SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995.
---------------------------------------------
Commission file number 0-12405
IMATRON INC.
------------
New Jersey
I.D. No. 94-2880078
389 Oyster Point Blvd, South San Francisco, CA 94080
(415) 583-9964
Indicate by check mark whether the Registrant (1) had 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 periods that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
At July 28, 1995 55,143,590 shares of the Registrant's common stock (no par
value) were issued and outstanding.
<PAGE>
IMATRON INC.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets
June 30, 1995 (unaudited) and December 31, 1994.
Condensed Consolidated Statements of Operations
Three and Six Months Ended June 30, 1995 and 1994 (unaudited).
Condensed Consolidated Statements of Cash Flows
Six Months Ended June 30, 1995 and 1994 (unaudited).
Notes to Condensed Consolidated Financial Statements (unaudited).
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
PART II. OTHER INFORMATION
SIGNATURES
<PAGE>
IMATRON INC.
Condensed Consolidated Balance Sheets
(Amounts in thousands)
June 30, December 31,
1995 1994
----------- -----------
(Unaudited)
ASSETS:
Current Assets
Cash and cash equivalents $ 1,974 $ 1,694
Accounts receivable, net 4,429 6,066
Accounts receivable from affiliate 4,000 780
Notes receivable 603 660
Inventories 7,318 8,236
Prepaid expenses 676 616
--------- ---------
Total current assets 19,000 18,052
Property and equipment 8,783 8,246
Less accumulated depreciation (6,617) (6,353)
--------- ---------
2,166 1,893
Other assets, net 930 1,228
--------- ---------
Total assets $ 22,096 $ 21,173
========= =========
LIABILITIES & SHAREHOLDERS' EQUITY:
Current liabilities
Accounts payable $ 3,042 $ 4,242
Notes payable 2,092 --
Other accrued liabilities 6,254 5,069
--------- ---------
Total current liabilities 11,388 9,311
Long-term debt -- 4,992
Deferred revenue 785 --
--------- ---------
Total liabilities 12,173 14,303
--------- ---------
SHAREHOLDERS' EQUITY
Convertible preferred stock:
Authorized: 10,000 shares
Issued and outstanding: 1,108 at June
30, 1995 and 1,308 at December 31, 1994 2,204 2,602
Common stock, no par value:
Authorized: 100,000 shares
Issued and outstanding: 55,062 at June
30, 1995 and 53,631 at December 31, 1994 58,492 57,876
Additional paid-in capital 1,500 1,500
Accumulated deficit (52,273) (55,108)
--------- ---------
Total shareholders' equity 9,923 6,870
--------- ---------
Total liabilities and shareholders' equity $ 22,096 $ 21,173
========= =========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
IMATRON INC.
Condensed Consolidated Statements of Operations
(Amounts in thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1995 1994 1995 1994
-------- -------- -------- --------
Revenues:
Net product sales $ 7,287 $ 5,376 $10,240 $ 8,586
Service 2,606 955 3,502 2,475
Development contracts 1,384 1,504 3,137 2,626
Clinic 91 52 139 136
-------- -------- -------- --------
Total revenues 11,368 7,887 17,018 13,823
-------- -------- -------- --------
Cost of revenues:
Product 5,584 3,700 8,279 6,308
Service 1,285 737 2,274 1,965
Development contracts 1,384 1,364 2,478 2,597
Clinic 367 111 564 238
-------- -------- -------- --------
Total cost of revenues 8,620 5,912 13,595 11,108
-------- -------- -------- --------
Gross profit 2,748 1,975 3,423 2,715
Operating expenses:
Research and development 776 433 1,760 869
Marketing and sales 811 426 1,560 992
Gen. and admin 592 553 1,169 1,099
-------- -------- -------- --------
Total operating expenses 2,179 1,412 4,489 2,960
-------- -------- -------- --------
Total operating income (loss) 569 563 (1,066) (245)
Other income, net 11 23 4,000 1,543
Interest expense (25) (139) (63) (256)
-------- -------- -------- --------
Net income before income taxes 555 447 2,871 1,042
-------- -------- -------- --------
Provision for income taxes (36) -- (36) --
-------- -------- -------- --------
Net income $ 519 $ 447 $ 2,835 $ 1,042
======== ======== ======== ========
Net income per share $ 0.01 $ 0.01 $ 0.05 $ 0.02
======== ======== ======== ========
Number of shares used
in per share calculation 62,490 62,209 62,519 61,664
======== ======== ======== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
IMATRON INC.
Condensed Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
Six Months Ended June 30,
--------------------------
1995 1994
---------- ----------
Cash flows from operating activities:
Net income $ 2,835 $ 1,042
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 828 936
Other Income (4,000) --
Changes in:
Accounts and notes receivable (1,526) (912)
Inventories 918 (1,009)
Prepaid expenses and deposits (60) (117)
Other assets (59) (15)
Accounts payable (1,200) (757)
Other accrued liabilities 1,970 960
-------- --------
Net cash provided by (used in) operating activities (294) 128
Cash flows from investing activities:
Capital expenditures (744) (121)
-------- --------
Net cash used in investing activities (744) (121)
Cash flows from financing activities:
Proceeds from issuance of notes payable 1,100 --
Issuance of common stock 218 702
-------- --------
Net cash provided by financing activities 1,318 702
-------- --------
Net increase in cash and cash equivalents 280 709
Cash and cash equivalents, at beginning
of the period 1,694 2,213
-------- --------
Cash and cash equivalents, at end of the period $ 1,974 $ 2,922
======== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
IMATRON INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
--------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for annual consolidated financial statements. In the opinion of
management, adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for
the three and six month periods ended June 30, 1995 are not necessarily
indicative of the results that may be expected for the year ended December
31, 1995. For further information, refer to the consolidated financial
statements and notes thereto included in the Company's Annual Report to
Shareholders for the year ended December 31, 1994.
2. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Imatron Inc.
and its wholly-owned subsidiary Heartscan Imaging, Inc. All intercompany
accounts and transactions have been eliminated in consolidation.
3. INVENTORIES
Inventories consist of (in thousands of dollars):
June 30, December 31,
1995 1994
------------ ------------
Purchased parts and sub-assemblies $4,107 $3,899
Service parts 838 808
Work-in-process 2,209 3,529
Finished goods 164 0
-------- --------
$7,318 $8,236
======== ========
4. CREDIT AND BORROWING ARRANGEMENTS
Interest paid for the six months ended June 30, 1995 and 1994 was
approximately $63,306 and $256,000, respectively.
In March 1995 the Company and Siemens entered into a Memorandum of
Understanding. In conjunction with this Agreement, Imatron sold five Imatron
EBT patents to Siemens and cancelled the existing Siemens' minimum purchase
obligations under a previous distribution agreement in satisfaction of
Imatron's $4,000,000 note payable to Siemens. The $4,000,000 has been
included in other income for the six months ended June 30, 1995.
In March 1995, FI.M.A.I. Holding S.A. extended to March 1996 its guaranty to
the bank under the line of credit. In consideration for such extension, the
Company issued to FI.M.A.I. a five year warrant to purchase 200,000 shares
of the Company's common stock at $1.50 per share. In addition, the Company
agreed to issue to FI.M.A.I. shares of the Company's common stock at $1.00
per share, subject to adjustments, for each dollar of the Company's
indebtedness to the bank paid by FI.M.A.I. The Company believes that the
value of the warrants issued was not material and no value has been
attributed to them in the accompanying financial statements.
In April 1995, the Company entered into a $2 million line of credit
agreement with a financial institution. As of June 30, 1995, $1.1 million
was drawn on the line of credit for which inventory is the collateral.
<PAGE>
5. INCOME (LOSS) PER SHARE
Net income per common and common equivalent share is computed using the
weighted average number of common shares outstanding after considering the
dilutive effect of stock options, convertible preferred stock and warrants.
Net loss per common share is computed using the weighted average number of
common shares outstanding. Stock options, convertible preferred stock and
warrants have not been included in the computation as their effect would
have been antidilutive.
6. MAJOR CUSTOMER - SIEMENS
The following table represents the percent of revenues attributable to the
development and distribution agreements between the Company and Siemens
Corporation:
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1995 1994 1995 1994
-------- -------- -------- --------
Net product sales 22% 44% 16% 44%
Service 38% 11% 40% 11%
Development contracts 100% 81% 100% 89%
Total revenues 36% 47% 37% 46%
In March 1995 the Company and Siemens entered into a Memorandum of
Understanding. Under the terms of the Memorandum, Siemens will contribute up
to $15,000,000 to the Company under a joint development agreement over the
next three years in order to improve and enhance the C-150/Evolution
Ultrafast CT scanner and will discontinue funding the previous Development
Agreement. In connection with this revision, Siemens retains distribution
rights, thru March 31, 1998. Pursuant to the Joint Development Agreement
Siemens maintains exclusive distribution rights in the United States,
Europe, Canada, and India for sales of the C-150/Evolution scanner. Under
the revised agreement, Siemens is no longer subject to the minimum purchase
provision of the previous distribution agreement.
7. ACQUISITION AND DISTRIBUTION AGREEMENT TERMINATION
In January 1994, the Company formed a joint venture, Imatron Japan K.K.
(Joint Venture), with two unrelated parties. Imatron holds a 24% interest in
the Joint Venture. The Joint Venture assumed all of the service and
maintenance obligations of Mitsui & Co., Ltd., under an agreement with the
Company. In connection with terminating the distribution agreement, the
Company received $1,500,000 which is included in other income for the six
months ended June 30, 1994.
As of June 30, 1995 Imatron's interest in the Joint Venture is carried in
the accompanying financial statements at no value. The Company has no
financial commitments to the Joint Venture and is prepared to abandon its
interest. The Company intends to carry this investment at no value until
such time as the Joint Venture can demonstrate that it will be able to
sustain profitable operations. Once profitable operations are sustained, the
Company will account for the Joint Venture investment on the equity method.
Summarized financial information for the Joint Venture is not included in
the notes to the consolidated financial statements for the period ended or
as of June 30, 1995, as such information is not considered material to the
operations of Imatron Inc.
During the six month period ending June 30, 1995, revenues from product
sales to the Joint Venture accounted for approximately 67% of total product
sales revenue. Scanner shipments to Imatron Japan K.K. totalled four during
the first six months of 1995 and three during the first six months of 1994.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations:
Three months ended June 30, 1995 versus 1994
Overall revenues for the second quarter ended June 30, 1995 of $11,368,000
increased $3,481,000 or 44% compared to 1994 revenues of $7,887,000. Net product
revenues increased 36% to $7,287,000 from $5,376,000 in 1994 primarily because
of an increase in scanner shipments to 5 in 1995 from 4 in 1994 and an increase
in product upgrade revenues. Service revenues increased 173% to $2,606,000 due
to a high volume of spares shipments. The decrease in development contract
revenue of 8% to $1,384,000 was due to the fact that the government contract was
completed in 1994. Clinic revenues related to the HeartScan Imaging subsidiary
increased to $91,000 for the quarter.
Total cost of revenues as a percent of revenues for the second quarter of 1995
and 1994 remained nearly constant at 76% and 75% respectively. Product cost of
revenues increased to 77% in 1995 from 69% in 1994 due to lower margins. Lower
margins were partially due to the accounting treatment on the Heartscan Seattle
system sale to Finova Capital Corporation requiring quarterly recognition of
profit over the 5 year life of the lease back to Heartscan. Service cost of
revenues decreased to 49% in 1995 from 77% in 1994 due primarily to higher
margins on spares shipments. Development contract cost of revenues, related to
the three year Memorandum of Understanding entered into with Siemens in March
1995, corresponds to the Siemens development contract revenue. Clinic cost of
revenues increased $256,000 to $367,000 for the quarter due primarily to the
startup of the Heartscan Seattle site.
Operating expenses of $2,179,000 increased $767,000 or 54% compared to 1994
expenses of $1,412,000. R&D expenses of $776,000 in 1995 reflect the portion of
R&D spending not covered by the new Siemens research and development contract.
Selling expenses increased $385,000 to $811,000 in 1995 due primarily to an
increase in outside commissions on sales of C-150 Ultrafast CT systems and
development expenses for HeartScan Imaging.
Six months ended June 30, 1995 versus 1994
Overall revenues for the six months ended June 30, 1995 of $17,018,000 increased
$3,195,000 or 23% compared to revenues of $13,823,000 for the same period in
1994. Net product revenues increased 19% to $10,240,000 in 1995 from $8,586,000
in 1994. Seven scanners were shipped for revenue during 1995 compared to six
scanner in 1994. Service revenues increased 41% to $3,502,000 in 1995 due
primarily to a high volume of spares shipments made during the second quarter.
The increase in development contract revenue of 19% to $3,137,000 in 1995
reflects an increase in the amount of Siemens contract funding and milestone
billings. Clinic revenues related to the HeartScan Imaging subsidiary were flat.
Total cost of revenues as a percent of revenues for the first six months of 1995
compared to 1994 were flat at 80%. Product cost of revenues increased to 81% in
1995 from 73% in 1994 due to lower margins on scanners, , an increase in the
average manufacturing department headcount, and lower margins on product
upgrades. Service cost of revenues decreased to 65% in 1995 from 79% in 1994 due
primarily to higher margins on spares shipments. Development contract cost of
revenues decreased to $2,478,000 in 1995 from $2,597,000 in 1994 due to the
completion of the Army contract in 1994. Clinic cost of revenues related to the
HeartScan Imaging subsidiary increased $326,000 to $564,000 in 1995 due
primarily to the opening of the Seattle site.
<PAGE>
Operating expenses of $4,489,000 in 1995 increased $1,529,000 or 52% compared to
1994 expenses of $2,960,000. R&D expenses of $1,760,000 in 1995 reflect the
portion of R&D spending not related to the Siemens research and development
contract. Selling expenses increased to $1,560,000 in 1995 from $996,000 in 1994
due primarily to an increase in outside commissions on sales of C-150 Ultrafast
CT systems and development expenses for HeartScan Imaging.
Other income increased to $4,000,000 in 1995 from $1,543,000 in 1994. The
$4,000,000 was received in consideration for the sale of five Imatron EBT
patents to Siemens and the cancellation of Siemens' existing minimum purchase
obligations under the previous distribution agreement. In 1994 other income
included the $1,500,000 payment received as a result of the termination of
Imatron's Exclusive Distributorship Agreement with Mitsui and Co., LTD. of
Japan. Interest expense decreased to $63,000 in 1995 from $256,000 in 1994 due
to the decrease in long-term debt obligations.
Liquidity and Capital Resources:
Working capital decreased 13% to $7,612,000 during the six month period ended
June 30, 1995. This is primarily due to the reclassification of $992,000 of debt
from long term to current. In addition, Imatron utilized $1,100,000 of its
$2,000,000 available credit line from Silicon Valley Bank. Although, the Company
received funds from various sources, it was offset by reducing accounts payable
and increasing customer deposits. Accounts receivable increased by 23% at the
end of June 1995 as a result of higher spares shipment. This was partially
offset by decreases in inventories and notes receivable.
The Company's management believes that the Company has sufficient cash resources
to sustain normal operations through December 31, 1995. To satisfy the Company's
long term (beyond 1995) future growth, capital and operating requirements,
continued profitable operations or additional public or private financing of the
Company's Heartscan subsidiary will be required. If future public or private
financing is required by the Company, holders of the Company's securities may
experience dilution. There can be no assurance that equity or debt sources, if
required, will be available or, if available, will be on terms favorable to the
Company or its shareholders. If such financing is required and cannot be
obtained, the Company may seek to sell or license additional portions of its
technology, to sell some or all of its other assets or to merge with another
company. The Company has no current plans related to such events.
The Company anticipates that capital equipment acquisitions for 1995 will be
slightly higher than 1994.
The Company does not believe that inflation has had a material effect on its
revenues or results of operations.
<PAGE>
PART II. OTHER INFORMATION
--------------------------
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a vote of Security Holders
The Company's Annual Meeting of Shareholders was held on June 2,
1995. At the meeting all existing directors were re-elected. In
addition, a proposal to approve the Company's 1993 Employee Stock
Options Plan was approved. The proposal received 27,487,635 votes
for, 3,261,598 against, and 316,691 abstentions.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
No. 11 - Computation of per share earnings.
(b) Form 8-K Reports:
Not applicable.
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 14, 1995
IMATRON INC.
(Registrant)
/s/ Gary H. Brooks
-----------------------
Gary H. Brooks
Vice President, Finance/Administration
and Chief Financial Officer
Exhibit No. 11
IMATRON INC.
Computation of Per Share Earnings
(Amounts in thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
------------------- -------------------
1995 1994 1995 1994
-------- -------- -------- --------
PRIMARY:
Average shares outstanding 54,402 49,520 54,091 49,142
Conversion of preferred stock 6,039 10,039 6,289 10,039
Net effect of dilutive stock options
based on the treasury stock method
using the average market price 1,302 1,955 1,379 1,849
Net effect of dilutive stock warrants
based on the treasury stock method
using the average market price 747 695 760 634
-------- -------- -------- --------
TOTAL 62,490 62,209 62,519 61,664
======== ======== ======== ========
Net income $ 519 $ 477 $2,835 $1,042
======== ======== ======== ========
Net income per share $ 0.01 $ 0.01 $ 0.05 $ 0.02
======== ======== ======== ========
FULLY DILUTED:
Average shares outstanding 54,402 49,520 54,091 49,142
Conversion of preferred stock 6,039 10,039 6,289 10,039
Net effect of dilutive stock options
based on the treasury stock method
using the year end market price 440 1,955 1,000 2,037
Net effect of dilutive stock warrants
based on the treasury stock method
using the year end market price 570 695 682 665
-------- -------- -------- --------
TOTAL 61,451 62,209 62,062 61,883
======== ======== ======== ========
Net income $ 519 $ 447 $2,835 $1,042
======== ======== ======== ========
Net income per share $ 0.01 $ 0.01 $ 0.05 $ 0.02
======== ======== ======== ========
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from Imatron Inc.'s
CONSOLIDATED CONDENSED STATEMENTS OF INCOME AND CONSOLIDATED CONDENSED BALANCE
SHEETS and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 1,974
<SECURITIES> 0
<RECEIVABLES> 8,429
<ALLOWANCES> 0
<INVENTORY> 7,318
<CURRENT-ASSETS> 19,000
<PP&E> 8,783
<DEPRECIATION> 6,617
<TOTAL-ASSETS> 22,096
<CURRENT-LIABILITIES> 11,388
<BONDS> 0
<COMMON> 58,492
0
2,204
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 22,096
<SALES> 11,368
<TOTAL-REVENUES> 11,368
<CGS> 8,620
<TOTAL-COSTS> 8,620
<OTHER-EXPENSES> 0
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</TABLE>
