SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
Commission file number 0-12405
IMATRON INC.
a New Jersey Corporation
I.D. No. 94-2880078
389 Oyster Point Blvd, South San Francisco, CA 94080
Telephone (415) 583-9964
Common Stock, without Par Value
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 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
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The aggregate market value of the voting stock (which is the outstanding Common
Stock) of the Registrant held by non-affiliates thereof, based upon the closing
sale price of the Common Stock on March 20, 1996 on the NASDAQ National Market
System ($2.75 per share) was approximately $184,354,000. For the purpose of the
foregoing computation, only the directors and executive officers of the
Registrant were deemed to be affilliates. This determination of affiliate status
is not necessarily a conclusive determination for other purposes.
As of March 20,1996, Registrant had outstanding 68,965,590 shares of Common
Stock, no par value, which is the only class of shares publicly traded.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of the Proxy Statement for Registrant's 1995 Annual Meeting of
Shareholders, to be filed with the Commission on or before 120 days after the
end of the 1995 fiscal year, are incorporated by reference into Part III hereof.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K (ss.229.405 of this chapter) is not contained herein, and will
not be contained to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this form 10-K. [X]
<PAGE>
PART I
ITEM 1 - BUSINESS
GENERAL
Imatron Inc. ("Imatron" or the "Company"), a New Jersey corporation incorporated
in 1983, is a technology-based company principally engaged in the business of
designing, manufacturing and marketing a high performance computed tomography
(CT) scanner. This scanner uses Electron Beam Tomography ("EBT") technology
based on a scanning electron beam. The scanner is used in large and midsized
hospitals and free-standing imaging clinics. The Company provides service, parts
and maintenance to hospitals and clinics that operate its scanners.
The Company is also engaged in performing research and development for others in
the field of CT devices and licensing its patents and know-how in the fields of
imaging sciences. The Company holds approximately a 1% interest in InVision
Technologies, Inc. (formerly Imatron Industrial Products, Inc.), a corporation
organized in 1990 to engage in the development of an explosives detection
scanner and to which Imatron has licensed certain of its technology.
HeartScan Imaging, Inc. ("HSI"), incorporated in Delaware in 1993, is a
wholly-owned subsidiary of Imatron. HSI operates a coronary artery scanning
(CAS) test facility and corporate demonstration site in South San Francisco,
California and is engaged in the business of developing a world-wide network of
coronary artery disease risk assessment centers. In 1995 HSI opened two Coronary
Artery Disease Risk Assessment Centers in Seattle, Washington and Houston,
Texas.
PRODUCT AND SERVICES
ULTRAFAST CT(R)
PRODUCT DESCRIPTION
A conventional CT scanner is a diagnostic imaging device in which a
cross-sectional (tomographic) image of a patient's anatomy is acquired from
multiple intensity readings (samplings) taken as an x-ray source rotates around
the patient during a scanning cycle. The acquired x-ray data are processed
through a complex mathematical algorithm relating tissue density differences to
variations in the intensity of x-rays passing through a patient's body. The
acquired data are subsequently reconstructed and displayed as images on a video
monitor, typically with white corresponding to high density matter, such as
bone, and with black corresponding to low density matter, such as air. In this
manner, the patient's anatomy can be displayed in a succession of
cross-sectional, anatomical gray-scale representations.
The Imatron Ultrafast CT scanner design differs from conventional CT scanners in
two important ways. First, the mechanically rotating x-ray tube technology of
conventional CT scanners is replaced by a high power electron beam accelerator
that generates a small, high-intensity electron beam which is steered along
stationary target rings to produce a rotating fan-shaped x-ray beam. This
patented electron beam technology permits significantly faster scan speeds to be
achieved. The Company scanner can acquire CT images at a rate of 50 to 100
milliseconds per slice in contrast with conventional CT scanners that require
between 1 and 10 seconds per slice. Second, the Imatron Ultrafast CT permits
rapid scanning of multiple contiguous images without moving the patient. With
these features the Ultrafast CT can perform stop-action or dynamic studies of
the heart and various other organs, contributing to the scanner's usefulness for
both diagnosis and examination.
The Ultrafast CT scanner can be operated in either of two modes: the
"multi-slice" mode or the "single-slice, high-resolution" mode. When operating
in the multi-slice mode, 8 levels of the body can be scanned in 224
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milliseconds. This mode was originally developed for cine, multi-slice cardiac
imaging and gives resolution lower than the current standards of conventional
CT. The single-slice, high-resolution mode enables the scanner to obtain still
images that the Company believes are of superior quality to those produced by
most conventional CT scanners currently on the market. Moreover, the 100
millisecond scanning speed, higher resolution mode is faster than the scanning
speeds of conventional CT scanners, thereby significantly reducing image
degradation caused by motion.
PRODUCT DEVELOPMENT
In June 1992, the Company began shipping the latest model of its Ultrafast CT
scanner, the C-150. This scanner is substantially shorter in length than its
predecessor, the C-100 XL, and incorporates several advanced capabilities. These
advanced capabilities include a new collimator upgrade permitting slice widths
as small as 1.5 mm, a helical or continuous volume scan mode having the
capability of obtaining 40 consecutive high-resolution scans in 18 seconds (This
represents an increase in z-axis speed of scanning by up to a factor of 4
compared to previous modes), and a new workstation link which will transfer
image data to a number of third-party workstations in real time as the images
are reconstructed. The Company has also developed an upgrade package
(Accelerator upgrade) which allows the advanced capabilities of the C-150
scanner to be added to the previously installed base of scanners.
MARKETS
The Company sells its CT scanner to the diagnostic medical imaging market. The
diagnostic medical imaging market includes several different medical imaging
modalities including CT, ultrasound, nuclear medicine, digital subtraction
angiography and magnetic resonance imaging. These imaging modalities are based
upon the ability of x-rays, sound waves, gamma rays or magnetic fields to
penetrate human tissue and to be detected by electronic devices for presentation
of an image on a video monitor. In some cases, these imaging modalities compete
with one another for the same type of diagnostic procedure.
All of these systems have been evaluated in the diagnosis of cardiac diseases,
but the extent of application of several is limited due to distortions arising
from the heart's motion as it beats at a rate greater than the scanning rates of
these systems. This is not the case for Imatron's Ultrafast CT. One of the
significant benefits of the fast scanning speed of Imatron's Ultrafast CT
scanner is to allow it to image and quantify calcium in the coronary arteries, a
procedure known as the coronary artery scan ("CAS").
Cardiovascular disease is the number one cause of death in the United States
accounting for more than 930,000 deaths annually. Of these deaths coronary heart
disease contributes to approximately 500,000 deaths annually. Of particular
importance is the fact that in approximately 150,000 cases annually, the first,
last and only symptom of coronary heart disease is a fatal heart attack. The
Company believes that this widespread incidence of coronary heart disease in the
United States coupled with the fact that a large number of asymptomatic
individuals experience heart attacks each year indicates a clear need for a safe
and effective screening test for the earliest stages of coronary heart disease.
The correlation between calcium in the coronary arteries, atherosclerosis, and
myocardial infarction (heart attack) has been known since the 1950's. In the
mid-1960's selective coronary angiography was introduced and soon became
routine. Since that time coronary angiography which demonstrated narrowing or
occlusion of the coronary arteries has become the "gold standard" for positive
identification of coronary artery disease. Abnormal results from screening tests
such as exercise electrocardiography (ECG) and thallium stress nuclear medicine
are commonly used as an indication for coronary angiography. These screening
tests produce a significant percentage of false abnormal results such that as
few as 25 percent of the coronary angiograms conducted are normal. In addition,
statistics indicate that some patients die suddenly after receiving a "normal"
stress ECG study and are then found upon autopsy to have had significant
coronary artery disease. The Company believes these statistics illustrate the
inadequate predictive value of the standard noninvasive screening tests used to
indicate coronary artery disease.
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The Company believes that research demonstrates CAS has the potential to
accurately identify those people who are developing early coronary artery
disease. CAS can then serve as a feedback mechanism to monitor the treatment of
those with early coronary artery disease, a disease which recent research
indicates that treatment may slow, stop or even cause to regress. Until now, the
only way to directly determine the effect of life-style modification and
lipid-lowering pharmacologic treatment on coronary artery disease was to perform
invasive coronary angiography.
For those patients in whom CAS detects advanced coronary artery disease,
intervention can help prevent a crippling heart attack or sudden death. The CAS
test also has great potential for reducing the costs associated with the
unnecessary treatment of those who have coronary risk factors, but show no sign
of coronary artery disease. Thirty to thirty-five percent of people with
elevated cholesterol levels do not develop coronary artery disease, but since
there has not been a method to find those who are beginning to develop coronary
disease, everyone with a high cholesterol reading is treated as if they will
develop the disease. The Company believes that CAS is a powerful and
cost-effective method of detecting or ruling out coronary artery disease and
represents a unique market. Currently, only the Ultrafast CT scanner can provide
the necessary technological capability to address the clinical application
requirements. Notwithstanding the foregoing, CAS to date has not been broadly
accepted as a method of identifying coronary artery disease and there is no
assurance that a significant market will develop for this procedure.
Imatron believes that possible factors affecting the demand for CT products
include, among others, potential customers' budgetary constraints including
those imposed by government regulation, changes in the reimbursement policies of
the government and third party insurers, replacement of older equipment,
advancements in technology, and the introduction of new medical procedures.
SERVICE
The Company and its distributors provide installation, service, and warranty
service to their respective Ultrafast CT customers. Imatron provides a warranty
to its distributors on parts only during the 12 month period following
installation and warrants replacement parts for 90 days.
The Company maintains a staff of technical support engineers who are available
on a contract basis to assist its distributors during installations or during
emergencies. The Company also sells spare parts to its distributors.
CORONARY ARTERY SCANNING
In 1993, the Company organized HeartScan Imaging, Inc. ("HeartScan") as a
wholly-owned subsidiary. During that year, HeartScan opened a CAS test facility
at the Company's facility in South San Francisco, California. The principal
purposes of the facility are to market test a variety of consumer advertising
and professional education programs, to determine the feasibility of developing
a network of CAS clinics, to test software developments for the Company's
scanner products and to serve as a corporate demonstration site for the
Company's products and services.
HeartScan is also engaged in the business of developing coronary artery disease
risk assessment centers and is developing a business and financing plan for a
nationwide network of Company-owned and operated CAD risk assessment centers.
The services of such centers will be marketed to physicians, insurers, employers
and directly to the public. As of December 31, 1995, two CAD risk assessment
centers were owned and operated by HeartScan. HeartScan's near-term business
strategy involves the development of six to nine Coronary Artery Disease Risk
Assessment Centers over the next eighteen months and additional centers
thereafter. There is no assurance that HeartScan will be able to complete the
centers provided for in its business plan. The success of HeartScan's proposed
Coronary Artery Disease Risk Assessment Centers will depend on a number of
factors including, but not limited to, HeartScan's ability to: obtain and
operate in compliance with appropriate licenses from applicable regulatory
<PAGE>
authorities; develop working relationships with local groups of cardiologists;
educate patients, referring physicians and third-party payors about the benefits
of the CAS and HeartScan's centers; and manage effectively the operations of the
centers. HeartScan anticipates negative cash flow and substantial operating
losses during the next several years of its operations and there is no certainty
that HeartScan can operate profitably.
Imatron is currently engaged in a $10,000,000 private offering of HeartScan unit
securities to accredited investors. Imatron anticipates that the current
offering, if fully subscribed and all of the net proceeds are contributed to
HeartScan's capital, will provide sufficient funds which, together with lease or
debt financing HeartScan believes is available from other sources, will enable
it to open six to nine Coronary Artery Disease Risk Assessment Centers over the
next eighteen months. To satisfy HeartScan's future capital and operating
requirements and to complete its business plan, additional financing will be
required. There is no certainty that HeartScan will, in the future, be able to
sell its securities privately or in a registered public offering. If future
public or private financing is required by HeartScan, Imatron may experience
dilution. If such financing cannot be obtained, HeartScan will not be able to
complete its business plan and may seek to sell some or all of its assets or to
merge with another company.
HeartScan is dependent on Imatron for the scanner used by it in its Coronary
Artery Disease Risk Assessment Centers. HeartScan does not believe there are any
other machines which can accomplish the same tests. In the event that Imatron,
for any reason, should cease manufacturing such equipment, HeartScan would be
unable to complete its business plan.
HeartScan's near-term plans for opening new clinics will place significant
strain on its administrative, operational and financial resources and increased
demands on its systems and controls. If its management is unable to manage
growth effectively, HeartScan's operating results could be adversely effected.
RESEARCH AND DEVELOPMENT CONTRACTS
In March 1991, the Company entered into an agreement with Siemens Corporation
("Siemens") which included a Development Agreement. (See "Transactions With
Siemens Corporation" below) Pursuant to the Development Agreement the Company
and Siemens pursued the joint development of certain EBT technology products
funded by Siemens. Upon successful conclusion of the development of such
products, Siemens had the sole right to manufacture the products. The Company
recognized $1,753,000, $5,013,000 and $4,667,000 of revenue under this
Development Agreement in 1995, 1994 and 1993, respectively.
On March 31, 1995, the Company and Siemens entered into a new agreement (the
"Memorandum of Understanding") pursuant to which the parties agreed to terminate
the existing Development Agreement and substitute in its place a new
collaborative research agreement. Under the new collaborative research agreement
the parties will jointly conduct research and development over a three year
period directed toward certain improvements and enhancements to the Company's
C-150 product. Siemens agreed to fund an aggregate of $15 million of
Imatron-managed research and development for a three year period beginning April
1, 1995, subject to achieving mutually agreed upon goals and objectives.
Pursuant to the funding, Imatron will contribute a portion equal to fifty
percent of Siemens' contribution for the sole purpose of conducting the
collaborative agreement. The primary goals of the research and development
program are to develop and enhance system performance, increase product
reliability, reduce manufacturing costs, and improve system upgradability. The
results of the collaborative research will be jointly owned by the parties and
cross-licensed. The Company recognized $3,884,000 of revenue under the
collaborative agreement during the 1995 fiscal year.
Imatron also performs contract research for government agencies in computed
tomography and related X-ray technologies. During 1991 the Company was awarded
an extension of its research contracts from the National Institutes of Health
and the U.S. Army. The contract periods ranged from one to four years with an
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aggregate contract amount in excess of $2,000,000. Research and development
contracts for government agencies contributed approximately $0, $368,000, and
$845,000 in revenues in 1995, 1994 and 1993, respectively.
MARKETING
The Company's scanners are utilized by a variety of customers including large
teaching and research hospitals, medium-size hospitals and imaging clinics.
The Company sells its Ultrafast CT product directly and through distributors.
The Company has, or had, the following distribution arrangements:
UNITED STATES, CANADA, AND EUROPE
In April 1995, the Company entered into an agreement with Siemens giving Siemens
the exclusive right to distribute the Company's C-150 scanner in the United
States, Canada, Europe and India. (See "Transactions With Siemens Corporation"
below).
JAPAN
Beginning in 1986, Mitsui & Co., Ltd. ("Mitsui") was the distributor of the
Company's products in Japan, either directly or through a third-party
distributor. On December 10, 1993 Imatron entered into two agreements with
Mitsui that became effective in January of 1994, the Settlement Agreement and
the Transition Agreement. Pursuant to these agreements, Mitsui agreed to pay
Imatron $1.5 million in consideration of Imatron's agreement to relieve Mitsui
of its obligation to purchase additional Ultrafast CT scanners from Imatron.
Imatron agreed to purchase certain Ultrafast CT scanner inventory from Mitsui
and to undertake all service and warranty responsibility for the Ultrafast CT
scanners installed in Japan. Imatron further agreed to complete certain sales
contracts currently in place between Mitsui and various end users in Japan.
On January 7, 1994, Imatron entered into a Joint Company Agreement with Tobu
Land System Company and Kino Corporation pursuant to which a joint venture
company was established to market, sell, install and service Imatron CT
scanners. The joint venture was designated as Imatron Japan Inc. Imatron Japan
Inc. is owned 51% by Tobu Land System Company, 25% by Kino Corporation and 24%
by Imatron. Imatron did not assume any financial funding requirements associated
with the formation of Imatron Japan Inc. The Company's investment in Imatron
Japan Inc. is carried in the accompanying financial statements at no value.
Imatron is under no obligation to fund the operations of Imatron Japan Inc. and
is prepared to abandon its interest.
On February 3, 1994, Imatron and Imatron Japan Inc. entered into a
Distributorship Agreement pursuant to which Imatron Japan Inc. has been
appointed as Imatron's Distributor in Japan. Imatron has transferred its rights
and obligations under the Transition Agreement between Imatron and Mitsui & Co.
Ltd. to Imatron Japan Inc. Imatron Japan Inc. took delivery of six Ultrafast CT
scanner systems from Imatron in 1994.
In 1995, Imatron Japan Inc. purchased five CT scanner systems and two
refurbished systems. In connection with the sales, the Company paid $130,000 in
commissions for every new Ultrafast CT scanner sold to Imatron Japan KK.
Imatron Japan Inc. has ordered five additional Ultrafast CT scanner systems and
one refurbished system for delivery in 1996.
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HONG KONG AND TAIWAN
The Company has a Distributorship Agreement with Polly Force Co., Ltd. ("Polly
Force") pursuant to which Polly Force has the exclusive right to sell and
service the Company's Ultrafast CT scanner in Hong Kong and Taiwan.
This agreement is renewable by the Company on an annual basis.
RELIANCE ON DISTRIBUTORS
A substantial portion of the Company's sales of its scanners is done through
distributors. There is no assurance that the Company's distibutors will actually
meet their contractual minimums on a timely basis. Failure by the distributors
to meet their obligations could adversely affect the Company.
SALES INFORMATION
The end user list price for the Ultrafast CT scanner varies depending on the
configuration and country to which the scanner is shipped. The sales price
includes installation by field service personnel, system check and
certification, customer training in the scanner's use, and a limited 12-month
parts warranty. In addition, local taxes and import duties may be added. This
price, which is significantly higher than that of conventional CT scanners, may
serve to limit sales of the Company's scanner to larger hospitals and medical
imaging clinics that are able to generate a higher than average volume of
patient usage to offset its higher cost.
Unit export sales for fiscal years ended December 31 are as follows:
1995 1994 1993
---- ---- ----
Total Export Sales 7 10 2
TRANSACTIONS WITH SIEMENS CORPORATION
In March 1991, the Company entered into a Basic Agreement with Siemens
Corporation ("Siemens") which consisted of four separate sub-agreements each of
which has been subsequently modified in various respects by the parties.
On March 31, 1995, the Company and Siemens entered into an agreement (the
"Memorandum of Understanding" or "MOU") pursuant to which the relationship of
the parties as established by the Basic Agreement was substantially
restructured. Pursuant to the MOU, the sub-agreements of the Basic Agreement
were terminated and a number of new relationships were created. First, a $4
million term loan was canceled in exchange for the transfer to Siemens of all of
Imatron's interest in five patents subject to a royalty-bearing license back to
Imatron and the cancellation of the minimum purchase provision of the previous
distribution agreement. Second, the parties agreed to terminate, as of March 31,
1995, the existing Development Agreement and substitute in its place a new
collaborative research agreement pursuant to which the parties will jointly
conduct research and development over a three year period directed toward
certain improvements and enhancements to the Company's C-150 product described
above. Third, Siemens was appointed Imatron's exclusive distributor for the
company's C-150 Ultrafast scanner in the United States, Canada, Europe and India
for a three year period effective April 1, 1995. Imatron retains exclusive
distribution rights in the rest of the world. Fourth, the Company and Siemens
granted reciprocal licenses to each other covering the electron beam technology
presently used (and to be developed) relating to the design and manufacture of
electron beam products.
Pursuant to the new collaborative research agreement, Siemens has agreed to fund
an aggregate of $15 million of Imatron-managed research and development over the
next three years, subject to achieving certain mutually agreed upon goals and
objectives. Pursuant to the funding, Imatron will contribute a portion equal to
fifty percent of Siemens' contribution for the sole purpose of conducting the
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collaborative agreement. The primary goals of the research and development
program are to develop enhanced system performance, increase product
reliability, reduce manufacturing costs, and improve system upgradability. The
results of the collaborative research will be jointly owned by the parties and
cross-licensed.
Siemens has agreed to use its best efforts to distribute the Company's C-150
product in its exclusive markets subject to no minimum purchase obligations.
Siemens has the option to extend the term of the Distribution Agreement for an
additional three year period. Any extension of the agreement is subject to
agreement on minimum purchase commitments. Imatron and Siemens have agreed that
Siemens will be the distributor of the Company's C-150 units to HeartScan
Imaging, Inc., the Company's wholly-owned subsidiary, in those markets where
Siemens has exclusive distribution rights. Siemens purchased one unit in 1995.
Pursuant to the cross licensing agreement, Siemens has granted Imatron a license
to: (a) all of the research results from the prior development agreement; (b)
the patents transferred by Imatron to Siemens; and (c) Siemens' rights under the
new collaborative research agreement. Imatron has granted a license to Siemens
in the field of medical imaging to: (a) Imatron's rights under the new
collaborative research agreement; and (b) Imatron's electron beam technology.
Pursuant to the license, Imatron has agreed not to grant to any third party a
license in the field of medical imaging during the term of the Distribution
Agreement and the collaborative research agreement and for a period of three
years thereafter. Siemens may not use Imatron's technology to manufacture C-150
scanners until Imatron has delivered to Siemens 50 such units in any year, not
including systems designated for use in HeartScan centers, or in the event
Imatron is unable to perform its obligations to Siemens under the Distribution
Agreement.
INVISION TECHNOLOGIES, INC.
In 1990 the Company established a joint venture company, InVision Technologies,
Inc. (formerly Imatron Industrial Products, Inc.), with FI.M.A.I. Holding S.A.
("FI.M.A.I."), a shareholder of Imatron, to develop, manufacture, market and
support advanced CT technology in the baggage, parcel and freight scanning
market. Upon organization, Imatron contributed $250,000, certain parts,
components and material and entered into a Technology License Agreement.
The Technology License Agreement between the Company, FI.M.A.I. and InVision
Technologies, Inc. ("InVision") grants InVision an exclusive, worldwide,
perpetual and fully-paid license to use the Company's technology and patents for
the development, manufacture, use, and sale of compact medical scanner products
for military field applications, and mail, freight, parcel or baggage scanner
products. Also, InVision has agreed to grant back to Imatron an exclusive,
worldwide, perpetual and fully-paid right and license to use InVision's
technology and patents outside of InVision's field of use.
As of December 31, 1995, Imatron's interest in InVision was approximately 1%
which is carried in the Company's consolidated financial statements at no value.
As of December 31, 1995, InVision had an accumulated deficit. The Company is
under no obligation to fund the accumulated deficit of InVision and is prepared
to abandon its interest.
COMPETITION
In the non-cardiac imaging applications market (comprised principally of
hospital radiology departments), the Company's principal competition is from
current manufacturers of conventional CT scanners, including General Electric
Company, Siemens Corporation, Elscint, Picker International, Inc., Philips
Medical Systems and Toshiba Medical Corporation. Non-invasive diagnostic imaging
techniques such as ultrasound, radioisotope imaging, digital subtraction
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angiography and magnetic resonance imaging are also partially competitive with
the Company's scanners, particularly in the cardiac imaging market. Each of the
companies named above, as well as ATL, Accuson and ADAC Laboratories, markets
equipment using one or more of these techniques. All of these companies have
greater financial resources and larger and more established staffs than those of
the Company and their products are in most cases substantially less expensive
than the Ultrafast CT scanner.
The Company believes that to compete successfully against these competitors, it
must demonstrate that the Ultrafast CT scanner is both an acceptable substitute
for conventional CT scanners in scanning areas of the body where motion is not a
limitation and a valuable cardiac diagnostic tool capable of producing useful
images of the heart. Although the Company believes that the Ultrafast CT can
produce images of a quality and resolution as good as or superior to images
produced by "state of the art" conventional CT scanners, it lacks certain
features that many competing premium scanners offer. These include lack of a
high-resolution mode for imaging the temporal bones and inner ear. There is no
certainty that potential purchasers of the Company's scanner will accept it
without such features.
Also, the Company believes that customers and potential customers expect a
continuing development effort to improve the functionality and features of the
scanner. The Company continually seeks to develop product enhancements and
improve product reliability. Imatron's future success may depend on its ability
to complete certain product enhancement and product reliability projects
currently in progress, as well as on its continued ability to develop new
products or product enhancements in response to new products that may be
introduced by other companies. There can be no assurance that Imatron will be
able to continue to improve product reliability or introduce new product models
or product enhancements as required to remain competitive.
Other factors, in addition to those described above, that a potential purchaser
would consider in the decision to replace a conventional CT scanner with an
Ultrafast CT scanner include purchase price, patient throughput capacity,
anticipated operating expenses, estimated useful life and post-sale customer
service and support. The Company believes that its scanner and/or the Company is
competitive with respect to each of these factors.
MANUFACTURING
The Company manufactures its scanner at its South San Francisco, California
facility. To date, the typical manufacturing cycle has required six months from
the authorization of manufacturing to the delivery of a scanner.
Many of the components and sub-assemblies used in the scanner have been
developed and designed by Imatron to its custom specifications and are
obtainable from limited or single sources of supply. In view of the customized
nature of many of these components and sub-assemblies, there may be extended
delays between their order and delivery. Delays in such delivery could adversely
affect Imatron's present and future production schedules. The Company has made
and continues to make inventory investments to acquire long lead time components
and sub-assemblies to minimize the impact of such delays. In recent years, the
Company has developed alternative sources for many of its scanner subcomponents
and continues its programs to qualify vendors for the remaining critical parts.
Also, certain vendors currently require cash-on-delivery or prepay payment
terms. There can be no assurance that such actions will not adversely affect the
Company's production schedule and its ability to deliver products in a timely
manner. As a result of certain vendors currently requiring cash-on-delivery or
prepay terms, the Company must maintain higher levels of cash and other sources
of credit to fund material purchases than otherwise would be required.
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GOVERNMENT REGULATION
Amendments to the Federal Food, Drug, and Cosmetic Act ("Amendments") enacted in
1976, and regulations issued or authorized thereunder, provide for regulation by
the Federal Food and Drug Administration ("FDA") of the marketing, manufacture,
labeling, packaging, sale and distribution of "medical devices," including the
Company's scanner. Among these regulations are requirements that medical device
manufacturers register their manufacturing facilities with the FDA, list devices
manufactured by them, file various reports and comply with specified Good
Manufacturing Practice (GMP) regulations. The FDA enforces additional
regulations regarding the safety of equipment utilizing x-rays, including CT
scanners. Various states also impose similar regulations.
The Amendments also impose certain requirements which must be met prior to the
initial marketing of medical devices introduced into commerce after May 28,
1976. Other requirements imposed on medical device manufacturers include a
pre-market notification process commonly known as the 510(k) application to
market a new or modified medical device. Additionally, and specifically if
required by the FDA, a pre-market approval (PMA) may be required. This process
is potentially expensive and time consuming and must be completed prior to
marketing a new medical device. The Company has received appropriate clearances
from the FDA to market both the C-100 and C-150 Ultrafast CT scanner. The
Company believes that it is presently in substantial compliance with the GMP
requirements and other regulatory issues promulgated by the FDA.
The FDA also regulates the safety and efficacy of radiological devices. Although
the Company believes it is in compliance with all applicable radiological health
regulations promulgated by the FDA, there can be no assurance that the Ultrafast
CT scanner will continue to comply with all such standards and regulations that
may be promulgated. In any event, compliance with all such requirements can be
costly and time consuming, with a resultant materially adverse effect upon the
development of the Company's business and its future profitability.
FDA clearance to market does not guarantee or imply reimbursement by third-party
payers such as Medicare, Medicaid, Blue Cross/Blue Shield or private health
insurers. Medicare and Medicaid reimburse for procedures that are generally
accepted or that have been proven safe and effective. The Health Care Financing
Administration ("HCFA"), which oversees Medicare and Medicaid payment policies,
will not authorize payment for procedures which are considered to be
experimental. HCFA has determined that diagnostic examinations of the head and
other parts of the body performed by CT scanners are covered if the contractor
who administers the local Medicare program finds that medical and scientific
literature and opinion support the effective use of a scan for the particular
condition.
The Federal government and certain states have enacted cost-containment measures
such as the establishment of maximum fee standards in an attempt to limit the
extent and cost of governmental reimbursement of allowable medical expenses
under Medicare, Medicaid and similar governmental programs. A number of states
have adopted or are considering the adoption of similar measures. Such
limitations have led to a reduction in, and may further limit funds available
for, the purchase of diagnostic equipment such as the Company's scanner and in
the number of diagnostic imaging procedures performed in hospitals and other
medical institutions such as imaging clinics.
Certain states have adopted requirements that hospitals and other health care
facilities, such as imaging clinics, obtain a Certificate of Need ("CON") for
major capital expenditures, in the absence of which they will be denied
reimbursement for services and funding relating to such capital expenditures. A
number of states have enacted more stringent CON legislation such as requiring
private physicians to obtain a CON for any CT scanner, regardless of cost. There
can be no assurance that Imatron's potential customers will be able to secure
CON's or will be willing to pursue the application procedure.
The Company's primary customers operate in the helathcare industry. The health
care industry is highly regulated. Both existing and future governmental
regulations could adversely impact the market for the Company's Ultrafast CT
scanner and the Company's business. The Company's operations are also subject to
<PAGE>
regulation by other federal, state and local governmental entities empowered to
enforce pertinent statutes and regulations, such as those enforced by the
Occupational Safety and Health Agency and the Environmental Protection Agency.
In some cases, state or local regulations may be stricter than regulations
imposed by the federal government. The Company was most recently inspected by
the State of California, Department of Occupational Safety and Health
Administration in November, 1993. Minor violations were issued by Cal/OSHA and
were immediately corrected by the Company. The subsequent follow up inspection
in December 1993 by the same regulatory body yielded satisfactory results
without the issuance of further notice of violation. The Company believes that
it is in substantial compliance with California regulations applicable to its
business.
PATENTS AND LICENSES
Imatron relies heavily on proprietary technology which it attempts to protect
through patents and trade secrets.
In February 1981, the Company was granted the exclusive use for five years and
non-exclusive use thereafter of certain technology and a patent pending owned by
the University of California (UC) under the terms of a license agreement between
UC and Emersub, a wholly-owned subsidiary of a former principal shareholder of
the Company, and a sublicense agreement between Emersub and Imatron Associates
(the predecessor to the Company), respectively. In June 1986, the license and
sublicense agreements were amended to extend the Company's exclusive use of the
technology through the remaining 9-year life of the patent in exchange for
modified minimum annual royalty payments. Under the terms of Emersub's license
with UC, Emersub was obligated to make certain additional payments in connection
with the license. In October 1990, pursuant to subsequent amendments of the
license and sublicense agreements the Company issued an aggregate of 132,813
shares of Series A Preferred Stock to UC and Emersub in satisfaction of this
obligation. The University of California converted their 125,000 Series A
Preferred Stock into 625,000 common stock shares in 1993. Emersub converted
their 7,813 Series A Preferred Stock into 39,065 common stock shares in
September 1995.
In addition, the sublicense agreement, as amended, requires the Company to pay
annual royalties to Emersub equal to 2.125% of net sales of certain of the
Company's products. The Company's Chairman of the Board, Dr. Douglas P. Boyd,
receives 6% of all of the royalties paid by Emersub to UC. Loss by Imatron of
its rights under the patent as a result of termination of its sublicense from
Emersub, or the underlying license, could have a material adverse effect upon
Imatron's business and future prospects. There are no present disputes with
either UC or Emersub.
Development of portions of the technology covered by the UC patent and
sublicensed to Imatron has been funded in substantial part through research
financing made available to UC by the National Institutes of Health. As a result
of such financing, it is possible that the U.S. Government may assert certain
claims in such UC patents, including the right to a royalty-free license for
governmental use.
In addition, Imatron holds twenty-seven U.S. Patents of its own (each with a
remaining life in excess of 3 years) and has filed three U.S. patent
applications covering various integral components of the scanner including,
among others, its electron beam assembly and its x-ray detector and has filed
applications corresponding to several of these patents and applications in
various European Patent Convention countries, Canada and Japan. There can be no
assurance that any such applications will result in the issuance of a patent to
the Company. Imatron's patents and patent applications have not been tested in
litigation and no assurance can be given that patent protection will be upheld
or will be as extensive as claimed. Furthermore, no assurance can be given as to
the Company's ability to finance litigation against parties which may infringe
upon such patents or parties which may claim that the Company's scanner
infringes upon their patents. However, the agreement signed by the Company and
Siemens Corporation in March 1991 allows Siemens Corporation to enter litigation
in favor of Imatron.
<PAGE>
On March 31, 1995, the Company and Siemens Corporation (Siemens) entered into an
agreement (the "Memorandum of Understanding") relating in part to certain of the
Company's patents (See "Transactions With Siemens Corporation" ). Pursuant to
the agreement, the Company transferred to Siemens five patents, two of which
cover features of the Company's C-150 scanner, in consideration of the
cancellation by Siemens of a $4 million term loan to the Company. As part of the
agreement Siemens granted to the Company a non-exclusive, irrevocable, perpetual
license to the five patents. The license is subject to a royalty of $20,000 for
each new C-150 unit produced by the Company beginning with the twenty-first
C-150 unit produced in any year.
Siemens has recently asserted a claim against the Company regarding the lapse of
certain foreign registrations of one of the patents assigned to Siemens by the
Company in connection with the March 31, 1995 agreement between the companies.
The technology involved in the patent is not used presently in any of the
Company's products. The Company believes that it can provide a new patent to
Siemens to replace the lapsed patent. While an unfavorable resolution of the
claim is not expected to have a material effect on the Company's financial
position, it could however, have a material effect on the results of operations
of a particular future period.
In the event some or all of the Company's patent applications are denied and/or
some or all of its patents held invalid, the Company would be prevented from
precluding its competitors from using the protected technology set forth in such
patent applications or patents. Because the Company's products involve
confidential proprietary technology and know-how, the Company does not believe
such a loss of patent rights would have a material adverse effect upon the
Company.
The Company also believes that many of its proprietary technologies are better
protected as trade secrets or copyrights than by patents. Moreover, although
protection of the Company's existing proprietary technologies is important,
other factors such as product development, customer support and marketing
ability are equally important to the development of the Company's business.
EMPLOYEES
As of March 1, 1996, the Company had 190 employees, including 30 employees in
service, 8 in sales/marketing, 61 scientists and engineers in research and
development, 53 employees in manufacturing, 17 employees in finance and
administration and 21 in HeartScan. None of the Company's employees are
represented by a labor union and no work stoppages or strikes have occurred. The
Company believes that it has good labor relations with its employees.
CERTAIN FACTORS
In evaluating the Company and its business, the following factors should be
given careful consideration, in addition to the information mentioned elsewhere
in this Form 10-K:
OPERATING HISTORY
Imatron was incorporated in February, 1983 and in March, 1983 became the
successor to Imatron Associates, a limited partnership established in February,
1981. Imatron operated as a development-stage company until the fourth quarter
of 1984, at which time it recognized its initial sale of an ULTRAFAST CT
scanner. Imatron incurred losses each quarter from inception in February, 1981
through December 31, 1990. Its first recorded profitable year was the year ended
December 31, 1991 during which a $4,000,000 payment for the licensing of
technology to Siemens Corporation was received. The Company incurred net losses
of $2,871,000 and $6,523,000 in the years ended December 31, 1993 and 1992,
respectively. 1994 was the Company's first year of income from operations. In
1995, the Company incurred a net loss of $2,449,000. There is no assurance that
<PAGE>
Imatron can return to profitable operations in the future. In the past, Imatron
has funded its losses primarily though the sale of securities in two public
offerings and a number of private placements, through the exercise of options
and warrants, through the 1991 license for medical uses of its electron-beam
technology to Siemens Corporation, and through revolving lines of credit. In
1995, the Company raised $9,882,000 (net of offering costs) in two offerings of
Common Stock to certain institutional investors. The Company has an accumulated
deficit of $57,557,000 at December 31, 1995.
Management believes that cash, cash equivalents and short-term investments
existing at December 31, 1995 and the estimated proceeds from ongoing sales of
products and services in 1996 will provide the Company with sufficient cash for
operating activities and capital requirements through December 31, 1996.
NEED FOR ADDITIONAL FINANCING
To satisfy the Company's future capital and operating requirements, profitable
operations or additonal 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. If such financing 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. In
addition, HeartScan will need substantial additional financing to fund its plan
to own and operate CAS centers. To date, HeartScan has been unable to raise such
funds and has relied upon the Company for financing. In the event HeartScan
cannot raise such funds it will have to curtail its expansion activities.
MATERIAL DEPENDENCE UPON KEY PERSONNEL
The Company has been, and will continue to be, materially dependent upon the
technical expertise of its engineering management personnel. The loss of a
significant number of such personnel would have a materially adverse effect upon
the Company's business and future prospects. The Company does not maintain
key-man life insurance.
HIGH COST OF SCANNER
The distributor list price of Imatron's Ultrafast CT scanner is significantly
higher than that of commercially available conventional CT scanners and slightly
higher than the price of "top-of-the-line" scanners. Such pricing may limit the
market for Imatron's product. Potential customers' budgetary limitations,
including those imposed by government regulation, may often compel the purchase
of lower cost, conventional CT scanners.
LIMITED CLINICAL DEMONSTRATION OF CERTAIN ADVANTAGES OF THE COMPANY'S SCANNER
The Company's scanner has been used in a clinical environment on humans since
April 1983. Clinical use of the C-100 XL scanner model began in February 1989
and twenty-seven C-150 scanners are currently installed in a clinical setting.
The Company believes that market acceptance of the Ultrafast CT scanner
continues to depend in substantial part upon the clinical demonstration of
certain asserted technological advantages and diagnostic capabilities. There is
no assurance that these asserted technological advantages and diagnostic
capabilities will result in the development of a significant market for the
Ultrafast CT that will allow the Company to operate profitably.
PRODUCT LIABILITY RISKS
As a manufacturer and marketer of medical diagnostic equipment, the Company is
subject to potential product liability claims. For example, the exposure of
normal human tissue to x-rays, which is inherent in the use of CT scanners for
diagnostic imaging, may result in potential injury to patients subjecting the
Company to possible liability claims. The Company presently maintains primary
and excess product liability insurance with aggregate limits of $5.0 million per
<PAGE>
occurrence. No assurance can be given that the Company's product liability
insurance coverage will continue to be available or, if available, that it can
be obtained in sufficient amounts or at reasonable cost or that it will prove
sufficient to pay any claims that may arise.
VOLATILITY OF STOCK PRICE
The market prices for securities of advanced technology companies have
historically been highly volatile, including the market price of shares of the
Company's Common Stock. Future announcements by the Company or its competitors,
including announcements concerning technological innovations or new commercial
products, results of clinical testing, changes in government regulations,
regulatory actions, health care reform, proprietary rights, litigation and
public concerns as to the safety of the Company's or its collaborators'
products, as well as period-to-period variances in financial results could cause
the market price of the Common Stock to fluctuate substantially. In addition,
the stock market has experienced extreme price and volume fluctuations that have
particularly affected the market price for many advanced technology companies
that have often been unrelated to the operating performance of these companies.
These broad market fluctuations may adversely affect the market price of the
Common Stock.
NO DIVIDENDS ON PREFERRED AND COMMON STOCK
The Company has not paid any dividends on its Preferred or Common Stock since
inception. Even if its future operations result in revenues and/or
profitability, as to which there can be no assurance, there is no present
anticipation that dividends will be paid. Rather, the Company expects that any
future earnings will be applied toward the further development of the Company's
business.
ITEM 2 - PROPERTIES
The Company's manufacturing, research and development, marketing and
administrative operations occupy approximately 70,000 square feet of leased
space in modern buildings located in South San Francisco, California under
leases expiring in October, 2001. Under certain future conditions the facilities
could be expanded to approximately 75,000 square feet. The HeartScan clinics
located in Seattle, WA, and Houston, TX, are occupying approximately 3,000
square feet each of leased space in medical buildings close to hospitals. The
leases are renewable in July 1998, and May 2000, respectively.
The Company believes its facilities are adequate for its current needs and that
suitable additional or substitute space will be available as needed to
accommodate any future expansion of the Company's operations.
ITEM 3 - LEGAL PROCEEDINGS
None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of Imatron's shareholders during the
quarter ended December 31, 1995.
<PAGE>
SUPPLEMENTAL ITEM: EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company and their ages and positions with the
Company are set forth below. Unless otherwise indicated, officers are full-time
employees and serve at the discretion of the Board of Directors.
Name Age Position
Dr. Douglas P. Boyd 54 Chairman of the Board
Chief Technology Officer
S. Lewis Meyer 51 President
Chief Executive Officer
Dale E. Grant 50 Executive Vice President,
Sales and Marketing President,
HeartScan Imaging, Inc.
Gary H. Brooks 47 Vice President, Finance and
Administration, Chief Financial
Officer, Secretary
Dr. Boyd is a founder of Imatron, Inc. and has served as Chairman of the Board
of Directors since inception. Dr. Boyd currently also serves as Chief Technology
Officer and has served in a variety of executive positions in the past. Prior to
Imatron's formation he was Professor of Radiology (Physics) at the University of
California, San Francisco, and prior thereto served in various research
positions at Stanford University and Bell Telephone laboratories. Dr. Boyd is
internationally recognized for his pioneering work in the development of
fan-beam CT scanners, Xenon detector arrays, and Electron-Beam CT, for which he
has been awarded ten U.S. patents. He has published more than 100 scientific
papers and is a frequent speaker at university seminars and other scientific
symposia. He has received several awards for his contributions, including the
prestigious Conway Safe Sky's Award which was presented in Singapore in 1993 for
contributions to airline travel safety related to the development of a CT
baggage explosives detection system.
Dr. Boyd received his B.S. in Physics from the University of Rochester in 1963
and a Ph.D. in Physics from Rutgers University in 1968.
S. Lewis Meyer was appointed President, Chief Executive Officer and Director of
Imatron in June 1993. From April, 1991 to the time he joined Imatron, he was
Vice President, Operations of Otsuka Electronics (U.S.A.) Inc., Fort Collins,
Colorado, a manufacturer of clinical MR systems and analytical NMR
spectrometers. From August 1990 to April 1991, he was a founding partner of
Medical Capital Management, a company which provided consulting services to
medical equipment manufacturers, imaging services providers and related medical
professionals. Prior thereto, he was employed as President, Chief Executive
Officer and Chairman of the Board of American Health Services Corp., a publicly
held, nationwide developer and operator of diagnostic imaging treatment centers.
Before his participation in the founding of American Health Services Corp., Mr.
Meyer held various general management and marketing management positions at EMI
Medical Inc., the pioneer developer and manufacturer of CT scanners and Varian
Associates, the world's leading manufacturer of medical linear accelerators.
Mr. Meyer is a Director of BSD Medical Corporation, a publicly held company in
the business of designing and manufacturing medical hyperthermia equipment.
<PAGE>
Mr. Meyer received his B.S. degree in Physics in 1966 from the University of the
Pacific, Stockton, California, a M.S. in Physics in 1968 from Purdue University
and Ph.D. in Physics from Purdue University in 1971.
Mr. Grant was appointed Executive Vice President of the Company on January 3,
1994. Mr. Grant's primary responsibilities include direct supervision of the
Company's Sales, Service and Marketing programs. Mr. Grant is also President of
HeartScan Imaging, Inc. and will be responsible for developing the HSI business.
From September, 1990 to the time he joined the Company, Mr. Grant was Vice
President, Sales and Marketing for Otsuka Electronics (U.S.A.) Inc. Prior to Mr.
Grant's employment with Otsuka Electronics, he served for five years as a Vice
President of American Health Services Corporation.
Prior to joining AHSC, Mr. Grant served as both Regional and National Sales
Manager for EMI Medical. Mr. Grant has provided consulting services to hospitals
and physician groups throughout the U.S. assisting in the development of joint
venture imaging centers.
Mr. Brooks was appointed Vice-President, Finance and Administration, Chief
Financial Officer and Secretary of Imatron in December of 1993. Prior to joining
Imatron, Mr. Brooks was Chief Financial Officer for five years at Avocet, a
privately held, sports electronics manufacturer. Prior thereto, he had
progressively more responsible positions in accounting and finance at several
Fortune 500 corporations including Ford, Rockwell, Bendix and ITT.
Mr. Brooks received his B.A. in Zoology, 1971, University of California,
Berkeley and a M.B.A. in Finance and Accounting, 1973, University of California,
Los Angeles.
<PAGE>
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Since April 1985, the Company's Common Stock has traded on the NASDAQ National
Market System under the NASDAQ symbol "IMAT".
The following table sets forth, for the periods indicated, the range of high and
low sales prices, all as reported by NASDAQ. These prices reflect inter-dealer
prices, without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.
1995 1994
Quarter: High Low High Low
-------------- ----------- ------------ -----------
First $ 1.31 $ .97 $ 2.06 $ .50
Second 1.22 .81 1.88 .81
Third 3.63 .75 1.41 .88
Fourth 2.97 1.47 1.56 .88
As of March 20, 1996 there were approximately 6,570 holders of record of the
Company's common stock. On March 20, 1996 the closing price of the Company's
common stock on NASDAQ was $ 2.75.
DIVIDEND INFORMATION
The Company has paid no cash dividends on its Common Stock since incorporation
and anticipates that for the foreseeable future it will retain any earnings for
use in its business.
ITEM 6 - SELECTED FINANCIAL DATA
IMATRON INC.
SELECTED FINANCIAL INFORMATION
(In thousands, except per share amounts)
OPERATING INFORMATION
Year Ended December 31 1995 1994 1993 1992 1991
- ---------------------- ------- ------- ------ ------ -----
Total revenues $26,700 $33,571 $25,111 $14,263 $22,933
Net income(loss) $(2,449) $ 2,310 $(2,871) $(6,523) $ 1,010
Net income(loss)per share $ (0.04) $ 0.04 $ (0.06) $ (0.15) $ 0.02
Number of shares used
in per share calculations 57,598 62,102 47,865 43,294 51,889
BALANCE SHEET INFORMATION
At December 31 1995 1994 1993 1992 1991
- ---------------------- ------- ------ ------ ------ ------
Working capital $14,252 $ 8,741 $ 5,536 $ 6,971 $ 4,471
Total assets $30,876 $21,173 $15,903 $18,602 $19,399
Long-term debt $ - $ 4,992 $ 4,992 $ 4,992 $ 2,667
Total liabilities $14,651 $14,303 $12,265 $12,332 $11,010
Shareholders' equity $16,225 $ 6,870 $ 3,638 $ 6,270 $ 8,389
<PAGE>
The Company did not pay any cash dividends on its Common Stock during any of the
periods presented above.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1995, the Company had working capital of $14.3 million which was
a 64% increase compared to working capital of $8.7 million at December 31, 1994.
The current ratio increased to 2.4:1 from 1.9:1 at December 31, 1994.
The Company's assets increased in 1995 by 46% to $30.9 million compared to
December 31, 1994 total assets of $21.2 million primarily due to proceeds
realized of $9,882,000 (net of offering costs) from a private placement
offering. In addition, net property and equipment increased $4.4 million of
which approximately $4.2 million is related to capitalized leases. Capital lease
obligations of $4.2 million were entered into in 1995 principally due to the
establishment of two new HeartScan clinic scanners. The deferred income of $1.3
million is related to sales of scanners subject to sale-leaseback arrangements.
In connection with the March 1995 Memorandum of Understanding with Siemens, the
$4 million note payable to Siemens was cancelled in exchange for five patents
and termination of the minimum puchase obligation. (See Note 5 to the
Consolidated Financial Statements.)
Management believes that cash, cash equivalents and short-term investments
existing at December 31, 1995 and the estimated proceeds from ongoing sales of
products and services in 1996 will provide the Company with sufficient cash for
operating activities and capital requirements through December 31, 1996.
The Company anticipates that 1996 capital equipment acquisitions will increase
from 1995 due to the expansion of HeartScan clinics.
To satisfy the Company's capital and operating requirements beyond 1996,
profitable operations, additional public and/or private financing or the
incurrence of debt may 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.
The Company does not believe that inflation has had a material effect on its
revenues or results of operations.
RESULTS OF OPERATIONS
1995 vs. 1994
Overall revenues decreased 20% from $33.6 million in 1994 to $26.7 million in
1995. Product sales, including $1.8 million under the sale-leaseback
arrangements, decreased 35% due to decreased scanner shipments which was
partially offset by higher option/upgrade revenues. Scanner shipments in 1995
were 10 units versus 16 units in 1994. Service revenues increased 16% from $4.8
million in 1994 to $5.5 million in 1995 primarily due to higher spare parts
shipment. Research and development contract revenues went up by 5% to $5.6
million compared to $5.4 million in 1994. Clinic revenues increased by 99% due
to an increase in number of patient scans attributed to increased clinic
advertisements.
Product costs as a percentage of revenues was 89% in 1995 versus 71% in 1994.
This increase is the result of lower realized per unit revenue and overhead
expenses being allocated to a smaller number of units. The cost of service
<PAGE>
revenues as a percentage of revenues decreased to 71% in 1995 versus 85% in
1994. This decrease is the result of lower scanner maintenance costs. Cost of
clinic revenues as a percentage of revenues went up to 293% as compared to 226%
in 1994 because of start-up expenses related to the establishment of new
HeartScan clinics.
The cost of development contracts as a percent of development contract revenues
decreased to 88% in 1995 versus 97% in 1994. The continued high level of cost is
due primarily to head count and associated costs required to continue activities
under the Siemens Collaborative Agreement.
Operating expenses for 1995 increased by 38% as compared to 1994. Research and
development expenses are 63% higher in 1995 primarily due to the increased use
of consultants and prototype materials necessary under the Siemens'
Collaborative Agreement. Marketing and sales expenses were up 51% in 1995 versus
1994 primarily because of commissions paid for scanners sold to Imatron Japan KK
and increased marketing costs for HeartScan, a wholly-owned subsidiary of
Imatron. General and administrative expenses increased 6% in 1995 as compared to
1994.
The increase in other income in 1995 is a result of the elimination of the $4.0
million term loan with Siemens in exchange for the transfer of five Imatron EBT
patents and the cancellation of Siemens' existing minimum purchase obligations
under the previous distribution agreement.
Interest expense decreased 44% as compared to 1994 primarily due to the
elimination of the $4.0 million term loan with Siemens.
1994 vs. 1993
Overall revenues increased 34% from $25.1 million in 1993 to $33.6 million in
1994. Product sales increased 56% due to increased scanner shipments and higher
option/upgrade revenue. Scanner shipments in 1994 were 16 units versus 12 units
in 1993. Service and Research and Development contract revenues in 1994 of $4.7
million and $5.4 million, respectively, remained essentially flat with 1993
levels.
The cost of revenues as a percentage of revenues improved to 78% in 1994 from
94% in 1993.
Product cost as a percentage of revenues was 71% in 1994 versus 88% in 1993.
This decrease is due partially to higher average unit revenue and lower overhead
expenses. The cost of service revenues decreased to $4.0 million in 1994 from
$4.9 million in 1993 due to reduced site costs related to servicing installed
scanners.
The cost of development contracts as a percent of development contract revenues
of 97% in 1994 remained consistent with 1993. The continued high level of cost
is due primarily to head count and associated costs required to meet the
remaining milestones of the Siemens development contract.
Operating expenses for 1994 increased by 41% as compared to 1993. Research and
development expenses were 28% higher in 1994 primarily due to the increased use
of consultants and prototype materials. Marketing and sales expenses were up 74%
in 1994 versus 1993 largely because of increased sales expense related to the
higher level of scanner shipments, support of the distributor agreements in Asia
and increased marketing costs for HeartScan, a wholly-owned subsidiary of
Imatron. General and administrative expenses increased 31% in 1994 as compared
to 1993 due to increased salaries and benefit expenses, higher costs for
shareholder and investor relations, and increased HeartScan costs.
The increase in other income in 1994 is a result of the $1.5 million payment
received for the termination of Imatron's exclusive distributorship agreement
with Mitsui & Co., Ltd. of Japan and the extinguishment of a $.8 million
contingency with Siemens AG.
<PAGE>
Other 1994 expenses were 30% higher compared to 1993 primarily due to higher
interest rates on Imatron's debt obligations.
ITEM 8 - CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA
See Consolidated Financial Statements and Consolidated Financial Statement
Schedules listed in Item 14 (a) 1 and 2.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
The information required by items 10, 11, 12 and 13 will be included in the
definitive Proxy Statement for Registrant's 1995 Annual Meeting of Shareholders
or in an amendment to the Form 10-K under cover of Form 8. The information
required in this Part III will be filed with the Securities and Exchange
Commission not later than 120 days after the end of the 1995 fiscal year.
PART IV
ITEM 14 - EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
(a) 1. Consolidated Financial Statements See "Index to Consolidated
Financial Statements" attached here to and made a part hereof.
2. Consolidated Financial Statement Schedules Schedules are omitted
because of the absence of conditions under which they are required.
3. Exhibits The exhibits listed on the accompanying "Index to
Exhibits" are filed as part hereof and are incorporated herein by
reference.
(b) Reports on Form 8-K
None filed during the Company's fourth quarter ended December 31,1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) 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.
Dated: March 29, 1996 IMATRON INC.
By S. Lewis Meyer
S. Lewis Meyer
President, Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ---------------- -------------------- -------------
Douglas P. Boyd Director, March 28, 1996
- ---------------- Chairman of the Board
Douglas P. Boyd
John L. Couch Director March 28, 1996
- ---------------
John L. Couch
Giovanni Lanzara Director March 28, 1996
- ----------------
Giovanni Lanzara
S. Lewis Meyer Director, March 28, 1996
- -------------- President and Chief Executive
S. Lewis Meyer Officer
Terry Ross Director March 28, 1996
- -----------
Terry Ross
Aldo J. Test Director March 28, 1996
- -------------
Aldo J. Test
Gary H. Brooks Chief Financial Officer, March 28, 1996
- -------------- Chief Accounting Officer,
Gary H. Brooks Vice President, Finance and
Administration, Secretary
<PAGE>
IMATRON INC.
Index to Consolidated Financial Statements
STATEMENT PAGE
Report of Independent Auditors 25
Consolidated Balance Sheets at December 31, 1995 and 1994 26
Consolidated Statements of Operations for the years ended
December 31, 1995, 1994 and 1993 27
Consolidated Statements of Shareholders' Equity for the years ended
December 31, 1995, 1994 and 1993 28
Consolidated Statements of Cash Flows for the years ended
December 31, 1995, 1994 and 1993 29
Notes to Consolidated Financial Statements 30
<PAGE>
Report of Independent Auditors
Board of Directors and Shareholders
Imatron Inc.
We have audited the accompanying consolidated balance sheets of Imatron Inc. as
of December 31, 1995 and 1994, and the related consolidated statements of
operations, shareholders' equity, and cash flows for each of the three years in
the period ended December 31, 1995. These consolidated financial statements are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of Imatron
Inc. at December 31, 1995 and 1994, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
San Francisco, California
February 9, 1996
<PAGE>
IMATRON INC.
Consolidated Balance Sheets
(Amounts in thousands)
December 31,
ASSETS 1995 1994
- ------ -------- --------
Current Assets
Cash and cash equivalents $ 7,269 $ 1,694
Short-term investments 1,266 -
Accounts receivable 3,083 6,066
Accounts receivable from affiliate 2,957 780
Notes receivable 250 660
Inventories 8,937 8,236
Prepaid expenses 563 616
-------- ------
Total current assets 24,325 18,052
Property and equipment, net 6,260 1,893
Capitalized software, net 12 143
Development machinery, net - 566
Other assets 279 519
-------- -------
Total assets $ 30,876 $ 21,173
========= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Borrowings under line of credit $ 992 $ -
Accounts payable 2,785 4,242
Other accrued liabilities 5,607 5,069
Captial lease obligations - due within one year 689 -
---------- --------
Total current liabilities 10,073 9,311
Long term debt - 4,992
Deferred income on sale leaseback transactions 1,267 -
Capital lease obligations 3,311 -
----------- -------
Total Liabilities 14,651 14,303
Commitments and contingencies - Note 3 & 6
Shareholders' Equity
Convertible preferred stock, authorized-10,000
shares;issued and outstanding-0 shares in 1995
and 1,308 in 1994 - 2,602
Common stock, no par value;authorized-100,000
shares;issued and outstanding-68,835 shares
in 1995 and 53,631 in 1994 72,282 57,876
Additional paid-in capital 1,500 1,500
Accumulated deficit (57,557) (55,108)
--------- ---------
Total Shareholders' Equity 16,225 6,870
---------- ---------
Total Liabilities and Shareholders' Equity $ 30,876 $ 21,173
========== =========
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
IMATRON INC.
Consolidated Statements of Operations
(Amounts in thousands, except per share amounts)
<CAPTION>
Year ended December 31,
1995 1994 1993
--------------- --------------- --------------
<S> <C> <C> <C>
Revenues
Product sales $ 13,254 $ 23,210 $ 14,902
Product sale-leaseback arrangements 1,820 - -
Service 5,529 4,750 4,553
Development contracts 5,637 5,380 5,513
Clinics 460 231 143
--------------- --------------- --------------
Total revenues 26,700 33,571 25,111
--------------- --------------- --------------
Cost of revenues
Product sales 11,533 16,556 13,169
Product sale-leaseback arrangements 1,820 - -
Service 3,952 4,021 4,859
Development contracts 4,978 5,227 5,332
Clinics 1,350 521 309
--------------- --------------- --------------
Total cost of revenues 23,633 26,325 23,669
--------------- --------------- --------------
Gross profit 3,067 7,246 1,442
Operating expenses
Research and Development 3,430 2,101 1,646
Marketing and Sales 3,137 2,077 1,190
General and Administrative 2,658 2,519 1,925
--------------- --------------- --------------
Total operating expenses 9,225 6,697 4,761
--------------- --------------- --------------
Operating income (loss) (6,158) 549 (3,319)
Other income 4,021 2,342 912
Interest expense (312) (558) (464)
--------------- --------------- --------------
Income (loss) before provision for income taxes (2,449) 2,333 (2,871)
--------------- --------------- --------------
Provision for income taxes - (23) -
--------------- --------------- --------------
Net income (loss) $ (2,449) $ 2,310 $ (2,871)
=============== =============== ==============
Net income (loss) per common share $ (.04 ) $ .04 $ (.06)
=============== =============== ==============
Number of shares used in per share calculations 57,598 62,102 47,865
=============== =============== ==============
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
IMATRON INC.
Consolidated Statements of Shareholders' Equity
(Amounts in thousands)
<CAPTION>
Convertible
Preferred Stock Common Stock Additional Accum-
Paid-in ulated
Shares Amount Shares Amount Capital Deficit Total
-------- -------- ------- -------- -------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1992 2,133 $4,247 47,267 $55,070 $1,500 $(54,547) $6,270
Preferred stock converted to
common stock (125) (250) 625 250 - - -
Common stock issued for employee
stock bonus and purchase plans,
and exercise of employee stock
options - - 262 139 - - 139
Warrants exercised - - 200 100 - - 100
Net loss - - - - - (2,871) (2,871)
-------- -------- ------- -------- --------- --------- ----------
Balances at December 31, 1993 2,088 3,997 48,354 55,559 1,500 (57,418) 3,638
Preferred stock converted to
common stock (700) (1,395) 3,500 1,395 - - -
Common stock issued for employee
stock bonus and purchase plans,
and exercise of employee stock
options - - 1,650 837 - - 837
Common stock issued for services - - 127 85 - - 85
Net Income - - - - - 2,310 2,310
-------- -------- ------- -------- --------- --------- -------
Balances at December 31, 1994 (1,308) 2,602 53,631 57,876 1,500 (55,108) 6,870
Preferred stock converted to
common stock 1,308 (2,602) 6,539 2,602 - - -
Common stock sold in a private
placement, net of offering costs - - 6,459 9,882 - - 9,882
Common stock issued for employee
stock purchase plans and
exercise of employee stock
options - - 1,656 1,147 - - 1,147
Warrants exercised - - 550 775 - - 775
Net loss - - - - - (2,449) (2,449)
-------- -------- ------- -------- -------- ---------- -------
Balances at December 31, 1995 - - 68,835 $ 72,282 $1,500 $ (57,557) $ 16,225
========== ======== ========== ========= ========= =========== =======
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
IMATRON INC.
Consolidated Statements of Cash Flows
(Amounts in thousands)
<CAPTION>
Year Ended December 31,
1995 1994 1993
-------------- -------------- --------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (2,449) $ 2,310 $ (2,871)
Adjustments to reconcile net income(loss to net
cash provided by (used in) operating activities:
Depreciation and amortization 1,709 1,786 2,332
Other income (4,000) - -
Changes in:
Accounts and notes receivable 1,216 (2,945) (2,435)
Unbilled receivables - - 151
Inventories (701) (3,343) 3,049
Prepaid expenses 53 (252) 51
Other assets (26) (414) (5)
Accounts payable (1,457) 2,232 652
Other accrued liabilities 538 584 487
Deferred income 1,267 (778) (868)
-------------- -------------- --------------
Net cash provided by (used in) operating activities (3,850) (820) 543
-------------- -------------- --------------
Cash flows from investing activities:
Capital expenditures (1,132) (621) (658)
Purchases of short-term investments (1,000) - -
-------------- -------------- --------------
Net cash used in investing activities (2,132) (621) (658)
-------------- -------------- --------------
Cash flows from financing activities:
Payments of obligations under capital leases (247) - -
Repayment of borrowings - - (338)
Proceeeds from issuance of common stock 11,804 922 239
-------------- -------------- --------------
Net cash used in financing activities 11,557 922 (99)
-------------- -------------- --------------
Net increase(decrease) in cash and cash equivalents 5,575 (519) (214)
Cash and cash equivalents,at beginning of year 1,694 2,213 2,427
-------------- -------------- --------------
Cash and cash equivalents, at end of year $ 7,269 $ 1,694 $ 2,213
============== ============== ==============
Supplemental Disclosure of Noncash Investing Activities:
Preferred stock converted to common stock $ 2,602 $ 1,395 $ 250
============== =============== ===============
Equipment acquired under capital leases $ (4,247) $ - $ -
============== =============== ===============
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</FN>
</TABLE>
<PAGE>
IMATRON INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF COMPANY
Imatron Inc., (the "Company"), a New Jersey corporation incorporated in 1983, is
a technology-based company principally engaged in the business of designing,
manufacturing, and marketing a high performance computed tomography scanner. The
scanner is used in large and mid-sized hospitals and free standing imaging
clinics. The Company provides service, parts and maintenance to hospitals and
clinics that operate its scanners.
HeartScan Imaging, Inc.(HSI), incorporated in Delaware in 1993, is a
wholly-owned subsidiary of Imatron. HSI operates coronary artery scanning test
facilities in the United States.
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.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
CASH EQUIVALENTS
Cash equivalents consist of liquid instruments purchased with a maturity date of
three months or less and money market funds. In accordance with Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities," the Company has classified its investments in money
market funds as available-for-sale. Available-for-sale securities are carried at
amounts which approximate fair value, with unrealized gains and losses reported
in a separate component of shareholders' equity when material. Realized gains
and losses and declines in value judged to be other than temporary on
available-for-sale securities are included in interest income and expense.
SHORT-TERM INVESTMENTS
Short-term investments at December 31, 1995 consist of certificates of deposit
and debt securities (U.S. Treasury Bills). Management determines the appropriate
classification of debt securities at the time of purchase and reevaluates such
designation as of each balance sheet date. Debt securities are classified as
held-to-maturity when the Company has the positive intent and ability to hold
the securities to maturity. Held-to-maturity securities are stated at amortized
cost.
The amortized cost of debt securities classified as held-to-maturity is adjusted
for amortization of premiums and accretion of discounts to maturity. Such
amortization is included in interest income from investments. Interest and
dividends are included in interest income from investments. Realized gains and
losses, and declines in value judged to be other-than-temporary are included in
net securities gains (losses). The cost of securities sold is based on the
specific identification method.
<PAGE>
The Company has classified all its short-term investments as held-to-maturity,
at December 31, 1995.
CONCENTRATIONS OF RISK
The Company's primary customers operate in the healthcare industry. The
healthcare industry is highly regulated. Both existing and future governmental
regulations could adversely impact the market for the Company's Ultrafast CT
scanner and the Company's business. The Company's operations are also subject to
regulation by other federal, state and local governmental entities empowered to
enforce pertinent statutes and regulations, such as those enforced by the
Occupational Safety and Health Agency and the Environmental Protection Agency.
The Company sells its products primarily through exclusive distributors such as
Siemens in the United States, Europe, Canada and India, as well as other
distributors in the Pacific rim. The Company usually requires cash deposits
based on a percentage of the sales price and maintains allowances for potential
credit losses. Such losses have been within management's expectations.
The Company invests its excess cash in money market funds and treasury bills
with major banks. These funds have virtually no principal risk and have a
variable interest rate. The Company has not experienced any losses on its money
market funds.
The Company revenues are principally derived from the Ultrafast CT scanner. Many
of the components and sub-assemblies used in the scanner have been developed and
designed by Imatron to its custom specifications and are obtainable from limited
or single sources of supply. In view of the customized nature of many of these
components and sub-assemblies, there may be extended delays between their order
and delivery. Delays in such delivery could adversely affect Imatron's present
and future production schedules. The Company has made and continues to make
inventory investments to acquire long lead time components and sub-assemblies to
minimize the impact of such delays. In recent years, the Company has developed
alternative sources for many of its scanner subcomponents and continues its
programs to qualify vendors for the remaining critical parts.
INVENTORIES
Inventories are stated at the lower of standard cost (which approximates cost on
a first-in, first-out basis) or market. Provisions are made in each period for
the estimated effects of excess and obsolete inventories. Actual excess and
obsolete inventories may differ from the Company's estimates and such
differences could be material to the consolidated financial statements.
PROPERTY AND EQUIPMENT
Major additions and betterments are capitalized at cost, while maintenance and
repairs which do not improve or extend the life of the respective assets are
expensed currently. When assets are retired or otherwise disposed of, the costs
and related accumulated depreciation are removed from the accounts, and any gain
or loss on disposal is included in the statements of operations. Property and
equipment, other than leasehold improvements, are depreciated on a straight-line
method over their estimated useful lives (3-5 years). Equipment under capital
leases and leasehold improvements are amortized on a straight-line method over
the lesser of their estimated useful lives or the remaining term of the related
leases.
CAPITALIZED SOFTWARE
Costs related to the conceptual formulation and design of software products are
expensed as product development. Costs incurred subsequent to establishing the
technological feasibility of software products are capitalized. Capitalized
software costs are amortized using the straight-line method over the expected
product lives, generally estimated to be five years. Since 1992, the Company has
<PAGE>
not capitalized any software development costs. Amortization of capitalized
software costs for 1995, 1994 and 1993 was $131,000, $203,000 and $275,000,
respectively. Amortization of these costs has been charged to cost of product
revenues.
RESTRICTED CASH
In connection with a sales agreement in 1994, the Company has issued letters of
credits to a purchasor related to performance bond requirements. The letters of
credit are collaterized by Certificates of Deposit totalling approximately
$155,000 and $404,000 at December 31,1995 and 1994 respectively. Accordingly,
this restricted cash amount has been classified as a non-current asset (included
in other assets).
JOINT VENTURES
In 1994, the Company formed a joint venture, Imatron Japan Inc. ("Joint
Venture") with two unrelated parties. Imatron holds a 24% interest in the Joint
Venture, which is carried at no value in the accompanying consolidated balance
sheets. Imatron has no financial commitments, and is prepared to abandon its
interest to the Joint Venture, which is being funded by the other joint venture
partners.
The Company recognized revenues of $9,213,000 and $8,240,000 in 1995 and 1994,
respectively, from sales to the Joint Venture and has $2,957,000 and $780,000 in
accounts receivable from the Joint Venture at December 31, 1995 and 1994,
respectively.
The Joint Venture assumed maintenance and service obligations of a former
distributor and has a commitment to purchase five additional scanner units both
in 1995 and 1996.
In exchange for permitting the former distributor to terminate its maintenance
and service agreement with the Company, Imatron received $1,500,000 in 1994.
This amount is classified as other income in the consolidated statement of
operations in 1994.
REVENUE RECOGNITION
Revenues related to product sales are recognized upon shipment to the customer
or to a customer designated location, at which time title and risk of ownership
passes. The Company accrues for estimated installation and warranty costs at the
time of sale. Revenues related to service are recognized ratably over the
relevant contractual period or as the service is performed. Service revenue
billed but unearned is included on the consolidated balance sheets as other
accrued liabilities. Revenues related to development contracts are recognized
ratably over the contract. Revenues from clinics are recognized when services
are performed for the clinic customer.
RESEARCH AND DEVELOPMENT
Research and development expenditures are charged to operations as incurred.
STOCK-BASED COMPENSATION
In October 1995, the Financial Accounting Standards Board issued Statement No.
123, "Accounting for Stock-Based Compensation." The statement is effective for
fiscal years beginning after December 15, 1995. Under Statement No. 123,
stock-based compensation expense is measured using either the intrinsic-value
method as prescribed by Accounting Principle Board Opinion No. 25 or the
fair-value method described in Statement No. 123. Companies choosing the
intrinsic-value method will be required to disclose the pro forma impact of the
fair-value method on net income and earnings per share. Imatron Inc. plans to
continue using the intrinsic-value method to account for stock-based
compensation; there will be no effect of adopting the standard on the Company's
financial position and results of operations.
<PAGE>
NET INCOME / (LOSS) PER SHARE
Net loss per common share in 1995 and 1993 has been computed using the weighted
average number of common shares outstanding. Net income per common share in 1994
has been computed using the weighted average number of common shares outstanding
after considering the dilutive effect of convertible preferred shares (using the
"as if" converted method) and, common stock options and warrants (using the
"treasury stock" method).
Note 2 - SHORT-TERM INVESTMENTS
The following is a summary of Held-to-Maturity Securities as of December 31,
1995 (in thousands):
U.S. Treasury Bills $1,000
Certificates of deposit 266
============
Total $1,266
============
These short-term investments are recorded at cost and approximate fair value at
December 31, 1995.
Note 3 - TRANSACTIONS WITH SIEMENS CORPORATION
In March of 1991, the Company entered into a multi-part agreement with Siemens
Corporation ("Siemens"). The Agreement contains four principal segments: a
Distribution Agreement, a Development Agreement, a License Agreement and a Loan
Agreement.
Pursuant to the Distribution Agreement, beginning in July 1992 and expiring on
the earlier of (i) December 31, 1995, (ii) the date on which the parties develop
a successor product, or (iii) termination of the Development Agreement, Siemens
had exclusive rights to distribute the C-150 Ultrafast CT worldwide (excluding
Japan, Hong Kong, the People's Republic of China, and Taiwan). Siemens had
minimum annual purchase requirements at fixed prices under this agreement.
Pursuant to this, the Company recognized product sales of $1,751,000, $7,161,000
and $8,309,000 in 1995, 1994 and 1993 respectively. Siemens also had
manufacturing rights for the C-150 should the Company be unable to deliver
sufficient quantities.
Pursuant to the Development Agreement, the Company and Siemens agreed to the
joint development of other medical scanner products. Siemens provided the
funding to the Company of $1,753,000, $5,013,000 and $4,667,000 under this
agreement in 1995, 1994 and 1993, respectively.
Under an amendment to the Agreement in November 1992, the minimum purchase
obligation was reduced by 50% and the Company granted Siemens a right to
terminate the Agreement without cause or liability. In December 1993 this
agreement was further amended to provide for an extension of Siemens' right to
terminate the agreement through August 31, 1994 in exchange for a $1 million
reduction in the aggregate termination payments. In 1994 an Amendment to the
Agreement was executed that stated the Company has the right but no obligation
to purchase the developed technology should Siemens terminate the Agreement.
Siemens' right to terminate the Agreement was extended through February 28,
1995. With the progressive extinguishment of the termination agreement, the
Company reduced the recorded liability by $778,000 and $868,000 in 1994 and
1993, respectively, recognizing this reduction as other income.
In March 1995, the Company and Siemens entered into a Memorandum of
Understanding. Under the terms of the Memorandum, Siemens agreed to provide $15
million to the Company's C-150 Evolution Ultrafast CT scanner research and
development program over the next three years in order to improve and enhance
the scanner. The previous agreement was discontinued. Imatron will fund a
<PAGE>
portion equal to fifty percent of Siemens' contribution for the sole purpose of
conducting the collaborative agreement. In connection with this revision,
Siemens retains exclusive distribution rights, through March 31, 1998, in
certain geographical regions for sales of the C-150/Evolution scanner. The
Company has recognized $3,884,000 of revenue under the collaborative development
agreement in 1995.
In conjunction with this Memorandum of Understanding, Imatron transferred the
ownership of five Imatron EBT patents to Siemens and cancelled the minimum
purchase provision of the previous distribution agreement in satisfaction of
Imatron's $4 million note payable to Siemens. Imatron has classified the entire
$4 million as other income in 1995.
Siemens has recently asserted a claim against the Company regarding the lapse of
certain foreign registrations of one of the patents assigned to Siemens by the
Company in connection with the March 31, 1995 agreement between the companies.
The technology involved in the patent is not used presently in any of the
Company's products. The Company believes that it can provide a new patent to
Siemens to replace the lapsed patent. While the resolution of the claim is not
expected to have a material effect on the Company's financial position, it could
however, have a material effect on the results of operations of a particular
future period if resolved unfavorably.
The Company's Loan Agreement with Siemens is discussed in Note 5.
<TABLE>
Note 4 - BALANCE SHEET DETAIL:
(Amounts in thousands)
<CAPTION>
December 31,
1995 1994
------------- ---------------
<S> <C> <C>
Inventories consist of:
Purchased parts and sub-assemblies $ 2,594 $ 3,899
Service parts 1,079 808
Work-in-process 2,403 3,529
Finished goods 2,861 -
------------- ---------------
Net Inventories $ 8,937 $ 8,236
============= ===============
Property and equipment, at cost consist of:
Machinery and equipment $ 9,266 $ 5,614
Furniture and fixtures 1,444 1,000
Leasehold improvements 2,380 1,632
------------- ---------------
13,090 8,246
Less accumulated depreciation (6,830) (6,353)
------------- ---------------
Net property and equipment $ 6,260 $ 1,893
============= ===============
Other accrued liabilities consist of:
Warranty and product upgrades $ 1,740 $ 2,052
Customer deposits 2,331 903
Employee compensation 628 711
Deferred service revenues 265 400
Other 643 1,003
------------- ---------------
Net other accrued liabilities $ 5,607 $ 5,069
============= ===============
</TABLE>
<PAGE>
<TABLE>
Note 5 - LONG-TERM DEBT
<CAPTION>
December 31,
Long-term debt consists of (in thousands):
1995 1994
------------ ------------
<S> <C> <C>
Secured note payable to Siemens, cancelled in exchange for
transfer of five patents to Siemens and cancellation of the
Siemens minimum purchase obligation in March 1995 $ - $ 4,000
Borrowings under the line of credit, due March 1996, interest at
prime rate plus one percent (9.5% at December 31, 1995) 992 992
------------ ------------
Total long term debt 992 4,992
Less amount due within one year (992) -
------------ ------------
$ - $ 4,992
============ ============
</TABLE>
In connection with the March 1995 Memorandum of Understanding with Siemens, the
$4 million note payable to Siemens was cancelled in exchange for the transfer of
five patents to Siemens and the cancellation of the Siemens minimum purchase
obligation under the previous Distribution Agreement.
The line of credit described above is guaranteed through March 1996 by
FI.M.A.I., a shareholder. The Company has pledged 650,000 shares of InVision
Preferred A Stock (Note 1) as collateral for the guarantee.
Interest paid was $386,000, $479,000 and $446,000 in 1995, 1994 and 1993,
respectively.
Note 6 - COMMITMENTS, CONTINGENCIES AND OTHER
OPERATING LEASES
The Company leases its present facilities under four operating leases expiring
between December 31, 1996 and October 30, 2001. Future minimum rental payments
under the leases as of December 31, 1995 are as follows (in thousands):
1996 $ 952
1997 829
1998 796
1999 751
2000 751
Thereafter 567
===========
Total remaining $4,646
===========
Rent expense for all leases totaled $921,000, $855,000 and $804,000 in 1995,
1994 and 1993 respectively.
CAPITAL LEASE OBLIGATIONS
The Company leases certain equipment, including two HeartScan clinic scanners
under noncancelable lease agreements that are accounted for as capital leases.
As of December 31, 1995, equipment under the capital lease arrangements and
included in property and equipment, aggregated $4,247,000. Accumulated
<PAGE>
amortization totalled $113,000 at December 31, 1995. Amortization expense is
included in depreciation and amortization.
Future minimum lease payments under capital lease obligations at December 31,
1995 are as follows (in thousands):
1996 $ 1,056
1997 1,056
1998 1,044
1999 1,041
2000 760
Thereafter 73
-------------------
Total minimum payments 5,030
Less amounts representing interest 1,030
-------------------
4,000
Less portion due within one year 689
===================
$ 3 ,311
===================
In 1995, the Company sold two scanners to leasing finance institutions with
their wholly-owned subsidiary, HeartScan, immediately leasing them back. The
sales were accounted for as sales-leaseback transactions resulting in $1,267,000
in deferred income on the sale-leaseback transactions at December 31, 1995.
Imatron Inc. is the guarantor of the HeartScan capital lease obligations.
LICENSE AGREEMENTS
In February 1981, the Company was granted the exclusive use for five years and
nonexclusive use thereafter of certain technology and a patent pending owned by
the University of California (UC) under the terms of license and sublicense
agreements between UC and Emersub Incorporated (Emersub), a wholly owned
subsidiary of Emerson Radio Corp., and Emersub and Imatron Associates, (the
predecessor to the Company), respectively. In June 1986, the license and
sublicense agreements were amended to extend the Company's exclusive use of the
technology through the remaining life of the patent in exchange for modified
annual royalty payments. The sublicense agreement, as amended, requires the
Company to pay annual royalties to Emersub equal to 2.125% of the net sales of
products utilizing the licensed technology. Charges to operations for the fiscal
years ended December 31, 1995, 1994 and 1993 were $91,470, $151,980 and
$140,582, respectively.
Note 7 - CAPITAL STOCK
PREFERRED STOCK
The Company is authorized to issue 10,000,000 shares for all series of preferred
stock. There are no outstanding shares of preferred stock at December 31, 1995.
The holders of outstanding shares of Series A Preferred Stock are entitled to
receive dividends in preference to the payment of any dividends on common stock.
Before any dividend may be paid on the common stock a dividend in an amount
equal to or greater than the dividend proposed to be paid on the common shares
must be paid on the Series A Preferred Stock.
<PAGE>
Each share of Series A Preferred stock is entitled to five votes, a preference
in liquidation of $2.00 per share, and is convertible into five shares of common
stock, which could be increased if the Company issues common stock under certain
circumstances for less than $0.40 per share.
Each share of Series B Preferred stock if and when issued would be entitled to
five votes, a preference in liquidation of $5.00 per share, and would be
convertible into five shares of common stock, which would be increased if the
Company issues common shares under certain circumstances for less than $0.75 per
share.
In 1993, the Regents of the University of California converted 125,000 shares of
Series A Preferred stock to 625,000 shares of common stock.
In 1994, FI.M.A.I. Holding S.A., an affiliate of Italimprese, converted 500,000
shares of Series A Preferred Stock to 2,500,000 shares of Common Stock. SIECIT,
the Company's largest shareholder converted 200,000 shares of Series A Preferred
stock to 1,000,000 shares of Common Stock.
In 1995, FI.M.A.I. and SIECIT each converted 650,000 shares of Series A
Preferred Stock to 6,500,000 shares of Common Stock. Regents of the University
of California converted 7,813 Series A Preferred Stock to 39,065 shares of
Common Stock.
COMMON STOCK
On October 20, 1995, the Company closed a private placement of its common stock.
The private placement realized proceeds of $9,882,000 (net of offering costs)
through the sale of 1,200,000 units. A unit consists of five shares of Imatron
Inc. Common Stock and one five-year Imatron Inc. Common Stock purchase warrant.
In connection with the private placements, the Company issued an additional
91,819 units as a result of the adjustment on the stock price based on the
60-day average price as stated in the Common Stock purchase agreement. The
adjusted price per unit was $8.25 or $1.65 per share of Common Stock.
<TABLE>
WARRANTS
<CAPTION>
At December 31, 1995, outstanding warrants to purchase shares of the Company's
common stock were as follows: Shares reserved for
exercise of warrants
------------------------
<S> <C>
Warrants, expiring in 1996, to purchase shares of common stock at $1.50 per 875,000
share issued under the July 1992 private placement
Warrants, expiring in 1997, to purchase shares of common stock at $0.40 per 1,000,000
share issued to FI.M.A.I. for bank credit line guarantee
Warrants, expiring in 2000, to purchase shares of common stock at $0.75 per 400,000
share issued to the Company's president
Warrants, expiring in 2000, to purchase shares of common stock at $2.31 per
share issued under the October 1995 private placement 1,291,820
------------------------
Total at December 31, 1995 3,566,820
========================
<FN>
In 1993, warrants were exercised to purchase 200,000 shares of common stock at
$0.50 per share.
In 1995, warrants were exercised to purchase a total of 550,000 shares of common
stock at $1.50 and $1.00 per share,
respectively.
</FN>
</TABLE>
<PAGE>
Note 8 - STOCK BONUS PLAN AND STOCK OPTION PLAN
STOCK BONUS PLAN
In February 1987, the Company adopted the 1987 Stock Bonus Plan which was
approved by the shareholders. The stock bonus plan was adopted to reward and to
provide incentive to participants for services. The total number of common
shares that may be granted is 1,200,000, with no more than 400,000 shares
awarded in any fiscal year. The Company has granted no shares since 1993,
leaving 590,894 common shares reserved for future grants.
DIRECTOR STOCK OPTION PLAN
In June 1991, the Company adopted a non-employee Directors' Stock Option Plan
for the directors of Imatron. The Directors Plan provides for the automatic
grant of non-statutory options to non-employee directors. The Directors Plan
covers 250,000 shares of the Company's common stock. In June 1993 an amendment
to the non-employee Directors Plan was approved increasing the number of shares
to 550,000. Under the plan, options for 350,000 shares have been granted to
non-employee Directors.
EMPLOYEE STOCK OPTION PLAN
In March 1983, the Company adopted a stock option plan which provides for the
granting of incentive stock options to employees and nonstatutory stock options
to employees, nonemployee directors, and certain consultants. The shareholders
approved the plan, as amended, in March 1984. In 1993 the original plan (1983
Plan) terminated and a new plan (1993 Plan) was approved. The terms of the 1993
Plan are consistent with the terms of the 1983 Plan.
All incentive stock options are granted at the common stock's fair market value
at the grant date and nonstatutory stock options are granted at not less than
85% of the common stock's fair market value at the grant date. Options granted
under the plan generally vest evenly over four years following the grant date
and expire five years from the grant date.
<PAGE>
<TABLE>
A summary of the activity under the stock option plans is as follows:
<CAPTION>
Reserved Optioned Shares
but Number Price per
unoptioned shares of shares share
<S> <C> <C> <C>
Balances at January 1, 1993 515,788 3,431,243 $0.51 - $1.83
Shares reserved - 1993 Plan 3,000,000 -
Shares reserved - 1991 Plan 300,000 -
Options granted (1,083,000) 1,083,000 $0.48 - $0.56
Options exercised - (103,000) $0.51 - $0.60
Options cancelled 666,027 (666,027) $0.51 - $1.83
1983 option plan termination (1,006,815) - $0.51 - $1.83
------------------ -------------------
Balances at December 31, 1993 2,392,000 3,745,216 $0.48 - $0.56
Options granted (2,230,808) 2,230,808 $0.43 - $1.22
Options exercised - (1,147,002) $0.48 - $0.61
Options cancelled 236,263 (236,263) $0.48 - $1.22
1983 option plan termination (28,563) - $0.51 - $0.56
------------------ -------------------
Balances at December 31, 1994 368,892 4,592,759 $0.43 - $1.22
Shares reserved - 1993 Plan 2,500,000 -
1983 option plan termination (83,950) - $0.51 - $0.56
Options granted (413,800) 413,800 $1.03
Options exercised - (1,320,377) $0.51 - $1.22
Options cancelled 301,125 (301,125) $0.56 - $1.22
------------------ -------------------
Balances at December 31, 1995 2,672,267 3,385,057
================== ===================
</TABLE>
<PAGE>
At the June 23, 1993 annual meeting, the shareholders approved an increase in
the number of shares reserved for option awards by 300,000 for the 1991
Directors Plan. The 1993 Option Plan was approved and 3,000,000 shares of common
stock were reserved under the plan. At the June 2, 1995 annual meeting, the
shareholders approved an increase in the number of shares reserved for the 1993
Option Plan from 3,000,000 to 5,500,000.
Options for 1,406,997 shares of the Company's common stock at prices ranging
from $0.51 to $1.50 per share were exercisable under the plans at December 31,
1995.
The Board of Directors, on August 25, 1993, approved the repricing of all stock
options to their then current market value of $0.56.
Note 9 - STOCK PURCHASE PLAN AND RETIREMENT SAVINGS PLAN
In March 1984, the Company adopted an employee stock purchase plan covering most
employees. Under the plan, employees may contribute up to 10% of their
compensation to purchase shares of the Company's common stock at the lesser of
85% of the stock's fair market value at the beginning or end of each six-month
offering period. This plan terminated on January 18, 1994. In order to replace
this Plan, the Board of Directors and shareholders approved the 1994 Employee
Stock Purchase Plan to provide eligible employees with an opportunity through
regular payroll deductions to purchase common stock of Imatron Inc. so that they
may increase their proprietary interest in the Company. The Plan is intended to
qualify as an "ESPP" under Section 423 of the Internal Revenue Code. This plan
contains pricing and vesting provisions that are consistent with the 1984 Plan.
The maximum number of shares offered under the Plan is 1,000,000 shares of
common stock. At December 31, 1995, 161,783 shares were reserved and available
for future issuance under the plan. A total of 334,975, 503,243 and 162,220
shares were issued at an average price of $0.75, $0.75, and $0.54 per share in
1995, 1994 and 1993, respectively.
In 1987, the Company established a qualified retirement plan, under the
provisions of section 401(K) of the Internal Revenue Code, in which eligible
employees may participate. Substantially all participants in this plan are able
to defer compensation up to the annual maximum amount allowable under the
Internal Revenue Service regulations. The Plan was amended in 1994 to provide
for employer contributions equal to 50% of every dollar of employee
contribution, with a maximum of 6% of employee wages. The Company contributed
approximately $169,000 in 1995, and $76,000 in 1994.
Note 10 - INCOME TAXES
Effective January 1, 1993 the Company changed its method of accounting for
income taxes from the deferred method to the liability method required by FASB
Statement No. 109, "Accounting for Income Taxes". As permitted under the new
rules, prior years' financial statements have not been restated. There was no
cumulative effect of adopting SFAS No. 109 at January 1, 1993.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes.
<PAGE>
<TABLE>
Significant components of the Company's deferred tax assets and liabilities as
of December 31, are as follows (in thousands):
<CAPTION>
1995 1994 1993
--------------- ------------- --------------
<S> <C> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 19,733 $ 18,626 $ 19,431
Federal credit carryforwards 880 858 821
Expenses not currently deductible for tax purposes 2,807 2,829 3,434
Other - 26 893
--------------- ------------- --------------
Deferred tax assets 23,420 22,339 24,579
Valuation allowance (22,407) (21,482) (23,274)
--------------- ------------- --------------
Net deferred tax assets 1,013 857 1,305
Deferred tax liabilities:
Capitalized development costs 42 339 638
State income taxes 504 429 565
Other 467 89 102
--------------- ------------- --------------
Deferred tax liabilities 1,013 857 1,305
Net deferred taxes $ - $ - $ -
=============== ============= ==============
</TABLE>
The net change in the valuation allowance was $925,000, ($1,792,000), and
$874,000 for the years ended December 31, 1995, 1994 and 1993, respectively,
principally resulting from net operating loss carryforwards.
The reconciliation of income tax attributable to continuing operations compared
at the U.S. federal statutory rates to income tax expense is as follows:
1995 1994 1993
----------- ---------- ---------
Federal statutory rate (34%) 34% (34%)
Net operating loss carry forwards - (33%) -
Valuation Allowance 34% - 34%
---------- ---------- ---------
Effective tax rate 0% 1% 0%
=========== =========== =========
At December 31, 1995 the Company has net operating loss carryforwards for
federal and state income tax purposes of approximately $55,200,000 and
$9,400,000 respectively. Additionally, the Company has research and development
and alternative minimum tax credit carry-forwards of approximately $821,000 at
December 31, 1995. The net operating loss and the research and development tax
credit carryforwards expire in various years from 1998 through 2008.
Pursuant to the Tax Reform Act of 1986, annual utilization of the Company's net
operating loss and tax credit carryforwards may be limited if a cumulative
change in ownership of more than 50% is deemed to occur within any three-year
period.
Note 11 - SEGMENT INFORMATION AND FOREIGN SALES
The Company operates in one industry segment in which it designs, manufactures
and markets a computed tomography scanner. The Company has distributors that
sell and service its scanner throughout the world (except China). Sales of
products to end-users outside the United States were $13,254,000, $14,990,000
and $2,583,000 in 1995, 1994 and 1993, respectively.
<PAGE>
IMATRON INC.
Index of Exhibits
Exhibit SEC
Number Description Page No.
(See Footnotes)
3.1 (1) Certificate of Incorporation of the Company as
amended as of March 31, 1983
3.2 (2) Certificate of Amendment of Certificate of
Incorporation filed with the New Jersey Secretary
of State on June 7, 1988
3.3 (2) Certificate of Amendment of Certificate of
Incorporation filed with the New Jersey Secretary
of State on June 17, 1988
3.4 (2) Certificate of Amendment of Certificate of
Incorporation filed with the New Jersey Secretary
of state on July 26, 1988
3.5 (9) Certificate of Correction of Certificate of
Amendment of Certificate of Incorporation filed
with the New Jersey Secretary of State on
February 7, 1989
3.6 (10) Certificate of Amendment of Certificate of
Incorporation filed with the New Jersey Secretary
of State on March 29, 1990
3.7 (11) Certificate of Amendment of Certificate of
Incorporation filed with the New Jersey Secretary
of State on December 7, 1990
3.8 (12) Bylaws, as amended April 30, 1992
1 (4) Form of certificate evidencing Class 1991 Warrant
4.2 (4) Amendment of Warrant Agency Agreement relating
to the Class 1991 Warrants
4.4 (5) Form of Warrant Agency Agreement relating to the
Class 1991 Warrants
4.5 (15) Warrant dated July 28, 1992 issued to Arthur P.
Gould & Co., Inc. in connection with Release
and Settlement Agreement dated July 27, 1992
4.6 (13) Warrant issued to FI.M.A.I. Holding, S.A. in
conjunction with bank credit line guarantee.
<PAGE>
Exhibit SEC
Number Description Page No.
(See Footnotes)
4.7 Form of Warrant issued to investors in Private
Offering concluded September 15, 1992
10.1 (1) Sublicense Agreement between the Company and
Emersub Incorporated dated February 1, 1981
10.2 (6) Amendment to Sublicense Agreement between
Registrant and Emersub Incorporated dated
June 30, 1986
10.4 (14) 1983 Stock Option Plan, as amended to date
10.5 (9) 1984 Employee Stock Participation Plan, as
amended to date
10.6 (7) Lease Agreement between the Company and Diodati
Trust and Patrician Association, Inc. for the
premises located at 389 Oyster Point Boulevard,
South San Francisco, California
10.7 (3) Common Stock Purchase Agreement dated February
26, 1987 between the Company and Mitsui & Co.
(U.S.A.), Inc.
10.8 (9) Common Stock Purchase Agreement dated February
26, 1988 between the Company and Pacific
Scientific Commerce Ltd.
10.9 (10) License Agreement dated as of September 13, 1988
between the Company and EMI Limited
10.10 (8) Series A Preferred Stock Purchase Agreement,
dated as of July 20, 1988, by and among the
Company, FI.M.A.I. Holding S.A. and Compagnie
Financiere Espirito Santo, S.A.
10.11 (9) Convertible Debenture between the Company and
Analogic Corporation
10.12 (9) 1987 Stock Bonus Incentive Plan
10.14 (9) Security Agreement dated December 15, 1988
between the Company and John Hancock Leasing
Corporation and Promissory Note dated December
30, 1988 from the Company to John Hancock Leasing
Corporation
10.15 (9) Agreement to Issue Warrant dated January 19, 1989
between the Company and John Hancock Leasing Corporation
<PAGE>
Exhibit SEC
Number Description Page No.
(See Footnotes)
10.16 (9) Amendment dated July 20, 1987 to Lease dated
August 23, 1983 by and between the Company and
Diodati Property Trust and Patrician Associates, Inc.
10.17 (10) Series B Preferred Stock Purchase Agreement and
Option to Form Joint Venture dated March 26, 1990
between the Company and FI.M.A.I. Holding, S.A.,
and the exhibits thereto
10.18 (10) Letter Agreement dated March 26, 1990 between
the Company and FI.M.A.I. Holding, S.A.
10.19 (10) Second Amendment to Sublicense Agreement between
Company and Emersub Incorporated dated
October 10, 1990
10.20 (12) Polly Force Distribution Agreement
10.21 (13) * Basic Agreement between the Company and Siemens
Corporation dated March 14, 1991
10.22 (13) Loan Agreement between the Company and Siemens
Corporation dated March 14, 1991
10.23 (12) Revolving Line of Credit Agreement between the
Company and Instituto Bancario San Paolo di
Torino dated November 9, 1990
10.24 (13) Registration Rights Agreements dated November 6,
1990 among the Company, FI.M.A.I. Holding, S.A.
and Societe d'Investissments dans des
Entreprises Commerciales, Industrielles et
Technologiques S.A.
10.25 (13) Stockholders Agreement dated August 13, 1990
between the Company and FI.M.A.I. Holding, S.A.
10.26 (13) Sales and Distribution Agreement dated July 20,
1988 between the Company and FI.M.A.I. Holding,
S.A.
10.27 (13) * Exclusive Importer Agreement dated November 12,
1990 between the Company and Mitsui & Co., Ltd.
10.28 (13) * Distributorship Agreement dated November 12, 1990
among the Company, Mitsui & Co., Ltd. and PASCO
Corporation
<PAGE>
Exhibit SEC
Number Description Page No.
(See Footnotes)
10.29 (13) Common Stock Purchase Agreement dated October 15,
1990 between the Company and PASCO Corporation
10.30 (14) Revolving Line of credit Agreement between the
Company and Istituto Bancario San Paolo di Torini
dated March 4, 1992
10.31 (14) Reimbursement and Security Agreement between the
Company and FIMAI Holding, S.A. dated February
22, 1992
10.32 (14) Stock Pledge Agreement between the Company and
FI.M.A.I. Holding, S.A. dated February 22, 1992
10.33 (14) Promissory Note dated February 22, 1992 granted
to Italimprese S.p.A.
10.34 (14) Sales Agreement between the Company and Picker
International, Inc. dated March 11, 1992
10.35 (14) 1991 Non-Employee Director's Stock Option Plan
10.36 (14) Agreement dated December 12, 1991 between the
Company and Mitsui & Co. Ltd.
10.37 (14) Letter Agreement dated April 2, 1992 from
FI.M.A.I. Holding S.A.
10.38 (15) Lease Agreement between the Company and J. Grant
Monahon, James S. Keagy and Jeffrey H.
Stevenson, as Trustees of AEW #79 Trust for the
premises located at 389 Oyster Point Boulevard,
South San Francisco, California, dated November
1, 1991
10.39 (15) Amendment No. 1 to Lease Agreement between the
Company and J. Grant Monahon, James S. Keagy
and Jeffrey H. Stevenson, as Trustees of AEW #79
Trust for the premises located at 389 Oyster
Point Boulevard, California, dated June 15, 1992
10.40 (15) Second amendment to Sublicense Agreement between
the Company and Emersub Incorporated dated
October 1, 1990
10.41 (15) Agreement dated October 31, 1991, to terminate
Lease Agreement dated August 23, 1983
<PAGE>
Exhibit SEC
Number Description Page No.
(See Footnotes)
10.42 (15) Release and Settlement Agreement between the
Company and Arthur P. Gould & Co. dated July 27,
1992
10.43 (16) Revolving line of credit agreement between the
Company and Instituto Bancario San Paolo di
Torini dated September 15, 1992
10.44 (16) First Amendment to Agreement for revolving line
of credit between the Company and Instituto
Bancario San Paolo di Torini dated February
2, 1993
10.45 (16) Right of first refusal and option agreement
between the Company and FI.M.A.I. Holding, S.A.
dated January 22, 1993
10.46 (16) * Amendment No.1 to Basic Agreement between the
Company and Siemens Corporation dated
September 30, 1992
10.47 (16) Amendment No.1 to loan agreement between the
Company and Siemens Corporation dated
December 31, 1992
10.48 (16) Amendment No.2 to loan agreement between the
Company and Siemens Corporation dated March 12,
1993
10.49 (16) Mortgage and Security Agreement dated as of March 12,
1993 between Imatron Inc. and Siemens Corporation
10.50 (16) * Patent License Agreement dated as of March 12, 1993
between Imatron Inc. and Severson & Werson, A
Professional Corporation
10.51 (16) Escrow Holder Agreement dated as of March 12, 1993
by and among Imatron Inc., Siemens Corporation and
Severson & Werson, A Professional Corporation
10.52 (16) * Sole License Agreement dated as of March 12, 1993
between Imatron Inc. and Siemens Corporation
10.53 (16) C-150 License Agreement dated as of March 12, 1993
between Imatron Inc. and Siemens Corporation
10.54 (16) * License Agreement dated as of March 12, 1993
between Imatron Inc. and Siemens Corporation
<PAGE>
Exhibit SEC
Number Description Page No.
(See Footnotes)
10.55 (16) Amendment No. 2 to Lease Agreement between the
Company and J. Grant Monahon, James S. Keagy
and Jeffrey H. Stevenson, as Trustees of AEW #79
Trust for the premises located at 389 Oyster
Point Boulevard, California dated December 31, 1992
10.56 (16) Termination Agreement dated December 9, 1992,
terminating Stockholders Agreement dated August
13,1990, between the Company and FI.M.A.I.
Holding, S.A.
10.57 (16) Amendment No.1 dated February 23, 1993, to
Release & Settlement Agreement
10.58 (16) Form of Registration Rights Agreement between the
Company and investors in Private Offering
concluded September 15, 1992
10.59 (17) 1993 Stock Option Plan
10.60 (18) 1994 Employee Stock Purchase Plan
10.61 (19) Settlement Agreement dated December 10, 1993
between the Company and Mitsui & Co., ltd.
10.62 (19) Transition Agreement dated December 10, 1993
between the Company and Mitsui & Co., Ltd.
10.63 (20) Amendment No. 2 to Basic Agreement dated
December 14, 1993 between the Company and
Siemens Corporation.
10.64 (20) Amendment to Loan Agreement and Waiver dated
December 14, 1993 between the Company and
Siemens Corporation.
10.65 (21) Executive Employment Agreement dated as of June
11, 1993 between the Company and S. Lewis Meyer.
10.66 (21) Warrant Agreement dated June 7, 1993 between the
Company and S. Lewis Meyer.
10.67 (21) Employment Agreement dated December 15, 1993
between the Company and Gary H. Brooks.
10.68 (21) Employment Agreement dated October 1, 1993
between the Company and Dale Grant.
<PAGE>
Exhibit SEC
Number Description Page No.
(See Footnotes)
10.69 (21) Agreement and Joint Company Agreement between
the Company, Tobu Land System Company and
Kino Corporation dated January 7, 1994
10.70 (21) Distributorship Agreement between the Company and
Imatron Japan K. K. dated February 3, 1994.
10.71 (21) First Amendment to Distributorship Agreement between
the Company and Imatron Japan K. K. dated February
8, 1994.
10.72 (21) Memorandum of Understanding dated February 2,
1994 between the Company and Siemens AG,
Medical Engineering Group.
10.73 (21) Memorandum of Understanding dated February 2,
1994 between Company and Siemens AG,
Medical Engineering Group (Evolution Upgrade project
and distribution agreement).
10.74 (21) Letter Agreement dated March 7, 1994 from FI.M.A.I.
Holding S. A.
10.75 (22) * Amendment No. 3 to Basic Agreement dated March 1,
1994 between the Company and Siemens Corporation.
10.76 (22) * Amendment No. 4 to Basic Agreement dated as of
October 20, 1994 between the Company and Siemens
Corporation.
10.77 (22) * Amendment No. 5 to Basic Agreement dated as of
November 17, 1994 between the Company and Siemens
Corporation.
10.78 (22) * Amendment No. 6 to Basic Agreement dated as of
December 28, 1994 between the Company and Siemens
Corporation and related Letter Agreement dated
December 29, 1994.
<PAGE>
10.79 (22) * Amendment No. 7 to Basic Agreement dated as of
February 28, 1995 between the Company and Siemens
Corporation.
10.80 (22) * Memorandum of Understanding dated March 31, 1995
between the Company and Siemens Corporation.
SEC
Page No.
11.0 Computation of Per Share Earnings. 52
Consent of Independent Auditors. 25
_______________
Confidential Treatment Request granted by the Securities
and Exchange Commission.
<PAGE>
(1) Filed as an exhibit to the Company's Registration Statement on Form
S-1 filed with the Commission on June 1, 1983 (File No. 2-84146)
and incorporated herein by reference.
(2) Filed as an exhibit to the Company's Registration Statement on Form
S-8 filed with the Comission on February 3, 1989 (File No. 33-26833)
and incorporated herein by reference.
(3) Filed as an exhibit to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1986 and incorporated herein by
reference.
(4) Filed as an exhibit to Amendment No. 2 to the Company's Registration
Statement on Form S-1 filed with the Commission on November 12, 1986
(File No. 33-8668) and incorporated herein by reference.
(5) Filed as an exhibit to Amendment No. 1 to the Company's
Registration Statement on Form S-1 filed with the Commission on
November 5, 1986 (File No. 33-8668) and incorporated herein by
reference.
(6) Filed as an exhibit to the Company's Registration Statement on Form
S-1 filed with the Commission on September 11, 1986 (File No. 33-
8668) and incorporated herein by reference.
(7) Filed as an exhibit to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1983 and incorporated herein by
reference.
(8) Filed as an exhibit to the Company's Current Report on Form 8-K filed
with the Commission on September 16, 1988.
(9) Filed as an exhibit to the Form 8 Amendment Number 1 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1988 and incorporated herein by reference.
(10) Filed as an exhibit to the Company's Annual Report Form 10-K for the
Fiscal year ended December 31, 1989 and incorporated herein by
reference.
(11) Filed as an exhibit to the Company's Registration Statement Form S-3
filed on January 24, 1991 (File No. 33-38676) and incorporated
herein by reference.
(12) Filed as an exhibit to Post-Effective Amendment Number 1 to the
Company's Registration Statement Form S-3 filed with the
Commission on May 5, 1992 (File No. 33-32218) and incorporated
herein by reference.
(13) Filed as an exhibit to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1990 and incorporated herein by
reference.
<PAGE>
(14) Filed as an exhibit to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1991 and incorporated herein by
reference.
(15) Filed as an exhibit to the Company's Amendment No.1 to Post-
Effective Amendment No.1 to Form S-3 (file No. 33-32218) filed with
the Commission on August 7, 1992 and incorporated herein by
reference.
(16) Filed as an exhibit to the Company's Annual Report on Form 10-K for
the fiscal year ended December, 1992 and incorporated herein by
reference.
(17) Filed as an exhibit to the Company's Registration Statement on Form
S-8 filed on August 3, 1993 (Registration No. 33-66992).
(18) Filed as an exhibit to the Company's Registration Statement on Form
S-8 filed on November 16, 1993 (Registration No. 33-71786).
(19) Filed as an Exhibit to the Company's Current Report on Form 8-K
filed on January 26, 1994.
(20) Filed as an Exhibit to the Company's Current Report on Form 8-K
filed on February 4, 1994
(21) Filed as an Exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31 1993, and incorporated herein by
reference.
(22) Filed as an Exhibit to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31,1994 and incorporated herein by
reference.
<PAGE>
<TABLE>
EXHIBIT No. 11
IMATRON INC.
Computation of Per Share Earnings
(In thousands, except per share data)
<CAPTION>
Year ended Year ended Year ended
December 31, 1995 December 31, 1994 December 31,1993
----------------------- ------------------------ -----------------------
<S> <C> <C> <C>
PRIMARY
Average shares outstanding 57,598 53,059 47,865
Conversion of preferred stock - 6,539 -
Net effect of dilutive stock
options based on the
treasury stock method using
the average market price - 1,746 -
Net effect of dilutive stock
warrants based on the
treasury stock method using
the average market price - 758 -
----------------------- ------------------------ -----------------------
TOTAL 57,598 62,102 47,865
----------------------- ------------------------ -----------------------
Net income $ (2,449) $ 2,310 $ (2,871)
----------------------- ------------------------ -----------------------
Net income per share $ (.04) $ .04 $ (.06)
----------------------- ------------------------ -----------------------
</TABLE>
<PAGE>
EXHIBIT 24.1
Consent of Independent Auditors
We consent to the incorporation by reference in:
- - Form S-3 (Registration No. 333-647) dated February 2, 1996 and related
Prospectus
- - Form S-3 (Registration No. 33-63123) dated October 2, 1995 and related
Prospectus
- - Form S-8 (Registration No. 33-71786) dated November 15, 1993 pertaining to
1994 Employee Stock Purchase Plan
- - Form S-8 (Registration No. 33-66992) dated August 3, 1993 pertaining to 1993
Stock Option Plan
- - Form S-8 (Registration No. 33-66952) dated August 3, 1993 pertaining to 1991
Non-Employee Directors' Stock Option Plan
- - Form S-8 (Registration No. 33-40391) dated May 6, 1991 pertaining to
Director Stock Option Grant
- - Form S-8 (Registration No. 33-28662) dated May 11, 1989 pertaining to 1983
Stock Option Plan
- - Form S-8 (Registration No. 33-26833) dated February 3, 1989 pertaining to
1984 Employee Stock Participation Plan
of our report dated February 9, 1996, with respect to the consolidated financial
statements of Imatron Inc. included in the Annual Report on Form 10K for the
year ended December 31, 1995.
ERNST & YOUNG LLP
San Francisco, California
March 26, 1996
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL 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> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 7,535
<SECURITIES> 1,000
<RECEIVABLES> 6,040
<ALLOWANCES> 0
<INVENTORY> 8,937
<CURRENT-ASSETS> 24,325
<PP&E> 13,090
<DEPRECIATION> 6,830
<TOTAL-ASSETS> 30,876
<CURRENT-LIABILITIES> 10,073
<BONDS> 0
0
0
<COMMON> 72,282
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 30,876
<SALES> 26,700
<TOTAL-REVENUES> 26,700
<CGS> 23,633
<TOTAL-COSTS> 23,633
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 312
<INCOME-PRETAX> (2,449)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,449)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
