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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO. 2 TO FORM 10-QSB
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended
December 31, 1999
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 1097181
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MOBILE P.E.T. SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 11-2787966
(State or other jurisdiction (I.R.S. Employer
of organization) Identification No.)
2240 SHELTER ISLAND DRIVE #205
SAN DIEGO, CA 92106
(Address of principal executive offices)
(619) 226-6738
(Issuer's telephone number, including area code)
NOT APPLICABLE
(Former name, address and fiscal year, if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES / / NO /X/
As of December 31, 1999, 13,359,658 shares of the registrant's common
stock were outstanding.
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In January 2000, the Company conducted a private placement to
accredited investors of 550,000 shares of common stock at $1.75 per share,
the proceeds from which was $962,458.
Pursuant to an action by written consent of the majority of the
shareholders of the Company, effective January 28, 2000, the Company amended
and restated its Certificate of Incorporation to increase the number of
authorized shares from 20,000,000 shares to 100,000,000 shares, of which
90,000,000 shares are designated as common stock and 10,000,000 shares are
designated as preferred stock. The shares of preferred stock may be issued by
the Company's board of directors in such series and with such rights,
privileges and preferences as they may determine.
In March 2000, the Company completed a private placement of 60
shares of Series A Convertible Preferred Stock and 120,000 warrants to
purchase common stock exercisable at $5 per share to York, LLC, raising
proceeds of $3,000,000. Concurrently with this private placement, the
Company filed a Certificate of Designation to its Certificate of
Incorporation setting forth the rights, privileges, preferences and other
terms of the Series A Convertible Preferred Stock. York, LLC was granted one
demand registration right with respect to the common stock underlying the
Series A Convertible Preferred Stock and the warrants.
Each share of Series A Convertible Preferred Stock may be converted
into that number of shares of common stock equal to $50,000 divided by the
lesser of (i) $5, or (ii) 75% of the average closing bid price for our common
stock on the five days before the conversion date. Shares of Series A
Convertible Preferred Stock outstanding on March 1, 2003 will automatically
be converted into common stock based on the foregoing formula. The conversion
ratio is subject to adjustment in the event of certain reorganizations of our
company or based on certain issuances of common stock and options to purchase
common stock by our company.
In March 2000, the Company completed a private placement of
1,000,000 shares of common stock and 200,000 warrants exercisable at $1.75
per share to purchase common stock to accredited investors, raising proceeds
of $1,750,000. The investors in this private placement were granted
registration rights with respect to the common stock purchased and the common
stock underlying the warrants, on any SB-2, S-1 or S-3 registration statement
filed by the Company, subject to any limitations imposed by underwriters.
These registration rights were granted pursuant to the term sheet for the
private placement, and the Company does not anticipate entering into a formal
registration rights agreement with respect to these registration rights. The
holders of these registration rights have agreed that their common stock and
warrants will not be registered in the SB-2 registration statement to be
filed in connection with the Series A Convertible Preferred Stock financing
which we completed in March 2000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
For the period from our inception through September 30, 1999, we had
minimal revenues and our operating activities related primarily to
establishing the management and operating infrastructure to provide PET
systems and services to hospitals and other health care providers on a
mobile, shared user basis. During the six-month period ended December 31,
1999, we commenced accruing revenues from the first PET unit placed in
operation in July of 1999. We placed a second unit into operation in December
1999.
Since forming the Company, operating activities have been focused on
establishing a national sales force, creating and executing a sales and
marketing strategy directed to key potential hospital and health care providers;
securing a $10 million lease financing package; establishing key equipment
vendor relationships; promoting our service brand strategy; and building a
management and operations infrastructure to effectively and efficiently manage
future operating growth opportunities.
Our PET services include the provision of high technology imaging
systems, technologists to operate the imaging systems, the management of
day-to-day operations and educational and marketing support. Our services
enable leading as well as small to mid-size hospitals to gain access to
advanced diagnostic imaging technology and related value-added services
without making a substantial investment in equipment and personal.
Our future revenues will principally be a function of the number of
mobile units in service, scan volumes and fees per scan. We generate
substantially all of our revenues from exclusive five-year contracts with
hospitals and health care providers. Our contracts offer tiered pricing which
may include lower fees per scan on incremental scans, allowing hospitals and
other health care customers to benefit from increased scan volumes and
provide us with the opportunity to benefit from operating leverage that may
be associated with increased scan volumes.
The principal component of our operating costs include salaries paid to
technologists and drivers, annual system maintenance costs, insurance and
transportation costs.
Since inception, we have incurred significant losses and, as of
December 31, 1999, had incurred cumulative net losses of $3,294,177. We
expect to experience operating losses and negative cash flow for the
foreseeable future. We anticipate our losses will increase significantly from
current levels as we expect to incur additional costs and expenses related to
staffing, infrastructure development, marketing and sales activities and
other capital expenditures. As a result, we will need to generate significant
revenues to achieve and maintain profitability.
We have a limited operating history on which to base an evaluation of
our business and prospects. You must consider our prospects in light of the
risks, expenses and difficulties frequently encountered by companies in their
early stage of development. To address these risks, we must establish, maintain
and expand our customer base, implement and successfully execute our business
and marketing strategy, provide superior customer service, anticipate and
respond to competitive developments and attract, retain and motivate qualified
personnel. We cannot assure you that we will be successful in addressing these
risks, and our failure to do so could have a negative impact on our business,
operating results and financial condition.
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PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 10
Sale/Leaseback Contracts*
Securities Purchase Agreement*
Exhibit 27.
Financial Data Schedule*
(b) Reports on Form 8-K
None
* Previously filed.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MOBILE P.E.T. SYSTEMS, INC.
Date: April 5, 2000 By: /s/ Thomas G. Brown
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Thomas G. Brown, Chief Financial Officer
