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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 MARCH 31, 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 April 17, 1995 54,996,057 shares of the Registrant's common stock (no par
value) were issued and outstanding.
Total Number of Pages: 11
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IMATRON INC.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE
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Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets - 3
March 31, 1995 (unaudited) and December 31, 1994.
Condensed Consolidated Statements of 4
Operations - Three Months Ended
March 31, 1995 and 1994 (unaudited).
Condensed Consolidated Statements of 5
Cash Flows - Three Months Ended
March 31, 1995 and 1994 (unaudited).
Notes to Condensed Consolidated Financial 6
Statements (unaudited).
Item 2. Management's Discussion and Analysis of Financial 8
Condition and Results of Operations.
PART II. OTHER INFORMATION 9
SIGNATURES 11
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IMATRON INC.
Condensed Consolidated Balance Sheets
(Amounts in thousands)
March 31, December 31,
1995 1994
---- ----
(Unaudited)
ASSETS:
Current Assets
Cash and cash equivalents $ 1,294 $ 1,694
Accounts receivable, net 2,090 6,066
Accounts receivable from affiliate 2,024 780
Notes receivable 603 660
Inventories 10,016 8,236
Prepaid expenses 648 616
-------- --------
Total current assets 16,675 18,052
Property and equipment 8,555 8,246
Less: accumulated depreciation (6,447) (6,353)
-------- --------
2,108 1,893
Other assets, net 1,071 1,228
-------- --------
Total assets $ 19,854 $ 21,173
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LIABILITIES & SHAREHOLDERS' EQUITY:
Current liabilities
Accounts payable $ 3,681 $ 4,242
Notes payable 992 --
Other accrued liabilities 5,903 5,069
-------- --------
Total current liabilities 10,576 9,311
Long-term debt -- 4,992
-------- --------
Total liabilities 10,576 14,303
SHAREHOLDERS' EQUITY Convertible preferred stock:
Authorized: 10,000 shares
Issued and outstanding: 1,308
at March 31, 1995 and December 31, 1994 2,602 2,602
Common stock, no par value:
Authorized: 100,000 shares
Issued and outstanding: 53,806
at March 31, 1995 and 53,631 at
December 31, 1994 57,968 57,876
Additional paid-in capital 1,500 1,500
Accumulated deficit (52,792) (55,108)
-------- --------
Total shareholders' equity 9,278 6,870
-------- --------
Total liabilities and shareholders' equity $ 19,854 $ 21,173
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The accompanying notes are an integral part of these condensed consolidated
financial statements.
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IMATRON INC.
Condensed Consolidated Statements of Operations
(Amounts in thousands, except per share data)
Three Months Ended March 31,
----------------------------
1995 1994
---- ----
(Unaudited)
Revenues:
Net product sales $ 2,953 $ 3,210
Service 896 1,520
Development contracts 1,753 1,123
Clinic 48 83
-------- --------
Total revenues 5,650 5,936
-------- --------
Cost of revenues:
Product 2,695 2,609
Service 989 1,228
Development contracts 1,094 1,232
Clinic 196 127
-------- --------
Total cost of revenues 4,974 5,196
-------- --------
Gross profit 676 740
Operating expenses:
Research and development 983 436
Marketing and sales 749 565
General and administrative 578 547
-------- --------
Total operating expenses 2,310 1,548
-------- --------
Total operating loss (1,634) (808)
Other income 4,000 1,520
Other expense (21) --
Interest expense (29) (117)
-------- --------
Net income (loss) $ 2,316 $ 595
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Net income (loss) per share $ 0.04 $ 0.01
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Number of shares used in per share calculation 62,547 61,119
======== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
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IMATRON INC.
Condensed Consolidated Statements of Cash Flows
(Amounts in thousands)
Three Months Ended March 31,
----------------------------
1995 1994
---- ----
(Unaudited)
Cash flows from operating activities:
Net income $ 2,316 $ 595
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 416 507
Other income (4,000) --
Changes in:
Accounts and notes receivable 2,789 (1,168)
Inventories (1,780) (134)
Prepaid expenses and deposits (32) (214)
Other assets (25) 15
Accounts payable (561) (834)
Other accrued liabilities 834 2,404
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Net cash provided by (used in)
operating activities (43) 1,171
Cash flows from investing activities:
Capital expenditures (449) (38)
------- -------
Net cash used in investing activities (449) (38)
Cash flows from financing activities:
Issuance of common stock 92 386
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Net cash provided by
financing activities 92 386
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Net increase (decrease) in cash and
cash equivalents (400) 1,519
Cash and cash equivalents, at beginning
of the period 1,694 2,213
------- -------
Cash and cash equivalents, at end of the
period $ 1,294 $ 3,732
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The accompanying notes are an integral part of these condensed consolidated
financial statements.
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IMATRON INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
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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 months ended March
31, 1995 are not necessarily indicative of the results that may be
expected for the year. 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):
March 31, December 31,
1995 1994
---- ----
Purchased parts and sub-assemblies $ 4,778 $ 3,899
Service parts 961 808
Work-in-process 2,655 3,529
Finished goods 1,622 --
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$10,016 $ 8,236
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4. CREDIT AND BORROWING ARRANGEMENTS
Interest paid for the three months ended March 31, 1995 and 1994 was
approximately $29,000 and $112,000, respectively. During the first
quarter of 1995 no interest was charged on the $4,000,000 Siemens note.
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 three months ended
March 31, 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.
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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
March 31,
-------------------
1995 1994
---- ----
Net product sales 3% 43%
Service 44% 11%
Development contracts 100% 100%
Percentage to total revenues 40% 45%
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, enhance and
reduce manufacturing costs of 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, in certain geographical regions 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 three months ended March 31, 1994.
As of March 31, 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 March
31, 1995, as such information is not considered material to the
operations of Imatron Inc.
During the three month period ending March 31, 1995, revenues from
product sales to the Joint Venture accounted for approximately 97% of
total product sales revenue.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations:
Three months ended March 31, 1995 versus 1994
Overall revenues for the first quarter ended March 31, 1995 of $5,650,000
decreased $286,000 or 5% from 1994 revenues of $5,936,000. Net product revenues
decreased 8% to $2,953,000 from $3,210,000 in 1994 primarily because of
decreased product upgrade revenues. Two scanners were shipped during each of the
quarters. Service revenues decreased 41% to $896,000 due to a decrease in the
number of installed scanners under service contract and a lower volume of spares
shipments. Development contract revenue increased 56% to $1,753,000 as the
result of an increase in both the amount of Siemens contract funding and
milestone billings under a now terminated development agreement. Clinic revenues
decreased to $48,000 in 1995 due to the installation and testing of the new
scanner hardware and software.
The cost of revenues as a percent of revenues remained constant at 88%. Product
cost of revenues increased to 91% in 1995 from 81% in 1994 due primarily to an
increase in the manufacturing headcount. Service cost of revenues increased to
110% from 81% as a result of relatively flat costs combined with the decrease in
service contract revenue. Development contract cost of revenues decreased 11% to
$1,094,000 in 1995 from $1,232,000 in 1994 due primarily to having no expenses
in 1995 for government contracts. Clinic cost of revenues related to the startup
expenses of the HeartScan Imaging subsidiary increased to $196,000 for the
quarter as a result of an increase in headcount .
Operating expenses increased $762,000 to $2,310,000 for the quarter. R&D
expenses increased to $983,000 in 1995 from $436,000 in 1994 due primarily to an
increase in headcount from transferring personnel into operating R&D from cost
of revenues R&D and hiring new personnel. Selling expenses increased to $749,000
from $565,000 due primarily to an increase in outside commissions.
Other income increased to $4,000,000 in 1995 from $1,520,000 in 1994. The
$4,000,000 was in consideration for the sale of 5 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 $1,500,00
payment received as a result of the termination of Imatron's Exclusive
Distributorship Agreement with Mitsui and Co., Ltd. of Japan.
Liquidity and Capital Resources:
Working capital decreased 30% to $6,099,000 during the three month period ended
March 31, 1995. The decrease in receivables of $2,789,000 was partially offset
by an increase in inventory of $1,780,000. The increase in inventory resulted
partially from the completion of scanners which were placed into finished goods
for sale in the second quarter. Current notes payable increased $992,000 as the
result of a reclassification from long term notes payable. Long term debt
decreased $4,000,000 as a result of Imatron's sale of 5 Imatron EBT patents to
Siemens and the cancellation of Siemens' existing minimum purchase obligations
under the previous distribution agreement.
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 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 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.
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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
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
No. 11 - Computation of per share earnings
No. 27 - Financial Data Schedule
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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: May 12, 1995
IMATRON INC.
(Registrant)
Gary H. Brooks
-----------------------------------------
Gary H. Brooks
Vice President, Finance/Administration
and Chief Financial Officer
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Exhibit No. 11
IMATRON INC.
Computation of Per Share Earnings
(Amounts in thousands, except per share data)
(Unaudited)
March 31, March 31,
1995 1994
---- ----
PRIMARY
Average shares outstanding 53,779 48,763
Conversion of preferred stock
Net effect of dilutive stock options 6,539 10,039
based on the treasury stock method
using the average market price 1,456 1,744
Net effect of dilutive stock warrants
based on the treasury stock method
using the average market price 773 573
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TOTAL 62,547 61,119
======= =======
Net income $ 2,316 $ 595
======= =======
Net income per share $ 0.04 $ 0.01
======= =======
FULLY DILUTED
Average shares outstanding 53,779 48,763
Conversion of preferred stock 6,539 10,039
Net effect of dilutive stock options
based on the treasury stock method
using the year end market price 1,560 2,119
Net effect of dilutive stock warrants
based on the treasury stock method
using the year end market price 795 636
------- -------
TOTAL 62,673 61,557
======= =======
Net income $ 2,316 $ 595
======= =======
Net income per share $ 0.04 $ 0.01
======= =======
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<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>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 1,294
<SECURITIES> 0
<RECEIVABLES> 4,114
<ALLOWANCES> 0
<INVENTORY> 10,016
<CURRENT-ASSETS> 16,675
<PP&E> 8,555
<DEPRECIATION> 6,447
<TOTAL-ASSETS> 19,854
<CURRENT-LIABILITIES> 10,576
<BONDS> 0
<COMMON> 57,968
0
2,602
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 19,854
<SALES> 5,650
<TOTAL-REVENUES> 5,650
<CGS> 4,974
<TOTAL-COSTS> 4,974
<OTHER-EXPENSES> 21
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 29
<INCOME-PRETAX> 2,316
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,316
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,316
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
