CEO'S LETTER TO SHAREHOLDERS OF IMAGING DIAGNOSTIC SYSTEMS, INC.
Fort Lauderdale, Florida, August 5, 2008-Imaging Diagnostic Systems, Inc., (OTCBB:IMDS)
Dear IDSI Shareholders,
As many of you know, I returned to the company 3 months ago to assume the position of Interim CEO and Chairman of the Board; we have received many phone calls from our shareholders asking essential questions about the Company's direction and future. As my first priority, I have recently secured a tiered debenture for up to 2 million dollars to aid in the clinical collection of the PMA data and the submission of the PMA application.
Over the past two years, the Company had installed upgraded CTLM systems, a new study protocol utilizing a new intended use at 10 various clinical sites throughout the United States. These sites are currently gathering cancer cases and non-cancer cases required to support the intended use hypothesis for the PMA application. Once the data required has been obtained it will be tested by independent radiologists, analyzed by our bio-statisticians and formalized into the PMA application for submission to the Food and Drug Administration (FDA). Developing an innovative medical imaging technology is a complicated and time consuming process. The CTLM is a innovative diagnostic imaging device designed to detect breast cancer without radiation or compression. Since the development of the first CTLM prototype, our engineering team has incorporated many improvements based on both new and evolving technologies in lasers, computer processors, image display, surface-mount electronics, and software. We believe we are on schedule to complete the data collection and submit the PMA application to the FDA in its entirety by the end of this year.
We have been fortunate enough to have a large number of longtime shareholders. They have experienced volumes of Company history and have been anticipating IDSI's technologic achievements and sales breakthrough. Since commercializing the CTLM in late 2002, we sold our first CTLM system in January 2003. Since that sale, we sold 12 additional units. There are CTLM systems sold or in clinical collaboration programs currently in China, Italy, Poland, Czech Republic, United Arab Emirates, and Malaysia. Our end users and clinical collaboration partners worldwide have completed more than 13,000 clinical scans. We have deposits for the purchase of CTLM systems from our distributors in Hong Kong and Turkey; and our Director of Global Marketing is working with our distributors to bring their earnest leads to sale before the end of the year. We anticipate the sale of eight CTLM systems before the end of the year in China, Italy, and the United Arab Emirates.
Our stock price has also faced challenges over the past several years as the Company evolved to establish itself on the market. IDSI is an equity funded Company. Since inception, substantially all of our necessary funding came from the proceeds of the sale of common stock, convertible preferred stock and convertible debentures. The convertible securities were all converted into common stock. In essence, our common stock is our currency and since January 2001 we have used a series of private equity credit agreements with Charlton Avenue, LLC, an institutional investor, to raise the capital necessary to fund the Company's operations. The use of private equity credit agreements is dilutive as the investor sells our shares into the market.
Cost cutting initiatives and staff reductions were initiated in April by the time I was appointed Interim CEO and Chairman of the Board. I met with Executive Management and we made the decision to terminate our lease pursuant to the six-month notice provision and to lease a smaller facility. Our current facility is 24,000 sq/ft with a base rent of $24,000 per month plus insurance, taxes and maintenance, which we estimate to be $9,440 per month for a total monthly cost of $33,440. Our new facility in Fort Lauderdale is 9,870 sq/ft and our total monthly rent including common area maintenance expenses and sales tax for the first year is $10,244.23 per month. This represents a 69% savings in office rent expense and we anticipate that our electric bill will be reduced proportionally. We have placed a temporary halt on new projects and all efforts are directed to the PMA filing and international sales.
In a press release dated December 27, 2007, IDSI announced the retirement of its CEO and Director, Tim Hansen. Subsequent to Mr. Hansen's retirement, we requested the resignations of our three outside directors; Jay Bendis; Patrick Gorman; and Sherman Lazrus in accordance to a request initiated by our investment banker as a condition for additional funding.
As a co-founder of IDSI and its former Chairman of the Board and CEO, I fought to maintain and improve the Company's financing and sales initiatives. I immediately arranged a new Sixth Private Equity Credit Agreement for $15 million over a three year period with Charlton Avenue LLC, who has provided substantially all of our necessary funding for the past eight years. Additionally, I began negotiating with other investment bankers and placement agents that could provide alternative financing. The management dynamics of the Company is changed. We have begun a more aggressive international sales and marketing program to appoint new distributors, terminate non-performing distributors and to offer introductory incentives to achieve sales. I traveled to China to visit our Representative Office and to interview our distributors to learn what support they need from the home office to sell CTLM systems. I also visited our clinical reference site at Tianjin Cancer Hospital and was very pleased with the acceptance of our technology at this prestigious hospital. Our Senior Vice President just traveled to Italy to meet with our distributor and to visit end-users and our clinical collaboration site at Catholic University in Rome. We will outsource additional experts as needed to expedite the filing of the PMA.
During this process the company will continue its efforts to raise additional funds to offset using the equity line and diluting the stock further. I want to personally thank all of the shareholders who have called me since April and want to assure you that I will do my best with the help of IDSI's management to achieve our strategic goals.