IMAGING DIAGNOSTIC SYSTEMS INC /FL/ - FORM 10-K/A

Attached files

file	filename
EX-31.2 - CERTIFICATION OF CFO PURSUANT TO SECTION 302 - IMAGING DIAGNOSTIC SYSTEMS INC /FL/	exhibit31-2.htm
EX-32.2 - CERTIFICATION OF CFO PURSUANT TO SECTION 906 - IMAGING DIAGNOSTIC SYSTEMS INC /FL/	exhibit32-2.htm
EX-31.1 - CERTIFICATION OF CEO PURSUANT TO SECTION 302 - IMAGING DIAGNOSTIC SYSTEMS INC /FL/	exhibit31-1.htm
EX-32.1 - CERTIFICATION OF CEO PURSUANT TO SECTION 906 - IMAGING DIAGNOSTIC SYSTEMS INC /FL/	exhibit32-1.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

[Mark One]

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: June 30, 2011

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________to_____________

Commission file number: 0-26028

IMAGING DIAGNOSTIC SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Florida	22-2671269
(State of incorporation)	(IRS employer Ident. No.)

5307 NW 35th Terrace, Fort Lauderdale, FL.	33309
(address of principal office)	(Zip Code)

Registrant's telephone number, including area code: (954) 581-9800

Securities registered under Section 12(b) of the Exchange Act:

None

Securities registered under Section 12(g) of the Exchange Act:

Common Stock, no par value

(Title of class)

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 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes xNo o

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 or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non- accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

¨ Large accelerated filer	¨ Accelerated filer
¨ Non Accelerated filer	x 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 act). Yes o No x

Based on the average closing bid and asked prices of the common stock on the latest practicable date, September 20, 2011, the aggregate market value of the voting stock held by non-affiliates of the registrant was $11,552,313.

The number of shares outstanding of each of the issuer’s classes of common stock, as of September 20, 2011 was 985,468,507. As of September 20 2011, the issuer had 20 shares of preferred stock outstanding.

Documents Incorporated By Reference

[None]

Explanatory Note

We are filing this Amendment No. 1 on Form 10-K/A (this “Amendment”) to our Annual Report on Form 10-K for the fiscal year ending June 30, 2011, which was filed on September 22, 2011 (the “Original Form 10-K”), to amend the Report of our Independent Registered Public Accounting Firm dated September 22, 2011; to add the word “Unaudited” in the inception to date column where applicable in our Financial Statements, and to revise our Liquidity section and Note 25 Commitments and Contingencies to address the accrued payroll taxes, interest and penalties disclosure. This Amendment does not amend any other information set forth in the Original Form 10-K, and we have not updated the disclosures contained herein to reflect any events that may have occurred at a date subsequent to the date of the Original Form 10-K.

THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS WITHIN THE MEANINGS OF SECTION 27A OF THE SECURITIES ACT OF 1933 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934. ACTUAL RESULTS AND EVENTS COULD DIFFER MATERIALLY FROM THOSE PROJECTED AS A RESULT OF THE “KNOWN UNCERTAINTIES” AS SET FORTH IN ITEM 7 “MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS-CAUTIONARY STATEMENTS.”

Item 6. Selected financial data

The following selected financial data should be read in conjunction with "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Item 8. Financial Statements"

	Year Ended			Year Ended			Year Ended			Year Ended			Year Ended
	June 30, 2011			June 30, 2010			June 30, 2009			June 30, 2008			June 30, 2007

Sales	$	55,118		$	181,172		$	70,617		$	39,647		$	65,136
Gain (Loss) on sale of fixed assets		-			-			1,181,894			1,609,525			-
Cost of Sales		15,265			22,512			20,546			20,944			17,870

Gross Profit		39,853			158,660			1,231,965			1,628,228			47,266

Operating Expenses		4,638,901			4,872,107			4,505,908			6,232,663			7,123,347

Operating Loss		(4,599,049	)		(4,713,447	)		(3,273,943	)		(4,604,435	)		(7,076,081	)


Interest income		1,438			995			636			13,377			11,455
Other income		110,858			118,796			5,909			7,827			250,001
Derivative (expense) income		-			(64,524	)		-			-			-
Change in fair value of derivative liability		273,037			(137,631	)		-			-			-
Interest expense		(1,663,809	)		(175,904	)		(677,031	)		(40,447	)		(387,697	)

Net Loss		(5,877,525	)		(4,971,715	)		(3,944,429	)		(4,623,678	)		(7,202,322	)

Dividends on cumulative Pfd. stock:
From discount at issuance		-			-			-			-			-
Earned		-			-			-			-			-

Net loss applicable to
common shareholders	$	(5,877,525	)	$	(4,971,715	)	$	(3,944,429	)	$	(4,623,678	)	$	(7,202,322	)


Net Loss per common share	$	(0.01	)	$	(0.01	)	$	(0.01	)	$	(0.01	)	$	(0.03	)
Weighted avg. no. of common shares,
Basic & Diluted		885,074,029			758,622,934			424,330,162			318,673,749			271,667,256


Cash and Cash Equivalents	$	189,135		$	73,844		$	12,535		$	49,433		$	477,812
Total Assets		870,653			980,360			1,134,580			1,583,356			4,365,427
Deficit accumulated during
the development stage		(117,758,407	)		(111,880,882	)		(106,909,167	)		(102,964,738	)		(98,341,059	)
Stockholders' Equity		(4,729,168	)		(2,715,156	)		(1,129,222	)		(468,761	)		3,441,322

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the “Selected Financial Data” and the Condensed Financial Statements included elsewhere in this report and the information described under the caption “Risk Factors” below.

CRITICAL ACCOUNTING POLICIES

The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to inventories, and intangible assets. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that may not be readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Inventory

Our inventories consist of raw materials, work-in-process and finished goods, and are stated at the lower of cost (first-in, first-out) or market. As a designer and manufacturer of high technology medical imaging equipment, we may be exposed to a number of economic and industry factors that could result in portions of our inventory becoming either obsolete or in excess of anticipated usage. These factors include, but are not limited to, technological changes in our markets, our ability to meet changing customer requirements, competitive pressures in products and prices and reliability, replacement and availability of key components from our suppliers. We evaluate on a quarterly basis, using the guidance provided in ASC 330 (“Inventory”), our ability to realize the value of our inventory based on a combination of factors including the following: how long a system has been used for demonstration or clinical collaboration purpose; the utility of the goods as compared to their cost; physical obsolescence; historical usage rates; forecasted sales or usage; product end of life dates; estimated current and future market values; and new product introductions. Assumptions used in determining our estimates of future product demand may prove to be incorrect, in which case excess and obsolete inventory would have to be adjusted in the future. If we determined that inventory was overvalued, we would be required to make an inventory valuation adjustment at the time of such determination. Although every effort is made to ensure the accuracy of our forecasts of future product demand, significant unanticipated changes in demand could have a significant negative impact on the value of our inventory and our reported operating results. Additionally, purchasing requirements and alternative usage avenues are explored within these processes to mitigate inventory exposure.

Stock-Based Compensation

The computation of the expense associated with stock-based compensation requires the use of a valuation model. ASC-718, (“Compensation-Stock Compensation”) is a very complex accounting standard, the application of which requires significant judgment and the use of estimates, particularly surrounding Black-Scholes assumptions such as stock price volatility, expected option lives, and expected option forfeiture rates, to value equity-based compensation. The Company currently uses a Black-Scholes option pricing model to calculate the fair value of its stock options. The Company primarily uses historical data to determine the assumptions to be used in the Black-Scholes model and has no reason to believe that future data is likely to differ materially from historical data. However, changes in the assumptions to reflect future stock price volatility and future stock award exercise experience could result in a change in the assumptions used to value awards in the future and may result in a material change to the fair value calculation of stock-based awards. ASC-718 requires the recognition of the fair value of stock compensation in net income. Although every effort is made to ensure the accuracy of our estimates and assumptions, significant unanticipated changes in those estimates, interpretations and assumptions may result in recording stock option expense that may materially impact our financial statements for each respective reporting period.

Impact of Derivative Accounting

As a result of recent financing transactions we have entered into, our financial statements for the year ended June 30, 2011 and future periods have and will be impacted by the accounting effect of the application of derivative accounting. The application of EITF 07-05 “Determining Whether an Instrument (or Embedded Feature) is Indexed to a Company's Own Stock,” which was effective on January 1, 2009 will significantly affect the application of ASC Topic 815 and ASC Topic 815-40 for both freestanding and embedded derivative financial instruments in our financial statements. Generally, warrants, conversion features in debt, and similar terms that include “full-ratchet” or reset provisions, which mean that the exercise or conversion price adjusts to pricing in subsequent sales or issuances, no longer meet the definition of indexed to a company's own stock and are not exempt from equity classification provided in ASC Topic 815-15. This means that instruments that were previously classified in equity are reclassified to liabilities and ongoing measurement under ASC Topic 815. The amount of quarterly non-cash gains or losses we will record in future periods will be based upon the fair market value of our common stock on the measurement date.

Results of Operations

In the continuing process of commercializing our operations and as part of our transition plan to exit from reporting as a development stage enterprise, we continue to use the format established for the fiscal year ending June 30, 2005 of our management discussion and analysis of financial condition and results of operations (MD&A) to better disclose and discuss the three most significant categories of expenses, i.e., general and administrative, research and development, and sales and marketing.

Beginning with the fiscal year ending June 30, 2005 we also expanded our discussion of health insurance and worker’s compensation insurance so that they fell into compensation and related benefits for one of the three expense categories, where previously they were included under insurance costs. For the fiscal year ending June 30, 2006, we expanded our compensation and related benefits disclosure to include the non-cash compensation related to the expensing of stock options in the three expense categories.

Twelve Months Ended June 30, 2011 and June 30, 2010

SALES AND COST OF SALES

Revenues during the year ended June 30, 2011, were $55,118 representing a decrease of $126,054 or 70% from $181,172 during the year ended June 30, 2010. The decrease in revenues is primarily a result of recording the installment sale of our CTLM® system to one of our distributors in fiscal 2011 compared to the sale of a CTLM® system to our distributor in Malaysia in fiscal 2010.

The Cost of Sales during the year ended June 30, 2011, was $15,265 representing a decrease of $7,247 or 32% from $22,512 during the year ended June 30, 2010. The decrease in Cost of Sales is primarily a result of recording the installment sale of our CTLM® system to one of our distributors in fiscal 2011 compared to the a sale of a CTLM® system to our distributor in Malaysia in fiscal 2010.

GENERAL AND ADMINISTRATIVE

Our general and administrative expenses include compensation and related benefits for employees in administration, finance, human resources and information technology. Also included are travel/subsistence related to general and administrative activities; property and casualty insurance; directors’ and officers’ liability insurance; professional fees associated with our corporate and securities attorneys and independent auditors; patent maintenance; corporate governance expenses; stockholder expenses; consulting; utilities; maintenance; telephones; office supplies and sales and property taxes.

General and administrative expenses during the year ended June 30, 2011, were $3,096,209 representing a decrease of $488,399 or 14% from $3,584,608 during the year ended June 30, 2010. Of the $3,096,209 and $3,584,608, compensation and related benefits comprised $1,638,657 (53%) and $1,768,030 (49%), respectively, representing a decrease of $129,374 or 7%. Of the $1,638,657 and $1,768,030 compensation and related benefits, $354,399 (22%) and $578,961 (33%), respectively, were due to non-cash compensation associated with expensing stock options.

The general and administrative decrease of $488,399 is due primarily to a decrease of $720,500 in loan cost expenses as a result of a reduction of the issuance of restricted shares in connection with short-term loans; $96,877 in premium expenses associated with short-term loans; $129,374 in compensation and related benefits as a result of non-cash compensation associated with the expensing of stock options, $26,705 in travel related expenses; and $37,500 for a call option fee associated with obtaining a medium term bank bond to be used as collateral for a bank loan in fiscal year 2010.

The total decrease is partially offset by increases of $295,883 in payroll tax penalty & interest, $63,351 in proxy service expenses for the processing and preparation of proxy materials for our annual meeting which was held in July 2011; $50,000 in additional consideration and $49,000 in placement fees associated with our Long-Term Promissory Notes with JMJ Financial; $43,610 in settlement expense associated the settlement agreement with Shraga Levin (see Item 3 Legal Proceedings); $18,237 in directors and officers liability insurance; and $6,990 in legal expenses involving corporate and securities matters.

We do not expect a material increase in our general and administrative expenses until we realize a significant increase in revenue from the sale of our product.

RESEARCH AND DEVELOPMENT

We incur research and development expenses to develop significant enhancements to our sole product, the CTLM®. These expenses consist primarily of compensation and related benefits; clinical, legal and consulting fees associated with our FDA application; costs of materials and components we use to make product enhancements; new product research; professional fees associated with the research and applications for new patents; and the costs associated with the travel/subsistence, shipping, training, installing and servicing clinical collaboration sites.

Research and development expenses during the year ended June 30, 2011, were $893,879 representing an increase of $158,936 or 22% from $734,943 during the year ended June 30, 2010. Of the $893,879 and $734,943, compensation and related benefits comprised $735,047 (82%) and $643,315 (88%), respectively, representing an increase of $91,732 or 14%. Of the $735,047 and $643,315 compensation and related benefits, $17,435 (2%) and $9,552 (1%), respectively, were due to non-cash compensation associated with expensing stock options.

The research and development increase of $158,936 is due primarily to an increase of $91,732 in compensation and related benefits as a result of non-cash compensation associated with the expensing of stock options; $48,200 in FDA Legal expenses; and $27,782 in consulting expenses due to the work performed by our consulting radiologist.

Clinical expenses during the year ended June 30, 2011, were $1,751 representing a decrease of $3,904 or 69% from $5,655 as a result of concluding costs associated with our FDA clinical trials.

We expect a significant increase in our research and development expenses during the fiscal year ending June 30, 2012 due to increased costs associated with conducting the clinical trial and preparing the FDA application for Pre-Market Approval and submitting it to the FDA. We also expect our consulting expenses and professional fees to increase due to the costs associated with conducting the clinical trial and preparing the FDA application. See Item 1. Our Business - “CTLM® Development History, Regulatory and Clinical Status”.

SALES AND MARKETING

Our sales and marketing expenses consist primarily of compensation and related benefits for employees in the areas of sales, marketing, sales support and sales administration. Also included are the expenses associated with advertising and promotion; representative office expense; trade shows; conferences; promotional and training costs related to marketing the CTLM®; commissions; travel/subsistence; consulting; certification expenses; and product liability insurance.

Sales and marketing expenses during the year ended June 30, 2011, were $452,967 representing an increase of $112,534 or 33% from $340,433 during the year ended June 30, 2010. Of the $452,967 and $340,433, compensation and related benefits comprised $77,131 (17%) and $762 (0%), respectively, representing an increase of $76,369 or 10,023%. Of the $77,131 and $762 compensation and related benefits, $3,870 (5%) and $0 (0%), respectively, were due to non-cash compensation associated with expensing stock options.

The sales and marketing increase of $112,534 was due primarily to an increase in compensation and related benefits of $76,369 as a result of the increase in staff; $30,723 in regulatory expenses; $26,375 in travel related expenses; $12,147 in freight expenses.

The total increase is partially offset by decrease of $26,241 in trade show expense.

We expect a significant increase in our sales and marketing expenses during the fiscal year ending June 30, 2012 due to the continued implementation of our global commercialization program. We expect commissions, trade show expenses, advertising and promotion and travel and subsistence costs to increase due to this program.

AGGREGATED OPERATING EXPENSES

Total operating expenses (general and administrative, research and development, sales and marketing, inventory valuation adjustments and depreciation and amortization) during the year ended June 30, 2011, were $4,638,901 representing a decrease of $233,206 or 5% from $4,872,107 when compared to the operating expenses during the year ended June 30, 2010. The overall decrease in expenses was a result of the reduced costs associated with short-term loans.

Compensation and related benefits during the year ended June 30, 2011, were $2,450,835 representing an increase of $38,728 or 2% from $2,412,107 during the year ended June 30, 2010 due to an increase in staff which was partially offset by a decrease in stock option expense. Of the $2,450,835 and $2,412,107 compensation and related benefits, $375,704 (15%) and $588,483 (24%), respectively, were due to non-cash compensation associated with expensing stock options. The net increase of $38,728 was due to a $251,507 increase in cash compensation which was partially offset by a decrease of $212,779 in the recording of non-cash compensation related to the expensing of stock options.

Inventory valuation adjustments during the year ended June 30, 2011, were $95,096 representing an increase of $27,418 or 41% from $67,678 during the year ended June 30, 2010. The increase is due to the additional write-down of systems that have lost value due to usage as demonstrators on consignment. See “Critical Accounting Policy – Inventory”.

Depreciation and amortization during the year ended June 30, 2011, were $100,751 representing a decrease of $43,694 or 30% from $144,445 during the year ended June 30, 2010.

Interest expense during the fiscal year ended June 30, 2011, was $1,663,809 representing an increase of $1,487,905 or 846% from $175,904 during the year ended June 30, 2010. The increase of $1,487,905 is primarily due to the recording of the $771,845 discount to the fair value at the debt to equity conversion of promissory notes that were originally issued with collateral shares of our common stock; $716,729 is the amortization of the debt discount on our convertible promissory notes; and $117,193 is imputed interest associated with our equity credit line with Southridge as per the terms and conditions of our private equity credit agreement. Our utilization of the equity credit line decreased during fiscal 2010 compared to the prior period. See Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters – “Financing/Equity Line of Credit”

Other income during the year ended June 30, 2011, was $110,858 representing a decrease of $7,938 or 7% from $118,796 during the year ended June 30, 2010. Of the $110,858 other income, $91,482 represented an adjustment to the allowance for doubtful accounts and $13,010 represented the extinguishment of debt.

We previously presented the gain on the sale of our Plantation property as a non-operating expense item. We have reviewed the guidance provided by ASC and have determined that the gain should be presented in the income section of our Statement of Operations.

Twelve Months Ended June 30, 2010 and June 30, 2009

SALES AND COST OF SALES

Revenues during the year ended June 30, 2010, were $181,172 representing an increase of $110,555 or 157% from $70,617 during the year ended June 30, 2009. The increase in revenues is a result of a sale of a CTLM® system to our distributor in Malaysia.

The Cost of Sales during the year ended June 30, 2010, was $22,512 representing an increase of $1,966 or 10% from $20,546 during the year ended June 30, 2009. The increase in Cost of Sales is a result of a sale of a CTLM® system to our distributor in Malaysia.

GENERAL AND ADMINISTRATIVE

General and administrative expenses during the year ended June 30, 2010, were $3,584,608 representing an increase of $1,205,496 or 51% from $2,379,112 during the year ended June 30, 2009. Of the $3,584,608 and $2,379,112, compensation and related benefits comprised $1,768,030 (49%) and $1,465,548 (63%), respectively, representing an increase of $302,482 or 21%. Of the $1,768,030 and $1,465,548 compensation and related benefits, $578,961 (33%) and $116,319 (9%), respectively, were due to non-cash compensation associated with expensing stock options.

The general and administrative increase of $1,205,496 is due primarily to increases of $302,482 in compensation and related benefits as a result of non-cash compensation associated with expensing stock options; $465,500 in loan costs expense associated with the issuance of additional consideration for short-term loans; $357,000 in loan costs expense to record one month of amortization of the debt discount; $438,144 in premium expenses associated with the short-term loans; $37,500 for a call option fee associated with obtaining a medium term bank bond to be used as collateral for a bank loan.

The total increase is partially offset by decreases of $81,103 in rent expense as a result of recording the rent holiday associated with the lease on our former Plantation facility in the prior fiscal year; $64,000 in placement fees and $7,467 in liquidated damage expense associated with the sale of Convertible Debentures in August and November 2008; $69,429 in proxy service expenses as no Annual Meeting was held in fiscal year 2010; $66,797 in legal expenses involving corporate and securities matters; $32,975 as a result of reducing or canceling several of our insurance policies; $24,819 in real estate taxes, $22,901 in maintenance and repairs, $14,101 in utilities as a result of our move to a smaller facility in August 2008 that we rent rather than own; and $17,640 in freight expenses.

We do not expect a material increase in our general and administrative expenses until we realize a significant increase in revenue from the sale of our product.

RESEARCH AND DEVELOPMENT

Research and development expenses during the year ended June 30, 2010, were $734,943 representing a decrease of $491,775 or 40% from $1,226,718 during the year ended June 30, 2009. Of the $734,943 and $1,226,718, compensation and related benefits comprised $643,315 (88%) and $755,348 (62%), respectively, representing a decrease of $112,033 or 15%. Of the $643,315 and $755,348 compensation and related benefits, $9,552 (1%) and $12,939 (2%), respectively, were due to non-cash compensation associated with expensing stock options.

The research and development decrease of $491,775 is due primarily to a decrease of $112,033 in compensation and related benefits as a result of a reduction in staff; $174,432 in consulting expenses due to our decreased use of consultants in the field of scientific and clinical disciplines, in consulting expenses primarily associated with the monitoring and data management of our FDA process and various consultants involved with design engineering, software engineering and research by our consulting radiologist; $136,058 in clinical expenses; $45,848 in freight expenses; $2,941 in legal patent expenses associated with patent applications; and $17,715 in travel related expenses due to reduced travel to our U.S. clinical sites and to our International clinical collaboration sites.

Clinical expenses during the year ended June 30, 2010, were $5,655 representing a decrease of $136,058 or 96% from $141,713 as a result of concluding costs associated with our FDA clinical trials.

We expect a significant increase in our research and development expenses during the fiscal year ending June 30, 2011 due to increased costs associated with preparing our FDA application and submitting it to the FDA. We also expect our consulting expenses and professional fees to increase due to the costs associated with our FDA application. See Item 1. Our Business - “Clinical Collaboration Sites Update”.

SALES AND MARKETING

Sales and marketing expenses during the year ended June 30, 2010, were $340,433 representing a decrease of $275,015 or 45% from $615,448 during the year ended June 30, 2009. Of the $340,433 and $615,448, compensation and related benefits comprised $762 (0%) and $111,743 (18%), respectively, representing a decrease of $110,982 or 99%. Of the $762 and $111,743 compensation and related benefits, $0 (0%) and $2,069 (2%), respectively, were due to non-cash compensation associated with expensing stock options.

The sales and marketing decrease of $275,015 was due primarily to a decrease in compensation and related benefits of $110,982 as a result of the reduction in staff; $116,053 in representative office expense as a result of closing our representative office in Beijing, China in the prior fiscal year as part of our cost savings initiative; $18,640 in regulatory expenses, $11,250 in public relations expense as a result of a reduction in the issuances of press releases during the year; $9,871 in advertising and promotion; and $5,416 in freight expenses.

After we file our FDA application, we expect commissions, trade show expenses, advertising and promotion and travel and subsistence costs to increase as we continue to implement our global commercialization program.

AGGREGATED OPERATING EXPENSES

Total operating expenses (general and administrative, research and development, sales and marketing, inventory valuation adjustments and depreciation and amortization) during the year ended June 30, 2010, were $4,872,107 representing an increase of $366,199 or 8% from $4,505,908 when compared to the operating expenses during the year ended June 30, 2009. The overall increase in expenses was a result of the costs associated with short-term loans.

Compensation and related benefits during the year ended June 30, 2010, were $2,412,107 representing an increase of $79,468 or 3% from $2,332,639 during the year ended June 30, 2009 due to an increase in stock option expense partially offset by a reduction in staff. Of the $2,412,107 and $2,332,639 compensation and related benefits, $588,483 (24%) and $131,327 (6%), respectively, were due to non-cash compensation associated with expensing stock options. The net increase of $79,468 was due to a $457,156 increase in the recording of non-cash compensation related to the expensing of stock options which was partially offset by a decrease of cash compensation of $377,688.

Inventory valuation adjustments during the year ended June 30, 2010, were $67,678 representing a decrease of $14,609 or 18% from $82,286 during the year ended June 30, 2009. The decrease is due to previous reductions in the write-down of systems that have lost value due to usage as demonstrators on consignment. See “Critical Accounting Policy – Inventory”.

Depreciation and amortization during the year ended June 30, 2010, were $144,445 representing a decrease of $57,889 or 29% from $202,344 during the year ended June 30, 2009.

Interest expense during the fiscal year ended June 30, 2010, was $175,904 representing a decrease of $501,127 or 74% from $677,031 during the year ended June 30, 2009. The decrease is due to the recording of the amortization of the debt discount on our convertible debentures and the imputed interest in the prior fiscal year. Of the $175,904, $24,792 is imputed interest

associated with our old equity credit line with Charlton Avenue, LLC (“Charlton”) and $102,754 is imputed interest associated with our new equity credit line with Southridge Partners II, LLP (“Southridge”) as per the terms and conditions of our private equity credit agreement(s); and $35,532 is the amortization of the debt discount on our convertible debentures. Our utilization of the equity credit line decreased during fiscal 2010 compared to the prior period. See Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters – “Financing/Equity Line of Credit”

Other income during the year ended June 30, 2010, was $118,796 representing an increase of $112,821 or 1,888% from $5,975 during the year ended June 30, 2009. Of the $118,796 other income, $98,829 represented the extinguishment of debt.

Balance Sheet Data

We have financed our operations since inception by the issuance of equity securities with aggregate net proceeds of approximately $70,271,248 and through loan transactions in the aggregate net amount of $5,137,994. Furthermore, we issued equity securities for the conversion of all outstanding convertible debentures in the aggregate net amount of $4,040,000.

Our combined cash and cash equivalents totaled $189,135 at June 30, 2011. We do not expect to generate a positive internal cash flow for at least the next 12 months due to our efforts to obtain FDA marketing clearance, the expected costs of commercializing our initial product, the CTLM®, and the time required for homologations from certain countries.

Our inventory, which consists of raw materials, work in process (including completed units under testing), finished goods less Inventory Reserve, totaled $322,562 at June 30, 2011 and $436,110 at June 30, 2010. Raw materials used for research and development or other purposes are expensed and not included in inventory. This decrease is primarily due to inventory valuation adjustments of $95,096 and $15,265 to Cost of Goods Sold. We expect to recover our investment because the CTLM® represents a new technology for imaging the breast using a laser beam instead of ionizing x-ray to produce three dimensional images. During fiscal year 2011, we continued to receive encouraging results and scientific clinical papers from our various clinical collaboration sites worldwide. We continue to believe that over time the CTLM® will gain worldwide acceptance in the medical community because computed tomography has a strong basis in science. (See Note 6 “Inventories”).

Our property and equipment, net, totaled $161,713 at June 30, 2011 and $221,763 at June 30, 2010. The overall decrease of $60,050 is due primarily to depreciation during fiscal year 2011 (See Note 7 – Property and Equipment).

Our Intangible assets (formerly “Other assets”) totaled $136,706 at June 30, 2011 compared to $170,882 at June 30, 2010. This decrease is due to the amortization of a patent licensing agreement.

Liquidity and Capital Resources

We are currently a development stage company and our continued existence is dependent upon our ability to resolve our liquidity problems, principally by obtaining additional debt and/or equity financing. We have yet to generate a positive internal cash flow, and until significant sales of our product occur, we are mostly dependent upon debt and equity funding from outside investors. In the event that we are unable to obtain debt or equity financing or are unable to obtain such financing on terms and conditions acceptable to us, we may have to cease or severely curtail our operations. This would materially impact our ability to continue as a going concern.

We have financed our operating and research and development activities through several private placement transactions. Net cash used for operating and product development expenses, which include our purchase of additional materials to continue the manufacture of CTLM® Systems in anticipation of receiving orders from our distributors in certain countries where permitted by law was $2,451,709 during fiscal 2011, compared to net cash used by operating activities and product development of the CTLM® and related software development of $2,785,910 during fiscal 2010. At June 30, 2011, we had negative working capital of ($4,424,145) compared to negative working capital of ($2,555,647) at June 30, 2010.

If and when we receive approval from the FDA, which cannot be assured, we believe that, based on our current business plan approximately $10 million will be required above and beyond normal operating expenses over the next year to fully complete all necessary stages in order for us to market the CTLM® in the United States and foreign countries.

The $10 million will be used to purchase inventory, sub-contracted components, tooling and manufacturing templates and pay non-recurring engineering costs associated with preparation for full capacity manufacturing and assembly and marketing, advertising and promotion, training, ongoing regulatory expenses, and other costs associated with product launch. We expect to use our Amended Private Equity Agreement with Southridge and/or alternative financing facilities to raise the additional funds required to continue operations. In the event that we are unable or elect not to utilize the Amended Private Equity Agreement with Southridge or any successor agreement(s) on comparable terms, we would have to raise the additional funds required by either equity or debt financing, including entering into a transaction(s) to privately place equity, either common or preferred stock, or debt securities, or combinations of both; or by placing equity into the public market through an underwritten secondary offering. If additional funds are raised by issuing equity securities, whether to Southridge or other investors, dilution to existing stockholders will result, and future investors may be granted rights superior to those of existing stockholders. See “Item 5. Market for Registrant’s Common Equity and Related Stockholder Matters/Financing/Equity Line of Credit”.

During fiscal 2011, we raised a total of $1,385,000 less expenses, through private placement transactions pursuant to our Amended Private Equity Credit Agreement with Southridge dated January 7, 2010. We do not expect to generate a positive internal cash flow for at least the next 12 months due to limited expected sales and the expected costs of commercializing our initial product, the CTLM®, in the international market and the expense of continuing our ongoing product development program. We will require additional funds for operating expenses, FDA regulatory processes, manufacturing and marketing programs and to continue our product development program. We expect to use our Amended Private Equity Agreement with Southridge and/or alternative financing facilities to raise the additional funds required to continue operations. In the event that we are unable or elect not to utilize the Amended Private Equity Agreement with Southridge or any successor agreement(s) on comparable terms, we would have to raise the additional funds required by either equity or debt financing, including entering into a transaction(s) to privately place equity, either common or preferred stock, or debt securities, or combinations of both; or by placing equity into the public market through an underwritten secondary offering. If additional funds are raised by issuing equity securities, whether to Southridge or other investors, dilution to existing stockholders will result, and future investors may be granted rights superior to those of existing stockholders. In the event we are unable to draw from this new private equity line, alternative financing will be required to continue operations, and there is no assurance that we will be able to obtain alternative financing on commercially reasonable terms. There is no assurance that, if and when Food and Drug Administration (“FDA”) marketing clearance is obtained, the CTLM® will achieve market acceptance or that we will achieve a profitable level of operations.

As of the date of this report, since January 2001, we have drawn an aggregate of $45,199,650 in gross proceeds from our equity credit lines with Charlton and Southridge and have issued 532,408,149 shares as a result of those draws.

As of the date of this report, we have issued and outstanding 985,468,507 shares of common stock out of 2,000,000,000 authorized shares. In addition, we have reserved 36,047,254 shares to cover outstanding options. We had anticipated that revenues would have been a significant source of cash by the date of this report, but commercialization has been slower than expected largely due to the delay in obtaining FDA approval, which we believe has depressed our stock price. We previously used the proceeds of the sale of our building and the proceeds of the sale of convertible debentures for working capital. In May 2008, we returned to equity funding through our Private Equity Credit Agreement(s). From November 2009 through September 2011 we relied on short-term loans from private investors for working capital (“See Issuance of Stock in Connection with Short-Term Loans”). From February 2011 through October 2011, we also relied on long-term loans from private investors for working capital (“See Issuance of Stock in Connection with Long-Term Loans”).

A claim could be made by the IRS for immediate payment of our accrued payroll taxes, interest and penalties, which total $1,141,967 as of June 30, 2011, and continue to grow; however, we hope to work with the IRS to formulate and implement a viable payment plan. We have hired special counsel to handle this matter and hope to have a reasonable time to resolve it without jeopardizing operations. We intend to fully satisfy our tax obligations and are seeking long-term financing in this regard.

We intend to use our counsel to handle negotiations and settlements with the IRS. No discussions have occurred to date with the IRS. We expect these discussions to commence once the IRS sends a formal collection demand. After the formal collection demand, we hope to negotiate a settlement agreement and make installment payments to satisfy outstanding taxes, penalties and interest due; however, there can be no assurance that we will be able to negotiate a settlement agreement with a payment plan that matches our ability to pay.

During fiscal 2011 and through September 22, 2011, we have not made any cash payments to reduce the balance of accrued payroll taxes. The increase of $295,883 in payroll tax penalty and interest were due to the recording of calendar year 2010 penalties and interest in fiscal 2011.

If we ultimately are unable to pay the outstanding tax, penalties and interest on a timetable satisfactory to the IRS, then we may have to cease operations.

Issuance of Stock in Connection with Short-Term Loans

In November 2009, we borrowed a total of $237,500 from four private investors pursuant to short-term promissory notes. These notes were due and payable in the amount of principal plus 20% premium, so that the total amount due was $285,000. In addition, we issued to the investors 70 shares of restricted common stock for each $1 lent so that a total of 16,625,000 shares of stock were issued to the investors. The aggregate fair market value of the 16,625,000 shares of stock when issued was $465,500. As of the date of this report, we have repaid an aggregate principal and premium in the amount of $148,500 on these short-term notes and owe a balance of $180,100 of which $100,000 is the principal remaining from one note and $80,100 is the balance of premium due from three notes. The original due date of December 21, 2009, was first extended to February 28, 2010, with a second extension to June 15, 2010, a third extension to September 30, 2010 and a fourth extension to October 31, 2010. Further extensions of the $100,000 note were made through September 30, 2011 for 3% additional premium per month. In connection with all of the extensions, a total of $43,600 of additional premium was accrued as of the date of this report.

In December 2009, we borrowed a total of $400,000 from a private investor pursuant to three short-term promissory notes. These notes were payable from March 10 through March 15, 2010 in the amount of principal plus 15% premium, so that the total amount due was $460,000. In addition, we issued to the investor 24,000,000 shares of restricted common stock as collateral. These shares are to be returned and cancelled upon payment of the notes. The original due date of March 15, 2010 was first extended to June 15, 2010, with a second extension to September 30, 2010 and a third extension to October 31, 2010. Further extensions of the notes were made through July 31, 2011 for 3% additional premium per month on each note. In connection with these extensions a total of $137,800 of additional premium was accrued for the December 2009 notes as of the date of this report. In April 2011, Southridge purchased a total of $200,000 in principal value of promissory notes from the private investor. Southridge converted $100,000 principal and $55,600 premium into 20,746,666 shares of our common stock that was previously issued as collateral.

On January 8, 2010, we borrowed a total of $600,000 from a private investor pursuant to two short-term promissory notes. These notes were payable April 6, 2010 in the amount of principal plus 15% premium, so that the total amount due was $690,000. In addition, we issued to the investor 31,363,637 shares of restricted common stock as collateral. These shares are to be returned and cancelled upon payment of the notes. The original due date of April 6, 2010 was first extended to June 15, 2010, with a second extension to September 30, 2010 and a third extension to October 31, 2010. Further extensions of the notes were made through July 31, 2011 for 3% additional premium per month on each note. In January 2011, Southridge purchased a total of $600,000 in principal value of promissory notes from the private investor. As of the date of this report, Southridge has converted $425,000 principal and $200,051 premium into 32,397,016 shares of our common stock of which 31,056,108 shares were collateral shares and 1,340,908 new shares were issued pursuant to Rule 144. Although we are in technical default of these two notes, the holder, Southridge has elected to convert these notes into common shares. In connection with these prior extensions and the accrual of the additional premiums through September 30, 2011, a total of $232,500 of additional premium was accrued for the January 2010 notes as of the date of this report.

On February 25, 2010, we borrowed $350,000 from a private investor pursuant to a short-term promissory note. We issued to the investor 35 shares of Series L Convertible Preferred Stock as collateral. This note had a maturity date of April 30, 2010; however, the investor gave us notice of conversion to the collateral shares on March 31, 2010. The Note was cancelled upon this conversion. The 35 shares of Series L Convertible Preferred Stock accrue dividends at an annual rate of 9% and are convertible into an aggregate of 16,587,690 shares of common stock (473,934 shares of common stock for each share of preferred stock). Pursuant to the Certificate of Designation, Rights and Preferences for the Series L Convertible Preferred Stock, we are obligated to reduce the conversion price and reserve additional shares for conversion if we sold or issued common shares below the price of $.0211 per share (the market price on the date of issuance of the Preferred Stock). In October 2010, we obtained a waiver from the private investor holding the 35 shares of Series L Convertible Preferred Stock in which the investor agreed to convert no more than the 16,587,690 common shares currently reserved as we do not have sufficient authorized common shares to reserve for further conversions pursuant to the Certificate of Designation, Rights and Preferences. The investor agreed to a conversion floor price of $.015, which required us to reserve

an additional 6,745,643 common shares.

On January 6, 2011, the investor converted 15 shares of the Series L Convertible Preferred Stock into 10,000,000 shares of common stock. As of the date of this report, the investor holds 20 shares of the Series L Convertible Preferred Stock.

On December 13, 2010, we borrowed a total of $60,000 from a private investor pursuant to a short-term promissory note. The note is payable on or before January 31, 2011. As consideration for this loan, we were obligated to pay back his principal, $10,800 in premium and issue 3,000,000 restricted shares of common stock upon the approval by our shareholders of an increase in authorized common stock at our annual meeting to be held on July 12, 2012. On September 9, 2011, we issued the 3,000,000 common shares pursuant to Rule 144. We received an extension of maturity date to September 30, 2011 for this note.

In November and December 2010, we received a total of $145,000 from Southridge pursuant to three short-term promissory notes. All three notes provide for a redemption premium of 15% of the principal amount on or before March 31, 2011. We received an extension of maturity date to September 30, 2011 for these notes. Interest will accrue at 8% per annum until maturity. Southridge may elect at an Event of Default to convert any part or all of the $145,000 Principal Amount of the Notes plus accrued interest into shares of our common stock at a conversion price equal to the lesser of (a) $0.01 or (b) 90% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice.

In January 2011, we received a total of $157,000 from Southridge pursuant to three short-term promissory notes. All three notes provide for a redemption premium of 15% of the principal amount on or before May 31, 2011. We received an extension of maturity date to September 30, 2011 for these notes. Interest will accrue at 8% per annum until maturity. Southridge may elect at an Event of Default to convert any part or all of the $157,000 Principal Amount of the Notes plus accrued interest into shares of our common stock at a conversion price equal to the lesser of (a) $0.01 or (b) 90% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice.

In February 2011, we received a total of $115,000 from Southridge pursuant to two short-term promissory notes. Both notes provide for a redemption premium of 15% of the principal amount on or before May 31, 2011. We received an extension of maturity date to September 30, 2011 for these notes. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at an Event of Default to convert any part or all of the $115,000 Principal Amount of the Notes plus accrued interest into shares of our common stock at a conversion price equal to the lesser of (a) $0.01 or (b) 90% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice.

In March 2011, we received $60,000 from Southridge pursuant to a short-term promissory note. The note provides for a redemption premium of 15% of the principal amount on or before May 31, 2011. We received an extension of maturity date to September 30, 2011 for these notes. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at an Event of Default to convert any part or all of the $60,000 Principal Amount of the Notes plus accrued interest into shares of our common stock at a conversion price equal to the lesser of (a) $0.01 or (b) 90% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice.

In April 2011, we received $165,000 from Southridge pursuant to two short-term promissory notes. The notes provide for a redemption premium of 15% of the principal amount on or before July 31, 2011. We received an extension of maturity date to September 30, 2011 for these notes. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at an Event of Default to convert any part or all of the $165,000 Principal Amount of the Notes plus accrued interest into shares of our common stock at a conversion price equal to the lesser of (a) $0.01 or (b) 90% of the average of the three lowest closing bid prices during the ten 10 trading days immediately prior to the date of the conversion notice.

In May 2011, we received $80,000 from Southridge pursuant to two short-term promissory notes. The notes provide for a redemption premium of 15% of the principal amount on or before July 31, 2011. We received an extension of maturity date to September 30, 2011 for these notes. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at an Event of Default to convert any part or all of the $80,000 Principal Amount of the Notes plus accrued interest into shares of our common stock at a conversion price equal to the lesser of (a) $0.01 or (b) 90% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice.

In July 2011, we received $150,000 from Southridge pursuant to a short-term promissory note. The note provided for a redemption premium of 15% of the principal amount on or before December 31, 2011. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at an Event of Default to convert any part or all of the $150,000 Principal Amount of the Notes plus accrued interest into shares of our common stock at a conversion price equal to the lesser of (a) $0.01 or (b) 70% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice.

In August 2011, we received $82,500 from Southridge pursuant to two short-term promissory notes of which the principal on these notes were $100,000 and $7,500. The $100,000 notes provided for a $25,000 discount upon issuance as additional consideration and both notes provided for a redemption premium of 15% of the principal amount on or before December 31, 2011. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at an Event of Default to convert any part or all of the $107,500 Principal Amount of the Notes plus accrued interest into shares of our common stock at a conversion price equal to the lesser of (a) $0.01 or (b) 70% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice.

In August 2011, we received $50,000 from OTC Global Partners, LLC pursuant to a short-term promissory note. The note provided for a redemption premium of 15% of the principal amount on or before March 1, 2012. Interest will accrue at 8% per annum until maturity above and beyond the premium. OTC Global Partners, LLC may elect at an Event of Default to convert any part or all of the $50,000 Principal Amount of the Notes plus accrued interest into shares of our common stock at a conversion price equal to the lesser of (a) $0.014 or (b) 65% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice.

In September 2011, we received $100,000 from Southridge pursuant to a short-term promissory note. The note provided for a redemption premium of 15% of the principal amount on or before December 31, 2011. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at an Event of Default to convert any part or all of the $100,000 Principal Amount of the Notes plus accrued interest into shares of our common stock at a conversion price equal to the lesser of (a) $0.0075 or (b) 70% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice.

On May 11, 2011, Southridge executed a debt to equity conversion of a $80,000 short-term promissory note dated November 11, 2010 plus accrued interest of $3,174. We issued Southridge 11,089,826 common shares pursuant to Rule 144 based on an agreed exchange price of $0.0075 per share. We still owe Southridge $12,000 in premium associated with this note.

On July 13, 2011, Southridge executed a debt to equity conversion of a $14,000 short-term promissory note dated December 16, 2010 plus accrued interest of $641. We issued Southridge 1,464,132 common shares pursuant to Rule 144 based on an agreed exchange price of $0.01 per share. We still owe Southridge $2,100 in premium associated with this note.

On July 13, 2011, Southridge executed a debt to equity conversion of a $51,000 short-term promissory note dated December 22, 2010 plus accrued interest of $2,269. We issued Southridge 5,326,915 common shares pursuant to Rule 144 based on an agreed exchange price of $0.01 per share. We still owe Southridge $7,650 in premium associated with this note.

On July 21, 2011, Southridge executed a debt to equity conversion of a $55,000 short-term promissory note dated January 13, 2011 plus accrued interest of $2,278. We issued Southridge 5,727,836 common shares pursuant to Rule 144 based on an agreed exchange price of $0.01 per share. We still owe Southridge $8,250 in premium associated with this note.

On July 21, 2011, Southridge executed a debt to equity conversion of a $22,000 short-term promissory note dated January 19, 2011 plus accrued interest of $882. We issued Southridge 2,288,241 common shares pursuant to Rule 144 based on an agreed exchange price of $0.01 per share. We still owe Southridge $3,300 in premium associated with this note.

On August 24, 2011, Southridge executed a debt to equity conversion of a $80,000 short-term promissory note dated January 28, 2011 plus accrued interest of $3,647. We issued Southridge 8,364,712 common shares pursuant to Rule 144 based on an agreed exchange price of $0.01 per share. We still owe Southridge $12,000 in premium associated with this note.

On August 24, 2011, Southridge executed a partial debt to equity conversion of a $80,000 short-term promissory note dated February 7, 2011 in which they converted $20,000 principal plus accrued interest of $868. We issued Southridge 2,086,795 common shares pursuant to Rule 144 based on an agreed exchange price of $0.01 per share. We still owe Southridge $60,000 principal, $12,000 in premium and $2,906 in interest associated with this note.

From January 2011 to April 2011, Southridge acquired promissory notes from a private investor totaling $800,000 in principal and 55,363,907 shares of common stock which were issued as collateral. Southridge proposed that we amend the conversion terms of the notes permitting the holder to convert the notes and we agreed to the amendment. From January 12, 2011 to September 20, 2011, Southridge issued notices of conversion to settle $525,000 in principal plus accrued premiums totaling $255,651 into 53,143,682 shares of our common stock, of which 51,802,774 shares were collateral shares and 1,340,908 new shares were issued pursuant to Rule 144.

As of the date of this report, we owe a total of $2,061,944 of short term debt of which $1,437,444 is principal, $606,824 is accrued premium and $17,676 is accrued interest. A promissory note totaling $60,000 in principal has been extended to September 30, 2011; five promissory notes totaling $575,000 in principal have a maturity date that has been extended to September 30, 2011; four promissory notes totaling $249,944 in principal have a maturity date of September 30, 2011; four promissory notes totaling $245,000 in principal have a maturity date of September 30, 2011; four promissory note totaling $357,500 in principal have a maturity date of December 31, 2011; and one promissory note totaling $50,000 in principal has a maturity date of March 1, 2012. We have repaid aggregate principal and premium in the amount of $173,376 on these short-term notes and a total of $852,056 principal, $255,651 in premium, and $13,760 in interest has been converted into 89,492,139 shares of our common stock of which 51,802,774 shares were collateral shares and 37,689,365 new shares were issued pursuant to Rule 144. Out of the original 55,363,637 shares of common stock held as collateral, a balance of 3,561,133 shares remains on the $475,000 principal of the remaining notes.

There can be no assurances that we will be able to pay our short-term loans when due. If we default on any or all of the notes due to the lack of new funding, the holders could exercise their right to sell the remaining 3,561,133 collateral shares and could take legal action to collect the amount due which could materially adversely affect IDSI and the value of our stock.

Issuance of Stock in Connection with Long-Term Loans

On February 23, 2011, we entered into a Convertible Promissory Note Agreement with an unaffiliated third party, JMJ Financial (the “Lender” or “JMJ”), relating to a private placement of a total of up to $1,800,000 in principal amount of a Convertible Promissory Note (the “Note”) providing for advances of a gross amount of $1,600,000 in seven tranches. Pursuant to the terms of a Registration Rights Agreement (the “Rights Agreement”) dated February 23, 2011, between the Company and JMJ, we are required to file within 10 days from the effective date of an increase of authorized shares approved by our shareholders, an S-1 Registration Statement (the “Registration Statement”) covering 130,000,000 shares of Company common stock to be reserved for conversion of the Note.

Although our shareholders on July 12, 2011, voted to increase our authorized shares to 2,000,000,000, we have not filed the registration statement as required by the Rights Agreement.

The Note provides for funding in seven tranches as stipulated in the Funding Schedule attached. The first tranche of $300,000 was closed on February 24, 2011, and we received $258,000 after deductions of $30,000 for a 10% Finder’s Fee and $12,000 for an Origination Fee. The second tranche of $100,000 closed on May 20, 2011, and we received $93,000 after deductions of $7,000 for a 7% Finder’s Fee. The remaining five tranches are to be funded based on achievement of milestones relating to the Registration Statement, with the final tranche of $300,000 being available 150 days after effectiveness of the Registration Statement, which must be effective 120 days after the date of the Agreement. For the remaining five tranches, we are obligated to pay a Finder’s Fee equal to 7% in cash at each closing date. We may cancel the unfunded portion of the Agreement at a fee of 20% of the unfunded amount. As of the date of this report, $1,400,000 in principal amount remains unfunded and if we choose to cancel we will have to pay JMJ $280,000 to terminate the agreement.

The Note, after the seven tranches are drawn, would generate net proceeds of $1,467,000 after payment of the Origination Fee and a 7% Finder’s Fee. JMJ has the option to provide an additional $1,600,000 of funding on substantially the same terms as the first Agreement; however, we have the right to cancel, without penalty, the Note Agreement within five days of

JMJ’s execution. Once executed and accepted by both parties and five days has passed, cancellation of unfunded payments is permitted at a fee of 20% of the unfunded amount. Cancellation of funded portions is not permitted.

The funding schedule of the seven tranches is as follows:

§	$300,000 paid to Borrower within 2 business days of execution and closing of the agreement.

§	$100,000 paid to Borrower within 5 business days of filing of Definitive Proxy to increase authorized shares to 2,000,000,000 or more.

§	$100,000 paid to Borrower within 5 business days of effective increase in authorized shares to 2,000,000,000 or more.

§	$100,000 paid to Borrower within 5 business days of filing of registration statement, and that registration statement must be filed no later than 10 days from the effective increase of authorized shares.

§	$400,000 paid to Borrower within 5 business days of notice of effective registration statement, and that registration statement must be effective no later than 120 days from the execution of the agreement.

§	$300,000 paid to Borrower within 90 business days of notice of effective registration statement, and that registration statement must be effective no later than 120 days from the execution of the agreement.

§	$300,000 paid to Borrower within 150 business days of notice of effective registration statement, and that registration statement must be effective no later than 120 days from the execution of the agreement.

The conditions to funding each payment are as follows:

§	At the time of each payment interval, the Conversion Price calculation on Borrower’s common stock must yield a Conversion Price equal to or greater than $0.015 per share (based on the Conversion Price calculation, regardless of whether a conversion is actually completed or not).

At the time of each payment interval, the total dollar trading volume of Borrower’s common stock for the previous 23 trading days must be equal to or greater than $1,000,000. The total dollar volume will be calculated by removing the three highest dollar volume days and summing the dollar volume for the remaining 20 trading days.

§	At the time of each payment interval, there shall not exist an event of default as described within any of the agreements between Borrower and Holder.

Prior to the maturity date of February 2, 2014, JMJ may convert both principal and interest into our common stock at 75% of the average of the three lowest closing prices in the 20 days previous to the conversion. We have the right to enforce a conversion floor of $0.015 per share; however, if we receive a conversion notice in which the Conversion Price is less than $0.015 per share, JMJ will incur a conversion loss [(Conversion Loss = $0.015 – Conversion Price) x number of shares being converted] which we must make whole by either of the following options: pay the conversion loss in cash or add the conversion loss to the balance of principal due. Prepayment of the Note is not permitted.

The Note has a 9% one-time interest charge on the principal sum. No interest or principal payments are required until the Maturity Date, but both principal and interest may be included in conversions prior to the maturity date.

On August 24, 2011, JMJ executed a debt to equity conversion of $36,015 in principal of the first tranche of $300,000 which we closed on February 24, 2011. We issued JMJ 3,500,000 common shares pursuant to Rule 144 based on a conversion price of $0.0103 per share.

On August 31, 2011, JMJ executed a debt to equity conversion of $41,160 in principal of the first tranche of $300,000 which we closed on February 24, 2011. We issued JMJ 4,000,000 common shares pursuant to Rule 144 based on a conversion price of $0.01029 per share.

On September 15, 2011, JMJ executed a debt to equity conversion of $37,597 in principal of the first tranche of $300,000 which we closed on February 24, 2011. We issued JMJ 4,100,000 common shares pursuant to Rule 144 based on a conversion price of $0.00917 per share. As of the date of this report, we now owe JMJ a total of $249,728 of which $185,228 in principal,

$37,500 in consideration and $27,000 in interest associated with this first tranche.

As of the date of this report, we owe JMJ a total of $371,228 of which $285,825 is principal, $50,000 is consideration on the principal and $36,000 is interest.

Capital expenditures for fiscal 2011 were $0 as compared to $0 for the prior year. During fiscal 2011, we reclassified the net realizable value of $6,525 of CTLM® systems in Inventory to Clinical equipment. We anticipate that our capital expenditures for fiscal 2012 will be approximately $25,000.

During the year ending June 30, 2011, there were no changes in our existing debt agreements other than extensions and we had no outstanding bank loans as of June 30, 2011. Our annual fixed commitments, including salaries and fees for current employees and consultants, rent, payments under license agreements and other contractual commitments are approximately $4 million, as of the date of this report, and are likely to increase as additional agreements are entered into and additional personnel are retained. We will require substantial additional funds for our product development programs, operating expenses, regulatory processes, and manufacturing and marketing programs, which are presently estimated at an aggregate of approximately $350,000 per month. The foregoing projections are subject to many conditions, most of which are beyond our control. Our future capital requirements will depend on many factors, including the following: the progress of our product development projects, the time and cost involved in obtaining regulatory approvals; the cost of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; competing technological and market developments; changes and developments in our existing collaborative, licensing and other relationships and the terms of any new collaborative, licensing and other arrangements that we may establish; and the development of commercialization activities and arrangements.

We do not expect to generate a positive internal cash flow for at least 12 months as substantial costs and expenses continue due principally to the international commercialization of the CTLM®, activities related to our FDA regulatory process, and advanced product development activities. We expect to use our Amended Private Equity Agreement with Southridge and/or alternative financing facilities to raise the additional funds required to continue operations. In the event that we are unable or elect not to utilize the Amended Private Equity Agreement with Southridge or any successor agreement(s) on comparable terms, we would have to raise the additional funds required by either equity or debt financing, including entering into a transaction(s) to privately place equity, either common or preferred stock, or debt securities, or combinations of both; or by placing equity into the public market through an underwritten secondary offering. If additional funds are raised by issuing equity securities, whether to Southridge or other investors, dilution to existing stockholders will result, and future investors may be granted rights superior to those of existing stockholders. There is no assurance that, if and when Food and Drug Administration (“FDA”) marketing clearance is obtained, the CTLM® will achieve market acceptance or that we will achieve a profitable level of operations. No assurances, however, can be given that this financing or any necessary future financing will be available or, if available, that it will be obtained on terms satisfactory to us. Our ability to effectuate our business plan and continue operations is dependent on our ability to raise capital, structure a profitable business, and generate revenues. If our working capital were insufficient to fund our operations, we would have to explore additional sources of financing. In the absence of adequate funding, we will have to cease operations.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

As of the date of this report, we believe that we do not have any material quantitative and qualitative market risks.

Item 8. Financial Statements

Index to Financial Statements

		Page

Report of Independent Registered Public Accounting Firm		21

Financial Statements

	Balance Sheets	22

	Statements of Operations	23

	Statements of Stockholders’ Deficit	24

	Statements of Cash Flows	37

	Notes to Financial Statements	39

10-K/A Financial Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and

Stockholders of Imaging Diagnostic Systems, Inc.

We have audited the accompanying balance sheets of Imaging Diagnostic Systems, Inc. (A Development Stage Enterprise) as of June 30, 2011 and 2010, and the related statements of operations, and cash flows for each of the years ended June 30, 2011 and 2010. We have also audited the amounts presented for the period July 1, 2005 to June 30, 2011 included in the statements of stockholders’ equity (deficit) and in the total amounts presented in the statements of operations and cash flows for the period from December 10 1993 (inception) to June 30, 2011. We did not audit the financial statements for the period December 10, 1993 (date of inception) to June 30, 2005. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of June 30, 2011 and 2010 , and the results of its operations and cash flows for each of the years then ended June 30, 2011 and 2010 , and the amounts presented for the period July 1, 2005 to June 30, 2011 included in the statements of stockholders’ equity (deficit) and in the total amounts presented in the statements of operations and cash flows for the period from December 10 1993 (inception) to June 30, 2011 in conformity with generally accepted accounting principles in the United States of America.

The accompanying financial statements have been prepared assuming that Imaging Diagnostic Systems, Inc. will continue as a going concern. As more fully described in Note 5, the Company has incurred recurring operating losses and will have to obtain additional capital to sustain operations. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 5. The accompanying financial statements do not include any adjustments to reflect the possible effects on the recoverability and classification of assets or the amounts and classification of liabilities that may result from the outcome of this uncertainty.

/s/ SHERB & CO, LLP

Certified Public Accountants

Boca Raton, Florida

September 22, 2011

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.
(A Development Stage Company)
Balance Sheets

Assets

		June 30, 2011			June 30, 2010
Current assets:
	Cash	$	189,135		$	73,844
	Accounts receivable, net of allowances for doubtful accounts
	of $23,500 and $57,982, respectively		11,198			12,850
	Loans receivable, net of reserve of $0
	and $57,000, respectively		-			3,796
	Inventories, net of reserve of $399,000 and $399,000, respectively		322,562			436,110
	Prepaid expenses		49,339			61,115

	Total current assets		572,234			587,715

Property and equipment, net			161,713			221,763
Intangible assets, net			136,706			170,882

	Total assets	$	870,653		$	980,360


Liabilities and Stockholders' (Deficit)
Current liabilities:
	Accounts payable and accrued expenses	$	1,344,168		$	1,538,748
	Accrued payroll taxes and penalties		1,141,967			-
	Customer deposits		112,563			98,114
	Short-term derivative liability		691,663			-
	Short-term debt, net of debt discount of $78,925 and $0		1,706,018			1,506,500

	Total current liabilities		4,996,379			3,143,362

Long-Term liabilities:
	Long-term debt, net of debt discount of $184,967 and $0		301,033			-

	Total long-term liabilities		301,033			-

Convertible preferred stock (Series L), 9% cumulative annual dividend,
no par value, 20 and 35 shares issued, respectively			200,000			350,000
	Long-term derivative liability		102,409			202,155

Stockholders' (Deficit):
	Common stock, no par value; authorized 950,000,000 shares,
	issued 942,196,924 and 837,087,622 shares, respectively		107,476,957			105,927,719
	Common stock - Debt Collateral		(73,970	)		(1,150,000	)
	Additional paid-in capital		5,626,252			4,388,006
	Deficit accumulated during development stage		(117,758,407	)		(111,880,882	)

	Total stockholders' (Deficit)		(4,729,168	)		(2,715,157	)

	Total liabilities and stockholders' (Deficit)	$	870,653		$	980,360




See accompanying notes to the financial statements.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.
(a Development Stage Company)

Statements of Operations
							From Inception
							(December 10,
	Year Ended			Year Ended			1993) to
	June 30, 2011			June 30, 2010			June 30, 2011
								Unaudited *
Net Sales	$	55,118		$	181,172		$	2,379,782
Gain on sale of fixed assets		-			-			2,794,565
Cost of Sales		15,265			22,512			943,882

Gross Profit		39,853			158,660			4,230,465

Operating Expenses:
General and administrative		3,096,209			3,584,608			61,670,231
Research and development		893,879			734,943			23,322,837
Sales and marketing		452,967			340,433			9,566,221
Inventory valuation adjustments		95,096			67,678			4,915,445
Depreciation and amortization		100,751			144,445			3,402,425
Amortization of deferred compensation		-			-			4,064,250

Total Operating Expenses		4,638,902			4,872,107			106,941,409

Operating Loss		(4,599,049	)		(4,713,447	)		(102,710,944	)

Interest income		1,438			995			310,834
Other income		110,858			118,796			994,046
Other income - LILA Inventory		-			-			(69,193	)
Derivative (expense) income		-			(64,524	)		(64,524	)
Change in fair value of derivative liability		273,037			(137,631	)		135,406
Interest expense		(1,663,809	)		(175,904	)		(9,506,272	)

Net Loss		(5,877,525	)		(4,971,715	)		(110,910,647	)

Dividends on cumulative preferred stock:
From discount at issuance		-			-			(5,402,713	)
Earned		-			-			(1,445,047	)

Net loss applicable to
common shareholders	$	(5,877,525	)	$	(4,971,715	)	$	(117,758,407	)

Net Loss per common share:
Basic and diluted	$	(0.01	)	$	(0.01	)	$	(0.54	)

Weighted average number of
common shares outstanding:
Basic and diluted		885,074,029			758,622,934			218,151,949


* The numbers presented from inception December 10, 1993 to June 30, 2005 are unaudited by our current auditor.


See accompanying notes to the financial statements.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.
(a Development Stage Company)

Statements of Stockholders' (Deficit)

From December 10, 1993 (date of inception) to June 30, 2011 (Unaudited) *
											Deficit
											Accumulated
	Preferred Stock (**)				Common Stock				Additional		During the
	Number of				Number of				Paid-in		Development			Subscriptions			Deferred
	Shares		Amount		Shares		Amount		Capital		Stage			Receivable			Compensation			Total

Balance at December 10, 1993 (date of inception)		-	$	-		-	$	-	$	-	$	-		$	-		$	-		$	-

Issuance of common stock, restated for reverse
stock split		-		-		510,000		50,000		-		-			-			-			50,000

Acquisition of public shell		-		-		178,752		-		-		-						-			-

Net issuance of additional shares of stock		-		-		15,342,520		16,451		-		-						-			16,451

Common stock sold		-		-		36,500		36,500		-		-						-			36,500

Net loss		-				-		-		-		(66,951	)					-			(66,951	)

Balance at June 30, 1994		-		-		16,067,772		102,951		-		(66,951	)		-			-			36,000

Common stock sold		-		-		1,980,791		1,566,595		-		-			(523,118	)		-			1,043,477

Common stock issued in exchange for services		-		-		115,650		102,942		-		-			-			-			102,942

Common stock issued with employment agreements		-		-		75,000		78,750		-		-			-			-			78,750

Common stock issued for compensation		-		-		377,500		151,000		-		-			-			-			151,000

Stock options granted		-		-		-		-		622,500		-			-			(622,500	)		-

Amortization of deferred compentsation		-		-		-		-		-		-			-			114,375			114,375

Forgiveness of officers' compensation		-		-		-		-		50,333		-			-			-			50,333

Net loss		-		-		-		-		-		(1,086,436	)		-			-			(1,086,436	)

Balance at June 30, 1995		-		-		18,616,713		2,002,238		672,833		(1,153,387	)		(523,118	)		(508,125	)		490,441

*The numbers presented from inception December 10, 1993 to June 30, 2005 are unaudited by our current auditor.
**See note 17 for a detailed breakdown by Series.

See accompanying notes to the financial statements.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.
(a Development Stage Company)

Statements of Stockholders' (Deficit) (Continued)

From December 10, 1993 (date of inception) to June 30, 2011 (Unaudited) *
																Deficit
																Accumulated
	Preferred Stock (**)						Common Stock						Additional			During the
	Number of						Number of						Paid-in			Development			Subscriptions			Deferred
	Shares			Amount			Shares			Amount			Capital			Stage			Receivable			Compensation			Total

Balance at June 30, 1995		-			-			18,616,713			2,002,238			672,833			(1,153,387	)		(523,118	)		(508,125	)		490,441

Preferred stock sold, including dividends		4,000			3,600,000			-			-			1,335,474			(1,335,474	)		-			-			3,600,000

Common stock sold		-			-			700,471			1,561,110			-			-			-			-			1,561,110

Cancellation of stock subscription		-			-			(410,500	)		(405,130	)		-			-			405,130			-			-

Common stock issued in exchange for services		-			-			2,503,789			4,257,320			-			-			-			-			4,257,320

Common stock issued with exercise of stock options		-			-			191,500			104,375			-			-			(4,375	)		-			100,000

Common stock issued with exercise of options
for compensation		-			-			996,400			567,164			-			-			-			-			567,164

Conversion of preferred stock to common stock		(1,600	)		(1,440,000	)		420,662			1,974,190			(534,190	)		-			-			-			-

Common stock issued as payment of preferred
stock dividends		-			-			4,754			14,629			-			(14,629	)		-			-			-

Dividends accrued on preferred stock not
yet converted		-			-			-			-			-			(33,216	)		-			-			(33,216	)

Collection of stock subscriptions		-			-			-			-			-			-			103,679			-			103,679

Amortization of deferred compentsation		-			-			-			-			-			-			-			232,500			232,500

Forgiveness of officers' compensation		-			-			-			-			100,667			-			-			-			100,667

Net loss (restated)		-			-			-			-			-			(6,933,310	)		-			-			(6,933,310	)

Balance at June 30, 1996 (restated)		2,400			2,160,000			23,023,789			10,075,896			1,574,784			(9,470,016	)		(18,684	)		(275,625	)		4,046,355

*The numbers presented from inception December 10, 1993 to June 30, 2005 are unaudited by our current auditor.
**See note 17 for a detailed breakdown by Series.

See accompanying notes to the financial statements.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.
(a Development Stage Company)

Statements of Stockholders' (Deficit) (Continued)

From December 10, 1993 (date of inception) to June 30, 2011 (Unaudited) *
																Deficit
																Accumulated
	Preferred Stock (**)						Common Stock						Additional			During the
	Number of						Number of						Paid-in			Development			Subscriptions			Deferred
	Shares			Amount			Shares			Amount			Capital			Stage			Receivable			Compensation			Total

Balance at June 30, 1996 (restated)		2,400			2,160,000			23,023,789			10,075,896			1,574,784			(9,470,016	)		(18,684	)		(275,625	)		4,046,355

Preferred stock sold, including dividends		450			4,500,000			-			-			998,120			(998,120	)		-			-			4,500,000

Conversion of preferred stock to common stock		(2,400	)		(2,160,000	)		1,061,202			2,961,284			(801,284	)		-			-			-			-

Common stock issued in exchange for services		-			-			234,200			650,129			-			-			-			-			650,129

Common stock issued for compensation		-			-			353,200			918,364			-			-			-			-			918,364

Common stock issued with exercise of stock options		-			-			361,933			1,136,953			-			-			(33,750	)		-			1,103,203

Common stock issued to employee		-			-			(150,000	)		(52,500	)		-			-			-			-			(52,500	)

Common stock issued as payment of preferred
stock dividends		-			-			20,760			49,603			-			(16,387	)		-			-			33,216

Dividends accrued on preferred stock not
yet converted		-			-			-			-			-			(168,288	)		-			-			(168,288	)

Stock options granted		-			-			-			-			1,891,500			-			-			(1,891,500	)		-

Collection of stock subscriptions		-			-			-			-			-			-			16,875			-			16,875

Amortization of deferred compentsation		-			-			-			-			-			-			-			788,000			788,000

Net loss (restated)		-			-			-			-			-			(7,646,119	)		-			-			(7,646,119	)

Balance at June 30, 1997 (restated)		450			4,500,000			24,905,084			15,739,729			3,663,120			(18,298,930	)		(35,559	)		(1,379,125	)		4,189,235

*The numbers presented from inception December 10, 1993 to June 30, 2005 are unaudited by our current auditor.
**See note 17 for a detailed breakdown by Series.


See accompanying notes to the financial statements.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.
(a Development Stage Company)

Statements of Stockholders' (Deficit) (Continued)

From December 10, 1993 (date of inception) to June 30, 2011 (Unaudited) *
														Deficit
														Accumulated
	Preferred Stock (**)						Common Stock				Additional			During the
	Number of						Number of				Paid-in			Development			Subscriptions			Deferred
	Shares			Amount			Shares		Amount		Capital			Stage			Receivable			Compensation			Total

Balance at June 30, 1997 (restated)		450			4,500,000			24,905,084		15,739,729		3,663,120			(18,298,930	)		(35,559	)		(1,379,125	)		4,189,235

Preferred stock sold, including dividends
and placement fees		501			5,010,000			-		-		1,290,515			(1,741,015	)		-			-			4,559,500

Conversion of preferred stock to common stock		(340	)		(3,400,000	)		6,502,448		4,644,307		(1,210,414	)		-			-			-			33,893

Common stock sold		-			-			500,000		200,000		-			-			-			-			200,000

Common stock issued in exchange for services		-			-			956,000		1,419,130		-			-			-			-			1,419,130

Common stock issued for compensation		-			-			64,300		54,408		-			-			-			-			54,408

Common stock issued with exercise of stock options		-			-			65,712		22,999		-			-			-			-			22,999

Common stock issued in exchange for
licensing agreement		-			-			3,500,000		1,890,000		(3,199,000	)		-			-			-			(1,309,000	)

Dividends accrued on preferred stock not
yet converted		-			-			-		-		-			(315,000	)		-			-			(315,000	)

Stock options granted		-			-			-		-		1,340,625			-			-			(1,340,625	)		-

Collection of stock subscriptions		-			-			-		12,500		-			-			21,250			-			33,750

Amortization of deferred compentsation		-			-			-		-		-			-			-			1,418,938			1,418,938

Net loss (restated)		-			-			-		-		-			(6,715,732	)		-			-			(6,715,732	)

Balance at June 30, 1998 (restated)		611			6,110,000			36,493,544		23,983,073		1,884,846			(27,070,677	)		(14,309	)		(1,300,812	)		3,592,121

*The numbers presented from inception December 10, 1993 to June 30, 2005 are unaudited by our current auditor.
**See note 17 for a detailed breakdown by Series.


See accompanying notes to the financial statements.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.
(a Development Stage Company)

Statements of Stockholders' (Deficit) (Continued)

From December 10, 1993 (date of inception) to June 30, 2011 (Unaudited) *
														Deficit
														Accumulated
	Preferred Stock (**)						Common Stock				Additional			During the
	Number of						Number of				Paid-in			Development			Subscriptions			Deferred
	Shares			Amount			Shares		Amount		Capital			Stage			Receivable			Compensation			Total

Balance at June 30, 1998 (restated)		611			6,110,000			36,493,544		23,983,073		1,884,846			(27,070,677	)		(14,309	)		(1,300,812	)		3,592,121		*

Preferred stock issued - satisfaction of debt		138			1,380,000			-		-		(161,348	)		(492,857	)		-			-			725,795

Conversion of preferred stock to common stock		(153	)		(1,530,000	)		4,865,034		1,972,296		(442,296	)		-			-			-			-

Common stock sold		-			-			200,000		60,000		-			-			-			-			60,000

Common stock issued - exchange for services
and compensation		-			-			719,442		301,210		-			-			-			-			301,210

Common stock issued - repayment of debt		-			-			2,974,043		1,196,992		-			-			-			-			1,196,992

Common stock issued in exchange for loan fees		-			-			480,000		292,694		-			-			-			-			292,694

Common stock issued with exercise of stock options		-			-			65,612		124,464		-			-			-			-			124,464

Common stock issued in satisfaction of
licensing agreement payable		-			-			3,500,000		1,890,000		-			-			-			-			1,890,000

Redeemable preferred stock sold, deemed dividend		-			-			-		-		-			(127,117	)		-			-			(127,117	)

Dividends accrued-preferred stock not yet converted		-			-			-		-		-			(329,176	)		-			-			(329,176	)

Stock options granted		-			-			-		-		209,625			-			-			(209,625	)		-

Amortization of deferred compentsation		-			-			-		-		-			-			-			1,510,437			1,510,437

Net loss (restated)		-			-			-		-		-			(6,543,292	)		-			-			(6,543,292	)

Balance at June 30, 1999 (restated)		596			5,960,000			49,297,675		29,820,729		1,490,827			(34,563,119	)		(14,309	)		-			2,694,128


*The numbers presented from inception December 10, 1993 to June 30, 2005 are unaudited by our current auditor.
**See note 17 for a detailed breakdown by Series.

See accompanying notes to the financial statements.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.
(a Development Stage Company)

Statements of Stockholders' (Deficit) (Continued)

From December 10, 1993 (date of inception) to June 30, 2011 (Unaudited) *
															Deficit
															Accumulated
	Preferred Stock (**)						Common Stock					Additional			During the
	Number of						Number of					Paid-in			Development			Subscriptions			Deferred
	Shares			Amount			Shares		Amount			Capital			Stage			Receivable			Compensation		Total

Balance at June 30, 1999 (restated)		596			5,960,000			49,297,675		29,820,729			1,490,827			(34,563,119	)		(14,309	)		-		2,694,128

Conversion of convertible debentures		-			-			4,060,398		3,958,223			-			-			-			-		3,958,223

Conversion of preferred stock to common, net		(596	)		(5,960,000	)		45,415,734		7,313,334			(648,885	)		-			-			-		704,449

Common stock sold		-			-			100,000		157,000			-			-			-			-		157,000

Common stock issued - exchange for services
and compensation, net of cancelled shares		-			-			137,000		(18,675	)		-			-			-			-		(18,675	)

Common stock issued - repayment of debt
and accrued interest		-			-			5,061,294		1,067,665			-			-			-			-		1,067,665

Common stock issued in exchange for
interest and loan fees		-			-			7,297		2,408			-			-			-			-		2,408

Common stock issued with exercise of stock options		-			-			1,281,628		395,810			157,988			-			(13,599	)		-		540,199

Common stock issued with exercise of warrants		-			-			150,652		121,563			97,850			-			-			-		219,413

Issuance of note payable with warrants at a discount		-			-			-		-			500,000			-			-			-		500,000

Dividends accrued-preferred stock not yet converted		-			-			-		-			-			(145,950	)		-			-		(145,950	)

Net loss (restated)		-			-			-		-			-			(6,531,662	)		-			-		(6,531,662	)

Balance at June 30, 2000 (restated)		-			-			105,511,678		42,818,057			1,597,780			(41,240,731	)		(27,908	)		-		3,147,198


*The numbers presented from inception December 10, 1993 to June 30, 2005 are unaudited by our current auditor.
**See note 17 for a detailed breakdown by Series.

See accompanying notes to the financial statements.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.
(a Development Stage Company)

Statements of Stockholders' (Deficit) (Continued)

From December 10, 1993 (date of inception) to June 30, 2011 (Unaudited) *
														Deficit
														Accumulated
	Preferred Stock (**)						Common Stock				Additional			During the
	Number of						Number of				Paid-in			Development			Subscriptions			Deferred
	Shares			Amount			Shares		Amount		Capital			Stage			Receivable			Compensation		Total

Balance at June 30, 2000 (restated)		-			-			105,511,678		42,818,057		1,597,780			(41,240,731	)		(27,908	)		-		3,147,198

Preferred stock sold, including dividends		500			5,000,000			-		-		708,130			(708,130	)		-			-		5,000,000

Conversion of preferred stock to common, net		(500	)		(5,000,000	)		5,664,067		5,580,531		(708,130	)		-			-			-		(127,599	)

Common stock issued - line of equity transactions		-			-			3,407,613		3,143,666		-			-			-			-		3,143,666

Common stock issued - exchange for services
and compensation		-			-			153,500		227,855		-			-			-			-		227,855

Common stock issued - repayment of debt
and accrued interest		-			-			810,000		1,393,200		-			-			-			-		1,393,200

Common stock issued with exercise of stock options		-			-			3,781,614		1,868,585		-			-			13,599			-		1,882,184

Common stock issued with exercise of warrants		-			-			99,375		119,887		-			-			-			-		119,887

Dividends accrued-preferred stock		-			-			-		-		-			(422,401	)		-			-		(422,401	)

Net loss (restated)		-			-			-		-		-			(9,532,450	)		-			-		(9,532,450	)

Balance at June 30, 2001 (restated)		-			-			119,427,847		55,151,781		1,597,780			(51,903,712	)		(14,309	)		-		4,831,540

*The numbers presented from inception December 10, 1993 to June 30, 2005 are unaudited by our current auditor.
**See note 17 for a detailed breakdown by Series.

See accompanying notes to the financial statements.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.
(a Development Stage Company)

Statements of Stockholders' (Deficit) (Continued)

From December 10, 1993 (date of inception) to June 30, 2011 (Unaudited) *
											Deficit
											Accumulated
	Preferred Stock (**)				Common Stock				Additional		During the
	Number of				Number of				Paid-in		Development			Subscriptions			Deferred
	Shares		Amount		Shares		Amount		Capital		Stage			Receivable			Compensation			Total

Balance at June 30, 2001 (restated)		-		-		119,427,847		55,151,781		1,597,780		(51,903,712	)		(14,309	)		-			4,831,540

Common stock issued - line of equity transactions		-		-		11,607,866		6,213,805		-		-			-			-			6,213,805

Common stock issued - exchange for services
and compensation		-		-		560,000		294,350		-		-			-			(117,600	)		176,750

Net loss (restated)		-		-		-		-		-		(7,997,652	)		-			-			(7,997,652	)

Balance at June 30, 2002 (restated)		-		-		131,595,713		61,659,936		1,597,780		(59,901,364	)		(14,309	)		(117,600	)		3,224,443

Common stock issued - line of equity transactions		-		-		29,390,708		8,737,772		-		-			-			-			8,737,772

Common stock issued - exchange for services
and compensation		-		-		2,007,618		970,653		-		-			-			117,600			1,088,253

Payment of subscriptions receivable		-		-		-		-		-		-			14,309			-			14,309

Net loss (restated)		-		-		-		-		-		(8,358,774	)		-			-			(8,358,774	)

Balance at June 30, 2003 (restated)		-		-		162,994,039		71,368,361		1,597,780		(68,260,138	)		-			-			4,706,003

*The numbers presented from inception December 10, 1993 to June 30, 2005 are unaudited by our current auditor.
**See note 17 for a detailed breakdown by Series.

See accompanying notes to the financial statements.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.
(a Development Stage Company)

Statements of Stockholders' (Deficit) (Continued)

From December 10, 1993 (date of inception) to June 30, 2011 (Unaudited) *
											Deficit
											Accumulated
	Preferred Stock (**)				Common Stock				Additional		During the
	Number of				Number of				Paid-in		Development			Subscriptions		Deferred
	Shares		Amount		Shares		Amount		Capital		Stage			Receivable		Compensation		Total

Balance at June 30, 2003 (restated)		-		-		162,994,039		71,368,361		1,597,780		(68,260,138	)		-		-		4,706,003

Common stock issued - line of equity transactions		-		-		8,630,819		6,541,700		-		-			-		-		6,541,700

Common stock issued - exchange for services
and compensation		-		-		734,785		832,950		-		-			-		-		832,950

Common stock issued - exercise of stock options		-		-		967,769		492,701		-		-			-		-		492,701

Net loss		-		-		-		-		-		(8,402,959	)		-		-		(8,402,959	)

Balance at June 30, 2004 (Restated)		-		-		173,327,412		79,235,712		1,597,780		(76,663,097	)		-		-		4,170,395

Common stock issued - line of equity transactions		-		-		26,274,893		7,797,807		-		-			-		-		7,797,807

Common stock issued - exchange for services
and compensation		-		-		285,000		113,850		-		-			-		-		113,850

Common stock issued - exercise of stock options		-		-		13,264		3,404		-		-			-		-		3,404

Net loss		-		-		-		-		-		(7,312,918	)		-		-		(7,312,918	)

Balance at June 30, 2005		-	$	-		199,900,569	$	87,150,773	$	1,597,780	$	(83,976,015	)	$	-	$	-		4,772,538

*The numbers presented from inception December 10, 1993 to June 30, 2005 are unaudited by our current auditor.
**See note 17 for a detailed breakdown by Series.

See accompanying notes to the financial statements.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.
(a Development Stage Company)

Statements of Stockholders' (Deficit) (Continued)

From December 10, 1993 (date of inception) to June 30, 2011
											Deficit
											Accumulated
	Preferred Stock (**)				Common Stock				Additional		During the
	Number of				Number of				Paid-in		Development			Subscriptions		Deferred
	Shares		Amount		Shares		Amount		Capital		Stage			Receivable		Compensation		Total

Balance at June 30, 2005		-		-		199,900,569		87,150,773		1,597,780		(83,976,015	)		-		-		4,772,538

Common stock issued - line of equity transactions		-		-		47,776,064		7,409,543		-		-			-		-		7,409,543

Fair Value of Stock Option Expenses		-		-		-		-		632,557		-			-		-		632,557

Net loss		-		-		-		-		-		(7,162,722	)		-		-		(7,162,722	)

Balance at June 30, 2006		-		-		247,676,633		94,560,316		2,230,337		(91,138,737	)		-		-		5,651,916

Common stock issued - line of equity transactions		-		-		63,861,405		4,560,415		-		-			-		-		4,560,415

Fair Value of Stock Option Expenses		-		-		-		-		431,313		-			-		-		431,313

Net loss		-		-		-		-		-		(7,202,322	)		-		-		(7,202,322	)

Balance at June 30, 2007		-		-		311,538,038		99,120,731		2,661,650		(98,341,059)			-		-		3,441,322


** See Note 17 for a detailed breakdown by Series.
See accompanying notes to the financial statements.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.
(a Development Stage Company)

Statements of Stockholders' (Deficit) (Continued)

From December 10, 1993 (date of inception) to June 30, 2011
											Deficit
											Accumulated
	Preferred Stock (**)				Common Stock				Additional		During the
	Number of				Number of				Paid-in		Development			Subscriptions		Deferred
	Shares		Amount		Shares		Amount		Capital		Stage			Receivable		Compensation		Total

Balance at June 30, 2007		-		-		311,538,038		99,120,731		2,661,650		(98,341,059	)		-		-		3,441,322

Common stock issued - line of equity transactions		-		-		13,979,430		530,414		-		-			-		-		7,409,543

Fair Value of Stock Option Expenses		-		-		-		-		183,182		-			-		-		183,182

Net loss		-		-		-		-		-		(4,623,679	)		-		-		(4,623,679	)

Balance at June 30, 2008		-		-		325,517,468		99,651,145		2,844,832		(102,964,738	)		-		-		(468,761	)

Common stock issued - line of equity transactions		-		-		158,747,217		1,674,885		-		-			-		-		1,674,885

Common stock issued - Conversion of Cv Debenture		-		-		93,958,547		621,220		-		-			-		-		621,220

Common stock issued - Exercise of Warrants		-		-		21,755,555		178,778		-		-			-		-		178,778

Common stock issued - Consulting		-		-		5,000,000		55,000		-		-			-		-		55,000

Common stock issued - Employees		-		-		2,400,000		19,200		-		-			-		-		19,200

Sale of Common Stock - Restricted Shares Issued		-		-		4,000,000		80,000		-		-			-		-		80,000

Fair Value of Stock Option Expenses		-		-		-		-		145,577		-			-		-		145,577

Discount - FV and BCF for $400,000 Cv Deb.		-		-		-		-		400,000		-			-				400,000

Discount - FV and BCF for $400,000 Cv Deb. # 2		-		-		-		-		92,308		-			-		-		92,308

Repricing of Warrants		-		-		-		-		17,000		-			-		-		17,000

Net loss		-		-		-		-		-		(3,944,429	)		-		-		(3,944,429	)

Balance of June 30, 2009		-		-		611,378,787		102,280,228		3,499,717		(106,909,167	)		-		-		(1,129,222	)


** See Note 17 for a detailed breakdown by Series.
See accompanying notes to the financial statements.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.
(a Development Stage Company)

Statements of Stockholders' (Deficit) (Continued)

From December 10, 1993 (date of inception) to June 30, 2011
												Deficit
												Accumulated
	Preferred Stock (**)				Common Stock				Additional			During the
	Number of				Number of				Paid-in			Development			Subscriptions		Deferred
	Shares		Amount		Shares		Amount		Capital			Stage			Receivable		Compensation		Total

Balance at June 30, 2009		-		-		611,378,787		102,280,228		3,499,717			(106,909,167	)		-		-		(1,129,222)

Preferred stock issued - Series L(1)	35	-		-		-		-		(10,875	)		-			-		-		(10,875)

Common stock issued - line of equity transactions(2)		-		-		90,803,568		1,524,764		-			-			-		-		1,524,764

Common stock issued - Conversion of Cv Debenture		-		-		45,334,856		223,743		-			-			-		-		223,743

Common stock issued - Exercise of Warrants		-		-		11,180,822		89,444		(89,444	)		-			-		-		-

Common stock issued - Consulting		-		-		250,000		2,250		11,250			-			-		-		13,500

Common stock issued - Employees		-		-		6,150,952		191,790		10,793			-			-		-		202,583

Common stock issued - Add'l Consideration for Loans		-		-		16,625,000		465,500		21,000			-			-		-		486,500

Common stock issued - Collateral for Loans		-		-		55,363,637		-		-			-			-		-		-

Fair Value of Stock Option Expenses		-		-		-		-		588,565			-			-		-		588,565

Discount - Add'l Consideration for Loans		-		-		-		-		357,000			-			-		-		357,000

Net loss				-		-		-		-			(4,971,715	)		-		-		(4,971,715	)

Balance of June 30, 2010(2)	35			-		837,087,622		104,777,719		4,388,006			(111,880,882	)		-		-		(2,715,157	)


(1)Convertible Preferred Shares are reported as a liability and therefore have no value in Stockholders' Equity.
(2)As of June 30, 2010 JH Darbie & Co. is holding 196,431 shares that have been issued but not sold under the Equity Credit Line.
** See Note 17 for a detailed breakdown by Series.

See accompanying notes to the financial statements.

IMAGING DIAGNOSTIC SYSTEMS, INC.
(a Development Stage Company)

Statements of Stockholders' (Deficit) (Continued)

From December 10, 1993 (date of inception) to June 30, 2011
						Deficit
						Accumulated
	Preferred Stock (**)		Common Stock		Additional	During the
	Number of		Number of		Paid-in	Development	Subscriptions	Deferred
	Shares	Amount	Shares	Amount	Capital	Stage	Receivable	Compensation	Total

Balance at June 30, 2010	35	-	837,087,622	104,777,719	4,388,006	(111,880,882)	-	-	(2,715,157)

Preferred stock issued - Series L(1)	(15)	-	10,000,000	150,000	(24,989)	-	-	-	125,011

Common stock issued - line of equity transactions(2)	-	-	77,928,568	1,502,193	-	-	-	-	1,502,193

Common stock issued - Employees	-	-	4,750,000	109,250	-	-	-	-	109,250

Reduction in Collateral Shares	-	-	-	1,076,030	-	-	-	-	1,076,030

Adjustment for Collateral Sharers Issued	-	-	-	(324,879)	-	-	-	-	(324,879)

Common stock issued - Extinguishment Debt	-	-	12,430,734	112,674	-	-	-	-	112,674

Fair Value on Debt to Equity Conversions	-	-	-	-	771,865	-	-	-	771,865

Fair Value of Stock Option Expenses	-	-	-	-	375,703	-	-	-	375,703

Discount - BCF for Southridge Notes	-	-	-	-	779,000	-	-	-	779,000

Discount - BCF for JMJ Financial Notes	-	-	-	-	201,621	-	-	-	201,621

Reclassification of Fair Value of Derivative Securities	-	-	-	-	(864,954)	-	-	-	(864,954)

Net loss	-	-	-	-	-	(5,877,525)	-	-	(5,877,525)

Balance at June 30, 2011(2)	20	-	942,196,924	107,402,987	5,626,252	(117,758,407)	-	-	(4,729,168)

(1) Convertible Preferred Shares are reported as a liability and therefore have no value in Stockholders' Equity.
(2) As of June 30, 2011 JH Darbie & Co. is holding 505,619 shares that have been issued but not sold under the Equity Credit Line.
** See Note 19 for a detailed breakdown by Series.

See accompanying notes to the financial statements.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.
(A Development Stage Company)

Statement of Cash Flows

							From Inception
							(December 10,
	Year Ended			Year Ended			1993) to
	June 30, 2011			June 30, 2010			June 30, 2011
								Unaudited *
Net loss	$	(5,877,525	)	$	(4,971,715	)	$	(110,910,647	)
Adjustments to reconcile net loss to net cash
used for operating activities:
Depreciation and amortization		100,751			144,445			3,410,068
(Gain) Loss on sale of fixed assets		-			-			(2,794,565	)
Extinguishment of debt		(13,010	)		(98,829	)		(543,301	)
Inventory valuation adjustment		95,096			67,678			4,915,445
Amoritization of deferred compensation		-						4,064,250
Noncash interest, compensation and consulting services		1,913,754			1,835,184			23,587,430
Fair Value of Stock Option Expenses		375,704			588,564			2,356,897
(Increase) decrease in accounts and
loans receivable - employees, net		39,929			5,225			(130,384	)
Increase (decrease) in allowance for
doubful account		(91,482	)		-			23,500
(Increase) decrease in inventories, net		18,452			23,680			(2,309,428	)
(Increase) decrease in prepaid expenses		11,776			(25,498	)		(49,339	)
(Increase) decrease in other assets		-			-			(306,618	)
Increase (decrease) in accounts payable and
accrued expenses		960,397			(356,644	)		2,763,407
Increase (decrease) in other current liabilities		14,449			2,000			112,563

Total adjustments		3,425,816			2,185,805			35,099,925

Net cash used for operating activities		(2,451,709	)		(2,785,910	)		(75,810,722	)


Cash flows from investing activities:
Proceeds from sale of property & equipment		-			-			4,390,015
Prototype equipment		-			-			(2,799,031	)
Capital expenditures		-			-			(4,779,405	)

Net cash used for investing activities		-			-			(3,188,421	)


Cash flows from financing activities:
Repayment of capital lease obligation		-			-			(50,289	)
Proceeds from convertible debenture		-			-			4,040,000
Proceeds from loan payable		1,201,171			1,241,794			5,037,994
(Repayment) of loan payable		(19,171	)		(141,794	)		(160,964	)
Proceeds from issuance of preferred stock		-			350,000			18,389,500
Proceeds from exercise of stock options		-			-			903,989
Net proceeds from issuance of common stock		1,385,000			1,397,219			51,028,048

Net cash provided by financing activities		2,567,000			2,847,219			79,188,278

Net increase (decrease) in cash and cash equivalents		115,291			61,309			189,135

Cash and cash equivalents at beginning of period		73,844			12,535			-

Cash and cash equivalents at end of period	$	189,135		$	73,844		$	189,135


* The numbers presented from inception December 10, 1993 to June 30, 2005 are unaudited by our current auditor.


See accompanying notes to the financial statements.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.
(A Development Stage Company)

Statement of Cash Flows (Continued)

					From Inception
					(December 10,
	Year Ended		Year Ended		1993) to
	June 30, 2011		June 30, 2010		June 30, 2011
Supplemental disclosures of cash						Unaudited *
flow information:

Cash paid for interest	$	-	$	-	$	215,962

Supplemental disclosures of noncash
investing and financing activities:

Issuance of common stock and options
in exchange for services	$	-	$	11,250	$	6,317,600

Issuance of common stock as loan fees in
connection with loans to the Company	$	-	$	-	$	293,694

Issuance of common stock as collateral in
connection with loans to the Company	$	-	$	1,150,000	$	1,150,000

Issuance of common stock as additional consideration
in connection with loans to the Company	$	-	$	465,500	$	465,500

Issuance of common stock as satisfaction of
loans payable and accrued interest	$	112,674	$	-	$	3,511,639

Issuance of common stock as satisfaction of
certain accounts payable	$	-	$	2,250	$	260,142

Issuance of common stock in
exchange for property and equipment	$	-	$	-	$	89,650

Issuance of common stock and other current liability
in exchange for patent liceensing agreement	$	-	$	-	$	581,000

Issuance of common stock through
exercise of incentive stock options	$	-	$	-	$	3,117,702

Issuance of common stock as
payment for preferred stock dividends	$	-	$	-	$	507,645

Acquisition of property and equipment
through the issuance of a capital
lease payable	$	-	$	-	$	50,289


* The numbers presented from inception December 10, 1993 to June 30, 2005 are unaudited by our current auditor.

See accompanying notes to the financial statements.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements

(1) BACKGROUND

The Company, ("Imaging Diagnostic Systems, Inc.") was organized in the state of New Jersey on November 8, 1985, under its original name of Alkan Corp. On April 14, 1994, a reverse merger was effected between Alkan Corp. and the Florida corporation of Imaging Diagnostic Systems, Inc. ("IDSI-Fl."). IDSI-Fl. was formed on December 10, 1993. (See Note 4) Effective July 1, 1995 the Company changed its corporate status to a Florida corporation.

The Company is a development stage enterprise and during fiscal year ending June 30, 2011, utilized the proceeds from short-term loans and our Private Equity Credit Agreements with Charlton Avenue, LLC and Southridge Partners II LP (“Southridge”). As additional working capital will be required, the Company will obtain such capital through the use of its Private Equity Credit Agreement with Southridge and other sources of financing. Since January 2003, the Company has had revenues of $2,379,782 from the sale of its CTLM® Breast Imaging System. There is no assurance that once the development of the CTLM® device is completed and finally receives Federal Drug Administration marketing clearance, that the Company will achieve a profitable level of operations.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a) Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

(b) Revenue Recognition

We recognize revenue in accordance with the guidance presented in the SEC’s Staff Accounting Bulletin No. 104. We sell our medical imaging products, parts, and services to independent distributors and in certain unrepresented territories directly to end-users. Revenue is recognized when persuasive evidence of a sales arrangement exists, delivery has occurred such that title and risk of loss have passed to the buyer or services have been rendered, the selling price is fixed or determinable, and collectibility is reasonable assured. Unless agreed otherwise, our terms with international distributors provide that title and risk of loss passes F.O.B. origin.

To be reasonably assured of collectibility, our policy is to minimize the risk of doing business with distributors in countries which are having difficult financial times by requesting payment via an irrevocable letter of credit (“L/C”) drawn on a United States bank prior to shipment of the CTLM®. It is not always possible to obtain an L/C from our distributors so in these cases we must seek alternative payment arrangements which include third-party financing, leasing or extending payment terms to our distributors.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

In the event that management determines that a receivable becomes uncollectible, or events or circumstances change, which result in a temporary cessation of payments from the distributor, we will make our best estimate of probable or potential losses in our accounts receivable balance using the allowance method for each quarterly period. Management will periodically review the receivables at the end of each quarterly reporting period and the appropriate accrual will be made based on current available evidence and historical experience.

Our allowance for doubtful accounts was $23,500 as of June 30, 2011 and was $114,982 in the prior fiscal year.

(d) Cash and cash equivalents

Holdings of highly liquid investments with original maturities of three months or less and investment in money market funds are considered to be cash equivalents by the Company.

(e) Inventory

Inventories, consisting principally of raw materials, work-in-process (including completed units under testing), finished goods and units placed on consignment, are carried at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method. Raw materials consist of purchased parts, components and supplies. Work-in-process includes completed units undergoing final inspection and testing.

We have used and will continue to use CTLM® systems from finished goods as demonstrators or for clinical collaboration. At the conclusion of the demonstration or clinical collaboration period, the CTLM® may be sold at reduced prices. On a quarterly basis, using the guidance provided by ASC 330, our ability to realize the value of our inventory is based on a combination of factors including the following: how long a consigned system has been used for demonstration or clinical collaboration purpose; the utility of the goods as compared to their cost; physical obsolescence; historical usage rates; forecasted sales or usage; product end of life dates; estimated current and future market values; and new product introductions.

Due to recent technological advances resulting in overall lower costs for certain inventory components; the Company has reduced these components of its inventory to their net realizable value. The inventory valuation adjustments are reflected in the statement of operations and amounted to $95,096, $67,678 and $4,915,445, for the years ended June 30, 2011, 2010 and for the period December 10, 1993 (date of inception) to June 30, 2011, respectively.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(f) Property, equipment and software development costs

Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization are computed using straight-line methods over the estimated useful lives of the related assets. Expenditures for renewals and betterments which increase the estimated useful life or capacity of the asset are capitalized; expenditures for repairs and maintenance are expensed when incurred.

Using the guidance provided by ASC 985, capitalization of software development costs begins upon the establishment of technological feasibility for the product. The establishment of technological feasibility and the ongoing assessment of the recoverability of these costs require considerable judgment by management with respect to certain external factors, including, but not limited to, anticipated future gross product revenues, estimated economic life and changes in software and hardware technology. After considering the above factors, the Company has determined that software development costs, incurred subsequent to the initial acquisition of the basic software technology, should be properly expensed. Such costs are included in research and development expense in the accompanying statements of operations.

(g) Research and development

Research and development expenses consist principally of expenditures for equipment and outside third-party consultants, raw materials which are used in testing and the development of the Company's CTLM® device or other products, product software and compensation to specific company personnel. The non-payroll related expenses include testing at outside laboratories, parts associated with the design of initial components and tooling costs, and other costs which do not remain with the developed CTLM® device. The software development costs are with outside third-party consultants involved with the implementation of final changes to the developed software. All research and development costs are expensed as incurred.

(h) Net loss per share

The Company relies on the guidance provided by ASC 260, (“Earnings Per Share”), which requires the reporting of both basic and diluted earnings per share. Basic net loss per share is determined by dividing loss available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted loss per share reflects the potential dilution that could occur if options or other contracts to issue common stock were exercised or converted into common stock, as long as the effect of their inclusion is not anti-dilutive.

The Company has excluded vested options and warrants in the amount of 34,479,473 and 44,496,012 during the years June 30, 2011 and 2010 as the inclusion of such options and warrants would be anti-dilutive.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(i) Patent license agreement

The patent license agreement will be amortized over the seventeen-year life of the patent, the term of the agreement. See Note 2(m) Intangible Assets for disclosure on impairment policy.

(j) Stock-based compensation

The Company relies on the guidance provided by ASC 718, (“Share Based Payments”). ASC 718 requires companies to expense the value of employee stock options and similar awards and applies to all outstanding and vested stock-based awards.

In computing the impact, the fair value of each option is estimated on the date of grant based on the Black-Scholes options-pricing model utilizing certain assumptions for a risk free interest rate; volatility; and expected remaining lives of the awards. The assumptions used in calculating the fair value of share-based payment awards represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management judgment. As a result, if factors change and the Company uses different assumptions, the Company’s stock-based compensation expense could be materially different in the future. In addition, the Company is required to estimate the expected forfeiture rate and only recognize expense for those shares expected to vest. In estimating the Company’s forfeiture rate, the Company analyzed its historical forfeiture rate, the remaining lives of unvested options, and the amount of vested options as a percentage of total options outstanding. If the Company’s actual forfeiture rate is materially different from its estimate, or if the Company reevaluates the forfeiture rate in the future, the stock-based compensation expense could be significantly different from what we have recorded in the current period. The impact of applying ASC 718 approximated $375,703 and $588,564, respectively, in additional compensation expense for the twelve months ended June 30, 2011 and 2010.

The fair value concepts were not changed significantly in ASC 718, however, in adopting this Standard, companies were given the option to choose among alternative valuation models and amortization assumptions. We elected to continue to use the Black-Scholes option pricing model and expense the options as compensation over the requisite service period of the grant. We will reconsider use of the Black-Scholes model if additional information becomes available in the future that indicates another model would be more appropriate, or if grants issued in future periods have characteristics that cannot be reasonably estimated using this model.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

	Year Ended	Year Ended
	June 30, 2011	June 30, 2010
Volatility	173.73%	173.16%
Risk Free Interest Rate	5%	5%
Expected Term	8 yrs	8 yrs

Our expected term assumption of eight years for the year ended June 30, 2011, was based upon the guidance provided by SEC Staff Accounting Bulletin 107 enabling us to use the simplified method for “plain vanilla” options for this calculation. This provision was allowed to be used for grants made on or before December 31, 2007. On December 21, 2007, the SEC issued Staff Accounting Bulletin 110 which extended the timeframe we will have to use the simplified method on an interim basis. The SEC will suspend use of this method once detailed information on exercise terms become readily available. We then will be required to estimate the expected term of an option using historical data.

See Note 22 – Stock Options

(k) Long-lived assets

The Company relies on the guidance provided by ASC 360 (“Property, Plant & Equipment”). ASC 360 requires companies to write down to estimated fair value long-lived assets that are impaired. The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. In performing the review of recoverability the Company estimates the future cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future cash flows is less than the carrying amount of the assets, an impairment loss is recognized.

In April 2008, the Company adopted FASB ASC 350-30 and ASC 275-10-50 (formerly FSP FAS 142-3, “Determination of the Useful Life of Intangible Assets”), which amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142 ("SFAS 142"), “Goodwill and Other Intangible Assets.” The Company will apply ASC 350-30 and ASC 275-10-50 prospectively to intangible assets acquired subsequent to the adoption date. The adoption of these revised provisions had no impact on the Company’s Audited Financial Statements.

The Company has determined that no impairment losses need to be recognized through the fiscal year ended June 30, 2011.

(l) Income taxes

The Company provides for income taxes using the asset and liability method as required by ASC 740 (“Income Taxes”). ASC 740 recognizes the amount of federal and state taxes payable or refundable for the current year as well as deferred tax assets and liabilities for the future tax consequence of events recognized in the financial statements and income tax returns. Deferred income tax assets and liabilities are adjusted to recognize the change in tax laws or tax rates. These changes are recognized in income in the year that includes the enactment date.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(m) Intangible assets

Intangible assets, consisting of the patent license agreement and certain initial UL and CE costs are reflected in “Intangible Assets” on the balance sheet, net of accumulated amortization (See Note 9). The patent license agreement has a fixed life of seventeen years and will continue to be amortized over its remaining useful life.

Long-lived assets, including patents, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell.

The impairment analysis for patents can be very subjective as we rely upon signed distribution, dealer or license agreements with variable cash flows to substantiate the recoverability of these long-lived assets. In our analysis we also take into account our position as a world-wide market leader in CT optical tomography; net sales of CTLM® systems of $2,379,782 since January 2003; the growing acceptance of our technology with over 17,000 scans performed world-wide; approvals or product registration in the following countries: CE Mark for the European Union, Canada, Peoples Republic of China, Argentina, Brazil and Colombia. We believe the fair value of our patent license exceeds the carrying amount of $136,706.

We have recorded accumulated amortization of $444,294 with a balance remaining of $136,706, which will be amortized over the next five years at $8,544 per quarter. We will continue to test for impairment on an annual basis or more frequently if events and circumstances change using the guidance provided in ASC 350. Examples of such events and circumstances are:

·	A significant adverse change in legal factors or in the business climate
·	An adverse action or assessment by a regulator
·	Unanticipated competition
·	Loss of key personnel
·	An expectation that all or a significant portion of a deporting unit will be sold or otherwise disposed of.

Based on our analysis, we determined that there was no impairment as of June 30, 2011.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(n) Warranty Reserve

The Company established a warranty reserve effective for the fiscal year ending June 30, 2005. The table below reflects the Warranty Reserve established for the last three fiscal years. Although the Company tests its product in accordance with its quality programs and processes, its warranty obligation is affected by product failure rates and service delivery costs incurred in correcting a product failure. Should actual product failure rates or service costs differ from the Company’s estimates, which are based on limited historical data, where applicable, revisions to the estimated warranty liability would be required.

	Year Ended		Year Ended
	June 30, 2011		June 30, 2010
Warranty Reserve	$	3,013	$	3,244

(o) Deemed preferred stock dividend

The accretion resulting from the incremental yield embedded in the conversion terms of the convertible preferred stock is computed based upon the discount from market of the common stock at the date the preferred stock was issued. The resulting deemed preferred stock dividend subsequently increases the value of the common shares upon conversion.

(p) Discount on convertible debt

The discount which arises as a result of the allocation of proceeds to the beneficial conversion feature upon the issuance of the convertible debt increases the effective interest rate of the convertible debt and will be reflected as a charge to interest expense. The amortization period will be from the date of the convertible debt to the date the debt first becomes convertible.

(q) Comprehensive income

The Company relies on the guidance provided by ASC 220, (“Comprehensive Income”). ASC 220 requires a full set of general-purpose financial statements to be expanded to include the reporting of “comprehensive income”. Comprehensive income is comprised of two components, net income and other comprehensive income. For the period from December 10, 1993 (date of inception) to June 30, 2011, the Company had no items qualifying as other comprehensive income.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

(r) Impact of recently issued accounting standards

In December 2007, the Securities and Exchange Commission (“SEC”) (“SAB 110”) which provides guidance to allow eligible public companies to continue to use a simplified method for estimating the expense of stock options if their own historical experience isn’t sufficient to provide a reasonable basis. Since we have limited experience in determining expected term of “plain vanilla” share options, we will continue to use the simplified method as discussed in SAB No. 107.

In June 2009, the FASB issued guidance which will amend the Consolidation Topic of the Codification. The guidance addresses the effects of eliminating the qualifying special-purpose entity (QSPE) concept and responds to concerns over the transparency of enterprises’ involvement with variable interest entities (VIEs). The guidance is effective beginning on January 1, 2010. We do not expect the adoption of this guidance to have an impact on our financial statements.

In June 2010, the Company adopted FASB ASC 815-10-65 (formerly SFAS 161, “Disclosures about Derivative Instruments and Hedging Activities”), which amends and expands previously existing guidance on derivative instruments to require tabular disclosure of the fair value of derivative instruments and their gains and losses., This ASC also requires disclosure regarding the credit-risk related contingent features in derivative agreements, counterparty credit risk, and strategies and objectives for using derivative instruments. The adoption of this ASC did not have an impact on the Company’s Audited Financial Statements.

In July 2010, the FASB issued ASU No. 2010-20, Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses. ASU 2010-20 requires additional disclosures about the credit quality of a company’s loans and the allowance for loan losses held against those loans. Companies will need to disaggregate new and existing disclosures based on how it develops its allowance for loan losses and how it manages credit exposures. Additional disclosure is also required about the credit quality indicators of loans by class at the end of the reporting period, the aging of past due loans, information about troubled debt restructurings, and significant purchases and sales of loans during the reporting period by class. The new guidance is effective for interim- and annual periods beginning after December 15, 2010. The Company anticipates that adoption of these additional disclosures will not have a material effect on its financial position or results of operations.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

In May 2011, the FASB together with the International Accounting Standards Board (IASB) jointly issued ASU 2011-04, “Fair Value Measurement (Topic 820) — Amendments to Achieve Common Fair Value Measurements and Disclosure Requirements in U.S. GAAP and IFRSs.” ASU 2011-04 amends Topic 820, “Fair Value Measurements and Disclosures,” to converge the fair value measurement guidance in U.S. generally accepted accounting principles and International Financial Reporting Standards. ASU 2011-04 clarifies the application of existing fair value measurement requirements, changes certain principles in Topic 820 and requires additional fair value disclosures. ASU 2011-04 is effective for annual periods beginning after December 15, 2011, and is not expected to have a significant impact on the Company’s financial statements.

All other issued but not yet effective FASB issued guidances have been deemed to be not applicable hence when adopted, these guidances are not expected to have any impact on the financial position of the company.

(s) Reclassifications

Certain amounts in the prior period financial statements have been reclassified to conform with the current period presentation.

(3) OTHER INCOME

During the fiscal years ending June 30, 2011 and 2010, the Company recorded a net total of Other Income of $110,858 and $118,796 of which $13,010 and $98,829, respectively, represents extinguishment of debt. In the fiscal year ending June 30, 2010, we have recorded income as a result of the recapture of expenses associated with the closing of our Representative Office in Beijing, China and legal expenses associated with a case that settled in October 2003. Of the $110,858 and $118,796 Other Income, $6,411 and $19,967, respectively, represents the monthly rent expense and fees we charged Bioscan Inc. During the fiscal year ending June 30, 2007, the Company sold its LILA technology to Bioscan Inc. for the sum of $250,001 which we received and recorded as Other Income.

(4) MERGER

On April 14, 1994, IDSI-Fl. acquired substantially all of the issued and outstanding shares of Alkan Corp. The transaction was accounted for as a reverse merger in accordance with Accounting Principles Board Opinion No. 16, wherein the shareholders of IDSI-Fl. retained the majority of the outstanding stock of Alkan Corp. after the merger. (see Note 21)

As reflected in the Statement of Stockholders’ Equity, the Company recorded the merger with the public shell at its cost, which was zero, since at that time the public shell did not have any assets or equity. There was no basis adjustment necessary for any portion of the merger transaction as the assets of IDSI-Fl. were recorded at their net book value at the date of merger. The 178,752 shares represent the exchange of shares between the companies at the time of merger.

As part of the transaction, the certificate of incorporation of Alkan was amended to change its name to Imaging Diagnostic Systems, Inc.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(5) GOING CONCERN

The Company is currently a development stage enterprise and our continued existence is dependent upon our ability to resolve our liquidity problems, principally by obtaining additional debt and/or equity financing. We have yet to generate a positive internal cash flow, and until significant sales of our product occur, we are mostly dependent upon debt and equity funding. See Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”

In the event that we are unable to obtain debt or equity financing or we are unable to obtain such financing on terms and conditions acceptable to us, we may have to cease or severely curtail our operations. This would materially impact our ability to continue as a going concern. In the event that we are unable to draw on our private equity line, alternative financing would be required to continue operations. Management has been able to raise the capital necessary to reach this stage of product development and has been able to obtain funding for capital requirements to date. There is no assurance that, if and when Food and Drug Administration (“FDA”) marketing clearance is obtained, the CTLM® will achieve market acceptance or that we will achieve a profitable level of operations.

We have commenced our planned principal operations of the manufacture and sale of our sole product, the CTLM®, CT Laser Mammography System. We are continuing to appoint distributors and are installing systems under our clinical collaboration program as part of our global commercialization program. We have sold a total of 15 systems as of June 30, 2011; however, we continue to operate as a development stage enterprise because we have yet to produce significant revenues. Should additional working capital be required, the Company will obtain such capital through the use of its Southridge Private Equity Credit Agreement and other sources of financing. We have to create product awareness as a foundation to developing our markets through our existing distributor network and through the appointment of additional distributors and the training of their field service engineers. We would be able to exit the status of a Development Stage Enterprise pursuant to the guidance provided by ASC 915 (“Development Stage Entities”) reporting sufficient revenues for two successive quarters such that we would not have to utilize our Southridge Private Equity Credit Agreement or alternative funding sources for capital to cover our quarterly operating expenses.

(6) INVENTORIES

Inventories consisted of the following:

	June 30,
	2011			2010
Raw materials consisting of purchased parts, components and supplies	$	508,176		$	513,556
Work-in process including units undergoing final inspection and testing		28,943			28,943
Finished goods		184,443			292,611

Sub-Total Inventories	$	721,562		$	835,110

Less Inventory Reserve		(399,000	)		(399,000	)

Total Inventory - Net	$	332,562		$	436,110

We review our Inventory for parts that have become obsolete or in excess of our manufacturing requirements and our Finished Goods for valuation pursuant to our Critical Accounting Policy for Inventory. For the fiscal year ending June 30, 2011, we reclassified the net realizable value of $6,525 of CTLM® systems in Inventory to Clinical equipment. For the fiscal year ending June 30, 2009, we reclassified the net realizable value of $8,591 as this CTLM® system is being used as a clinical system at the University of Florida. For the fiscal year ending June 30, 2008 since such finished goods are being utilized for collecting data for our FDA application, we reclassified the net realizable value of $311,252 of CTLM® systems in Inventory to Clinical equipment. For the fiscal year ending June 30, 2009 we identified $408,000 of Inventory that we deem impaired due to the lack of inventory turnover. For

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(6) INVENTORIES (Continued)

the fiscal year ending June 30, 2010 we identified $399,000 of Inventory that we deem impaired due to the lack of inventory turnover. There were no changes to Inventory Reserve for the fiscal year ending June 30, 2011.

(7) PROPERTY AND EQUIPMENT

The following is a summary of property and equipment, less accumulated depreciation:

	June 30,
	2011			2010
Furniture and fixtures	$	257,565		$	257,565
Building and land (See Note 8)		-			-
Computers, equipment and software		426,873			426,873
CTLM® software costs		352,932			352,932
Trade show equipment		298,400			298,400
Clinical equipment		447,462			440,937
Laboratory equipment		212,560			212,560

Total Property & Equipment		1,995,792			1,989,267
Less: accumulated depreciation		(1,834,079	)		(1,767,504	)

Total Property & Equipment - Net	$	161,713		$	221,763

For the fiscal year ending June 30, 2008, we reclassified the net realizable value of $311,252 of CTLM® systems in Inventory to Clinical equipment as these CTLM® systems continue to be used as clinical systems associated with the data collection for our FDA application which we planned to submit to the FDA in December 2008.

For the fiscal year ending June 30, 2009, we reclassified the net realizable value of $8,591 of CTLM® systems in Inventory to Clinical equipment as this CTLM® system is being used as a clinical system at the University of Florida.

For the fiscal year ending June 30, 2011, we reclassified the net realizable value of $6,525 of CTLM® systems in Inventory to Clinical equipment.

The estimated useful lives of property and equipment for purposes of computing depreciation and amortization are:

	Furniture, fixtures, clinical, computers, laboratory
	equipment and trade show equipment	5-7 years
	Building	40 years
	CTLM® software costs	5 years

Telephone equipment, acquired under a long-term capital lease at a cost of $50,289, is included in furniture and fixtures. The CTLM® software is fully amortized.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(8) SALE/LEASE-BACK OF BUILDING

On March 31, 2008, we closed the sale of our commercial building for $4.4 million to Bright Investments LLC (“Bright”), an unaffiliated third-party and a sister company to Superfun B.V. pursuant to our September 13, 2007 sale/lease-back agreement with Superfun B.V. We received payments of $2,200,000 in the quarter ending September 30, 2007, $550,000 in the quarter ending December 31, 2007, and $1,650,027 in the quarter ending March 31, 2008. We recorded the advanced payments received as a current liability on the Balance Sheet which was carried until we received the full payment of $4.4 million. At that time we conveyed title to our property and executed the five year lease. Pursuant to existing FASB guidance at the time of the sale, we recorded the sale, removed the sold property and its related liabilities from the Balance Sheet and deferred the gain over the five year term of the operating lease. We computed the amount of gain on the sale portion of the sale/lease-back in accordance with the existing FASB guidance at the time of the sale. In this regard, we recorded a gain of $1,609,525 and recorded a deferred gain of $1,040,000, which is the present value of the lease payments over the five year term of the lease. We planned to amortize the deferred gain in proportion to the gross rental charged to expense over the lease term. The lease provided a six-month rent holiday with rent payments commencing on September 14, 2008. To account for the rent holiday, we recorded $13,935 for Rent Expense from March 14th to March 31st and accrued that amount as a deferred rent liability. From April 1st to September 14th, we recorded rent expense of $24,000 per month and accrued that amount as a deferred rent liability. The $144,000 deferred rent liability was amortized on a straight-line basis over the lease term. See “Item 2, Results of Operations, Liquidity and Capital Resources, Sale/Lease-Back.

The lease provided that either party may cancel the lease without penalty or fault upon 180 days prior notice given to the other party. On April 29, 2008, we gave six months prior written notice of termination of our lease of our Plantation, Florida facility as part of our cost cutting initiatives. On September 24, 2008, we gave notice to Bright that we vacated the Plantation, Florida premises. Because of our termination of the lease, we accelerated the deferred gain of $1,040,000 on the sale of our commercial building and accelerated amortization of the deferred rent liability of $144,000 and recorded the accrual of 45 days of rent expense in the amount of $35,506.85 for the period September 15 to October 28, 2008.

On June 2, 2008, we executed a Business Lease Agreement with Ft. Lauderdale Business Plaza Associates, an unaffiliated third-party, for 9,870 square feet of commercial office and manufacturing space at 5307 NW 35th Terrace, Ft. Lauderdale, Florida. (See Note 15 - Leases)

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(9) INTANGIBLE ASSETS

Intangible assets consist of the following:

	June 30,
	2011		2010

Patent license agreement, net of accumulated
amortization of $444,294 and $410,118 respectively	$	136,706	$	170,882

Totals	$	136,706	$	170,882

During June 1998, the Company signed an exclusive Patent License Agreement with its former chief executive officer. The officer was the originator of patents issued on December 2, 1997 which covers some of the technology of the CTLM®. Pursuant to the terms of the agreement, the Company was granted the exclusive right to modify, customize, maintain, incorporate, manufacture, sell, and otherwise utilize and practice the Patent, all improvements thereto and all technology related to the process, throughout the world. The license shall apply to any extension or re-issue of the Patent. The term of license is for the life of the Patent and any renewal thereof, subject to termination, under certain conditions. As consideration for the License, the Company issued to the officer 7,000,000 shares of common stock (See Note 21). The License agreement has been recorded at the historical cost basis of the chief executive officer, who owned the patent. The amortization expense for the year ended June 30, 2011 for the patent license agreement is $34,176, with a balance to be amortized over the remaining life of the patent which is four (4) years. We will review the value of this patent and test it for impairment on an annual basis. No impairment of this intangible asset was identified for the fiscal year ending June 30, 2011.

The core costs of obtaining the initial UL and CE approvals have an indefinite life, and intangible assets having an indefinite life are not amortized at the point of acquisition or subsequent to point of acquisition in accordance with the guidance of ASC 350. We recorded the initial costs of these systems and protocols as an intangible asset with an indefinite life because we believed that the costs of obtaining them applied to our Company’s entire functional process including manufacturing, labeling and compliance. We followed the guidance provided in a paradigm, Figure 23-1: Summary of Accounting for Intangible Assets by ASC 350, in which questions are asked relative to indefinite life, asset impairment and whether assumption of indefinite life is still valid.

(10) ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consist of the following:

	June 30,
	2011		2010

Accounts payable - trade	$	877,449	$	894,432
Accrued tangible personal property taxes payable		6,000		6,000
Accrued compensated absences		53,063		47,529
Accrued wages payable, payroll taxes and penalties		1,287,800		498,424
Other accrued expenses		261,823		92,363

Totals	$	2,486,135	$	1,538,748

As of June 30, 2011, we owe $145,832 in accrued wages and $1,141,968 in accrued payroll taxes. The $1,141,968 in accrued payroll taxes represents unfunded payroll taxes, interest and penalties for the last six quarters commencing with the quarter ending March 31, 2010.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(11) CUSTOMER DEPOSITS

Customer deposits consisted of the following:

	June 30,
	2011		2010

Customer deposits	$	112,563	$	98,114

Total	$	112,563	$	98,114

Deposits received from customers are identified and accounted for as customer deposits and are presented as both a current asset and an offsetting current liability on our balance sheet. In the event of a cancellation or termination of a customers’ order, the deposit is refunded less any fees previously agreed to.

(12) SHORT-TERM DEBT

In November 2009, we borrowed a total of $237,500 from four private investors pursuant to short-term promissory notes. These notes were due and payable in the amount of principal plus 20% premium, so that the total amount due was $285,000. In addition, we issued to the investors 70 shares of restricted common stock for each $1 lent so that a total of 16,625,000 shares of stock were issued to the investors. The aggregate fair market value of the 16,625,000 shares of stock when issued was $465,500. As of June 30, 2011, we have repaid an aggregate principal and premium in the amount of $147,500 on these short-term notes and owe a balance of $175,100 of which $100,000 is the principal remaining from one note and $75,100 is the balance of premium due from three notes. The original due date of December 21, 2009, was first extended to February 28, 2010, with a second extension to June 15, 2010, a third extension to September 30, 2010 and a fourth extension to October 31, 2010. Further extensions of the $100,000 note were made through September 30, 2011 for 3% additional premium per month. In connection with all of the extensions, a total of $37,600 of additional premium was accrued as of June 30, 2011.

In December 2009, we borrowed a total of $400,000 from a private investor pursuant to three short-term promissory notes. These notes were payable from March 10 through March 15, 2010 in the amount of principal plus 15% premium, so that the total amount due was $460,000. In addition, we issued to the investor 24,000,000 shares of restricted common stock as collateral. These shares are to be returned and cancelled upon payment of the notes. The original due date of March 15, 2010 was first extended to June 15, 2010, with a second extension to September 30, 2010 and a third extension to October 31, 2010. Further extensions of the notes were made through September 30, 2011 for 3% additional premium per month on each note. In connection with these extensions a total of $128,800 of additional premium was accrued for the December 2009 notes as of June 30, 2011. In April 2011, Southridge purchased a total of $200,000 in principal value of promissory notes from the private investor. Southridge converted $100,000 principal and $55,600 premium into 20,746,666 shares of our common stock that was previously issued as collateral.

On January 8, 2010, we borrowed a total of $600,000 from a private investor pursuant to two short-term promissory notes. These notes were payable April 6, 2010 in the amount of principal plus 15% premium, so that the total amount due was $690,000. In addition, we issued to the investor 31,363,637 shares of restricted common stock as collateral. These shares are to be returned and cancelled upon payment of the notes. The original due date of April 6, 2010 was first extended to June 15, 2010, with a second extension to September 30, 2010 and a third extension to October 31, 2010. Further extensions of the notes were made through July 31, 2011 for 3% additional premium per month on each note. In January 2011, Southridge purchased a total of $600,000 in principal value of promissory notes from the private investor. As of the date of this report, Southridge has converted $425,000 principal and $200,051 premium into 32,397,016 shares of our common stock of which 31,056,108 shares were collateral shares and 1,340,908 new shares were issued pursuant to Rule 144. Although we are in technical default of these two notes, the holder, Southridge has elected to convert these notes into common shares. In connection with these prior extensions and the accrual of the additional premiums through September 30, 2011, a total of $222,000 of additional premium was accrued for the January 2010 notes as of the date of June 30, 2011.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(12) SHORT-TERM DEBT (Continued)

On January 6, 2011, the investor converted 15 shares of the Series L Convertible Preferred Stock into 10,000,000 shares of common stock. As of June 30, 2011, the investor holds 20 shares of the Series L Convertible Preferred Stock.

On December 13, 2010, we borrowed a total of $60,000 from a private investor pursuant to a short-term promissory note. The note is payable on or before January 31, 2011. As consideration for this loan, we are obligated to pay back his principal, $7,200 in premium and will issue 3,000,000 restricted shares of common stock upon the approval by our shareholders of an increase in authorized common stock at our annual meeting to be held on July 12, 2012. On September 9, 2011, we issued the investor 3,000,000 common shares pursuant to Rule 144 in connection with the short-term promissory note. We received an extension of maturity date to September 30, 2011 for this note.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(12) SHORT-TERM DEBT (Continued)

received an extension of maturity date to September 30, 2011 for these notes. Interest will accrue at 8% per annum until maturity. Southridge may elect at an Event of Default to convert any part or all of the $157,000 Principal Amount of the Notes plus accrued interest into shares of our common stock at a conversion price equal to the lesser of (a) $0.01 or (b) 90% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice.

In April 2011, we received $165,000 from Southridge pursuant to two short-term promissory notes. The notes provide for a redemption premium of 15% of the principal amount on or before July 31, 2011. We received an extension of maturity date to September 30, 2011 for these notes. Interest will accrue at 8% per annum until maturity above and beyond the premium. Southridge may elect at an Event of Default to convert any part or all of the $165,000 Principal Amount of the Notes plus accrued interest into shares of our common stock at a conversion price equal to the lesser of (a) $0.01 or (b) 90% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(12) SHORT-TERM DEBT (Continued)

From January 12, 2011 to June 30, 2011, Southridge issued notices of conversion to settle $525,000 in principal plus accrued premiums totaling $255,651 into 53,143,682 shares of our common stock, of which 51,802,774 shares were collateral shares and 1,340,908 new shares were issued pursuant to Rule 144.

As of June 30, 2011, we owe a total of $1,779,887 of short term debt of which $1,271,944 is principal, $491,349 is accrued premium and $16,594 is accrued interest. A promissory note totaling $60,000 in principal has been extended to September 30, 2011; five promissory notes totaling $575,000 in principal have a maturity date that had been extended to September 30, 2011; five promissory notes totaling $196,944 in principal have a maturity date of September 30, 2011 as the new maturity date; and four promissory notes totaling $245,000 in principal have a maturity date of September 30, 2011 as the new maturity date. We have repaid aggregate principal and premium in the amount of $172,376 on these short-term notes and a total of $868,881 principal, $255,651 in premium, and $3,174 in interest has been converted into 64,739,127 shares of our common stock of which 51,802,774 shares were collateral shares and 12,430,734 new shares were issued pursuant to Rule 144. Out of the original 55,363,637 shares of common stock held as collateral, a balance of 3,561,133 shares remains on the $475,000 principal of the remaining notes.

There can be no assurances that we will be able to pay our short-term loans when due. If we default on all of the notes due to the lack of new funding, the holders could exercise their right to sell the remaining 3,561,133 collateral shares and could take legal action to collect the amount due which could materially adversely affect IDSI and the value of our stock.

(13) LONG-TERM DEBT

According to our agreement with JMJ, we were obligated to file a registration statement for the shares underlying potential conversions of the convertible promissory note upon receiving an increase in our authorized shares from 950,000,000 to 2,000,000,000 at our annual meeting held on July 12, 2011. Although our shareholders voted in favor of the increase to 2,000,000,000 we have not filed the registration statement as required by the agreement.

The Note provides for funding in seven tranches as stipulated in the Funding Schedule attached. The first tranche of $300,000 was closed on February 24, 2011, and we received $258,000 after deductions of $30,000 for a 10% Finder’s Fee and $12,000 for an Origination Fee. The second tranche of $100,000 closed on May 20, 2011, and we received $93,000 after deductions of $7,000 for a 7% Finder’s Fee. The remaining five tranches are to be funded based on achievement of milestones relating to the Registration Statement, with the final tranche of $300,000 being available 150 days after effectiveness of the Registration Statement, which must be effective 120 days after the date of the Agreement. For the remaining five tranches, we are obligated to pay a Finder’s Fee equal to 7% in cash at each closing date. We may cancel the unfunded portion of the Agreement at a fee of 20% of the unfunded amount. As of June 30, 2011, $1,400,000 in principal amount remains unfunded and if we choose to cancel we will have to pay JMJ $280,000 to terminate the agreement.

The Note, after the seven tranches are drawn, would generate net proceeds of $1,467,000 after payment of the Origination Fee and a 7% Finder’s Fee. JMJ has the option to provide an

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(13) LONG-TERM DEBT (Continued)

additional $1,600,000 of funding on substantially the same terms as the first Agreement; however, we have the right to cancel, without penalty, the Note Agreement within five days of JMJ’s execution. Once executed and accepted by both parties and five days has passed, cancellation of unfunded payments is permitted at a fee of 20% of the unfunded amount. Cancellation of funded portions is not permitted.

The funding schedule of the seven tranches is as follows:

§	$300,000 paid to Borrower within 2 business days of execution and closing of the agreement.

§	$100,000 paid to Borrower within 5 business days of filing of Definitive Proxy to increase authorized shares to 2,000,000,000 or more.

§	$100,000 paid to Borrower within 5 business days of effective increase in authorized shares to 2,000,000,000 or more.

§	$100,000 paid to Borrower within 5 business days of filing of registration statement, and that registration statement must be filed no later than 10 days from the effective increase of authorized shares.

§	$400,000 paid to Borrower within 5 business days of notice of effective registration statement, and that registration statement must be effective no later than 120 days from the execution of the agreement.

§	$300,000 paid to Borrower within 90 business days of notice of effective registration statement, and that registration statement must be effective no later than 120 days from the execution of the agreement.

§	$300,000 paid to Borrower within 150 business days of notice of effective registration statement, and that registration statement must be effective no later than 120 days from the execution of the agreement.

The conditions to funding each payment are as follows:

§	At the time of each payment interval, the Conversion Price calculation on Borrower’s common stock must yield a Conversion Price equal to or greater than $0.015 per share (based on the Conversion Price calculation, regardless of whether a conversion is actually completed or not).

§	At the time of each payment interval, there shall not exist an event of default as described within any of the agreements between Borrower and Holder.

As of June 30, 2011, we owe JMJ a total of $486,000 of which $400,000 is principal, $50,000 is consideration on the principal and $36,000 is interest.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(14) EQUITY LINE OF CREDIT

On August 17, 2000 the Company finalized a financing agreement with a private institutional equity investor, which contained two component parts, a $25 million Private Equity Agreement and a private placement of 500 shares of Series K convertible preferred stock as bridge financing in the amount of $5,000,000 (See Note 19). The Private Equity Agreement committed the investor to purchase up to $25 million of common stock subject to certain conditions pursuant to Regulation D over the course of 12 months after an effective registration of the shares. The timing and amounts of the purchase by the investor were at the sole discretion of the Company. However, they were required to draw down a minimum of $10 million from the credit line over the twelve-month period. The purchase price of the shares of common stock was set at 91% of the market price. The market price, as defined in the agreement, was the average of the three lowest closing bid prices of the common stock over the ten day trading period beginning on the put date and ending on the trading day prior to the relevant closing date of the particular tranche.

On May 15, 2002, the Company entered into a second private equity agreement, which replaced the original Private Equity Agreement. The terms of the second Private Equity Agreement were substantially equivalent to the terms of the original agreement, except that (i) the commitment period was three years from the effective date of a registration statement covering the second Private Equity Agreement shares, (ii) the minimum amount required to be drawn through the end of the commitment period was $2,500,000, (iii) the minimum stock price requirement was reduced to $.20, and (iv) the minimum average trading volume was reduced to $40,000.

On October 29, 2002, the Company entered into a new “Third Private Equity Credit Agreement” which the Company intended to supplement the second Private Equity Agreement. The terms of the Third Private Equity Credit Agreement were substantially equivalent to the terms of the prior agreement, in that (i) the commitment period was three years from the effective date of a registration statement covering the Third Private Equity Credit Agreement shares, (ii) the maximum commitment was $15,000,000, (iii) the minimum amount required to be drawn through the end of the commitment period was $2,500,000, (iv) the minimum stock price requirement was reduced to $.10, and (v) the minimum average trading volume in dollars was reduced to $20,000.

On January 9, 2004, the Company entered into a new “Fourth Private Equity Credit Agreement” which replaced the prior private equity agreements. The terms of the Fourth Private Equity Credit Agreement were more favorable to the Company than the terms of the prior Third Private Equity Credit Agreement. The new, more favorable terms were: (i) The put option price was 93% of the three lowest closing bid prices in the ten day trading period beginning on the put date and ending on the trading day prior to the relevant closing date of the particular tranche, while the prior Third Private Equity Credit Agreement provided for 91%, ii) the commitment period was two years from the effective date of a registration statement covering the Fourth Private Equity Credit Agreement shares, while the prior Third Private Equity Credit Agreement was for three years, (iii) the maximum commitment was $15,000,000, (iv) the minimum amount the Company was required to draw through the end of the commitment period was $1,000,000, while the prior Third Private Equity Credit Agreement minimum amount was $2,500,000, (v) the minimum stock price requirement was controlled by the Company as it had the option of setting a floor price for each put transaction (the previous

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(14) EQUITY LINE OF CREDIT (Continued)

minimum stock price in the Third Private Equity Credit Agreement was fixed at $.10), (vi) there were no fees associated with the Fourth Private Equity Credit Agreement; the prior private equity agreements required the payment of a 5% consulting fee, which was subsequently lowered to 4% by mutual agreement in September 2001, and (vii) the elimination of the requirement of a minimum average daily trading volume in dollars. The previous trading volume requirement in the Third Private Equity Credit Agreement was $20,000.

On March 21, 2006, the Company and Charlton entered into a new “Fifth Private Equity Credit Agreement,” which replaced the Company’s prior Fourth Private Equity Credit Agreement upon the April 25, 2006, effectiveness of our S-1 Registration Statement filed on March 23, 2006 to register shares underlying the Fifth Private Equity Credit Agreement. The terms of the Fifth Private Equity Credit Agreement are similar to the terms of the prior Fourth Private Equity Credit Agreement. The new credit line’s material terms are (i) The put option price is 93% of the three lowest closing bid prices in the ten day trading period beginning on the put date and ending on the trading day prior to the relevant closing date of the particular tranche (the “Valuation Period”), (ii) the commitment period is two years from the effective date of a registration statement covering the Fifth Private Equity Credit Agreement shares, (iii) the maximum commitment is $15,000,000, (iv) the minimum amount the Company must draw through the end of the commitment period is $1,000,000, (v) the minimum stock price, also known as the floor price is computed as follows: In the event that, during a Valuation Period, the Bid Price on any Trading Day falls more than 18% below the closing trade price on the trading day immediately prior to the date of the Company’s Put Notice (a “Low Bid Price”), for each such Trading Day the parties shall have no right and shall be under no obligation to purchase and sell one tenth of the Investment Amount specified in the Put Notice, and the Investment Amount shall accordingly be deemed reduced by such amount. In the event that during a Valuation Period there exists a Low Bid Price for any three Trading Days—not necessarily consecutive—then the balance of each party’s right and obligation to purchase and sell the Investment Amount under such Put Notice shall terminate on such third Trading Day (“Termination Day”), and the Investment Amount shall be adjusted to include only one-tenth of the initial Investment Amount for each Trading Day during the Valuation Period prior to the Termination Day that the Bid Price equals or exceeds the Low Bid Price and (vi) there are no fees associated with the Fifth Private Equity Credit Agreement. The conditions to the Company’s ability to draw under this private equity line, as described above, may materially limit the draws available to the Company.

These financing agreements have had no warrants attached to either the bridge financing or the private equity line. Furthermore, the Company was not required to pay the investor’s legal fees, but the Company previously paid a 5% consulting fee for the money funded in all prior transactions up until the approval of the Fourth Private Equity Credit Agreement. The Company sold $2,840,000 of common stock under the terms of the initial private equity agreement during the year ended June 30, 2001. The total shares issued by the Company amounted to 3,407,613. The Company incurred $139,985 of consulting fees and recorded $303,666 of deemed interest expense as a result of the 9% discount off of the market price. During the year ended June 30, 2002, an additional $5,585,000 of common stock was sold under the terms of the applicable equity credit line agreement, and the Company issued a total of 11,607,866 shares of common stock. The Company incurred $296,250 of consulting fees and recorded $628,805 of deemed interest expense as a result of the 9% discount off of the market price. During the year ended June 30, 2003, an additional $7,881,000 of common stock was sold under the terms of the applicable equity credit line agreement, and the Company issued a total of 29,390,708 shares of common stock. The Company incurred $211,800 of consulting fees and recorded $856,772 of deemed interest expense as a result of the 9% discount off of the market price. During the year ended June 30, 2004, an additional $5,850,000 of common stock was sold under the terms of the equity credit line agreements, and the Company issued a total of 8,630,819 shares of common stock. The Company incurred $188,000 of consulting fees which was solely from the Third Private Equity Credit Agreement and recorded a total of $691,701 of deemed interest expense of which $555,897 is a result of the 9% discount off the market price under the Third Private Equity Credit Agreement and $135,804 is a result of the 7% discount off the market price under the Fourth Private Equity Credit Agreement. During the year ended June 30, 2005, an additional $7,204,370 of common stock was sold under the terms of the Fourth Private Equity Credit Agreement and the Company issued a total of 26,274,893 shares of common stock. The Company recorded a total of $593,437 of deemed interest expense as a result of the 7% discount off the market price under the Fourth Private Equity Credit Agreement.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(14) EQUITY LINE OF CREDIT (Continued)

During the year ended June 30, 2006, an additional $6,844,171 of common stock was sold under the terms of the equity credit line agreements, and the Company issued a total of 47,776,064 shares of common stock. The Company recorded a total of $565,372 of deemed interest expense as a result of the 7% discount off the market price under the Fourth Private Equity Credit Agreement and Fifth Private Equity Credit Agreement.

During the year ended June 30, 2007, an additional $4,192,717 of common stock was sold under the terms of the Fifth Private Equity Credit Agreement and the Company issued a total of 63,861,405 shares of common stock. The Company recorded a total of $367,698 of deemed interest expense as a result of the 7% discount off the market price under the Fifth Private Equity Credit Agreement.

On April 21, 2008, we and Charlton entered into a new “Sixth Private Equity Credit Agreement” which has replaced our prior Fifth Private Equity Credit Agreement. The terms of the Sixth Private Equity Credit Agreement are similar to the terms of the prior Fifth Private Equity Credit Agreement. This new credit line’s terms are (i) The put option price is 93% of the three lowest closing bid prices in the ten day trading period beginning on the put date and ending on the trading day prior to the relevant closing date of the particular tranche (the “Valuation Period”), (ii) the commitment period is three years from the effective date of a registration statement covering the Sixth Private Equity Credit Agreement shares, (iii) the maximum commitment is $15,000,000, (iv) There is no minimum commitment amount, (v) the minimum stock price, also known as the floor price is computed as follows: In the event that, during a Valuation Period, the Bid Price on any Trading Day falls more than 20% below the closing trade price on the trading day immediately prior to the date of the Company’s Put Notice (a “Low Bid Price”), for each such Trading Day the parties shall have no right and shall be under no obligation to purchase and sell one tenth of the Investment Amount specified in the Put Notice, and the Investment Amount shall accordingly be deemed reduced by such amount. In the event that during a Valuation Period there exists a Low Bid Price for any three Trading Days—not necessarily consecutive—then the balance of each party’s right and obligation to purchase and sell the Investment Amount under such Put Notice shall terminate on such third Trading Day (“Termination Day”), and the Investment Amount shall be adjusted to include only one-tenth of the initial Investment Amount for each Trading Day during the Valuation Period prior to the Termination Day that the Bid Price equals or exceeds the Low Bid Price and (vi) there are no fees associated with the Sixth Private Equity Credit Agreement. The conditions to our ability to draw under this private equity line, as described above, may materially limit the draws available to us.

During the year ended June 30, 2008, an additional $275,000 of common stock was sold under the terms of the Fifth Private Equity Credit Agreement and the Company issued a total of 7,726,647 shares of common stock. The Company recorded a total of $23,782 of deemed interest expense as a result of the 7% discount off the market price under the Fifth Private Equity Credit Agreement.

During the year ended June 30, 2008, an additional $215,000 of common stock was sold under the terms of the Sixth Private Equity Credit Agreement and the Company issued a total of 6,252,783 shares of common stock. The Company recorded a total of $16,665 of deemed interest expense as a result of the 7% discount off the market price under the Sixth Private Equity Credit Agreement.

During the year ended June 30, 2009, an additional $1,530,173 of common stock was sold under the terms of the Sixth Private Equity Credit Agreement and the Company issued a total of 158,747,217 shares of common stock. The Company recorded a total of $144,713 of deemed interest expense as a result of the 7% discount off the market price under the Sixth Private Equity Credit Agreement.

During the year ended June 30, 2010, an additional $297,219 of common stock was sold under the terms of the Sixth Private Equity Credit Agreement and the Company issued a total of 62,000,000 shares of common stock. The Company recorded a total of $24,792 of deemed interest expense as a result of the 7% discount off the market price under the Sixth Private Equity Credit Agreement.

On November 23, 2009, we and Southridge entered into a new “Southridge Private Equity Credit Agreement” which has replaced our prior Sixth Private Equity Credit Agreement with Charlton. On January 7, 2010, we and Southridge amended the terms of the “Southridge Private Equity Credit Agreement” and revised the language to

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(14) EQUITY LINE OF CREDIT (Continued)

clarify that Southridge is irrevocably bound to accept our put notices subject to compliance with the explicit conditions of the Agreement.

The terms of the Southridge Private Equity Credit Agreement are similar to the terms of the prior Sixth Private Equity Credit Agreement with Charlton. This new credit line’s terms are (i) The put option price is 93% of the three lowest closing bid prices in the ten day trading period beginning on the put date and ending on the trading day prior to the relevant closing date of the particular tranche (the “Valuation Period”), (ii) the commitment period is three years from the effective date of a registration statement covering the Southridge Private Equity Credit Agreement shares, (iii) the maximum commitment is $15,000,000, (iv) There is no minimum commitment amount, and (v) there are no fees associated with the Southridge Private Equity Credit Agreement. The conditions to our ability to draw under this private equity line, as described above, may materially limit the draws available to us.

We are obligated to prepare promptly, and file with the SEC within sixty (60) days of the execution of the Southridge Private Equity Credit Agreement, a Registration Statement with respect to not less than 100,000,000 of Registrable Securities, and, thereafter, use all diligent efforts to cause the Registration Statement relating to the Registrable Securities to become effective the earlier of (a) five (5) business days after notice from the Securities and Exchange Commission that the Registration Statement may be declared effective, or (b) one hundred eighty (180) days after the Subscription Date, and keep the Registration Statement effective at all times until the earliest of (i) the date that is one year after the completion of the last Closing Date under the Purchase Agreement, (ii) the date when the Investor may sell all Registrable Securities under Rule 144 without volume limitations, or (iii) the date the Investor no longer owns any of the Registrable Securities (collectively, the "Registration Period"), which Registration Statement (including any amendments or supplements, thereto and prospectuses contained therein) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.

We are further obligated to prepare and file with the SEC such amendments (including post-effective amendments) and supplements to the Registration Statement and the Prospectus used in connection with the Registration Statement as may be necessary to keep the Registration Statement effective at all times during the Registration Period, and, during the Registration Period, and to comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities of the Company covered by the Registration Statement until the expiration of the Registration Period.

On January 12, 2010, we filed a Registration Statement for 120,000,000 shares pursuant to the requirements of the Southridge Private Equity Credit Agreement. This Registration Statement was declared effective on February 25, 2010. On May 24, 2010 we filed a Post-Effective Amendment No. 1 to our Registration Statement to update our financial statements and related notes to the financial statements and business information for the quarter ending March 31, 2010. We reduced the amount of shares registered to 85,744,007 shares. This amended Registration Statement was declared effective on May 27, 2010.

During the year ended June 30, 2010, $1,100,000 of common stock was sold under the terms of the Southridge Private Equity Credit Agreement and the Company issued a total of 28,803,569 shares of common stock. The Company recorded a total of $102,754 of deemed interest expense as a result of the 7% discount off the market price under the Southridge Private Equity Credit Agreement.

On December 21, 2010 we filed a Registration Statement for 35,487,756 shares pursuant to the requirements of the Southridge Private Equity Credit Agreement. This Registration Statement was declared effective on June 8, 2011.

During the year ended June 30, 2011, $1,385,000 of common stock was sold under the terms of the Southridge Private Equity Credit Agreement and the Company issued a total of 77,928,568 shares of common stock. The Company recorded a total of $117,193 of deemed interest expense as a result of the 7% discount off the market price under the Southridge Private Equity Credit Agreement.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(15) LEASES

The Company leases certain office equipment under capital leases expiring in future years. Minimum future lease payments under the non-cancelable operating lease having a remaining term in excess of one year as of June 30, 2011 are as follows:

Total rent expense for capital leases amounted to $5,327 and $6,349 for the years ended June 30, 2011 and 2010, respectively, and $389,546 from inception (December 10, 1993) to June 30, 2011.

Total rent expense for operating leases amounted to $131,931 and $127,019 for the years ended June 30, 2011 and 2010, respectively, and $553,007 from inception (December 10, 1993) to June 30, 2011.


	Total		2012		2013		2014		2015
Capital Lease Obligations	$	3,394	$	3,394	$	-	$	-	$	-

Operating Lease –	$	292,564	$	137,773	$	143,273	$	11,518	$	-
Fort Lauderdale Business
Plaza Associates(i)

Additional Space(ii)	$	122,273	$	47,700	$	59,243	$	15,329

See Operating Lease – Fort Lauderdale Business Plaza Associates, footnotes i and ii

Operating Lease – Bright Investments, LLC

On September 13, 2007, we entered into an agreement with an unaffiliated third-party for the sale and lease-back of our property at 6531 N.W. 18th Court, Plantation, Florida. On March 31, 2008, we closed the sale of our commercial building for $4.4 million to Bright Investments LLC, an unaffiliated third-party and a sister company to Superfun B.V. Terms of the triple net lease were five years with the first monthly rent payment due six months from the commencement date of the lease. The monthly rent for the base year is $24,000 plus applicable sales tax. During the term and any renewal term of the lease, the minimum annual rent shall be increased each year. Commencing with the first day of the second lease year and on each lease year anniversary thereafter, the minimum annual rent shall be cumulatively increased by $24,000 per each lease year or $2,000 per month plus applicable sales tax. Either party may cancel the lease without penalty or fault upon 180 days prior notice given to the other party. On April 29, 2008, we gave six months prior written notice of termination of our lease of our Plantation, Florida facility as part of our cost cutting initiatives.

The lease provided a six-month rent holiday with rent payments commencing on September 14, 2008. To account for the rent holiday, we recorded $13,935 for Rent Expense from March 14th to March 31st and accrued that amount as a deferred rent liability. From April 1st to September 14th, we recorded rent expense of $24,000 per month and accrued that amount as a deferred rent liability. The $144,000 deferred rent liability will be amortized on a straight-line basis over the lease term.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(15) LEASES (Continued)

Operating Lease – Fort Lauderdale Business Plaza Associates

(i)On June 2, 2008, the Company executed a Business Lease Agreement with Ft. Lauderdale Business Plaza Associates, an unaffiliated third-party, for 9,870 square feet of commercial office and manufacturing space at 5307 NW 35th Terrace, Ft. Lauderdale, Florida. The term of the lease is five years and one month with the first monthly rent payment due September 1, 2008 with an option to renew for one additional period of three years. The monthly base rent for the initial year is $6,580 plus applicable sales tax. During the term and any renewal term of the lease, the base annual rent shall be increased each year. Commencing with the first day of August 2009 and each year thereafter, the base annual rent shall be cumulatively increased by 3.5% each lease year plus applicable sales tax. IDSI will also be obligated to pay as additional rent its pro-rata share of all common area maintenance expenses which is estimated to be $3,084 per month for the first 12 months of the lease. The total monthly rent including Florida sales tax for the first 12 months is $10,244. Upon the execution of the lease, we paid the first month’s rent of $10,244 and a security deposit of $13,160.

(ii)On July 21, 2011, we entered into an agreement with Ft. Lauderdale Business Plaza Associates, an unaffiliated third-party, for an additional 4,800 square feet of commercial office space at 5301 NW 35th Terrace, Ft. Lauderdale, Florida. The term of the lease will run concurrent with our original lease commencing on September 1, 2011 and terminating on September 30, 2013. The monthly base rent for the initial year is $4,500 plus applicable sales tax and increase by 3.5% each year to the lease expiration.

(16) INCOME TAXES

No provision for income taxes has been recorded in the accompanying financial statements as a result of the Company's net operating losses. The Company has unused tax loss carryforwards of approximately $89,400,000 to offset future taxable income. Such carryforwards expire in years beginning 2015 through 2031. The deferred tax asset recorded by the Company as a result of these tax loss carryforwards is approximately $34,400,000 and $30,100,000 at June 30, 2011 and 2010, respectively. The Company has established a full valuation allowance and reduced the deferred tax asset resulting from its tax loss carryforwards by an equal amount as the realization of the deferred tax asset is uncertain. The net change in the deferred tax asset and valuation allowance for the year ended June 30, 2010 was an increase of approximately $900,000 and increase of $4,300,000 for the year ended June 30, 2011, which includes an adjustment for the effects of future state income tax benefits. The reconciliation of the income tax benefit computed at the U.S. federal statutory rate of 35% has been increased by state income taxes, net of federal benefit of 3.5% and decreased by permanent differences relating to stock based compensation, stock option expense, derivative liability expense, and debt discounts in the amount of 13% and 12% for fiscal 2011 and 2010, and further decreased to 0% by the increase in the valuation allowance against the deferred tax asset for each of the respective years then ended. In addition to the uncertainty regarding the attainment of future taxable income which could be offset by net operating loss carryforwards (NOLs), the Company’s ability to utilize NOLs may also be limited in accordance with Internal Revenue Code Section 382 following certain owner shifts and changes in control. The Company is not aware of the existence of any uncertain tax positions in its tax returns requiring adjustment or disclosure.

(17) CONVERTIBLE DEBENTURES

On August 1, 2008, we entered into a Securities Purchase Agreement (the “Initial Purchase Agreement”) with an unaffiliated third party, Whalehaven Capital Fund Limited (“Whalehaven”), relating to a private placement (the “Initial Private Placement”) of a total of up to $800,000 in principal amount of one-year 8% Senior Secured Convertible Debentures (the “Initial Debentures”). We were required to file within 30 days an S-1 Registration Statement (the “Registration Statement”) covering the shares of common stock underlying the Initial Debentures and related Warrants pursuant to the terms of a Registration Rights Agreement dated August 1, 2008, between IDSI and Whalehaven; however, with Whalehaven’s consent, we were permitted to file the Registration Statement promptly after the filing of our Annual Report on Form 10-K.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(17) CONVERTIBLE DEBENTURES (Continued)

The Initial Purchase Agreement provided for the sale of the Initial Debentures in two closings. The first closing, which occurred on August 4, 2008, was for a principal amount of $400,000. The second closing would be for up to $400,000 and would occur within the earlier of five business days following the effective date of the Registration Statement and December 1, 2008, provided that the closing conditions in the Initial Purchase Agreement have been met. We retained the option to use our existing equity credit line until the Registration Statement is declared effective. Sales under the Initial Purchase Agreement were subject to an 8% placement agent fee. Thus, the first closing generated proceeds to IDSI of $368,000, before normal transaction costs.

Prior to maturity, the Initial Debentures bear interest at the rate of 8% per annum, payable quarterly in cash or, at our option, in shares of common stock based on the then-existing market price provided that we are in compliance with the Initial Purchase Agreement.

The Initial Debentures may be converted in whole or in part at the option of the holder any time after the closing date into our Common Stock at the lesser of (i) a set price, initially $.019 per share, which was the closing price of our shares on the closing date (“fixed conversion price”) or (ii) 80% of the 3 lowest bid prices during the 10 consecutive trading days immediately preceding a conversion date; however, the terms of each Initial Debenture prevent the holder from converting the Debenture to the extent that the conversion would result in the holder and its affiliates beneficially owning more than 4.99% of the outstanding shares of our common stock; however, the limit may be increased to 9.99% on 61 days prior written notice from the holder.

At any time after closing, we may redeem for cash, upon written notice, any and all of the outstanding Initial Debentures at a 25% premium of the principal amount plus accrued and unpaid interest on the Initial Debentures to be redeemed.

The Initial Debentures are secured by a pledge of substantially all of our assets pursuant to a Security Agreement dated August 1, 2008, between IDSI and Whalehaven.

Pursuant to the first closing of the Initial Private Placement, we issued to Whalehaven five-year Warrants to purchase 22,222,222 shares of our common stock. The exercise price of these Warrants was $0.0228, i.e., 120% of the market price on the closing date. The Warrants are subject to cashless exercise at Whalehaven’s option.

The placement agent was entitled to receive a Warrant to purchase common stock equal to 12% of Whalehaven’s Warrants with an exercise price equal to Whalehaven’s exercise price. Consequently, a Warrant to purchase 2,666,666 shares was issued to the placement agent based on the first closing.

On October 23, 2008, we entered into an Amendment Agreement (the “Amendment”) with Whalehaven relating to the Initial Purchase Agreement, and the Initial Debenture due August 1, 2009, in the principal amount of $400,000 issued by us to Whalehaven pursuant to the Initial Purchase Agreement. The Amendment provided that the minimum conversion price would be $.013 per share and that the contemplated second closing for another $400,000 debenture would be abandoned. Consequently, no debenture or warrants would be issued beyond the securities issued in connection with the first closing, as the total facility amount was limited to $400,000.

On November 12, 2008, our Registration Statement relating to the Initial Debenture was declared effective. On November 20, 2008, we entered into a Securities Purchase Agreement with two unaffiliated third parties, Whalehaven and Alpha Capital Anstalt (“Alpha”), relating to a private placement (the “New Private Placement”) of $400,000 in principal amount of one-year 8% Senior Secured Convertible Debentures (the “New Debentures”). We were required to file a Registration Statement covering the shares of common stock underlying the New Debentures, including any shares payable as interest, pursuant to the terms of a Registration Rights Agreement dated November 20, 2008, between IDSI and Whalehaven and Alpha promptly following our annual meeting of shareholders, which was held on December 29, 2008. At the meeting the shareholders voted to approve an amendment to our articles of incorporation to increase the authorized shares from 450,000,000 to 950,000,000 (the “Share Amendment”). We were required to use commercially reasonable efforts to cause a Registration Statement to be declared effective as promptly as practicable and no later than 75 days after filing. In the case of a review by the Securities and Exchange Commission

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(17) CONVERTIBLE DEBENTURES (Continued)

the effectiveness date deadline extended to 120 days. In the absence of timely filing or effectiveness, we would be subject to customary liquidated damages.

The New Private Placement generated gross proceeds of $368,000 after payment of an 8% placement agent fee but before other expenses associated with the transaction.

Prior to maturity, the New Debentures bear interest at the rate of 8% per annum, payable quarterly in cash or, at the Company’s option, in shares of common stock based on the then-existing market price.

The New Debentures may be converted in whole or in part at the option of the holder any time after the shareholders have voted to approve the Share Amendment at the lesser of (i) a set price, initially $.033 (the closing price of the shares on the closing date) or (ii) 80% of the 3 lowest bid prices during the 10 consecutive trading days immediately preceding a conversion date; provided, however, that the Conversion Price is subject to a floor price, initially $0.013, and provided further however, that the terms of each Initial Debenture prevent the holder from converting the Debenture to the extent that the conversion would result in the holder and its affiliates beneficially owning more than 4.99% of the outstanding shares of our common stock; however, the limit may be increased to 9.99% on 61 days prior written notice from the holder.

After the effectiveness of the Registration Statement, we may redeem for cash, upon written notice, any and all of the outstanding Debentures at a 25% premium of the principal amount plus accrued and unpaid interest on the Debentures to be redeemed.

The New Debentures are secured by a pledge of substantially all of our assets pursuant to a Security Agreement dated November 20, 2008 between IDSI and Whalehaven and Alpha. This security interest is pari passu with the security interest granted to Whalehaven on August 1, 2008, in connection with the Company’s sale of the $400,000 Initial Debenture to Whalehaven..

In November 2008, Whalehaven converted $160,000 principal amount of the Initial Debenture and received 9,206,065 shares of our common stock as a result. On November 26, 2008, Whalehaven sold to Alpha $50,000 principal amount of the Initial Debenture and the right to purchase 5,555,555 shares underlying the Warrant. As a result of this transaction, the Warrant for 22,222,222 shares was replaced by a warrant held by Whalehaven covering 16,666,667 shares (the "Whalehaven Warrant") and a warrant held by Alpha covering 5,555,555 shares (the "Alpha Warrant") (collectively, the "Warrants").

On December 10, 2008, we entered into an Amendment Agreement with Whalehaven and Alpha relating to the Warrants. Under this Amendment Agreement, we agreed to reduce the exercise price of the Warrants to $.015 per share in exchange for the Purchasers' agreement to immediately exercise the Warrants as to 7,000,000 shares (5,000,000 covered by the Whalehaven Warrant and 2,000,000 covered by the Alpha Warrant). We used the $105,000 proceeds from the warrant exercise for working capital.

On December 15, 2008, Alpha converted $15,000 principal amount of its Initial Debenture and received 1,052,628 shares of our common stock as a result.

We entered into a second Amendment Agreement dated as of December 31, 2008, with Whalehaven and Alpha relating to the Warrants. Under this Amendment Agreement, we agreed to reduce the exercise price of the Warrants to $.005 per share in exchange for the Purchasers' agreement to immediately exercise the Warrants as to 14,755,555 shares (11,200,000 by Whalehaven and 3,555,555 by Alpha). We further agreed to issue new Warrants to purchase at $.005 per share up to a number of shares of Common Stock equal to the number of shares underlying the existing Warrants being exercised by Whalehaven and Alpha under the second Amendment Agreement.

In December 2008 we received $56,000, and in January 2009 we received $17,778 in proceeds from these Warrant exercises, we used the proceeds for working capital.

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IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(17) CONVERTIBLE DEBENTURES (Continued)

After the issuance of shares pursuant to Whalehaven’s Notice of Exercise of its Warrant and subsequent issuance of new Warrants, they have a balance of 11,666,667 shares available for exercise. After the issuance of shares pursuant to Alpha’s Notice of Exercise of its Warrant and subsequent issuance of new Warrants, they have a balance of 3,555,555 shares available for exercise.

We entered into a third Amendment Agreement dated as of March 20, 2009, with Whalehaven and Alpha. This Amendment Agreement pertains to a request by the Company to the Holders that they agree to a suspension of the Company’s obligations under the Registration Rights Agreements for both the Initial and New Debentures. In consideration for such suspensions, the Company agreed to an adjustment in the conversion price for both debentures whereby the floor price was reduced from $0.013 to $0.005 and the set price was reduced from $0.019 to $0.01. The new formula for determining the conversion price on any Conversion Date shall be equal to the lesser of (a) $0.01, subject to certain standard adjustments (the “Set Price”) and (b) 80% of the average of the 3 lowest Closing Prices during the 10 Trading Days immediately prior to the applicable Conversion Date (subject to adjustments) (the “Conversion Price”); provided, however, that the Conversion Price shall in no event be less than $0.005 (subject to certain standard adjustments).

As of June 30, 2009, Whalehaven has sold to Alpha a total of $100,000 principal amount of the August Debenture and received from Alpha a total of $50,000 principal amount of the November Debenture, which it had acquired from Alpha on March 17, 2009 in connection with the sale of $50,000 of the August Debenture to Alpha. Whalehaven now holds a principal amount of $250,000 in the November Debenture. Whalehaven also holds Warrants to purchase 11,666,667 shares of common stock at an exercise price of $0.005.

As of June 30, 2009, Whalehaven has converted the $300,000 of the August Debenture which it did not sell to Alpha and has received 36,841,918 shares as a result. Whalehaven has converted $181,000 of the November Debenture and has received 37,803,364 shares as a result. Whalehaven holds a principal amount of $69,000 in the November Debenture.

As of June 30, 2009, Alpha has converted $100,000 of the August Debenture and received 17,313,265 shares as a result. Alpha holds a principal amount of $150,000 in the November Debenture. Alpha also holds Warrants to purchase 3,555,555 shares of common stock at an exercise price of $0.005.

As of June 30, 2010, Whalehaven had sold to Alpha a total of $100,000 principal amount of the August Debenture and received from Alpha a total of $50,000 principal amount of the November Debenture, which it had acquired from Alpha on March 17, 2009 in connection with the sale of $50,000 of the August Debenture to Alpha.

As of June 30, 2010, Whalehaven had converted the $300,000 of the August Debenture which it did not sell to Alpha and has received 36,841,918 shares as a result. Whalehaven has converted $250,000 of the November Debenture and has received 51,600,363 shares as a result. Thus, Whalehaven has converted all of its August and November Debentures into 88,442,281 shares of common stock.

In October 2009, Whalehaven exercised Warrants to purchase 6,000,000 shares and received 4,648,649 shares of common stock using the cashless conversion feature with a Volume Weighted Average Price (“VWAP”) conversion price of $0.022. The shares were issued pursuant to Rule 144. Whalehaven held Warrants to purchase 5,666,667 shares of common stock at an exercise price of $0.005.

As of June 30, 2010, Alpha had converted $100,000 of the August Debenture and received 17,313,265 shares as a result. Alpha has converted $150,000 of the November Debenture and has received 28,429,066 shares as a result. Thus, Alpha has converted all of its August and November Debentures into 45,742,331 shares of common stock which does not include interest. In October 2009, we issued Alpha 2,166,263 shares as a result of the 8% interest on their portion of the debentures.

In October 2009, Alpha exercised its remaining Warrants to purchase 3,555,555 shares and received 2,942,528 shares of common stock using the cashless conversion feature with a VWAP conversion price of $0.029. The shares were issued pursuant to Rule 144.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(17) CONVERTIBLE DEBENTURES (Continued)

In October 2009, the Placement Agents exercised its Warrants to purchase 2,666,666 shares and received 1,989,845 shares of common stock using the cashless conversion feature with a VWAP conversion price of $0.0197. The shares were issued pursuant to Rule 144.

In December 2009, Whalehaven exercised its remaining Warrants to purchase 5,666,667 shares and received 4,542,328 shares of common stock using the cashless conversion feature with a VWAP conversion price of $0.0252. The shares were issued pursuant to Rule 144.

(18) REDEEMABLE CONVERTIBLE PREFERRED STOCK

On March 17, 1999, the Company finalized the private placement to foreign investors of 35 shares of its Series G Redeemable Convertible Preferred Stock at a purchase price of $10,000 per share and two year warrants to purchase 65,625 shares of the Company’s common stock at an exercise price of $.50 per share. The agreement was executed pursuant to Regulation D as promulgated by the Securities Act of 1933, as amended. A total of 43,125 warrants were exercised during the year ended June 30, 2000, and an additional 9,375 warrants were exercised during the year ended June 30, 2001.

The Series G Preferred Stock had no dividend provisions. The preferred stock was convertible, at any time, for a period of two years thereafter, in whole or in part, without the payment of any additional consideration, into fully paid and nonassessable shares of the Company’s no par value common stock based upon the “conversion formula”. The conversion formula stated that the holder of the Series G Preferred Stock would receive shares determined by dividing (i) the sum of $10,000 by the (ii) “Conversion Price” in effect at the time of conversion. The “Conversion Price” shall be equal to the lesser of $.54 or seventy-five percent (75%) of the Average Closing Price of the Company’s common stock for the ten-day trading period ending on the day prior to the date of conversion.

In connection with the sale, the Company issued three preferred shares to an unaffiliated investment banker for placement and legal fees, providing net proceeds to the Company of $350,000. The shares underlying the preferred shares and warrant are entitled to demand registration rights under certain conditions.

Pursuant to the Registration Rights Agreement (“RRA”) the Company was required to register 100% of the number of shares that would be required to be issued if the Preferred Stock were converted on the day before the filing of the S-2 Registration Statement. In the event the Registration Statement was not declared effective within 120 days, the Series G Holders had the right to force the Company to redeem the Series G Preferred Stock at a redemption price of 120% of the face value of the preferred stock. The Registration Statement was declared effective on July 29, 2000. During the year ended June 30, 2000, the Series G Preferred Stock was converted into 3,834,492 shares of the Company’s common stock.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(19) CONVERTIBLE PREFERRED STOCK

On April 27, 1995, the Company amended the Articles of Incorporation to provide for the authorization of 2,000,000 shares of no par value preferred stock. The shares were divided out of the original 50,000,000 shares of no par value common stock. All Series of the convertible preferred stock are not redeemable and automatically convert into shares of common stock at the conversion rates three years after issuance.

The Company issued 4,000 shares of “Series A Convertible Preferred Stock” (“Series A Preferred Stock”) on March 21, 1996 under a Regulation S Securities Subscription Agreement. The agreement called for a purchase price of $1,000 per share, with net proceeds to the Company, after commissions and issuance costs, amounting to $3,600,000.

The holders of the Series A Preferred Stock could have converted up to 50% prior to May 28, 1996, and may convert their remaining shares subsequent to May 28, 1996 without the payment of any additional consideration, into fully paid and nonassessable shares of the Company’s no par value common stock based upon the “conversion formula”. The conversion formula states that the holder of the Preferred Stock will receive shares determined by dividing (i) the sum of $1,000 plus the amount of all accrued but unpaid dividends on the shares of Convertible Preferred Stock being so converted by the (ii) “Conversion Price”. The “Conversion Price” shall be equal to seventy-five percent (75%) of the Market Price of the Company’s common stock; provided, however, that in no event will the “Conversion Price” be greater than the closing bid price per share of common stock on the date of conversion.

As of June 30, 1996, 1,600 shares of the Series A Preferred Stock had been converted into a total 425,416 shares (including accumulated dividends) of the Company’s common stock. The remaining 2,400 shares of Series A Preferred Stock were converted into 1,061,202 shares (including accumulated dividends) of the Company’s common stock during the fiscal year ended June 30, 1997.

The Company issued 450 shares of “Series B Convertible Preferred Stock” (“Series B Preferred Stock”) and warrants to purchase up to an additional 112,500 shares of common stock on December 17, 1996 pursuant to Regulation D and Section 4(2) of the Securities Act of 1933. The agreement called for a purchase price of $10,000 per share, with proceeds to the Company amounting to $4,500,000.

The holders of the Series B Preferred Stock could have converted up to 34% of the Series B Preferred Stock 80 days from issuance (March 7, 1997), up to 67% of the Series B Preferred Stock 100 days from issuance (March 27, 1997), and may convert their remaining shares 120 days from issuance (April 19, 1997) without the payment of any additional consideration, into fully paid and nonassessable shares of the Company’s no par value common stock based upon the “conversion formula”. The conversion formula states that the holder of the Series B Preferred Stock will receive shares determined by dividing (i) the sum of $10,000 by the (ii) “Conversion Price” in effect at the time of conversion. The “Conversion Price” shall be equal to eighty-two percent (82%) of the Market Price of the Company’s common stock; provided, however, that in no event will the “Conversion Price” be greater than $3.85. The warrants are exercisable at any time for an exercise price of $5.00 and will expire five years from the date of issue.

On September 4, 1998, the Company received a notice of conversion from the Series B Holders. The Series B Holders filed a lawsuit against the Company on October 7, 1998. The Company was served on October 19, 1998. The lawsuit alleged that the Company has breached its contract of sale to the Series B Holders by failing to convert the Series B Holders and failure to register the common stock underlying the Preferred Stock. The Series B Holders demanded damages in excess of $75,000, to be determined at trial, together with interest costs and legal fees. On April 6, 1999, the Series B Holders sold their preferred stock to an unaffiliated third party (“the Purchaser”) with no prior relationship to the Company, or the Series B Holders. As part of the purchase agreement, the Series B Holders were required to dismiss the lawsuit with prejudice and the Company and the Series B Holders exchanged mutual general releases (see Series I).

As of June 30, 2000, the Series B Preferred Stock has been converted into 30,463,164 shares of the Company’s common stock, and 60 shares were canceled at the request of the holder.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(19) CONVERTIBLE PREFERRED STOCK (Continued)

During the years ended June 30, 1999 and 1998 the Company issued a total of six Private Placements of convertible preferred stock (see schedule incorporated into Note 16). The Private Placements are summarized as follows:

Series C Preferred Stock

On October 6, 1997, the Company finalized the private placement to foreign investors of 210 shares of its Series C Convertible Preferred Stock at a purchase price of $10,000 per share and warrants to purchase up to 160,000 shares of the Company’s common stock at an exercise price of $1.63 per share, and warrants to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $1.562 per share. The agreement was executed pursuant to Regulation S as promulgated by the Securities Act of 1933, as amended. As of June 30, 2001, 40,000 warrants at the $1.63 exercise price were exercised, and the remaining 140,000 warrants had expired. The remaining 50,000 warrants ($1.562 exercise price) are outstanding as of June 30, 2001.

In connection with the sale, the Company paid an unaffiliated investment banker $220,500 for placement and legal fees, providing net proceeds to the Company of $1,879,500.

Series D Preferred Stock

On January 9, 1998, the Company finalized the private placement to foreign investors of 50 shares of its Series D Convertible Preferred Stock at a purchase price of $10,000 per share and warrants to purchase up to 25,000 shares of the Company’s common stock at an exercise price of $1.22 per share. The agreement was executed pursuant to Regulation S as promulgated by the Securities Act of 1933, as amended. As of June 30, 2001 the warrants had expired.

In connection with the sale, the Company issued four preferred shares to an unaffiliated investment banker for placement fees and paid legal fees of $5,000, providing net proceeds to the Company of $495,000. The shares underlying the preferred shares and warrant are entitled to demand registration rights under certain conditions.

Series E Preferred Stock

On February 5, 1998, the Company finalized the private placement to foreign investors of 50 shares of its Series E Convertible Preferred Stock at a purchase price of $10,000 per share and warrants to purchase up to 25,000 shares of the Company’s common stock at an exercise price of $1.093 per share. The agreement was executed pursuant to Regulation S as promulgated by the Securities Act of 1933, as amended. As of June 30, 2001 the warrants had expired.

Series F Preferred Stock

On February 20, 1998, the Company finalized the private placement to foreign investors of 75 shares of its Series F Convertible Preferred Stock at a purchase price of $10,000 per share. The agreement was executed pursuant to Regulation S as promulgated by the Securities Act of 1933, as amended.

In connection with the sale, the Company paid an unaffiliated investment banker $50,000 for placement and legal fees, providing net proceeds to the Company of $700,000. The shares underlying the preferred shares and warrant are entitled to demand registration rights under certain conditions.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(19) CONVERTIBLE PREFERRED STOCK (Continued)

Series H Preferred Stock

On June 2, 1998, the Company finalized the private placement to foreign investors of 100 shares of its Series H Convertible Preferred Stock at a purchase price of $10,000 per share and Series H-“A” warrants to purchase up to 75,000 shares of the Company’s common stock at an exercise price of $1.00 per share, and Series H-“B” warrants to purchase up to 50,000 shares of the Company’s common stock at an exercise price of $1.50 per share. The agreement was executed pursuant to Regulation D as promulgated by the Securities Act of 1933, as amended. As of June 30, 2001 none of the warrants had been exercised.

In connection with the sale, the Company issued eight preferred shares and paid $10,000 to an unaffiliated investment banker for placement and legal fees, providing net proceeds to the Company of $990,000. The shares underlying the preferred shares and warrant are entitled to demand registration rights under certain conditions.

The Company was in technical default of the Registration Rights Agreement (“RRA”), which required the S-2 Registration Statement to be declared effective by October 2, 1998. Pursuant to the RRA, the Company was required to pay the Series H holders, as liquidated damages for failure to have the Registration Statement declared effective, and not as a penalty, 2% of the principal amount of the Securities for the first thirty days, and 3% of the principal amount of the Securities for each thirty day period thereafter until the Company procures registration of the Securities. On March 25, 1999, the Company issued 424,242 shares of common stock as partial payment of the liquidated damages. The cumulative liquidated damages expense for the years ended June 30, 2001 amounted to $140,000.

Series I Preferred Stock

On April 6, 1999, the Company entered into a Subscription Agreement with the Purchaser of the Series B Preferred Stock whereby the Company agreed to issue 138 shares of its Series I, 7% Convertible Preferred Stock ($1,380,000). The consideration for the subscription agreement was paid as follows:

1. Forgiveness of approximately $725,795 of accrued interest (dividends) in connection with the Series B Convertible Preferred stock. The Company recorded the forgiveness of the accrued interest (dividends) by reducing the accrual along with a reduction in the accumulated deficit.

2. Settlement of all litigation concerning the Series B Convertible Preferred stock.

3. Cancellation of 112,500 warrants that were issued with the Series B Convertible Preferred stock.

4. A limitation on the owner(s) of the Series B Convertible Preferred stock to ownership of not more than 4.99% of the Company’s outstanding common stock at any one time.

The Series I Preferred stock pays a 7% premium, to be paid in cash or freely trading common stock at the Company’s sole discretion, upon conversion.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(19) CONVERTIBLE PREFERRED STOCK (Continued)

Series K Preferred Stock

On July 17, 2000, the Company finalized the private placement to foreign investors of 500 shares of its Series K Convertible Preferred Stock at a purchase price of $10,000 per share. The agreement was executed in accordance with and in reliance upon the exemption from securities registration by Rule 506 under Regulation D as promulgated by the Securities Act of 1933, as amended.

The entire amount of the Series K Convertible Preferred Stock was converted or redeemed by the Company during the year ended June 30, 2001 into 5,664,067 shares of common stock, including 219,225 shares as payment of the 9% accrued dividend.

Series L Preferred Stock

On February 25, 2010, the Company issued 35 shares of its Series L Convertible Preferred Stock at a purchase price of $10,000 per share as collateral in connection with a $350,000 short-term loan. On March 31, 2010 the holder converted the note into the collateral shares of 35 preferred shares of Series L Convertible Preferred Stock. We may at any time, at the option of the Board of Directors, redeem in whole or in part the Series L Convertible Preferred Stock by paying in cash a per price share sum equal to $11,150 plus accrued but unpaid dividends. Any redemption affected shall be made on a pro rata basis among the holders of the Series L Preferred Stock in proportion to the number of shares of Series L Preferred Stock then held by them. We have reserved 16,587,690 shares of common stock stock (473,934 shares of common stock valued at $.0211 for each share of preferred stock) to cover the conversion of the 35 shares of Series L Convertible Preferred Stock outstanding. The 35 shares of Series L Convertible Preferred Stock accrue dividends at an annual rate of 9%. In October 2010, we obtained a waiver from the private investor holding the 35 shares of Series L Convertible Preferred Stock in which the investor agreed to convert no more than the 16,587,690 common shares currently reserved as we do not have sufficient authorized common shares to reserve for further conversions pursuant to the Certificate of Designation, Rights and Preferences. On January 6, 2011, the investor converted 15 shares of the Series L Convertible Preferred Stock into 10,000,000 shares of common stock. As of the date of this report, the investor holds 20 shares of the Series L Convertible Preferred Stock. At our annual meeting on July 12, 2011, our shareholders approved a proposal to increase our authorized shares from 950,000,000 to 2,000,000,000 which eliminated the need for the waiver. Pursuant to the Certificate of Designation of Series L Convertible Preferred Stock, (iii) Issuance of Securities, a reset provision is provided if common shares are issued less than $.0211 on or before the conversion of all of the Series L Convertible Preferred shares. The investor agreed to a fixed conversion floor price of $.015, which required us to reserve an additional 6,745,643 common shares. The reset provision triggered a Derivative Liability valuation for such provision.

The following schedule reflects the number of shares of preferred stock that have been issued, converted and are outstanding as of June 30, 2011, including certain additional information with respect to the deemed preferred stock dividends that were calculated as a result of the discount from market for the conversion price per share:

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.
(a Development Stage Company)

Notes to Financial Statements (Continued)

(19) COVERTIBLE PREFERRED STOCK (Continued)

	Series A						Series B						Series C						Series D						Series E						Series F						Series H						Series I						Series K						Series L					Total
	Shares			Amount			Shares			Amount			Shares			Amount			Shares			Amount			Shares			Amount			Shares			Amount			Shares			Amount			Shares			Amount			Shares			Amount			Shares		Amount			Shares			Amount
Balance at June 30, 1995		-		$	-			-		$	-			-		$	-			-		$	-			-		$	-			-		$	-			-		$	-			-		$	-			-		$	-			-	$	-			-		$	-

Sale of Series A		4,000			3,600,000																																																								4,000			3,600,000

Series A conversion		(1,600	)		(1,440,000	)																																																							(1,600	)		(1,440,000	)

Balance at June 30, 1996		2,400			2,160,000																																																								2,400			2,160,000

Sale of Series B								450			4,500,000																																																		450			4,500,000

Series A conversion		(2,400	)		(2,160,000	)																																																							(2,400	)		(2,160,000	)

Balance at June 30, 1997		-			-			450			4,500,000																																																		450			4,500,000

Sale of preferred stock
(Series C - H)														210			2,100,000			54			540,000			54			540,000			75			750,000			108			1,080,000																				501			5,010,000

Conversion of preferred stock														(210	)		(2,100,000	)		(25	)		(250,000	)		(30	)		(300,000	)		(75	)		(750,000	)																									(340	)		(3,400,000	)

Balance at June 30, 1998		-			-			450			4,500,000			-			-			29			290,000			24			240,000			-			-			108			1,080,000																				611			6,110,000

Sale of Series I																																												138			1,380,000														138			1,380,000

Conversion of preferred stock								(60	)		(600,000	)								(29	)		(290,000	)		(24	)		(240,000	)								(40	)		(400,000	)																			(153	)		(1,530,000	)

Balance at June 30, 1999		-			-			390			3,900,000			-			-			-			-			-			-			-			-			68			680,000			138			1,380,000			-			-								596			5,960,000

Conversion of preferred stock, net								(390	)		(3,900,000	)																										(68	)		(680,000	)		(138	)		(1,380,000	)													(596	)		(5,960,000	)

Balance at June 30, 2000		-			-			-			-			-			-			-			-			-			-			-			-			-			-			-			-			-			-								-			-

Sale of Series K																																																		50			5,000,000								50			5,000,000

Conversion of preferred stock																																																		(50	)		(5,000,000	)							(50	)		(5,000,000	)

Balance at June 30, 2001		-			-			-			-			-			-			-			-			-			-			-			-			-			-			-			-			-			-								-			-

Sale of Series L(1)																																																								35		350,000			35		$	350,000

Conversion of preferred stock																																																								-		-			-

Balance at June 30, 2010		-		$	-			-		$	-			-		$	-			-		$	-			-		$	-			-		$	-			-		$	-			-		$	-					$	-			35		350,000			35		$	350,000

Conversion of preferred stock																																																								(15)		(150,000)			(15)			(150,000)

Balance at June 30, 2011		-			-			-			-			-			-			-			-			-			-			-			-			-			-			-			-						-			20		200,000			20			200,000

Additional information:
Discount off market price					25	%					18	%					25	%					25	%					25	%					30	%					25	%					25	%					12.5	%				58.63	%
Fair market value-issue rate				$	8.31					$	3.25					$	1.63					$	0.99					$	1.07					$	1.24					$	0.57					$	0.38					$	1.13				$	0.0211
Deemed preferred stock dividend				$	1,335,474					$	998,120					$	705,738					$	182,433					$	182,250					$	318,966					$	351,628					$	492,857					$	708,130				$	10,875
																																																															(Continued)

(1)The Series L Convertible Preferred Stock was initially issued as collateral for a short-term loan and was converted by the holder on March 31, 2010.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(20) DERIVATIVE LIABILITY

Effective June 1, 2010, we adopted the ASC 815 guidance provided for Derivatives and Hedging which applies to any free standing financial instruments or embedded features that have characteristics of a derivative and to any free standing financial instruments that are potentially settled in an entity’s own common stock. As of June 30, 2010, we had 35 shares of Series L Convertible Preferred Stock outstanding for which the underlying common has a reset provision which classifies the Series L Convertible Preferred Stock as a free standing derivative instrument. ASC 815 requires the Series L Convertible Preferred Stock to be recorded as a liability as it is no longer afforded equity treatment. As a result of the reset provision we recorded a Derivative Liability of $64,524 which accrued on the date of issuance and recorded an increase of $137,631 as a result in changes in the market price of our stock. The total Derivative Liability for the Series L Convertible Preferred Stock for the fiscal year ended June 30, 2010 was $202,156.

For the quarter ending September 30, 2010, we recorded additional Derivative Expense of $19,355 due to a conversion rate adjustment from $.0211 to $.019933 associated with Series L Convertible Preferred Stock issued to the holder. For the quarter ending December 31, 2010, we recorded additional Derivative Expense of $81,827 due to a conversion rate adjustment from $.019933 to $.015 associated with Series L Convertible Preferred Stock issued to the holder. On January 6, 2011, the investor converted 15 shares of the Series L Convertible Preferred Stock into 10,000,000 shares of common stock. On May 11, 2011, we obtained a waiver from the private investor where the investor agreed to convert no additional Series L Convertible Preferred Stock into common shares until the approval by our shareholders of an increase in authorized common stock at our next annual meeting to be held on July 12, 2011. Due to this conversion and the receipt of the waiver, we retired $303,337 of Derivative Liability. This waiver encompasses a total of 13,333,333 shares issuable upon full conversion of the 20 shares of the Series L Convertible Preferred Stock held by the investor as of the date of this report.

For the fiscal year ending June 30, 2011, we recorded an initial Derivative Liability of $142,954 on two JMJ notes and an additional Derivative Liability of $187,691 for the quarter ending June 30, 2011. As of June 30, 2011 the Derivative Liability of the JMJ notes was $330,645

For the fiscal year ending June 30, 2011, the Derivative Liability of the Southridge Promissory Notes was $722,000 and a decrease of Derivative Liability of $360,982 for the quarter ending June 30, 2011. As of June 30, 2011 the Derivative Liability of the Southridge notes was $361,018

As of June 30, 2011, we had 20 shares of Series L Convertible Preferred Stock outstanding for which the underlying common has a reset provision which classifies the Series L Convertible Preferred Stock as a free standing derivative instrument. The total Derivative Liability for the Series L Convertible Preferred Stock for the fiscal year ended June 30, 2011 was $102,409.

The total net Derivative Liability for the fiscal year ending June 30, 2011 is $794,072.

The following are the ranges of the input variables we used for the fiscal year ending June 30, 2011.

		Series L Convertible
Range of Input Variables	JMJ Notes	Preferred Stock	Southridge Notes
Stock price	$.015 to $.026	$.015 to $.03	$.015 to $.037
Exercise Price	$.011 to $.0185	$.02	$.01
Expected Term	2.67 to 3 years	.17 to 1.5 years	.08 to .38 years
Volatility	174.8% to 261.98%	147.19% to 192.97%	24.61 % to 46.18%
Discount rate – Bond Equivalent Yield	.03% to .012%	.03% to .12%	.02% to .03%

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(21) COMMON STOCK

On June 8, 1994, at a special meeting of shareholders of the Company, a one for one hundred reverse stock split was approved reducing the number of issued and outstanding shares of common stock from 68,875,200 shares to 688,752 shares (510,000 shares of original stock, for $50,000, and the 178,752 shares acquired in the merger). In addition, the board of directors approved the issuance of an additional 27,490,000 shares of common stock that had been provided for in the original merger documents. However, during April, 1995 the four major shareholders agreed to permanently return 12,147,480 of these additional shares. Therefore, the net additional shares of common stock issued amounts to 15,342,520 shares, and the net additional shares issued as a result of this transaction have been reflected in the financial statements of the Company (See Statement of Stockholders’ Equity).

The Company has sold 1,290,069 shares of its common stock through Private Placement Memorandums dated April 20, 1994 and December 7, 1994, as subsequently amended. The net proceeds to the Company under these Private Placement Memorandums were approximately $1,000,000. In addition, the Company has sold 690,722 shares of "restricted common stock" during the year ended June 30, 1995. These shares are restricted in terms of a required holding period before they become eligible for free trading status. As of June 30, 1995, receivables from the sale of common stock during the year amounted to $523,118. During the year ended June 30, 1996, 410,500 shares of the common stock related to these receivables were canceled and $103,679 was collected on the receivable. The unpaid balance on these original sales and other subsequent sales of common stock, in the amount of $35,559, as of June 30, 1997, is reflected as a reduction to stockholder’s equity on the Company’s balance sheet.

During the year ended June 30, 1995, 115,650 shares of common stock were issued to satisfy obligations of the Company amounting to $102,942, approximately $.89 per share. The stock was recorded at the fair market value at the date of issuance.

In addition, during the year ended June 30, 1995, wages accrued to the officers of the Company in the amount of $151,000, were satisfied with the issuance of 377,500 shares of restricted common stock. Compensation expense has been recorded during the fiscal year pursuant to the employment agreements with the officers. In addition, during the year ended June 30, 1995, 75,000 shares of restricted common stock were issued to a company executive pursuant to an employment agreement. Compensation expense of $78,750 was recorded in conjunction with this transaction.

During the year ended June 30, 1996, the Company sold, under the provisions of Regulation S, a total of 700,471 shares of common stock. The proceeds from the sale of these shares of common stock amounted to $1,561,110. The Company issued an additional 2,503,789 shares ($4,257,320) of its common stock as a result of the exercise of stock options issued in exchange for services rendered during the year. Cash proceeds associated with the exercise of these options and the issuance of these shares amounted to $1,860,062, with the remaining $2,397,258 reflected as noncash compensation. These 2,503,789 shares were issued at various times throughout the fiscal year. The stock has been recorded at the fair market value at the various grant dates for the transactions. Compensation, aggregating $2,298,907, has been recorded at the excess of the fair market value of the transaction over the exercise price for each of the transactions.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(21) COMMON STOCK (Continued)

As of June 30, 1996, there were a total of 425,416 shares of common stock issued as a result of the conversion of the Series A Convertible Preferred Stock and the related accumulated dividends (See Note 19).

Common stock issued to employees as a result of the exercise of their incentive stock options and their non-qualified stock options during the fiscal year ended June 30, 1996 amounted to 1,187,900, of which 996,400 shares were issued pursuant to the provisions of the non-qualified stock option plan and were exercised in a “cash-less” transaction, resulting in compensation to the officers of $567,164. Compensation cost was measured as the excess of fair market value of the shares received over the value of the stock options tendered in the transaction. The excess of fair market value at July 15, 1995 approximated $.57 per share on the 996,400 shares issued.

During the year ended June 30, 1997, the Company issued a total of 1,881,295 shares ($5,461,589) of its common stock. The conversion of Series A Convertible Preferred Stock, including accrued dividends (See Note 19), accounted for the issuance of 1,081,962 shares ($2,808,643). The remaining 799,333 shares were issued as follows:

1. Services rendered by independent consultants in exchange for 31,200 shares. Research and development expenses of $90,480 were charged as the fair market value at November 20, 1996 was $2.90 per share.

2. On December 20, 1996, bonus stock was issued to Company employees, 3,200 shares. Compensation expense of $10,463 was charged as the fair market value at that date was $3.27 per share.

3. On January 3, 1997 bonus stock was issued to the officers of the Company, 350,000 shares. Compensation expense of $907,900 was charged, as the fair market value at that date was $2.59 per share.

4. On February 13, 1997, 4,000 shares were issued to an outside consultant in exchange for services performed. Consulting services of $11,500 were recorded, representing the fair market value ($2.88 per share) on that date.

5. Services rendered by an independent consultant during June 1997 in exchange for 199,000 shares. Consulting expenses of $548,149 were charged, as the fair market value on the date of the transaction was approximately $2.75 per share.

6. Exercise of incentive stock options comprised of 27,000 shares ($33,750) exercised and paid for at $1.25 per share, and 334,933 shares ($1,103,203) acquired in the exchange for options tendered in a cash-less transaction.

7. The Company repurchased 150,000 shares ($52,500), which had been previously acquired by one of its employees.

During the year ended June 30, 1998, the Company issued a total of 11,588,460 shares ($8,583,721) of its common stock. The conversion of Convertible Preferred Stock (see Note 19) accounted for the issuance of 6,502,448 shares ($4,984,684). The remaining 5,056,012 shares were issued as follows:

1. Services rendered by independent consultants in exchange for 100,000 shares. Consulting expenses of $221,900 were charged as the fair market value at July 10, 1997 was $2.22 per share.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(21) COMMON STOCK (Continued)

2. Services rendered by an independent consultant in exchange for 200,000 shares. Consulting expenses of $400,000 were charged as the fair market value at August 20, 1997 was $2.00 per share.

3. Services rendered by an independent consultant in exchange for 40,000 shares. Consulting expenses of $67,480 were charged as the fair market value at September 4, 1997 was $1.69 per share.

4. Services rendered by a public relations company in exchange for 166,000 shares. Public relations expenses of $269,750 were charged as the fair market value at October 24, 1997 was $1.63 per share.

5. On December 15, 1997, bonus stock was issued to Company employees, for 39,300 shares. Compensation expense of $41,658 was charged as the fair market value at that date was $1.06 per share.

6. Services rendered by an independent consultant in exchange for 250,000 shares. Consulting expenses of $320,000 were charged as the fair market value at January 7, 1998 was $1.28 per share.

7. Services rendered by an independent consultant during May 1998 in exchange for 200,000 shares. Consulting expenses of $140,000 were charged, as the fair market value on that date was $.70 per share.

8. The Company sold 500,000 shares on May 15, 1998 in a Regulation D offering at $.40 per share, and received cash proceeds of $200,000.

9. On June 5, 1998, the Company issued to its chief executive officer 3,500,000 shares ($1,890,000) as consideration for an exclusive Patent License Agreement (see Note 9). The market value of the stock on this date was $.54 per share. The excess of the fair market value of the common stock over the historical cost basis of the patent license was recorded as a distribution to the shareholder; recorded as a reduction to additional paid-in capital of $3,199,000.

10. On June 11, 1998, the Company issued 25,000 shares to its corporate counsel as additional bonus compensation. Legal expenses of $12,750 were recorded as the market value of the stock on that date was $.51 per share.

11. A total of 65,712 non-qualified stock options were exercised and proceeds of $22,999 ($.35 per share) was received by the Company.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(21) COMMON STOCK (Continued)

On July 10, 1998, the majority shareholders of the Company authorized, by written action, the Company’s adoption of an Amendment to the Company’s Articles of Incorporation increasing the Company’s authorized shares of common stock from 48,000,000 shares to 100,000,000 shares. The Florida Statutes provide that any action to be taken at an annual or special meeting of shareholders may be taken without a meeting, without prior notice and without a vote, if the action is taken by a majority of outstanding stockholders of each voting group entitled to vote. On August 5, 1998, the Company filed an Information Statement with the Securities and Exchange Commission with regard to the Written Action. The Majority Shareholders consent with respect to the Amendment was effective on February 18, 1999. The number of authorized shares was further increased to 150,000,000 shares during the shareholders annual meeting held on May 10, 2000, and increased again during the 2002 annual meeting to 200,000,000 shares, effective January 3, 2003.

During the year ended June 30, 1999, the Company issued a total of 12,804,131 shares ($5,837,656) of its common stock. The conversion of Convertible Preferred Stock (see Note 19) accounted for the issuance of 4,865,034 shares ($1,972,296). The remaining 7,939,097 shares were issued as follows:

1. The Company sold 200,000 shares on August 5, 1998 in a Regulation D offering at $.30 per share, and received cash proceeds of $60,000.

2. In June 1999, the Company issued to its chief executive officer 3,500,000 shares ($1,890,000), representing the balance of shares to be issued as consideration for the exclusive Patent License Agreement (see Note 9).

3. On November 9, 1998, the Company issued 15,000 shares to its corporate counsel as additional bonus compensation. Legal expenses of $10,800 were recorded as the market value of the stock on that date was $.72 per share.

4. A total of 65,612 non-qualified stock options were exercised and proceeds of $22,964 ($.35 per share) was received by the Company. An additional $101,500 was received this year for stock sold in the prior year.

5. A total of 480,000 shares were issued in connection with loans that were received by the Company. The total loan fee expenses (based on the market value of the stock at the date of issuance) charged to the statement of operations for the year was $292,694, or an average of $.61 per share.

6. A total of 2,974,043 shares were issued as repayment of various accounts payable and loans payable during the year. A total of $1,196,992 (average of $.40 per share) of debts were satisfied through the issuance of the stock.

7. On December 11, 1998, bonus stock was issued to Company employees, for 130,200 shares. Compensation expense of $79,422 was charged as the fair market value at that date was $.61 per share.

8. On March 26, 1999, the Company issued 424,242 shares of stock as partial-payment ($140,000) on the liquidated damages in connection with Series H Preferred Stock. The fair market value at that date was $.33 per share.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(21) COMMON STOCK (Continued)

9. During the year a total of 150,000 shares were issued for to various independent parties for services rendered to the Company. Expenses of $81,788 were charged, or an average price of $.50 per share.

During the year ended June 30, 2000, the Company issued a total of 56,214,003 shares ($12,997,328) of its common stock. The conversion of Convertible Debentures accounted for the issuance of 4,060,398 shares ($3,958,223), the conversion of Redeemable Convertible Preferred Stock (see Note 19) accounted for the issuance of 3,834,492 shares ($507,115), and the conversion of Convertible Preferred Stock (see Note 19) accounted for the issuance of 41,581,242 shares ($6,806,219). The remaining 6,737,871 shares were issued as follows:

1. The Company sold 100,000 shares on April 27, 2000 in a Regulation D offering at $1.57 per share, and received cash proceeds of $157,000.

2. A total of 5,061,294 shares were issued as repayment of various loans payable during the year. A total of $1,067,665 (average of $.21 per share) of debts were satisfied through the issuance of the stock.

3. On November 12, 1999, bonus stock was issued to Company employees, for 145,000 shares. Compensation expense of $12,325 was charged as the fair market value at that date was $.09 per share. The company also canceled 8,000 shares, which had been previously issued to an independent contractor for consulting services. A reduction of $31,000 was recorded to consulting expenses for the year.

4. A total of 7,297 shares were issued in connection with a loan that was received by the Company. The total loan fee expense and interest charged to income amounted to $2,408 during the year.

5. During the year at total of 150,652 shares were issued for the exercise of warrants. On March 21, 2000, the Company received $100,000 for the exercise of 107,527 warrants at an exercise price of $.93 per share. The Company recorded a charge to consulting expense, as the fair market value at the date the warrants were issued was $1.84. The Company also received $21,563 from the exercise of 43,125 of Series G Preferred Stock warrants during the last quarter of the fiscal year.

6. Exercise of 1,281,628 incentive stock options, ($395,810) exercised and paid for at prices ranging from $.13 per share to $1.13 per share.

During the year ended June 30, 2001, the Company issued a total of 13,916,169 shares ($12,333,724) of its common stock. The conversion of Convertible Preferred Stock (see Note 19) accounted for the issuance of 5,664,067 shares ($5,580,531), and the common stock issued through the equity line of credit (See Note 14) accounted for the issuance of 3,407,613 shares ($3,143,666). The remaining 4,844,489 shares were issued as follows:

1. A total of 810,000 shares were issued as repayment of a loan payable during the year. A total of $530,000 of debt was satisfied through the issuance of the stock, and an additional $863,200 was charged as interest expense as the fair market value of the stock at the date of issuance was $1.72 per share.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(21) COMMON STOCK (Continued)

2. On December 7, 2000, 143,500 shares of bonus stock were issued to Company employees. Compensation expense of $219,555 was charged as, the fair market value of the common stock at that date was $1.53 per share. The Company also issued 10,000 shares on May 17, 2001. Consulting services of $8,300 was charged, as the fair market value of the stock was $.83 per share.

3. During the year a total of 99,375 shares of common stock were issued for the exercise of warrants. The Company received $4,687 from the exercise of 99,375 Series G Preferred Stock warrants. On August 10, 2000, the Company received $65,200 for the exercise of 40,000 Series C Preferred Stock warrants at an exercise price of $1.63 per share.

4. Common stock issued to officers as a result of the exercise of their incentive stock options and their non-qualified stock options amounted to 3,755,414 shares. The options were exercised in a “cash-less” transaction, resulting in compensation to the officers of $1,848,566. An additional 26,200 shares were issued to employees upon the exercise of their incentive stock options during the year, at exercise prices ranging from $.35 per share to $.60 per share.

During the year ended June 30, 2002, the Company issued a total of 12,167,866 shares ($6,508,155) of its common stock. The common stock issued through the equity line of credit (See Note 14) accounted for the issuance of 11,607,866 shares ($6,213,805). The remaining 560,000 shares were issued as follows:

1. On November 21, 2001, 210,000 shares of bonus stock were issued to Company employees. Deferred compensation of $117,600 was charged as, the fair market value of the common stock at that date was $.56 per share, and the stock will not be physically delivered to the employees until January 2003.

2. A total of 350,000 shares were issued in conjunction with the settlement on March 22, 2002 of a lawsuit. Settlement expense of $176,750 has been charged on the statement of operations, as the fair market value of the stock at the date of issuance was $.51 per share.

During the year ended June 30, 2003, the Company issued a total of 31,398,326 shares ($9,708,425) of its common stock. The common stock issued through the equity line of credit (See Note 14) accounted for the issuance of 29,390,708 shares ($8,737,772). The remaining 2,007,618 shares were issued as follows:

1. During December 2002, 258,500 shares of bonus stock were issued to Company employees. Compensation of $62,425 was charged as, the fair market value of the common stock on the dates of issuance averaged $.24 per share. In addition, the Company recorded an adjustment for deferred compensation, which resulted in a reduction to common stock for $73,500.

2. A total of 1,194,118 shares were issued in conjunction with the settlement on June 5, 2003 of a lawsuit. Settlement expense of $841,853 has been charged on the statement of operations, as the fair market value of the stock at the date of issuance was $.70 per share.

3. During the year a total of 555,000 shares were issued to various parties for services rendered to the Company. Expenses of $139,875 were charged, or an average price of $.25 per share.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(21) COMMON STOCK (Continued)

During the year ended June 30, 2004, the Company issued a total of 10,333,373 shares ($7,867,351) of its common stock. The common stock issued through the equity line of credit (See Note 14) accounted for the issuance of 8,630,819 shares ($6,541,700). The remaining 1,702,554 shares were issued as follows:

1. During November 2003, 401,785 shares were issued in conjunction with the settlement on September 18, 2003 of a lawsuit. Settlement expense of $450,000 has been charged on the statement of operations as the fair market value of the stock at the date of the settlement agreement was $1.12 per share.

2. During January 2004, 333,000 shares of bonus stock were issued to Company employees. Compensation of $382,950 was charged as the fair market value of the common stock on the date of issuance was $1.15 per share.

3. Common stock issued to directors as a result of the exercise of their incentive stock options amounted to 450,000 shares during the year. The Company received $262,500 from the exercise of 450,000 option shares. The exercise prices range from $.55 per share to $.65 per share.

4. Common stock issued to employees as a result of the exercise of their incentive stock options amounted to 517,769 shares during the year. The Company received $230,201 from the exercise of 517,769 option shares. The exercise prices range from $.19 per share to $.65 per share.

During the year ended June 30, 2005, the Company issued a total of 26,573,157 shares ($7,915,061) of its common stock. The common stock issued through the equity line of credit (See Note 14) accounted for the issuance of 26,274,893 shares ($7,797,807). The remaining 298,264 shares were issued as follows:

1. During September 2004, 100,000 restricted shares were issued to our CEO in conjunction with his employment agreement. Compensation of $38,000 was charged as the fair market value of the common stock on the date of issuance was $.38 per share.

2. During January 2005, 185,000 shares of bonus stock were issued to Company employees. Compensation of $75,850 was charged as the fair market value of the common stock on the date of issuance was $.41 per share.

3. Common stock issued to employees as a result of the exercise of their incentive stock options amounted to 13,264 shares during the year. The Company received $3,404 from the exercise of 13,264 option shares. The exercise prices range from $.20 per share to $.27 per share.

During the year ended June 30, 2006, the Company issued a total of 47,776,064 shares ($7,409,543) of its common stock. The common stock issued through the equity line of credit (See Note 14) accounted for the issuance of 47,776,064 shares ($7,409,543).

During the year ended June 30, 2007, the Company issued a total of 63,861,405 shares ($4,560,415) of its common stock. The common stock issued through the equity line of credit (See Note 14) accounted for the issuance of 63,861,405 shares ($4,560,415).

During the year ended June 30, 2008, the Company issued a total of 13,979,430 shares ($490,000) of its common stock. The common stock issued through the equity line of credit (See Note 14) accounted for the issuance of 13,979,430 shares ($490,000).

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(21) COMMON STOCK (Continued)

During the year ended June 30, 2009, the Company issued a total of 285,861,319 shares ($2,646,083) of its common stock. The common stock issued through the equity line of credit (See Note 14) accounted for the issuance of 158,747,217 shares ($1,674,885). The conversion of Convertible Debentures accounted for the issuance of 93,958,547 shares ($621,220). The exercise of warrants accounted for the issuance of 21,755,555 shares ($195,778).

The remaining 11,400,000 shares were issued as follows:

1. During July 2008, 5,000,000 restricted shares were issued to a consultant. Compensation expense of $55,000 was recorded as the fair market value of the common stock on the date of issuance was $.011 per share.

2. During November 2008, 3,000,000 shares of restricted stock were issued to a shareholder in a private placement pursuant to Rule 144. The shareholder paid the Company $75,000 as the fair market value of the shares on the date of issuance was $.025.

3. During March 2009, 2,400,000 shares of restricted stock were issued to Company employees. Compensation expense of $19,200 was charged as the fair market value of the common stock on the date of issuance was $.008 per share.

4. During March 2009, 1,000,000 shares of restricted stock were issued to a shareholder in a private placement pursuant to Rule 144. The shareholder paid the Company $5,000 as the fair market value of the shares on the date of issuance was $.005.

During the year ended June 30, 2010, the Company issued a total of 225,708,835 shares ($2,497,491) of its common stock. The common stock issued through the equity line of credit (See Note 14) accounted for the issuance of 90,803,568 shares ($1,524,764). The conversion of Convertible Debentures accounted for the issuance of 45,334,856 shares ($223,743). The exercise of warrants accounted for the issuance of 11,180,822 shares ($89,444).

The remaining 78,389,589 shares were issued as follows:

1. During December 2009, 16,625,000 shares of restricted stock were issued to a various investors as additional consideration for short-term loans. Premium expense of $465,500 was recorded as the fair market value of the shares on the date of issuance was $.028.

2. During December 2009, 3,000,000 shares of common stock were issued to Company employees and 750,000 shares of restricted stock were issued to Company officers. Compensation expense of $75,000 was charged as the fair market value of the common stock on the date of issuance was $.02 per share. A total of 200,000 shares of common stock were canceled. Compensation expense of $1,600 was credited as the fair market value of the common stock on the date of issuance was $.008 per share.

3. During December 2009 and January 2010 a total of 55,363,637 shares of restricted stock were issued as collateral in connection with short-term loans. A total of $1,150,000 was recorded as Common Stock – Debt Collateral.

4 During April 2010, 250,000 shares of restricted stock were issued to a consultant of which $2,250 was satisfaction of an aged accounts payable owed to him for investor relations services and for providing a limited amount of investor relation services without further charge. Additional Paid-In-Capital of $11,250 was

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(21) COMMON STOCK (Continued)

recorded as the fair market value of the common stock on the date of issuance was $.054 per share. The aggregate fair market value of the 250,000 restricted shares when issued was $13,500.

5. During May 2010, 2,600,952 shares of restricted stock were issued to Company employees. Compensation expense of $128,389 and Additional Paid-In-Capital of $10,793 were recorded as the fair market value of the common stock on the date of issuance was $.045 per share.

During the year ended June 30, 2011, the Company issued a total of 105,109,302 shares ($2,625,268) of its common stock. The common stock issued through the equity line of credit (See Note 14) accounted for the issuance of 77,928,568 shares ($1,502,193) to Southridge. The conversion of 15 shares of the Series L Convertible Preferred Stock accounted for the issuance of 10,000,000 shares ($150,000).

The conversion of Promissory Notes accounted for the issuance of 12,430,734 shares ($112,674).

The remaining 17,180,734 shares were issued as follows:

1. During September 2010, 4,000,000 shares of common stock were issued to Company employees and 750,000 shares of restricted stock were issued to Company officers. Compensation expense of $109,250 was charged as the fair market value of the common stock on the date of issuance was $0.023 per share.

2. January 2011 to April 2011, Southridge acquired promissory notes from a private investor totaling $800,000 in principal and 55,363,907 shares of common stock which were issued as collateral. Southridge proposed that we amend the conversion terms of the notes permitting the holder to convert the notes and we agreed to the amendment. From January 12, 2011 to June 30, 2011, Southridge issued notices of conversion to settle $525,000 in principal plus accrued premiums totaling $255,651 into 53,143,682 shares of our common stock, of which 51,802,774 shares were collateral shares and 1,340,908 new shares were issued pursuant to Rule 144.

3. During May 2011, an $80,000 Promissory Note plus $3,174 in interest was converted by Southridge into 11,089,826 shares of common stock which were issued pursuant to Rule 144.

(22) STOCK OPTIONS

The Company relies on the guidance provided by ASC 718 (“Compensation-Stock Compensation”). ASC 718 requires companies to expense the value of employee stock options and similar awards and applies to all outstanding and vested stock-based awards.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(22) STOCK OPTIONS (Continued)

The Company continues to use an expected term of eight years as provided by Staff Accounting Bulletin 110. Our expected term assumption of eight years for the year ended June 30, 2011, was based upon the guidance provided by SEC Staff Accounting Bulletin 107 enabling us to use the simplified method for “plain vanilla” options for this calculation. This provision was allowed to be used for grants made on or before December 31, 2007. On December 21, 2007, the SEC issued Staff Accounting Bulletin 110 which extended the timeframe we will have to use the simplified method on an interim basis. The SEC will suspend use of this method once detailed information on exercise terms become readily available. We then will be required to estimate the expected term of an option using historical data by analyzing its historical forfeiture rate, the remaining lives of unvested options, and the amount of vested options as a percentage of total options outstanding. If the Company’s actual forfeiture rate is materially different from its estimate, or if the Company reevaluates the forfeiture rate in the future, the stock-based compensation expense could be significantly different from what we have recorded in the current period. The impact of applying ASC 718 approximated $375,704 and $588,564, respectively, in additional compensation expense for the twelve months ended June 30, 2011 and 2010.

During July 1994, the Company adopted a non-qualified Stock Option Plan (the "Plan"), whereby officers and employees of the Company could be granted options to purchase shares of the Company’s common stock. Under the plan and pursuant to their employment contracts, an officer could be granted non-qualified options to purchase shares of common stock over the next five calendar years, at a minimum of 250,000 shares per calendar year. The exercise price shall be thirty-five percent of the fair market value at the date of grant. On July 5, 1995 the Board of Directors authorized an amendment to the Plan to provide that upon exercise of the option, the payment for the shares exercised under the option may be made in whole or in part with shares of the same class of stock. The shares to be delivered for payment would be valued at the fair market value of the stock on the day preceding the date of exercise. The plan was terminated effective July 1, 1996, however the officers will be issued the options originally provided under the terms of their employment contracts.

On March 29, 1995, the incentive stock option plan was approved by the Board of Directors and adopted by the shareholders at the annual meeting. This original plan was revised and on January 3, 2000 the Board of Directors adopted the Company’s “2000 Non-Statutory Plan”, and the plan was subsequently approved by the shareholders on May 10, 2000 at the annual meeting. This plan provided for the granting, exercising and issuing of incentive stock options pursuant to Internal Revenue Code Section 422. The Company was entitled to grant incentive stock options to purchase up to 4,850,000 shares of common stock. This Plan also allowed the Company to provide long-term incentives in the form of stock options to the Company's non-employee directors, consultants and advisors, who were not eligible to receive incentive stock options. In January 2002, the Board replaced the 1995 Plan and 2000 Plan with a new combined stock option plan, the 2002 Incentive and Non-Statutory Stock Option Plan (the "2002 Plan"), which provided for the grant of incentive and non-statutory

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(22) STOCK OPTIONS (Continued)

options to purchase an aggregate of 6,340,123 shares of Common Stock. Upon approval of the 2002 Plan, all options outstanding under the 1995 and 2000 Plans remained outstanding; however, no new options could be granted under those plans. The Board of Directors or a company established compensation committee had direct responsibility for the administration of these plans.

The exercise price of the non-statutory stock options was required to be equal to no less than 50% of the fair market value of the common stock on the date such option is granted.

On February 4, 2004, the Board of Directors adopted the Company’s 2004 Non-Statutory Stock Option Plan (the “2004 Plan”), which was adopted by the shareholders on March 24, 2004 at the annual meeting, to provide a long-term incentive for employees, non-employee directors, consultants, attorneys and advisors of the Company. The maximum number of options that may be granted under the 2004 Plan shall be options to purchase 8,432,392 shares of Common Stock (5% of our issued and outstanding common stock as of February 4, 2004). Options may be granted under the 2004 Plan for up to 10 years after the date of the 2004 Plan. The 2004 Non-Statutory Stock Plan replaced the 2002 Incentive and Non-Statutory Stock Option Plan.

On August 24, 2005, the Board Of Directors resolved that the Company’s 1995, 2000, 2002 and 2004 Stock Option Plans and Stock Options Agreements that were entered into pursuant to these plans, be amended to increase the post-termination exercise period following the termination of the Optionee’s employment/directorship or in the event of change of control of the Company, to be three (3) years from the date of termination or change of control, subject to those options that were vested as of the date of termination or change of control and subject to the original term of the option, which ever time is less.

On July 26, 2007, the Board of Directors adopted the Company’s 2007 Non-Statutory Stock Option Plan (the “2007 Plan”), which must be adopted by the shareholders at the annual meeting which must occur within one year of the Board’s adoption of the 2007 Plan. The 2007 Plan will provide a long-term incentive for employees, non-employee directors, consultants, attorneys and advisors of the Company. The maximum number of options that may be granted under the 2007 Plan shall be options to purchase 15,693,358 shares of Common Stock (5% of our issued and outstanding common stock as of July 26, 2007). Options may be granted under the 2007 Plan for up to 10 years after the date of the 2007 Plan. The 2007 Non-Statutory Stock Plan replaced the 2004 Non-Statutory Stock Option Plan.

On March 11, 2010, the Board of Directors adopted the Company’s 2010 Non-Statutory Stock Option Plan (the “2010 Plan”), which must be adopted by the shareholders at the annual meeting which must occur within one year of the Board’s adoption of the 2010 Plan. The 2010 Plan will provide a long-term incentive for employees, non-employee directors, consultants, attorneys and advisors of the Company. The maximum number of options that may be granted under the 2010 Plan shall be options to purchase 37,428,466 shares of Common Stock (5% of our issued and outstanding common stock as of March 11, 2010). Options may be granted under the 2010 Plan for up to 10 years after the date of the 2010 Plan. The 2010 Non-Statutory Stock Plan replaced the 2007 Non-Statutory Stock Option Plan.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(22) STOCK OPTIONS (Continued)

Transactions and other information relating to the plans are summarized as follows:

Employee Plan:

	Incentive Stock Options		Non Statutory Stock Options
	Shares	Wtd. Avg. Price	Shares	Wtd. Avg. Price

Outstanding at June 30, 1994	-0-		-0-
Granted	75,000	$ 1.40	1,500,000	$ 1.12
Exercised	-		-

Outstanding at June 30, 1995	75,000	1.40	1,500,000	1.12
Granted	770,309	1.66	750,000	1.44
Exercised	(164,956)	.92	(1,800,000)	1.50

Outstanding at June 30, 1996	680,353	1.81	450,000	.13
Granted	371,377	3.27	750,000	3.88
Exercised	(395,384)	1.10	-

Outstanding at June 30, 1997	656,346	3.07	1,200,000	2.47
Granted	220,755	1.95	750,000	2.75
Exercised	-		(65,712)	.35
Canceled	(175,205)	4.25	-

Outstanding at June 30, 1998	701,896	2.42	1,884,288	2.66
Granted	786,635	.48	750,000	.43
Exercised	-		(65,612)	.35
Canceled	(82,500)	3.37	-

Outstanding at June 30, 1999	1,406,031	.53 **	2,568,676	2.24
Granted	3,139,459	.34	-
Exercised	(770,702)	.37	(318,676)	.35
Canceled	(64,334)	.47	-

Outstanding at June 30, 2000	3,710,454	.42	2,250,000	2.35
Granted	1,915,700	2.59	-
Exercised	(3,030,964)	.32	(750,000)	.31
Canceled	(279,982)	.60	(1,500,000)	2.75

Outstanding at June 30, 2001	2,315,208	2.38	-
Granted	6,839,864	.68	-
Exercised	-		-
Canceled	(2,695,482)	1.17	-

Outstanding at June 30, 2002	6,459,590	.85	-
Granted	1,459,705	.38	-
Exercised	-		-
Canceled	(56,788)	.74	-

Outstanding at June 30, 2003	7,862,507	.76	-
Granted	1,576,620	1.12	31,748	.69
Exercised	(517,769)	.44	-
Canceled	(97,525)	.78	-

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(22) STOCK OPTIONS (Continued)

Employee Plan (Continued)

Outstanding at June 30, 2004	8,823,833	.84	31,748	.69
Granted	-		4,253,159	.34
Exercised	(13,264)	.26	-
Canceled	(142,891)	.68	-

Outstanding at June 30, 2005	8,667,678	.98	4,284,907	.34
Granted	-		532,855	.18
Exercised	-		-
Canceled	(254,277)	.74	(23,100)	.26

Outstanding at June 30, 2006	8,413,401	.96	4,794,662	.32
Granted	-		3,927,437	.10
Exercised	-		-
Canceled	(4,804)	.70	(131,684)	.16

Outstanding at June 30, 2007	8,408,597	.96	8,590,415	.22
Granted	-		2,336,526	.05
Exercised	-		-
Canceled	(29,750)	.60	(2,707,852)	.14

Outstanding at June 30, 2008	8,378,847	.90	8,219,089	.20
Granted	-		7,123,300	.01
Exercised	-		-
Canceled	(1,094,655)	.60	(495,846)	.18

Outstanding at June 30, 2009	7,284,152	.95	14,846,543	.20
Granted	-		18,600,000	.05
Exercised	-		-
Canceled	(230,913)	.79	(203,769)	.08

Outstanding at June 30, 2010	7,053,239	1.02	33,242,774	.08
Granted	-		2,200,000	.02
Exercised	-		-
Canceled	(1,480,689)	2.11	(4,115,319)	.27

Outstanding at June 30, 2011	5,572,550	.73	31,327,455	.05

** On June 25, 1999, the exercise price of 502,225 outstanding incentive stock options was restated to $.60 per share. The Company has recorded compensation of $330,569 during the fiscal year ended June 30, 1999 as a result of this re-pricing, in accordance with the guidance provided by ASC 718.

Director Plan:

	Incentive Stock Options		Non Statutory Stock Options
	Shares	Wtd. Avg. Price	Shares	Wtd. Avg. Price

Outstanding at June 30, 2000	-0-		-
Granted	150,000	$.65	-
Exercised	-		-
Canceled	-		-

Outstanding at June 30, 2001	150,000	.65	-
Granted	300,000	.55	-
Exercised	-		-
Canceled	-		-

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(22) STOCK OPTIONS (Continued)

Director Plan (Continued)

Outstanding at June 30, 2002	450,000	.58	-
Granted	400,000	.18	-
Exercised	-		-
Canceled	-		-

Outstanding at June 30, 2003	850,000	.40	-
Granted	100,000	1.07	700,000	.76
Exercised	(450,000)	.58	-
Canceled	-		-

Outstanding at June 30, 2004	500,000	.39	700,000	.76
Granted	-		800,000	.35
Exercised	-		-
Canceled	-		-

Outstanding at June 30, 2005	500,000	.39	1,500,000	.54
Granted	-		800,000	.14
Exercised	-		-
Canceled	-		-

Outstanding at June 30, 2006	500,000	.39	2,300,000	.40
Granted	-		800,000	.08
Exercised	-		-
Canceled	-		-

Outstanding at June 30, 2007	500,000	.39	3,100,000	.32
Granted	-		600,000	.05
Exercised	-		-
Canceled	-		-

Outstanding at June 30, 2008	500,000	.39	3,700,000	.27
Granted	-		-
Exercised	-		-
Canceled	-		-

Outstanding at June 30, 2009	500,000	.39	3,700,000	.27
Granted	-		-
Exercised	-		-
Canceled	-		-

Outstanding at June 30, 2010	500,000	.39	3,700,000	.27
Granted	-		-
Exercised	-		-
Canceled	(500,000)	.39	(3,700,000)	.27

Outstanding at June 30, 2011	-		-

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(22) STOCK OPTIONS (Continued)

A summary of the vested and exercisable stock options of the Company is presented as follows:

	June 30, 2011	June 30, 2010
Employee ISO	5,572,550	7,053,239
Director ISO	-	500,000
Employee Non-Statutory	28,906,923	23,442,789
Director Non-Statutory	-	3,700,000

Total	34,479,473	34,696,028

Shares of authorized common stock have been reserved for the exercise of all options outstanding. The following summarizes the option transactions that have occurred:

On July 5, 1994 the Company issued non-qualified options to its officers and directors to purchase an aggregate of 750,000 shares of common stock at 35% of the fair market value at the date of grant. Compensation expense of $567,164 was recorded during the year ended June 30, 1996 as a result of the discount from the market value.

On November 7, 1994, the Company granted 300,000 non-qualified options to its general counsel, then a vice-president of the Company, at an exercise price of $0.50 per share. Deferred compensation of $150,000 was recorded on the transaction and is being amortized over the vesting period. The options were all exercised as of June 30, 1997.

On March 30, 1995, the Company granted to the director of engineering, a non-qualified option to purchase up to 150,000 shares of common stock per year, or a total of 450,000 shares, during the period March 30, 1995 and ending March 31, 1999. The exercise price shall be $0.35 per share. The options did not “vest” until one year from the anniversary date. Deferred compensation of $472,500 was recorded on the transaction and is being amortized over the vesting period. The Company also granted the individual, incentive options to purchase 75,000 shares of common stock at an exercise price of $1.40 per share. The options originally expired on March 30, 1998, but were reissued on March 30, 1998 for two years.

On July 5, 1995 the Company issued non-qualified options to its officers and directors to purchase an aggregate of 750,000 shares of common stock at 35% of the fair market value at the date of grant. Compensation expense was recorded during the year ended June 30, 1996 as a result of the discount from the market value.

On September 1, 1995, the Company issued to its three officers and directors incentive options to purchase 107,527 shares, individually, at an exercise price of $0.93 per share (110% of the fair market value). The options expired on September 1, 1999.

On September 1, 1995, the Company issued to an employee incentive options to purchase 119,047 shares of common stock at an exercise price of $0.84 per share. The options expired on September 1, 1999

At various dates during the fiscal year ended June 30, 1996, the Company issued to various employees incentive options to purchase 328,681 shares of common stock at prices ranging from $0.81 to $8.18. In all instances, the exercise price was established as the fair market value of the common stock at the date of grant, therefore no compensation was recorded on the issuance of the options. In most cases, one-third of the options vested one year from the grant date, with one-third vesting each of the next two years. The options expire in ten years from the grant date.

On July 4, 1996, the Company issued to its three officers and directors incentive options to purchase 22,883 shares, individually, at an exercise price of $4.37 per share (110% of the fair market value). The options expired on July 4, 2001.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(22)	STOCK OPTIONS (Continued)

On July 5, 1996 the Company issued non-qualified options to its officers and directors to purchase an aggregate of 750,000 shares of common stock at 35% of the fair market value at the date of grant. Deferred compensation of $1,891,500 was recorded on the transaction and was being amortized over the remaining term of the employment contracts (three years).

At various dates during the year ended June 30, 1997, the Company issued to various employees incentive options to purchase 264,778 shares of common stock at prices ranging from $2.56 to $3.81. In all instances, the exercise price was established as the fair market value of the common stock at the date of grant, therefore no compensation was recorded on the issuance of the options. In most cases, one-third of the options vested one year from the grant date, with one-third vesting each of the next two years. The options expired in ten years from the grant date.

On July 4, 1997, the Company granted to its three officers and directors incentive options to purchase 34,000 shares, individually, at an exercise price of $2.94 per share (110% of the fair market value). The options expired on July 4, 2002.

On July 5, 1997, the Company issued non-qualified options to its officers and directors to purchase 750,000 shares of common stock at 35% of the fair market value at the date of grant. Deferred compensation of $1,340,625 was recorded on the transaction and was amortized over the remaining term of the employment contract (two years).

At various dates during the year ended June 30, 1998, the Company issued to various employees incentive options to purchase 204,905 shares of common stock at prices ranging from $.55 to $2.60. In all instances, the exercise price was established as the fair market value of the common stock at the date of grant, therefore no compensation was recorded on the issuance of the options. In most cases, one-third of the options vested one year from the grant date, with one-third vesting each of the next two years. The options expired in ten years from the grant date.

On July 5, 1998, the Company issued non-qualified options to its officers and directors to purchase 750,000 shares of common stock at 35% of the fair market value at the date of grant. Deferred compensation of $622,500 was recorded on the transaction and was amortized over the remaining term of the employment contract (one year).

At various dates during the year ended June 30, 1999, the Company issued to various employees incentive options to purchase 786,635 shares of common stock at prices ranging from $.46 to $.60. In all instances, the exercise price was established as the fair market value of the common stock at the date of grant, therefore no compensation was recorded on the issuance of the options. In most cases, one-third of the options vested one year from the grant date, with one-third vesting each of the next two years. The options expired in ten years from the grant date.

At various dates during the year ended June 30, 2000, the Company issued to its officers and various employees incentive options to purchase 3,139,459 shares of common stock at prices ranging from $.23 to $4.38. The exercise price was established at the fair market value of the common stock at the date of grant for employees and 110% of the fair market value at the date of grant for officers, therefore no compensation was recorded on the issuance of the options. The officers’ options vested immediately, while the employees’ options vested one-third from the grant date, with one-third vesting each of the next two years. The options expired in five years from the grant date.

At various dates during the year ended June 30, 2001, the Company issued to its officers and various employees incentive options to purchase 1,915,700 shares of common stock at prices ranging from $.65 to $2.85. The exercise price was established as the fair market value of the common stock at the date of grant for employees and 110% of the fair market

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(22)	STOCK OPTIONS (Continued)

value at the date of grant for officers, therefore no compensation was recorded on the issuance of the options. The officers’ options vested immediately, while the employees’ options vested one-third from the grant date, with one-third vesting each of the next two years. The options expired in five years from the grant date.

In addition, on November 20, 2000 the Company granted to each director a stock option to purchase 50,000 shares (an aggregate of 150,000 shares) of the Company’s common stock at an exercise price of $.65 per share. The option expires in ten years and became exercisable on a quarterly pro-rata basis (12,500 shares) from the date of grant. The option is not intended to be an incentive stock option pursuant to Section 422 of the Internal Revenue Code.

At various dates during the year ended June 30, 2002, the Company issued to its officers and various employees incentive options to purchase 6,839,864 shares of common stock at prices ranging from $.50 to $.93. The exercise price was established as the fair market value of the common stock at the date of grant for employees and 110% of the fair market value at the date of grant for officers, therefore no compensation was recorded on the issuance of the options.

Vesting for certain of the officers’ options was immediately, while the other officers’ options and the employees’ options vested over varying periods up to three years from the date of grant. The options expire from four to ten years from the grant date.

In addition, on November 20, 2001 the Company granted to each director a stock option to purchase 100,000 shares (an aggregate of 300,000 shares) of the Company’s common stock at an exercise price of $.55 per share. The option expired in ten years and became exercisable on a quarterly pro-rata basis (25,000 shares) from the date of grant. The option was not intended to be an incentive stock option pursuant to Section 422 of the Internal Revenue Code.

At various dates during the year ended June 30, 2003, the Company issued to its officers and various employees incentive options to purchase 1,459,705 shares of common stock at prices ranging from $.19 to $.79. The exercise price was established as the fair market value of the common stock at the date of grant for employees and 110% of the fair market value at the date of grant for officers, therefore no compensation was recorded on the issuance of the options. Vesting for certain of the officers’ options was immediate, while the other officers’ options and the employees’ options vested over varying periods up to three years from the date of grant. The options expire from four to ten years from the grant date.

In addition, at various dates during the year ended June 30, 2003 the Company granted to each new director a stock option to purchase 100,000 shares (an aggregate of 400,000 shares) of the Company’s common stock at exercise price ranging from $.20 to $.25 per share. The option expires in ten years and became exercisable on a quarterly pro-rata basis (25,000 shares) from the date of grant. The option was not intended to be an incentive stock option pursuant to Section 422 of the Internal Revenue Code.

At various dates during the year ended June 30, 2004, the Company issued to its officers and various employees incentive options to purchase 1,576,620 shares of common stock at prices ranging from $.81 to $1.25. At various dates during the year ended June 30, 2004, the Company issued to various employees Non-Statutory options to purchase 31,748 shares of common stock at prices ranging from $.39 to $.78. The exercise price was established as the fair market value of the common stock at the date of grant for employees, and 110% of the fair market value at the date of grant for an officer, therefore no compensation was recorded on the issuance of the options. Vesting for certain of the officers’ options is immediate, while the other officers’ options and the employees’ options vested over varying periods up to five years from the date of grant. The options expire from four to ten years from the grant date.

In addition, at various dates during the year ended June 30, 2004, the Company issued to its Directors stock options to purchase 100,000 shares of the Company’s common stock at prices ranging from $1.03 to $1.11. At various dates during the year ended June 30, 2004, the Company issued to its Directors Non-Statutory options to purchase 700,000 shares of

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(22)	STOCK OPTIONS (Continued)

common stock at prices ranging from $.69 to $.88. The options expire in ten years and became exercisable on a quarterly pro-rata basis (50,000 shares) from the date of grant. Options issued to the Directors are not intended to be incentive stock options pursuant to Section 422 of the Internal Revenue Code.

At various dates during the year ended June 30, 2005, the Company issued to various employees and two consultants Non-Statutory options to purchase 4,253,159 shares of common stock at prices ranging from $.20 to $.44. The exercise price was established as the fair market value of the common stock at the date of grant for employees and 110% of the fair market value at the date of grant for an officer, therefore no compensation was recorded on the issuance of the options. Vesting for certain of the officers’ options was immediate, while the other officers’ options and the employees’ options vest over varying periods up to five years from the date of grant. The options expire from four to ten years from the grant date.

At various dates during the year ended June 30, 2005, the Company issued to its Directors Non-Statutory options to purchase 800,000 shares of common stock at prices ranging from $.31 to $.44. The options expire in ten years and shall become exercisable on a quarterly pro-rata basis (50,000 shares) from the date of grant. Options issued to the Directors are not intended to be incentive stock options pursuant to Section 422 of the Internal Revenue Code.

At various dates during the year ended June 30, 2006, the Company issued to various employees Non-Statutory options to purchase 532,855 shares of common stock at prices ranging from $.14 to $.30. The exercise price was established as the fair market value of the common stock on the date of grant for employees. Options granted during the fiscal year ended June 30, 2006 vest over varying periods from one year up to three years from the date of grant. The options expire ten years from the grant date.

At various dates during the year ended June 30, 2006, the Company issued to its Directors Non-Statutory options to purchase 800,000 shares of common stock at prices ranging from $.13 to $.14. The options expire in ten years and shall become exercisable on a quarterly pro-rata basis (50,000 shares) from the date of grant. Options issued to the Directors are not intended to be incentive stock options pursuant to Section 422 of the Internal Revenue Code.

For the fiscal year ending June 30, 2006, the total compensation for options recorded was $632,558. We have $479,717 of non-cash unvested stock option compensation remaining to be expensed over the next three years. These unvested options are being expensed each quarter over the remaining vesting periods.

At various dates during the year ended June 30, 2007, the Company issued to various employees Non-Statutory options to purchase 3,927,437 shares of common stock at prices ranging from $.085 to $.127. The exercise price was established as the fair market value of the common stock on the date of grant for employees. Options granted during the fiscal year ended June 30, 2007 vest over varying periods from six-months up to three years from the date of grant. The options expire ten years from the grant date.

At various dates during the year ended June 30, 2007, the Company issued to its Directors Non-Statutory options to purchase 800,000 shares of common stock at prices ranging from $.069 to $.089. The options expire in ten years and shall become exercisable on a quarterly pro-rata basis (50,000 shares) from the date of grant. Options issued to the Directors are not intended to be incentive stock options pursuant to Section 422 of the Internal Revenue Code.

For the fiscal year ending June 30, 2007, the total compensation for options recorded was $431,313. We have $299,911 of non-cash unvested stock option compensation remaining to be expensed over the next three years. These unvested options are being expensed each quarter over the remaining vesting periods.

At various dates during the year ended June 30, 2008, the Company issued to various employees Non-Statutory options to purchase 2,336,526 shares of common stock at prices ranging from $.042 to $.084. The exercise price was established as the fair market value of the common stock on the date of grant for employees. Options granted during the

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(22)	STOCK OPTIONS (Continued)

fiscal year ended June 30, 2008 vest over varying periods from one year up to three years from the date of grant. The options expire ten years from the grant date.

At various dates during the year ended June 30, 2008, the Company issued to its Directors Non-Statutory options to purchase 600,000 shares of common stock at prices ranging from $.05 to $.051. The options expire in ten years and shall become exercisable on a quarterly pro-rata basis (50,000 shares) from the date of grant. In connection with the resignations of the three outside directors, we agreed to vest their respective options for 200,000 shares each which we granted in late 2007 and early 2008. Options issued to the Directors are not intended to be incentive stock options pursuant to Section 422 of the Internal Revenue Code.

In connection with the sale of our commercial property to Bright Investments, LLC, we agreed to grant a two-year Non-Qualified option to purchase 3,000,000 shares of common stock at $.035 upon the receipt of the down payment which was August 2, 2007.

For the fiscal year ending June 30, 2008, the total compensation for options recorded was $183,182. We have $79,633 of non-cash unvested stock option compensation remaining to be expensed over the next three years. These unvested options are being expensed each quarter over the remaining vesting periods.

At various dates during the year ended June 30, 2009, the Company issued to various employees Non-Statutory options to purchase 7,123,300 shares of common stock at prices ranging from $.01 to $.055. The exercise price was established as the fair market value of the common stock on the date of grant for employees. Options granted during the fiscal year ended June 30, 2009 vest over varying periods from immediately up to three years from the date of grant. The options expire ten years from the grant date.

For the fiscal year ending June 30, 2009, the total compensation for options recorded was $145,577. We have $10,178 of non-cash unvested stock option compensation remaining to be expensed over the next three years. These unvested options are being expensed each quarter over the remaining vesting periods.

At various dates during the year ended June 30, 2010, the Company issued to various employees Non-Statutory options to purchase 18,600,000 shares of common stock at prices ranging from $.022 to $.05. The exercise price was established as the fair market value of the common stock on the date of grant for employees. Options granted during the fiscal year ended June 30, 2010 vest over varying periods from immediately up to two years from the date of grant. The options expire ten years from the grant date.

For the fiscal year ending June 30, 2010, the total compensation for options recorded was $588,483. We have $334,037 of non-cash unvested stock option compensation remaining to be expensed over the next three years. These unvested options are being expensed each quarter over the remaining vesting periods.

At various dates during the year ended June 30, 2011, the Company issued to various employees Non-Statutory options to purchase 2,200,000 shares of common stock at an exercise price of $.027. The exercise price was established as the fair market value of the common stock on the date of grant for employees. Options granted during the fiscal year ended June 30, 2011 vest one year from the date of grant. The options expire ten years from the grant date.

For the fiscal year ending June 30, 2011, the total compensation for options recorded was $375,704. We have $48,978 of non-cash unvested stock option compensation remaining to be expensed over the next three years. These unvested options are being expensed each quarter over the remaining vesting periods.

The intrinsic value of a stock option/SSAR is the amount by which the market value of the underlying stock exceeds the exercise price of the option/SSAR. The intrinsic value for options/SSARs exercised in the fiscal years ended June 30, 2011 and 2010 was $-0- and $-0-, respectively.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(22)	STOCK OPTIONS (Continued)

The following table summarizes information about all of the stock options outstanding at June 30, 2011:

Outstanding options

Exercisable options

Weighted

average

Range of

remaining

Weighted

exercise prices

life (years)

avg. price

.01 - 1.25

36,900,004

7.25

.15

34,479,473

.19

At June 30, 2011, the Company has issued options pursuant to five different stock option plans, which have been previously described. On March 11, 2010, the Board adopted the Company’s 2010 Non-Statutory Stock Option Plan (the “2010 Plan”) and re-adopted the 2010 Plan on February 3, 2011, which was adopted by the shareholders at our annual meeting held on July 12, 2011.

(23) CONCENTRATION OF CREDIT RISK

During the year, the Company has occasionally maintained cash balances in excess of the Federally insured limits of $250,000. The funds are on deposit with Wells Fargo Bank, N.A.. Consequently, the Company does not believe that there is a significant risk in having these balances in one financial institution. The cash balance with the bank at June 30, 2011 was $189,135.

(24)	FAIR VALUE OF FINANCIAL INSTRUMENTS

The carrying values of cash and cash equivalents, receivables, accounts payable, short-term debt and accrued liabilities approximated their fair values due to the short maturity of these instruments. After a review of our accounts receivable, the Company has recorded an allowance of $23,500 for doubtful accounts. The fair value of the Company’s debt obligations is estimated based on the quoted market prices for the same or similar issues or on current rates offered to the Company for debt of the same remaining maturities. At June 30, 2011 and 2010, the aggregate fair value of the Company’s debt obligations approximated its carrying value.

The Company relies upon the guidance of ASC 820 (“Fair Value Measurements and Disclosures”). ASC 820 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 820 establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 establishes three levels of inputs that may be used to measure fair value:

Level 1 - Quoted prices in active markets for identical assets or liabilities.

Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(24) FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed and is determined based on the lowest level input that is significant to the fair value measurement.

Upon adoption of ASC 820, there was no cumulative effect adjustment to the beginning retained earnings and no impact on the consolidated financial statements.

The carrying value of the Company’s cash and cash equivalents, accounts payable, short-term borrowings (including convertible notes payable), and other current liabilities approximate fair value because of their short-term maturity. All other significant financial assets, financial liabilities and equity instruments of the Company are either recognized or disclosed in the consolidated financial statements together with other information relevant for making a reasonable assessment of future cash flows, interest rate risk and credit risk. Where practicable the fair values of financial assets and financial liabilities have been determined and disclosed; otherwise only available information pertinent to fair value has been disclosed.

The following table sets forth the Company’s financial instruments as of June 30, 2011 which are recorded on the balance sheet at fair value on a recurring basis by level within the fair value hierarchy. As required by ASC 820, these are classified based on the lowest level of input that is significant to the fair value measurement:


	Quoted Prices in Active Markets for Identical Instruments Level 1	Significant Other Observable Inputs Level 2	Significant Unobservable Inputs Level 3			Assets at Fair Value

Liabilities:
Series L Convertible Preferred Stock	$	$	$	(200,000	)	$	(200,000	)
Series L Accrued Dividend Payable				(35,864	)		(35,864	)
Derivative Liability				(794,072	)		(794,072	)

At June 30, 2011, the carrying amount of the Series L Convertible Preferred Stock at par value is deemed to be the fair value. The balance sheet also reflects a liability for the accrued dividend payable on the Series L Convertible Preferred Stock.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(25) COMMITMENTS AND CONTINGENCIES

In June 1998, IDSI signed an exclusive patent license agreement with Mr. Grable, which encompasses the technology for the CTLM®. Mr. Grable’s interests in the patent license agreement passed to his estate in August 2001. Mrs. Grable is the principal beneficiary of Mr. Grable’s estate. The term of the license is for the life of the Patent (17 years) and any renewals, subject to termination under specific conditions. The license agreement provides for a royalty based upon a percentage, ranging from 6% to 10%, of the dollar amount earned from each sale before taxes minus the cost of the goods sold and commissions or discounts paid. We are obligated to pay royalties based on the formula upon receiving FDA approval to market the CTLM® in the U.S. In addition, following FDA approval, Mrs. Grable would be eligible for minimum royalties of $250,000 per year based on the sales of the products and goods in which the CTLM® patent is used.

In April 2008, we were served with a lawsuit filed against us in Venice, Italy, by Gio Marco S.p.A. and Gio IDH S.p.A., related Italian companies which, between them, had purchased three CTLM® systems in 2005. One system was purchased directly from us, and the other two were purchased from our former Italian distributor and an affiliate of the distributor. We are obligated to pay an additional legal fee of 2,000 Euros in December 2009 in this matter.

The plaintiffs allege that they purchased the CTLM® systems for experimental purposes based on alleged oral assurances by our sales representative to the effect that we would promptly receive FDA approval for the CTLM® and that we would give them exclusive distribution rights in Italy. The plaintiffs are seeking to recover a total of €628,595, representing the aggregate purchase price of the systems plus related expenses.

Based on our preliminary investigation of this matter, we believed that this claim was without merit, and we vigorously defended the case. Our Italian counsel responded to the lawsuit in November 2008 and requested and was granted an extension to May 2009 to respond. Our counsel filed our defenses in the Court of Venice at a hearing held in June 2009. The judge set the next hearing for March 3, 2010 in order to allow the parties to clarify their claims and defenses. At the hearing, the plaintiffs did not prove all of the facts underlying their claims. The Judge set a hearing for November 10, 2010 for the “clarification of conclusions”. At that time, our counsel planned to present our demand for damages from “vexatious litigation” by the plaintiffs. The November 10, 2010 hearing was postponed until November 17, 2010. At the hearing, the plaintiffs failed to present their statements to the courtin a timely manner and therefore, we believe that the plaintiffs should no longer be able to pursue any legal remedy in this matter. The last hearing of the case was held on November 17, 2010. We will have to wait for the court to issue a final dismissal in this matter.

On March 5, 2010, the Company entered into a six month Finders Agreement with an entity to provide introductions to potential investors so that the Company would be able to obtain financing in the amount of up to Twenty Million dollars ($20,000,000). As compensation for its services under the agreement, the Finder shall be entitled to receive an amount equal to 7% of gross proceeds received in cash by the Company and resulting from introductions made by the Finder which resulted in financing to the Company during the term. On August 26, 2010, the Company extended the Finders Agreement for six (6) additional months automatically terminating on March 5, 2011.

On March 22, 2010, the Company entered into two-year employment agreement and accompanying stock option agreement with Linda B. Grable, our Chief Executive Officer. The agreement provided an annual base salary of $168,000. Ms. Grable was also granted an option to purchase 6,000,000 shares of the Company’s common stock, of which 3,000,000 shares vested and became exercisable on the effective date of the employment agreement and 3,000,000 shares shall vest and become exercisable on March 22, 2011. The option exercise price per share is $.05, the closing price of the Company’s common stock on March 22, 2010. Ms. Grable’s new employment agreement replaces her previous employment agreement which expired on April 15, 2010.

On March 22, 2010, the Company entered into two-year employment agreement and accompanying stock option agreement with Allan L. Schwartz, our Executive Vice-President and Chief Financial Officer. The agreement provided an annual base salary of $192,400. Mr. Schwartz was also granted an option to purchase 6,000,000 shares of the Company’s common stock, of which 3,000,000 shares vested and became exercisable on the effective date of the employment agreement and 3,000,000 shares shall vest and become exercisable on March 22, 2011. The option exercise price per share is $.05, the closing price of the Company’s common stock on March 22, 2010. His previous employment agreement expired on March 22, 2010.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(25) COMMITMENTS AND CONTINGENCIES (Continued)

On March 22, 2010, the Company entered into two-year employment agreement with Deborah O’Brien, our Senior Vice-President. The agreement provided an annual base salary of $138,000. Ms. O’Brien was also granted an option to purchase 6,000,000 shares of the Company’s common stock, of which 3,000,000 shares vested and became exercisable on the effective date of the employment agreement and 3,000,000 shares shall vest and become exercisable on March 22, 2011. The option exercise price per share is $.05, the closing price of the Company’s common stock on March 22, 2010. Her previous employment agreement expired on September 14, 2008.

We previously carried $3,000,000 in product liability insurance to cover both clinical sites and sales. As part of our cost savings initiatives, we cancelled the policy as we have not had any adverse experiences after conducting more then 17,000 patient scans worldwide. We are now self-insuring the risk of product liability.

During fiscal 2011, we have not made any cash payments to reduce the balance of accrued payroll taxes. The increase of $295,883 in payroll tax penalty and interest were due to the recording of calendar year 2010 penalties and interest in fiscal 2011.

If we ultimately are unable to pay the outstanding tax, penalties and interest on a timetable satisfactory to the IRS, then we may have to cease operations.

(26) SUBSEQUENT EVENTS - UNAUDITED

At our annual meeting on July 12, 2011, our shareholders approved a proposal to increase our authorized shares from 950,000,000 to 2,000,000,000.

On July 21, 2011, we entered into an agreement with Ft. Lauderdale Business Plaza Associates, an unaffiliated third-party, for an additional 4,800 square feet of commercial office space at 5301 NW 35th Terrace, Ft. Lauderdale, Florida. The term of the lease will run concurrent with our original lease commencing on September 1, 2011 and terminating on September 30, 2013. The monthly base rent for the initial year is $4,500 plus applicable sales tax and increase by 3.5% each year to the lease expiration.

As of September 20, 2011, we owe a total of $2,061,944 in short-term debt. Of the $2,061,944 we owe a total of $1,437,444 in principal, $606,824 in premium and $17,676 in interest. We have received loan extensions on all of our short-term notes to September 30, 2011.

As of September 20, 2011, we owe a total of $371,228 in long-term debt. Of the $371,228 we owe a total of $285,825 in principal, $50,000 is consideration on the principal and $36,000 is interest.

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(26) SUBSEQUENT EVENTS - UNAUDITED (Continued)

common stock at a conversion price equal to the lesser of (a) $0.01 or (b) 70% of the average of the three lowest closing bid prices during the 10 trading days immediately prior to the date of the conversion notice.

On August 24, 2011, Southridge executed a partial debt to equity conversion of a $80,000 short-term promissory note dated February 7, 2011 in which they converted $20,000 principal

10-K/A Financial Table of Contents

IMAGING DIAGNOSTIC SYSTEMS, INC.

(a Development Stage Company)

Notes to Financial Statements (Continued)

(26) SUBSEQUENT EVENTS - UNAUDITED (Continued)

plus accrued interest of $868. We issued Southridge 2,086,795 common shares pursuant to Rule 144 based on an agreed exchange price of $0.01 per share. We still owe Southridge $60,000 principal, $12,000 in premium and $2,683 in interest associated with this note.

On September 9, 2011, we issued a private investor 3,000,000 common shares pursuant to Rule 144 in connection with a short-term promissory note totaling $60,000 dated December 13, 2010.

The Company has entered into agreements with various distributors located throughout Europe, Asia and South America to market the CTLM® device. The terms of these agreements range from twelve months to three years. The Company has the right to renew the agreements, with renewal periods ranging from one to five years.

Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K

(a) Exhibits

EXHIBIT

DESCRIPTION

3.1	Articles of Incorporation (Florida)- Incorporated by reference to Exhibit 3(a) of our Form 10-KSB for the fiscal year ending June 30, 1995.
3.2	Amendment to Articles of Incorporation (Designation of Series A Convertible Preferred Shares) - Incorporated by reference to Exhibit 3. (i). 6 of our Form 10-KSB for the fiscal year ending June 30, 1996. File number 033-04008.
3.3	Amendment to Articles of Incorporation (Designation of Series B Convertible Preferred Shares). Incorporated by reference to our Registration Statement on Form S-1 dated July 1, 1997.
3.4	Amendment to Articles of Incorporation (Designation of Series C Convertible Preferred Shares). Incorporated by reference to our Form 8-K dated October 15, 1997.
3.5	Amendment to Articles of Incorporation (Designation of Series D Convertible Preferred Shares). Incorporated by reference to our Form 8-K dated January 12, 1998.
3.6	Amendment to Articles of Incorporation (Designation of Series E Convertible Preferred Shares). Incorporated by reference to our Form 8-K dated February 19,1998.
3.7	Amendment to Articles of Incorporation (Designation of Series F Convertible Preferred Shares). Incorporated by reference to our Form 8-K dated March 6, 1998.
3.8	Amendment to Articles of Incorporation (Designation of Series H Convertible Preferred Shares). Incorporated by reference to our Registration Statement on Form S-2 File Number 333-59539.
3.9	Certificate of Dissolution - is incorporated by reference to Exhibit (3)(a) of our Form 10-KSB for the fiscal year ending June 30, 1995.
3.10	Articles of Incorporation and By- Laws (New Jersey) -are incorporated by reference to Exhibit 3 (i) of our Form 10-SB, as amended, file number 0-26028, filed on May 6, 1995 ("Form 10-SB").
3.11	Certificate and Plan of Merger - is incorporated by reference to Exhibit 3(i) of the Form 10-SB.
3.12	Certificate of Amendment - is incorporated by reference to Exhibit 3(i) of the Form 10-SB.
3.13	Amended Certificate of Amendment-Series G Designation.
3.14	Certificate of Amendment-Series I Designation
3.15	Amended Certificate of Amendment-Series B Designation
3.16	Certificate of Amendment-Series K Designation. Incorporated by reference to our Form 10-KSB for the fiscal year ending June 30, 2000 filed on September 14, 2000.
3.17	Certificate of Amendment-Series L Designation.
10.2	Patent Licensing Agreement. Incorporated by reference to our Registration Statement on Form S-2, File Number 333-59539.
10.70	License Agreement dated as of June 16, 2006, as amended as of August 30, 2006, between Bioscan, Inc. and Imaging Diagnostic Systems, Inc. Incorporated by reference to our Form 8-K, filed on September 5, 2006.
10.77	2007 Non-Statutory Stock Option Plan
10.78	Agreement of Sale by and between Imaging Diagnostic Systems, Inc. and Superfun B.V. dated September 13, 2007 including Form of Lease Agreement (Exhibit D). Incorporated by reference to our Form 8-K filed on September 13, 2007.
10.79	Lease Agreement by and between Bright Investments, LLC (“Landlord”) and Imaging Diagnostic Systems, Inc. (“Tenant”) dated March 14, 2008. Incorporated by reference to our Form 8-K filed on April 3, 2008.
10.81	Sixth Private Equity Credit Agreement between IDSI and Charlton Avenue LLC dated April 21, 2008 without exhibits. Incorporated by reference to our Form 8-K filed on April 22, 2008.
10.82	Two-Year Employment Agreement dated as of April 16, 2008 between Imaging Diagnostic Systems, Inc. and Linda B. Grable, Interim CEO. Incorporated by reference to our Form 8-K filed on May 5, 2008.
10.83	Stock Option Agreement dated as of April 16, 2008 between Imaging Diagnostic Systems, Inc. and Linda B. Grable, Interim CEO. Incorporated by reference to our Form 8-K filed on May 5, 2008.
10.84	Business Lease Agreement by and between Ft. Lauderdale Business Plaza Associates (“Lessor”) and Imaging Diagnostic Systems, Inc. (“Lessee”) dated June 2, 2008. Incorporated by reference to our Form 8-K filed on June 5, 2008.
10.85	Financial Services Agreement by and between Imaging Diagnostic Systems, Inc. (the “Company” or “IDSI”) and R.H. Barsom Company, Inc. (the “Consultant”) dated July 15, 2008. Incorporated by reference to our Form 8-K filed on July 18, 2008.

10.86	Securities Purchase Agreement by and between Imaging Diagnostic Systems, Inc. (the “Company” or “IDSI”) and Whalehaven Capital Fund Limited (the “Purchaser” and collectively, the “Purchasers”) dated July 31, 2008. Incorporated by reference to our Form 8-K filed on August 5, 2008.
10.87	Form of 8% Senior Secured Convertible Debenture, Exhibit A. Incorporated by reference to our Form 8-K filed on August 5, 2008.
10.88	Registration Rights Agreement, Exhibit B. Incorporated by reference to our Form 8-K filed on August 5, 2008.
10.89	Common Stock Purchase Warrant, Exhibit C. Incorporated by reference to our Form 8-K filed on August 5, 2008.
10.90	Form of Legal Opinion, Exhibit D. Incorporated by reference to our Form 8-K filed on August 5, 2008.
10.91	Security Agreement, Exhibit E. Incorporated by reference to our Form 8-K filed on August 5, 2008.
10.92	Amendment Agreement by and between Imaging Diagnostic Systems, Inc. (the “Company”) and Whalehaven Capital Fund Limited (“Whalehaven”, or the “Holder”) dated as of October 23, 2008. Incorporated by reference to our Form 8-K filed on October 23, 2008.
10.93	Securities Purchase Agreement by and between Imaging Diagnostic Systems, Inc. (the “Company” or “IDSI”) and Whalehaven Capital Fund Limited (the “Purchasers”) dated November 20, 2008. Incorporated by reference to our Form 8-K filed on November 26, 2008.
10.94	Form of 8% Senior Secured Convertible Debenture, Exhibit A. Incorporated by reference to our Form 8-K filed on November 26, 2008.
10.95	Registration Rights Agreement, Exhibit B. Incorporated by reference to our Form 8-K filed on November 26, 2008.
10.96	Form of Legal Opinion, Exhibit D. Incorporated by reference to our Form 8-K filed on November 26, 2008.
10.97	Security Agreement, Exhibit E. Incorporated by reference to our Form 8-K filed on November 26, 2008.
10.98	Amendment Agreement by and among Imaging Diagnostic Systems, Inc., Whalehaven Capital Fund Limited, and Alpha Capital Anstalt dated as of December 10, 2008. Incorporated by reference to our Form 8-K filed on December 12, 2008.
10.99	Amendment Agreement by and among Imaging Diagnostic Systems, Inc., Whalehaven Capital Fund Limited, and Alpha Capital Anstalt dated as of December 31, 2008. Incorporated by reference to our Form 8-K filed on January 5, 2009.
10.100	Amendment Agreement (Revised) by and among Imaging Diagnostic Systems, Inc., Whalehaven Capital Fund Limited, and Alpha Capital Anstalt dated as of December 31, 2008. Incorporated by reference to our Form 8-K/A filed on January 7, 2009.
10.101	Amendment Agreement by and among Imaging Diagnostic Systems, Inc., Whalehaven Capital Fund Limited, and Alpha Capital Anstalt dated as of March 20, 2009. Incorporated by reference to our Form 8-K filed on March 26, 2009.
10.102	One-Year Employment and Stock Option Agreement dated March 23, 2009 between Imaging Diagnostic Systems, Inc. and Linda B. Grable, Chief Executive Officer. Incorporated by reference to our Form 8-K filed on March 27, 2009.
10.103	One-Year Employment and Stock Option Agreement dated March 23, 2009 between Imaging Diagnostic Systems, Inc. and Allan L. Schwartz, Executive Vice President and Chief Financial Officer. Incorporated by reference to our Form 8-K filed on March 27, 2009.
10.104	Private Equity Credit Agreement between Imaging Diagnostic Systems, Inc. and Southridge Partners II LP dated November 23, 2009. Incorporated by reference to our Form 8-K filed on November 25, 2009.
10.105	Registration Rights Agreement between Imaging Diagnostic Systems, Inc. and Southridge Partners II LP dated November 23, 2009. Incorporated by reference to our Form 8-K filed on November 25, 2009.
10.106	Private Equity Credit Agreement (Amended) between Imaging Diagnostic Systems, Inc. and Southridge Partners II LP dated January 7, 2010. Incorporated by reference to our Form S-1 filed on January 12, 2010.
10.107	Registration Rights Agreement (Amended) between Imaging Diagnostic Systems, Inc. and Southridge Partners II LP dated January 7, 2010. Incorporated by reference to our Form S-1 filed on January 12, 2010.

10.108	Employment Agreement and Stock Option Agreement dated March 22, 2010, between Imaging Diagnostic Systems, Inc. and Linda B. Grable, Chief Executive Officer. Incorporated by reference to our Form 8-K filed on March 25, 2010.
10.109	Employment Agreement and Stock Option Agreement dated March 22, 2010, between Imaging Diagnostic Systems, Inc. and Allan L. Schwartz, Executive Vice President and Chief Financial Officer. Incorporated by reference to our Form 8-K filed on March 25, 2010.
10.110	Employment Agreement and Stock Option Agreement dated March 22, 2010, between Imaging Diagnostic Systems, Inc. and Deborah O’Brien, Senior Vice-President. Incorporated by reference to our Form 8-K filed on March 25, 2010.
10.111	2010 Non-Statutory Stock Option Plan dated March 11, 2010. Incorporated by reference to our Form S-1 Amendment No. 1 filed on May 24, 2010.
10.112	Convertible Promissory Note by and between Imaging Diagnostic Systems, Inc. (the “Company” or “Borrower”) and JMJ Financial (the “Lender or “JMJ’’) dated February 23, 2011, Exhibit A. Incorporated by reference to our Form 8-K/A filed on March 2, 2011.
10.113	Letter Addendum to Promissory Note dated February 23, 2011, Exhibit B. Incorporated by reference to our Form 8-K/A filed on March 2, 2011.
10.114	Registration Rights Agreement dated February 23, 2011, Exhibit C. Incorporated by reference to our Form 8-K/A filed on March 2, 2011.
10.115	Patent Licensing Agreement, originally filed as Exhibit 10.2 to Form S-2 on July 21, 1998 as a text document. Incorporated by reference to our S-1 Amendment No. 2, filed on March 15, 2011.
10.116	U.S. Patent 5.692,511 issued Dec. 2, 1997, Exhibit A to Patent Licensing Agreement filed as Exhibit 10.115. Incorporated by reference to our S-1 Amendment No. 3, filed on April 26, 2011.
14.2	Code of Conduct of Imaging Diagnostic Systems, Inc. dated November 7, 2007.
31.1	Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, Imaging Diagnostic Systems, Inc. has duly caused this report to be signed on our behalf by the undersigned, thereunto duly authorized,

IMAGING DIAGNOSTIC SYSTEMS, INC.

	By:	/s/ Linda B. Grable
		Linda B. Grable, Chief Executive Officer and Chairman of the Board of Directors

Pursuant to the requirements of the Securities Act of 1933, as amended, this Annual Report on Form 10-K/A has been signed by the following persons in the capacities and on the dates indicated.

Signatures	Title	Date


/s/Linda B. Grable	Chief Executive Officer	November 29, 2011
Linda B. Grable	and Chairman of the Board of Directors


/s/Allan L. Schwartz	Director, Executive Vice-President,	November 29, 2011
Allan L. Schwartz	and Chief Financial Officer
	(Principal Accounting and Financial
	Officer)


/s/ David Schmidt	Director	November 29, 2011
David Schmidt

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IMAGING DIAGNOSTIC SYSTEMS INC /FL/ - FORM 10-K/A - November 29, 2011

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IMAGING DIAGNOSTIC SYSTEMS INC /FL/ Reports