding on record.
DIVIDENDS
The Company has not declared or paid any cash dividends on its Common
Stock and does not anticipate paying dividends for the foreseeable future.
EQUITY COMPENSATION PLAN INFORMATION
The Company has not yet, but may in the future, establish a management
stock option plan pursuant to which stock options may be authorized and granted
to the executive officers, directors, employees and key consultants of the
Company. In the event the Company establishes the stock option plan, the Company
expects to authorize approximately 16,000,000 shares or more for future
issuance.
WARRANTS
As of December 31, 2009, the Company had no warrants outstanding.
UNREGISTERED ISSUANCE OF EQUITY SECURITIES
The following is a list of the issuance of securities by the Company
during the fiscal year ending December 31, 2009 in transactions exempt from
registration, the proceeds of which were generally used for working capital or
services:
-15-
DOLLAR AMOUNT SERVICES OR OTHER EXEMPTION FROM
NUMBER OF SHARES OF CONSIDERATION(1) CONSIDERATION DATE OF SALE REGISTRATION(2)
---------------- ------------------- ----------------- ------------ ---------------
687,500 N/A Consulting(3) 3/12/2009 Section 4(2) of
the Act
2,134,016 $50,000 Conversion 8/31/2009 Section 4(2) of
of Loan the Act
3,030,303 $50,000 Conversion 8/17/2009 Section 4(2) of
of Loan the Act
9,325,000 $373,000 N/A 1/27/2009 Rule 506 of
through Regulation D
4/10/2009
15,425,841 $385,646 N/A 4/11/2009 Rule 506 of
through Regulation D
7/21/2009
15,183,186 $379,580 N/A 7/24/2009 Rule 506 of
through Regulation D
9/7/2009
20,000,000 $500,000 N/A 9/9/2009 Rule 506 of
Regulation D
20,000,000 $500,000 N/A 9/11/2009 Rule 506 of
Regulation D
20,000,000 $500,000 N/A 9/21/2009 Rule 506 of
Regulation D
20,000,000 $500,000 N/A 9/22/2009 Rule 506 of
Regulation D
-------------
(1) During the fiscal year ending December 31, 2009, the Company issued a
total of 119,934,027 shares of its common stock for cash consideration.
(2) Each placement of securities was done as a private placement not
involving any public offering or general solicitation, to investors who
met the suitability standards for "accredited investors" as defined in
Rule 501 of Regulation D of the Securities Act of 1933, as amended.
(3) The nature of the consulting services was rendering financial advisory
services for the Company with respect to its capitalization plans and
the estimated value of the services was approximately $34,375 based on
the prevailing market price of the Company's at the time of issuance of
the stock.
PART III
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
--------------------------------------------------------------------------------
On or about April 13, 2009, the Company engaged M&K CPAS, PLLC ("New
Accountant") to audit and review the Company's financial statements for the
fiscal year ending December 31, 2009. The New Accountant has been engaged for
general audit and review services and not because of any particular transaction
-16-
or accounting principle, or because of any disagreement with the Company's
former accountant, Kabani & Company, Inc., Certified Public Accountants (the
"Former Accountant").
Prior to engaging the New Accountant, the Company had not consulted the
New Accountant regarding the application of accounting principles to a specified
transaction, completed or proposed, or the type of audit opinion that might be
rendered on the Company's financial statements or a reportable event, nor did
the Company consult with the New Accountant regarding any disagreements with its
prior auditor on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements, if
not resolved to the satisfaction of the prior auditor, would have caused it to
make reference to the subject matter of the disagreements in connection with its
reports.
The Former Accountant was dismissed effective April 13, 2009. The
Former Accountant's reports on the Company's financial statements during its
past two fiscal years did not contain an adverse opinion or disclaimer of
opinion, nor was it modified as to uncertainty, audit scope or accounting
principles, except for a going concern qualification contained in its audit
reports for the fiscal years ending December 31, 2007 and December 31, 2008.
The decision to change accountants was recommended by the Company's
Audit Committee Chairperson and approved by the Company's Board of Directors on
April 13, 2009. During the fiscal years ended December 31, 2007 and December 31,
2008 through the date hereof, the Company did not have any disagreements with
the Former Accountant on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure which, if not
resolved to the Former Accountant's satisfaction, would have caused it to make
reference to the subject matter of the disagreement in connection with its
report.
The New Accountant was engaged effective April 13, 2009. The New
Accountant was engaged for general audit and review services and not because of
any particular transaction or accounting principle, or because of any
disagreement with the Former Accountant. A letter from the Former Accountant
addressed to The Securities and Exchange Commission was requested by the Company
and sent to the Securities and Exchange Commission.
ITEM 9A. CONTROL AND PROCEDURES
-------------------------------
EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES
We carried out an evaluation, under the supervision and with the
participation of our management, including our principal executive officer and
principal financial officer, of the effectiveness of our disclosure controls and
procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)). Based
upon that evaluation, our principal executive officer and principal financial
officer concluded that, as of the end of the period covered in this report, our
disclosure controls and procedures were not effective to ensure that information
required to be disclosed in reports filed under the Securities Exchange Act of
1934, as amended, is recorded, processed, summarized and reported within the
required time periods and is accumulated and communicated to our management,
including our principal executive officer and principal financial officer, as
appropriate to allow timely decisions regarding required disclosure.
Our management, including our principal executive officer and principal
financial officer, does not expect that our disclosure controls and procedures
or our internal controls will prevent all error or fraud. A control system, no
matter how well conceived and operated, can provide only reasonable, not
absolute, assurance that the objectives of the control system are met. Further,
the design of a control system must reflect the fact that there are resource
constraints and the benefits of controls must be considered relative to their
costs. Due to the inherent limitations in all control systems, no evaluation of
controls can provide absolute assurance that all control issues and instances of
fraud, if any, have been detected. To address the material weaknesses, we
performed additional analysis and other post-closing procedures in an effort to
ensure our consolidated financial statements included in this annual report have
been prepared in accordance with generally accepted accounting principles.
Accordingly, management believes that the financial statements included in this
report fairly present in all material respects our financial condition, results
of operations and cash flows for the periods presented.
-17-
MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Our management is responsible for establishing and maintaining adequate
internal control over financial reporting as defined in Rule 13a-15(f) under the
Securities Exchange Act of 1934, as amended. Our management assessed the
effectiveness of our internal control over financial reporting as of December
31, 2009. In making this assessment, our management used the criteria set forth
by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO")
in Internal Control-Integrated Framework. A material weakness is a deficiency,
or a combination of deficiencies, in internal control over financial reporting,
such that there is a reasonable possibility that a material misstatement of the
Company's annual or interim financial statements will not be prevented or
detected on a timely basis. We have identified the following material
weaknesses:
1. As of December 31, 2009, 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, 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.
Because of these material weaknesses, management has concluded that the
Company did not maintain effective internal control over financial reporting as
of December 31, 2009, based on the criteria established in "Internal
Control-Integrated Framework" issued by the COSO.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There have been no changes in the Company's internal control over
financial reporting through the date of this report or during the quarter ended
December 31, 2009, that materially affected, or are reasonably likely to
materially affect, the Company's internal control over financial reporting.
INDEPENDENT REGISTERED ACCOUNTANT'S INTERNAL CONTROL ATTESTATION
This annual report does not include an attestation report of the
Company's registered public accounting firm regarding internal control over
financial reporting. Management's report was not subject to attestation by the
Company's registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit the Company to provide only
management's report in this annual report.
CORRECTIVE ACTION
Management plans to make future investments in the continuing education
of our accounting and financial staff. Specifically, we plan to seek specific
public company accounting training during 2010. Improvements in our disclosure
controls and procedures and in our internal control over financial reporting
will, however, depend on our ability to add additional financial personnel and
independent directors to provide more internal checks and balances, and to
provide qualified independence for our Audit Committee. We believe we will be
able to commence achieving these goals once our sales and cash flow grow and our
financial condition improves.
ITEM 9B. OTHER INFORMATION
--------------------------
None.
-18-
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
----------------------------------------------------------------
The following table lists the executive officers and directors of the
Company as of March 31, 2010:
NAME AGE POSITION
--------------------- --- --------------------------------------------------
Dean Janes 44 Chairman of the Board of Directors and
Chief Executive Officer
Xavier Aguilera (1) 61 Executive Vice President, Chief Financial Officer,
Corporate Secretary and Director
Christopher Sohn 49 President and Chief Operating Officer
---------------------
(1) Member of Audit Committee.
DEAN JANES has been the Chairman and Chief Executive Officer of the
Company since its inception in October 1993. Mr. Janes founded Imaging Services,
Inc. in October of 1993 which changed its name to Imaging3, Inc. in 2002. Mr.
Janes was the President and Chief Executive Officer of Imaging Services, Inc.
from 1993 to 2001, where his responsibilities included business development and
overseeing operations, sales and marketing, operations and finance. In 2001, Mr.
Janes brought Mr. Christopher Sohn on as President and Chief Operating Officer
with Mr. Janes taking the position of Chairman and Chief Executive Officer, his
duties remaining the same with the exception of directly overseeing operations
and finance. Prior to founding the Company, Mr. Janes worked for COHR, Center
for Health Resources, from 1992 to 1993 as a Senior Field Service Engineer; his
job responsibilities included technical support for junior engineers and
business development of service contracts and revenues for all makes of medical
imaging equipment. From 1991 to 1992, Mr. Janes worked for Toshiba American
Medical Corporation; his job title was National Technical Support Engineer. His
primary responsibilities were to assist Service Engineers throughout the United
States with problems and design errors with Cath Labs and Angio Suites being a
conduit to Japan and the Service Engineers in the United States. From 1990 to
1991, Mr. Janes worked for OEC Medical Systems, Inc. as a Senior Field Service
Engineer; his responsibilities were to maintain, repair and install c-arms and
Urology systems in the Southern California area. From 1988 to 1990 Mr. Janes
worked for Kaiser Medical Physics as an in-house X-ray Service Engineer for
Kaiser Harbor City Hospital; his responsibilities were to maintain and repair
medical imaging equipment within the hospital and three outlying clinics. Mr.
Janes also served in the United States Army Reserves as a Biomedical engineer;
his service was from 1983 to 1991, with a tour in the first Gulf War from
December of 1990 to April of 1991. He majored in Bio-Medical Electronic
Engineering at the University of Colorado Technical Institute (1984-1988). Mr.
Janes is the principal inventor of Imaging3 real-time 3D medical diagnostic
imaging technology. Mr. Janes is a member of MENSA. Dean Janes and Michele Janes
are husband and wife.
XAVIER AGUILERA has been the Executive Vice President, Chief Financial
Officer and Corporate Secretary of the Company since 1999. Mr. Aguilera's
responsibilities include managing the Company's finances, accounting, taxes,
credit facilities and interfacing and developing new relationships with banks
and other financial institutions. Prior to working for the Company, Mr. Aguilera
was self-employed as a consultant for Xavier Aguilera & Associates from 1997 to
1999. His responsibilities were to manage and open primary healthcare facilities
throughout Southern California. He provided property management, estate
planning, credit facility and Import/Export consulting for several businesses in
Southern California. From 1995 to 1997, Mr. Aguilera was the Chief
Administrative Officer for East Los Angeles Doctors Hospital; his
responsibilities were to manage administrative personnel within the hospital,
manage public relations, business development and JCAHO compliance.
From 1992 to 1995, Mr. Aguilera was the Chief Executive Officer for El Centro
Human Services Corporation; his responsibilities were to develop and implement a
community based mental health facility consisting of eight satellite centers. He
managed a $9.4 million budget and a full time staff of 240 employees. From 1990
to 1992, Mr. Aguilera was a Deputy Director/Administrator for Northeast
Community Clinic; his responsibilities were to implement and administer the
clinics health programs and oversee operations. From 1988 to 1990, Mr. Aguilera
was self employed as a consultant for finance, management and international
finance. He provided these services to banks as well as businesses throughout
Southern California. From 1987 to 1988, Mr. Aguilera was Vice President of
International Banking Marketing for California Commerce Bank; his
responsibilities were to manage and administer a $14 million portfolio, develop
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new business in Southern California with Hispanic Businesses and develop
business relationships with Northern Mexico businesses and banks. From 1981 to
1987, Mr. Aguilera was an Assistant General Manager/Deputy Director for Banco
Nacional de Mexico (BANAMEX). He was responsible for $60 million in new deposits
as well as new business development and management of commercial and personal
lending departments. He holds a bachelors degree in business from California
State University at Northridge (1983) and a Certificate of Medical Management
from the University of California at Los Angeles (1995).
CHRISTOPHER SOHN has been the President and Chief Operating Officer of
the Company since 2001. As Chief Operating Officer for Imaging3, Mr. Sohn's
responsibilities include developing international sales, marketing and
resourcing network, organizing and strategizing with manufacturing companies and
researching new sources of products from developing countries for import into
the United States, overseeing of business operations and human resources. Prior
to working for the Company, Mr. Sohn was President and Chief Executive Officer
of DMI, Inc. from 1994 to 2000. As Chief Executive Officer for an international
trading company of diagnostic medical imaging systems, Mr. Sohn's main
responsibility was to develop business relationships and dealer networks in
Central and South American markets, connecting this with the needs of Asian
medical equipment manufactures as well as manufactures in the United States and
North America. Mr. Sohn has also organized and participated in more than a dozen
medical exhibitions during this period including the Hospitalar (Brazil
1995-2000) and RSNA during the same period. From 2000 to 2001, Mr. Sohn was
Chief Executive Officer of ISOL America, Inc.; his responsibilities included
starting up an overseas headquarters for the parent company ISOL Korea in the
United States as well as setting up a distribution and dealer network in the
United States, Central and South America for ISOL's products, which included,
Magnetic Resonance Imaging and Bone Desitometry Systems. Mr. Sohn also assisted
in the Company's efforts to achieve FDA and UL approval of its products as well
as researching manufacturing partners for the assembly and manufacture of ISOL
products within the United States. Mr. Sohn majored in biochemistry and computer
science at the University of California at Los Angeles (1978-1982).
LIMITATION OF LIABILITY AND INDEMNIFICATION OF OFFICERS AND DIRECTORS
Under the California Corporation Code, the Company's directors will
have no personal liability to the Company or its stockholders for monetary
damages incurred as the result of the breach or alleged breach by a director of
his "duty of care." This provision does not apply to the directors' (i) acts or
omissions that involve intentional misconduct or a knowing and culpable
violation of law, (ii) acts or omissions that a director believes to be contrary
to the best interests of the corporation or its shareholders or that involve the
absence of good faith on the part of the director, (iii) approval of any
transaction from which a director derives an improper personal benefit, (iv)
acts or omissions that show a reckless disregard for the director's duty to the
corporation or its shareholders in circumstances in which the director was
aware, or should have been aware, in the ordinary course of performing a
director's duties, of a risk of serious injury to the corporation or its
shareholders, (v) acts or omissions that constituted an unexcused pattern of
inattention that amounts to an abdication of the director's duty to the
corporation or its shareholders, or (vi) approval of an unlawful dividend,
distribution, stock repurchase or redemption. This provision would generally
absolve directors of personal liability for negligence in the performance of
duties, including gross negligence.
The California Corporations Code grants corporations the right to
indemnify their directors, officers, employees and agents in accordance with
applicable law. The Company's Bylaws provide for indemnification of such persons
to the full extent allowable under applicable law. These provisions will not
alter the liability of the directors under federal securities laws.
The Company intends to enter into agreements to indemnify its directors
and officers, in addition to the indemnification provided for in the Company's
Bylaws. These agreements, among other things, indemnify our directors and
officers for certain expenses (including attorneys' fees), judgments, fines, and
settlement amounts incurred by any such person in any action or proceeding,
including any action by or in the right of the Company, arising out of such
person's services as a director or officer of the Company, any subsidiary of the
Company or any other company or enterprise to which the person provides services
at the request of the Company. The Company believes that these provisions and
agreements are necessary to attract and retain qualified directors and officers.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers or persons controlling the Company
pursuant to the foregoing provisions, the Company has been informed that in the
opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
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BOARD COMMITTEES
The Board of Directors has appointed an Audit Committee. As of March
29, 2010, the sole member of the Audit Committee is Xavier Aguilera, who may not
be considered to be independent as defined in Rule 4200 of the National
Association of Securities Dealers' listing standards. The Board of Directors has
adopted a written charter of the Audit Committee. The Audit Committee is
authorized by the Board of Directors to review, with the Company's independent
accountants, the annual financial statements of the Company prior to
publication, and to review the work of, and approve non-audit services performed
by, such independent accountants. The Audit Committee will make annual
recommendations to the Board for the appointment of independent public
accountants for the ensuing year. The Audit Committee will also review the
effectiveness of the financial and accounting functions and the organization,
operations and management of the Company. The Audit Committee was formed on
August 31, 2003. The Audit Committee held one meeting during fiscal year ended
December 31, 2009.
The Company established a Compensation Committee on August 31, 2003,
which consists of one director, Dean Janes. The Compensation Committee is
responsible for reviewing general policy matters relating to compensation and
benefits of directors and officers, determining the total compensation of our
officers and directors. The Board of Directors does not have a nominating
committee. Therefore, the selection of persons or election to the Board of
Directors was neither independently made nor negotiated at arm's length.
REPORT OF THE AUDIT COMMITTEE
The Company's Audit Committee has reviewed and discussed the Company's
audited financial statements for the fiscal year ended December 31, 2009 with
senior management. The Audit Committee has reviewed and discussed with
management the Company's audited financial statements. The Audit Committee has
also discussed with M&K CPAS, PLLC ("M&K"), the Company's independent auditors,
the matters required to be discussed by the statement on Auditing Standards No.
61 (Communication with Audit Committees) and received the written disclosures
and the letter from M&K required by Independence Standards Board Standard No. 1
(Independence Discussion with Audit Committees). The Audit Committee has
discussed with M&K the independence of M&K as auditors of the Company. Finally,
the Audit Committee has considered whether the independent auditor's provision
of non-audit services to the Company is compatible with the auditors'
independence. Based on the foregoing, the Company's Audit Committee has
recommended to the Board of Directors that the audited financial statements of
the Company be included in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 2009 for filing with the United States Securities
and Exchange Commission ("SEC). The Company's Audit Committee did not submit a
formal report regarding its findings.
AUDIT COMMITTEE
XAVIER AGUILERA
Notwithstanding anything to the contrary set forth in any of the
Company's previous or future filings under the Securities Act of 1933, as
amended (the "Securities Act"), or the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), that might incorporate this report in future
filings with the Securities and Exchange Commission, in whole or in part, the
foregoing report shall not be deemed to be incorporated by reference into any
such filing.
CODE OF CONDUCT
The Company has adopted a Code of Conduct that applies to all of its
directors, officers and employees. The text of the Code of Conduct has been
posted on the Company's Internet website and can be viewed at www.imaging3.com.
Any waiver of the provisions of the Code of Conduct for executive officers and
directors may be made only by the Audit Committee or the full Board of Directors
and, in the case of a waiver for members of the Audit Committee, by the Board of
Directors. Any such waivers will be promptly disclosed to the Company's
shareholders.
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AGREEMENT WITH LEGAL COUNSEL
The Company has an engagement agreement with Richard Farkas, Esq. for
the provision of legal services in consideration for compensation to be paid by
the Company. As partial payment under that compensation contract, the Company
has issued free trading shares of its common stock to Mr. Farkas under a Form
S-8 Registration Statement filed by the Company with the Securities and Exchange
Commission, and may do so again in the future.
COMPLIANCE WITH SECTION 16(A) OF EXCHANGE ACT
Our affiliates who are members of our management voluntarily comply
with Section 16 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), even though we do not have securities registered under Section
12 of Exchange Act. Section 16(a) of the Exchange Act requires a registrant's
officers and directors, and certain persons who own more than 10% of a
registered class of a registrant's equity securities (collectively, "Reporting
Persons"), to file reports of ownership and changes in ownership ("Section 16
Reports") with the Securities and Exchange Commission (the "SEC"). Reporting
Persons are required by the SEC to furnish the registrant with copies of all
Section 16 Reports they file.
Based solely on its review of the copies of such Section 16 Reports
received by it, or written representations received from certain Reporting
Persons, all Section 16(a) filing requirements that would be applicable to the
Company's Reporting Persons (i.e. if the Company's securities were registered
under Section 12 of the Exchange Act) during and with respect to the fiscal year
ended December 31, 2009 have been complied with on a timely basis, except that
Dean Janes, the Company's Chief Executive Officer, filed one Form 4 late
covering a total of one transaction. For transactions occurring during the
fiscal year ending December 31, 2008, Mr. Janes filed four Forms 4 late covering
a total of ten transactions.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
--------------------------------------------------------------------------------
The following table sets forth the names of our executive officers and
directors and all persons known by us to beneficially own 5% or more of the
issued and outstanding common stock of Imaging3 at March 29, 2010. Beneficial
ownership is determined in accordance with the rules of the Securities and
Exchange Commission. In computing the number of shares beneficially owned by a
person and the percentage of ownership of that person, shares of common stock
subject to options held by that person that are currently exercisable or become
exercisable within 60 days of March 29, 2010 are deemed outstanding even if they
have not actually been exercised. Those shares, however, are not deemed
outstanding for the purpose of computing the percentage ownership of any other
person. The percentage ownership of each beneficial owner is based on
375,709,892 outstanding shares of common stock. Except as otherwise listed
below, the address of each person is c/o Imaging3, Inc., 3200 W. Valhalla Drive,
Burbank, California 91505. Except as indicated, each person listed below has
sole voting and investment power with respect to the shares set forth opposite
such person's name.
NUMBER OF
SHARES BENEFICIALLY PERCENTAGE
NAME, TITLE AND ADDRESS OWNED (1) OWNERSHIP
----------------------- ------------------- ----------
Dean Janes
(includes shares owned by wife, Michele Janes)
Chairman and Chief Executive Officer 59,561,328 15.9%
Christopher Sohn
President and Chief Operating Officer 23,000,000 6.1%
Xavier Aguilera
Director, Chief Financial Officer/Treasurer,
Executive Vice President, and Secretary 200,000 *%
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All current Executive Officers as a Group 83,116,328 22.0%
-----------------------
(*) Less than 1%.
(1) Except as pursuant to applicable community property laws, the persons named
in the table have sole voting and investment power with respect to all
shares of common stock beneficially owned. The total number of issued and
outstanding shares and the total number of shares owned by each person does
not include unexercised warrants and stock options, and is calculated as of
March 29, 2010.
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
------------------------------------------------
(a) Exhibits
EXHIBIT DESCRIPTION
------- ----------------------------------------------------------------------------------------------
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)
10.1 Patent No. 6,754,297(3)
10.2 Consulting Agreement(3)
10.3 Assignment(3)
10.6 Commercial Promissory Note dated August 4, 2004(4)
10.7 Security Agreement(4)
10.8 Commercial Promissory Note dated April 24, 2005(5)
10.9 IR Commercial Real Estate Association Standard Industrial/Commercial Single-Tenant Lease
- Net, dated June 21, 2004 by and between Four T's, Bryan Tashjian, Ed Jr. Tashjan, Bruce
Tashjan, Greg Tashjan and Dean Janes DBA Imaging Services, Inc.(6)
31.1 Section 302 Certification of Chief Executive Officer
31.2 Section 302 Certification of Chief Financial Officer
32.1 Section 906 Certification of Chief Executive Officer
32.2 Section 906 Certification of Chief Financial Officer
-------------
(1) Incorporated by reference to the Form 10SB/A Registration
Statement filed with the Securities and Exchange Commissioner on
December 9, 2002.
(2) Incorporated by reference to Amendment No. 2 to Form SB-2 Registration Statement filed with the
Securities and Exchange Commission on October 6, 2004.
(3) Incorporated by reference to Amendment No. 3 to Form SB-2 Registration Statement filed with the
Securities and Exchange Commission on October 21, 2004.
(4) Incorporated by reference to Amendment No. 5 to Form SB-2 Registration Statement filed with the
Securities and Exchange Commission on April 18, 2005.
(5) Incorporated by reference to Amendment No. 6 to Form SB-2 Registration Statement filed with the
Securities and Exchange Commission on July 7, 2005.
(6) Incorporated by reference to Amendment No. 8 to Form SB-2 Registration Statement filed with the
Securities and Exchange Commission on September 9, 2005.
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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: September 30, 2010 IMAGING3, INC.
By: /s/ Dean Janes
--------------------------------------
Dean Janes, Chairman of the Board and
Chief Executive Officer (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: September 30, 2010
---------------------------------------------------
Dean Janes, Chairman of the Board and Chief
Executive Officer (Principal Executive Officer)
By: /s/ Xavier Aguilera Dated: September 30, 2010
--------------------------------------------------
Xavier Aguilera, Chief Financial Officer/Treasurer,
Executive Vice President, Corporate Secretary and
Director (Principal Financial/Accounting Officer)
By: /s/ Christopher Sohn Dated: September 30, 2010
--------------------------------------------------
Christopher Sohn, President and
Chief Operating Officer
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