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 SEPTEMBER 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 November 9, 1995 58,508,828 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
September 30, 1995 (unaudited)and December 31, 1994.
Condensed Consolidated Statements of Operations
Three and Nine Months Ended September 30, 1995 and 1994 (unaudited).
Condensed Consolidated Statements of Cash Flows
Nine Months Ended September 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)
September 30, December 31,
1995 1994
------------- ------------
(Unaudited)
ASSETS:
Current Assets
Cash and cash equivalents $ 1,513 $ 1,694
Accounts receivable, net 2,131 6,066
Accounts receivable from affiliate 955 780
Notes receivable 585 660
Inventories 8,849 8,236
Prepaid expenses 720 616
--------- ---------
Total current assets 14,753 18,052
Property and equipment 9,094 8,246
Less accumulated depreciation (6,828) (6,353)
--------- ---------
2,266 1,893
Other assets, net 723 1,228
--------- ---------
Total assets $ 17,742 $ 21,173
========= =========
LIABILITIES & SHAREHOLDERS' EQUITY:
Current liabilities
Accounts payable $ 2,739 $ 4,242
Notes payable 1,792 --
Other accrued liabilities 4,872 5,069
--------- ---------
Total current liabilities 9,403 9,311
Long-term debt -- 4,992
Deferred revenue 733 --
--------- ---------
Total liabilities 10,136 14,303
--------- ---------
SHAREHOLDERS' EQUITY
Convertible preferred stock:
Authorized: 10,000 shares
Issued and outstanding: 1,108 at September
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: 56,168 at September
30, 1995 and 53,631 at December 31, 1994 59,307 57,876
Additional paid-in capital 1,500 1,500
Accumulated deficit (55,405) (55,108)
--------- ---------
Total shareholders' equity 7,606 6,870
--------- ---------
Total liabilities and shareholders' equity $ 17,742 $ 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 Nine Months Ended
September 30, September 30,
---------------------- ----------------------
1995 1994 1995 1994
--------- --------- --------- ---------
Revenues:
Net product sales $ 244 $ 6,235 $ 10,485 $ 14,821
Service 1,079 1,413 4,581 3,888
Development contracts 1,250 1,258 4,387 3,884
Clinic 132 33 271 169
--------- --------- --------- ---------
Total revenues 2,705 8,939 19,724 22,762
--------- --------- --------- ---------
Cost of revenues:
Product 999 4,345 9,278 10,653
Service 997 936 3,271 2,901
Development contracts 1,250 1,285 3,728 3,882
Clinic 425 129 989 367
--------- --------- --------- ---------
Total cost of revenues 3,671 6,695 17,266 17,803
--------- --------- --------- ---------
Gross profit (loss) (966) 2,244 2,458 4,959
Operating expenses:
Research and development 779 604 2,539 1,473
Marketing and sales 648 359 2,208 1,351
Gen. and admin 692 570 1,861 1,669
--------- --------- --------- ---------
Total operating expenses 2,119 1,533 6,608 4,493
--------- --------- --------- ---------
Total operating income (loss) (3,085) 711 (4,150) 466
Other income, net 16 19 4,014 1,562
Interest expense (46) (148) (109) (404)
--------- --------- --------- ---------
Net income (loss)
before income taxes (3,115) 582 (245) 1,624
--------- --------- --------- ---------
Provision for income taxes 17 -- 52 --
--------- --------- --------- ---------
Net income (loss) $ (3,132) $ 582 $ (297) $ 1,624
========= ========= ========= =========
Net income (loss) per share $ (0.06) $ 0.01 $ (0.01) $ 0.03
========= ========= ========= =========
Number of shares used
in per share calculation 55,488 62,445 54,764 61,924
========= ========= ========= =========
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)
Nine Months Ended September 30,
-------------------------------
1995 1994
--------- ---------
Cash flows from operating activities:
Net income (loss) $ (297) $ 1,624
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 1,207 1,362
Other Income (4,000) --
Changes in:
Accounts and notes receivable 3,835 (2,386)
Inventories (613) (2,782)
Prepaid expenses and deposits (104) (215)
Other assets (20) (15)
Accounts payable (1,503) 1,037
Other accrued liabilities (536) 328
-------- --------
Net cash provided by (used in) operating activities (959) (1,047)
Cash flows from investing activities:
Capital expenditures (1,055) (251)
-------- --------
Net cash used in investing activities (1,055) (251)
Cash flows from financing activities:
Proceeds from notes payable 800 --
Issuance of common stock 1,033 807
-------- --------
Net cash provided by financing activities 1,833 807
-------- --------
Net decrease in cash and cash equivalents (181) (491)
Cash and cash equivalents, at beginning
of the period 1,694 2,213
-------- --------
Cash and cash equivalents, at end of the
period $ 1,513 $ 1,722
======== ========
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 nine month periods ended September 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):
September 30, December 31,
1995 1994
------------- ------------
Purchased parts and sub-assemblies $3,492 $3,899
Service parts 967 808
Work-in-process 3,418 3,529
Finished goods 972 -
-------- --------
$8,849 $8,236
======== ========
4. CREDIT AND BORROWING ARRANGEMENTS
Interest paid for the nine months ended September 30, 1995 and 1994 was
approximately $109,000 and $350,000, 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 canceled 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 nine months ended September 30, 1995.
<PAGE>
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 $2,000,000 million line of credit
agreement with a financial institution. As of September 30, 1995, $800,000
was drawn on the line of credit using inventory as collateral.
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 Nine months ended
September 30, September 30,
-------------------- --------------------
1995 1994 1995 1994
------ ------ ------ ------
Net product sales 100% 38% 17% 41%
Service 49% 16% 39% 13%
Development contracts 100% 99% 100% 92%
Total revenues 76% 43% 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 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.
<PAGE>
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 nine
months ended September 30, 1994.
As of September 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 September 30, 1995, as such information is not considered material to
the operations of Imatron Inc.
During the nine month period ending September 30, 1995, revenues from
product sales to the Joint Venture accounted for approximately 59% of total
product sales revenue. Scanner shipments to Imatron Japan K.K. totaled four
during the first nine months of 1995 and five during the first nine months
of 1994.
8 SUBSEQUENT EVENT
In October, 1995, the Company completed a restricted distribution of a
private placement memorandum. The private placement raised $9,090,000
through the sale of 1,010,000 units. A unit consists of five shares of
Imatron Inc. common stock and one five-year Imatron Inc. common stock
purchase warrant.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations:
Three months ended September 30, 1995 versus 1994
Overall revenues for the third quarter ended September 30, 1995 of $2,705,000
decreased $6,234,000 or 70% compared to revenues of $8,939,000 for the same
period in 1994. Net product revenues decreased 96% to $244,000 in 1995 from
$6,235,000 in 1994 because there were no scanner shipments in the current
quarter. Service revenues decreased 24% to $1,079,000 due to a decrease in the
number of installed scanners under service contract. Development contract
revenue of $1,250,000 was unchanged from 1994. Clinic revenues related to the
HeartScan Imaging subsidiary increased to $132,000 in 1995 from $33,000 in 1994.
During the quarter ended September 30, 1995, the shipments of three units
planned for delivery to customers during the quarter were delayed due to certain
manufacturing problems. The Company believes such technical problems have been
solved and will not prevent the shipment of units which are planned for shipment
during the fourth quarter of 1995.
Total cost of revenues as a percent of revenues for the third quarter of 1995
and 1994 were 136% and 75% respectively. Product cost of revenues increased to
409% in 1995 from 70% in 1994 primarily to there being no scanner shipments. In
addition, introductory shipments of the new single bay computer systems were
made at reduced prices. Service cost of revenues increased to 92% in 1995 from
66% in 1994 as a result of a decrease in service contract revenue combined with
increased costs. Development contract cost of revenues, per 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
$296,000 to $425,000 for the quarter due primarily to the startup of the Seattle
and Houston clinic sites.
Operating expenses of $2,119,000 increased $586,000 or 38% compared to 1994
expenses of $1,533,000. R&D expenses of $779,000 in 1995 reflect the portion of
R&D spending not covered by the Siemens research and development contract.
Selling expenses increased $289,000 to $648,000 in 1995 due primarily to an
increase in marketing expenses for HeartScan Imaging. Administrative expenses
increased $122,000 to $692,000 due primarily to an increase in investor
relations expenses.
Nine months ended September 30, 1995 versus 1994
Overall revenues for the nine months ended 1995 of $19,724,000 decreased
$3,038,000 or 13% compared to revenues of $22,762,000 for the same period in
1994. Net product revenues decreased 29% to $10,485,000 in 1995 from $14,821,000
in 1994. Seven scanners were shipped for revenue during 1995 compared to eleven
scanners in 1994. Service revenues increased 18% to $4,581,000 in 1995 due
primarily to a higher volume of spares shipments which was offset by a decrease
in the number of installed scanners under service contract. The increase in
development contract revenue of 13% to $4,387,000 in 1995 reflected an increase
in the amount of Siemens contract funding and milestone billings. This increase
was offset by a decrease in government billings due to the fact that the
government contract was completed in 1994. Clinic revenues related to the
HeartScan Imaging subsidiary increased to $271,000 in 1995 from $169,000 in
1994.
<PAGE>
Total cost of revenues as a percent of revenues for the first nine months of
1995 and 1994 were 88% and 78% respectively. Product cost of revenues increased
to 88% in 1995 from 72% in 1994 primarily because there were no scanner
shipments in the current quarter. Service cost of revenues decreased to 71% in
1995 from 75% in 1994 due primarily to higher margins on increased spares and a
decrease in service contract revenue combined with relatively flat costs.
Development contract cost of revenues decreased $154,000 to $3,728,000 in 1995
from $3,882,000 in 1994. Clinic cost of revenues related to the HeartScan
Imaging subsidiary increased $622,000 to $989,000 in 1995 due primarily to the
opening of the Seattle and Houston clinic sites.
Operating expenses of $6,608,000 in 1995 increased $2,115,000 or 47% compared to
1994 expenses of $4,493,000. R&D expenses of $2,539,000 in 1995 reflect the
portion of R&D spending not related to the Siemens research and development
contract. Selling expenses increased to $2,208,000 in 1995 from $1,351,000 in
1994 due primarily to an increase in outside commissions on sales of C-150
Ultrafast CT systems and marketing expenses for HeartScan Imaging.
Administrative expenses increased to $1,861,000 in 1995 from $1,669,000 in 1994
due primarily to increase in investor relations expenses.
Other income increased to $4,014,000 in 1995 from $1,562,000 in 1994. In 1995,
$4,000,000 of consideration was received in exchange 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.
Liquidity and Capital Resources:
Working capital decreased 39% to $5,350,000 during the nine month period ended
September 30, 1995 due to a decrease of $3,760,000 in accounts receivable
because there were no scanner shipments in the current quarter. In addition, the
Company utilized $800,000 of its $2,000,000 credit line from Silicon Bank. These
items were partially offset by an increase in inventory as a result of higher
finished goods and payment of certain accounts payable.
On October 13, 1995, the Company completed a restricted distribution of a
private placement memorandum. The purpose of the private placement was to raise
$9,090,000 through the sale of 1,010,000 units. A unit consists of five shares
of Imatron Inc. common stock and one five-year Imatron Inc. common stock
purchase warrant.
The Company's management believes that the Company has sufficient cash resources
to sustain normal operations through December 31, 1996. To satisfy the Company's
long term (beyond 1996) 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 has no current plans
related to such events.
The Company anticipates that capital equipment acquisitions for 1995 will be
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
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.
(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: November 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 Nine Months Ended
September 30, September 30,
------------------- -------------------
1995 1994 1995 1994
-------- -------- -------- --------
PRIMARY/SIMPLE:
Average shares outstanding 55,488 50,778 54,764 50,778
Conversion of preferred stock 9,039 9,039
Net effect of dilutive stock options
based on the treasury stock method
using the average market price 1,842 1,321
Net effect of dilutive stock warrants
based on the treasury stock method
using the average market price 786 786
-------- -------- -------- --------
TOTAL 55,488 62,445 54,764 61,924
======== ======== ======== ========
Net income (loss) $ (3,132) $ 582 $ (297) $ 1,624
========= ======== ======== ========
Net income (loss) per share $ (0.06) $ 0.01 $ (0.01) $ 0.03
========= ======== ======== ========
<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> SEP-30-1995
<CASH> 1,513
<SECURITIES> 0
<RECEIVABLES> 3,086
<ALLOWANCES> 0
<INVENTORY> 8,849
<CURRENT-ASSETS> 14,753
<PP&E> 9,094
<DEPRECIATION> 6,828
<TOTAL-ASSETS> 17,742
<CURRENT-LIABILITIES> 9,403
<BONDS> 0
<COMMON> 59,307
0
2,204
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<TOTAL-LIABILITY-AND-EQUITY> 17,742
<SALES> 2,705
<TOTAL-REVENUES> 2,705
<CGS> 3,671
<TOTAL-COSTS> 3,671
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</TABLE>