SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996.
Commission file number 0-12405
IMATRON INC.
New Jersey
I.D. No. 94-2880078
389 Oyster Point Blvd, South San Francisco, CA 94080
(415) 583-9964
Indicate by check mark whether the Registrant (1) had filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
At May 1, 1996, 70,026,336 shares of the Registrant's common stock (no par
value) were issued and outstanding.
Total Number of Pages: 13
<PAGE>
IMATRON INC.
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets - 3
March 31, 1996 and December 31, 1995.
Condensed Consolidated Statements of 4
Operations - Three Months Ended
March 31, 1996 and 1995.
Condensed Consolidated Statements of 5
Cash Flow - Three Months Ended
March 31, 1996 and 1995.
Notes to Condensed Consolidated Financial 6
Statements.
Item 2. Management's Discussion and Analysis of Financial 8
Condition and Results of Operations.
PART II. OTHER INFORMATION 11
SIGNATURES 13
<PAGE>
<TABLE>
IMATRON INC.
Consolidated Balance Sheets
(Amounts in thousands)
<CAPTION>
March 31, December 31,
ASSETS 1996 1995
- ------ -------------- -------------
(Unaudited)
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 1,079 $ 7,269
Short-term investments 3,293 1,266
Accounts receivable 2,070 3,083
Accounts receivable from affiliate 4,798 2,957
Notes receivable 250 250
Inventories 9,931 8,937
Prepaid expenses 628 563
-------------- ---------------
Total current assets 22,049 24,325
Property and equipment, net 6,220 6,260
Other assets 286 291
-------------- ----------------
Total assets $ 28,555 $ 30,876
============== ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Borrowings under line of credit $ 992 $ 992
Accounts payable 2,819 2,785
Other accrued liabilities 4,639 5,607
Capital lease obligations - due within one year 715 689
-------------- ----------------
Total current liabilities 9,165 10,073
Deferred income on sale leaseback transactions 1,178 1,267
Capital lease obligations 3,130 3,311
-------------- ----------------
Total Liabilities 13,473 14,651
Shareholders' Equity
Convertible preferred stock, authorized-10,000
shares; issued and outstanding-0 shares in
1996 and 0 in 1995 - -
Common stock, no par value; authorized-100,000
shares; issued and outstanding-69,493 shares in
1996 and 68,835 in 1995 73,330 72,282
Additional paid-in capital 1,500 1,500
Accumulated deficit (59,748) (57,557)
-------------- ----------------
Total Shareholders' Equity 15,082 16,225
-------------- ----------------
Total Liabilities and Shareholders' Equity $ 28,555 $ 30,876
============== ================
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</FN>
</TABLE>
<PAGE>
IMATRON INC.
Condensed Consolidated Statements of Operations
(Amounts in thousands, except per share data)
(Unaudited)
Three Months Ended March 31,
1996 1995
-------- -------
Revenues:
Net product sales $ 3,791 $ 2,953
Service 767 896
Development contracts 1,250 1,753
Clinic 282 48
-------- --------
Total revenues 6,090 5,650
-------- --------
Cost of revenues:
Product 3,193 2,695
Service 698 989
Development contracts 1,250 1,094
Clinic 437 196
-------- --------
Total cost of revenues 5,578 4,974
-------- --------
Gross profit 512 676
Operating expenses:
Research and development 703 983
Marketing and sales 1,083 749
General and administrative 848 578
-------- --------
Total operating expenses 2,634 2,310
-------- --------
Total operating loss (2,122) (1,634)
Other income 51 4,000
Other expense - (21)
Interest expense (120) (29)
-------- --------
Net income (loss) $ (2,191) $ 2,316
========= ========
Net income (loss) per share $ (0.03) $ 0.04
========= ========
Number of shares used in per
share calculation 69,112 62,547
========== ========
The accompanying notes are an integral part of these condensed consolidated
financial statements.
<PAGE>
IMATRON INC.
Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
Three Months Ended March 31,
1996 1995
--------- ----------
Cash flows from operating activities:
Net income (loss) $ (2,191) $ 2,316
Adjustments to reconcile net
income(loss)to net cash provided by
(used in) operating activities:
Depreciation and amortization 257 416
Other income - (4,000)
Changes in:
Accounts and notes receivable (828) 2,789
Inventories (994) (1,780)
Prepaid expenses (65) (32)
Other assets (7) (25)
Accounts payable 34 (561)
Other accrued liabilities (968) 834
Deferred income (89) -
------------- ------------
Net cash used in operating activities (4,851) (43)
------------- -------------
Cash flows from investing activities:
Capital expenditures (205) (449)
Purchases of short-term investments (2,027) -
------------- -------------
Net cash used in investing activities (2,232) (449)
------------- -------------
Cash flows from financing activities:
Payments of obligations under capital leases (155) -
Proceeeds from issuance of common stock 1,048 92
------------- -------------
Net cash provided by financing activities 893 92
------------- -------------
Net decrease in cash and cash equivalents (6,190) (400)
Cash and cash equivalents, at beginning
of the period 7,269 1,694
------------- --------------
Cash and cash equivalents, at end of the
period $ 1,079 $ 1,294
============== ==============
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
IMATRON INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
-----------------------------------------------------------------
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form
10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include
all of the information and footnotes required by generally accepted
accounting principles for annual consolidated financial statements. In
the opinion of management, adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for the three months ended March 31, 1996
are not necessarily indicative of the results that may be expected for
the year. For further information, refer to the consolidated financial
statements and notes thereto included in the Company's Annual Report to
Shareholders for the year ended December 31, 1995.
2. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Imatron
Inc. and its wholly-owned subsidiary HeartScan Imaging, Inc. All
intercompany accounts and transactions have been eliminated in
consolidation.
3. INVENTORIES
Inventories consist of (in thousands of dollars):
March 31, December 31,
1996 1995
-------------- ---------------
Purchased parts and sub-assemblies $ 2,590 $ 2,594
Service parts 724 1,079
Work-in-progress 4,720 2,403
Finished Goods 1,897 2,861
-------------- ---------------
$ 9,931 $ 8,937
============== ===============
4. INCOME (LOSS) PER SHARE
Net income per common and common equivalent share is computed using the
weighted average number of common shares outstanding after considering
the dilutive effect of stock options, convertible preferred stock and
warrants.
Net loss per common share is computed using the weighted average number
of common shares outstanding. Stock options, convertible preferred
stock and warrants have not been included in the computation as their
effect would have been antidilutive.
<PAGE>
5. TRANSACTIONS WITH SIEMENS CORPORATION
The following table represents the percent of revenues attributable to
the development and distribution agreements between the Company and
Siemens Corporation:
Three months ended
March 31,
1996 1995
---- ----
Net product sales 2% 3%
Service 14% 44%
Development contracts 100% 100%
Percentage to total revenues 24% 40%
Siemens has 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.
6. JOINT VENTURE
As of March 31, 1996 Imatron's interest in the Joint Venture is carried
in the accompanying financial statements at no value. The Company has
no financial commitments to the Joint Venture and is prepared to
abandon its interest. The Company intends to carry this investment at
no value until such time as the Joint Venture can demonstrate that it
will be able to sustain profitable operations. Once profitable
operations are sustained, the Company will account for the Joint
Venture investment on the equity method. Summarized financial
information for the Joint Venture is not included in the notes to the
consolidated financial statements for the period ended or as of March
31, 1996, as such information is not considered material to the
operations of Imatron Inc.
The following table represents the percent of revenues attributable to
the Joint Venture between the Company and Imatron Japan K.K.:
Three months ended
March 31,
1996 1995
---- ----
Net product sales 93% 97%
Service 23% 9%
Percentage to total revenues 61% 52%
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations:
Three months ended March 31, 1996 versus 1995
Overall revenues for the first quarter ended March 31, 1996 of $6,090,000
increased $440,000 or 8% from 1995 revenues of $5,650,000. Net product revenues
increased 28% to $3,791,000 from $2,953,000 in 1995 primarily because of
increased product upgrade revenues. Two scanners were shipped during each of the
quarters. Service revenues decreased by 14% primarily due to a lower volume of
spares shipments which was offset by an increase in the number of installed
scanners under service contract. Development contract decreased 29% to
$1,250,000 as a result of lower revenue recognized under the new Memorandum of
Understanding entered into with Siemens as compared to the previous development
agreement terminated in March 1995. Clinic revenues increased to $282,000 in
1996 from $48,000 in 1995 because of additional coronary artery disease risk
assessment centers (clinics) operating in 1996.
The cost of revenues as a percent of revenues is slightly higher at 92% in 1996
as compared to 88% in 1995. Product cost of revenues as a percent of product
revenues decreased to 84% in 1996 from 91% in 1995 due primarily to lower
overhead expenses. Service cost of revenues as a percent of service revenues
decreased to 91% from 110% as a result of lower scanner maintenance costs which
was partially offset by lower margins on spares shipments. Development contract
cost of revenues is equal to the Siemens development contract revenue, as per
the three year Memorandum of Understanding with Siemens. Clinic cost of revenues
as a percentage of clinic revenues decreased to 155% as compared to 408% in 1995
primarily due to higher revenues related to the establishment of new Heartscan
clinics.
Operating expenses increased $324,000 to $2,634,000 for the quarter. R&D
expenses of $703,000 in 1996 reflect the portion of R&D spending not covered by
the Siemens research and development contract. Selling expenses increased to
$1,083,000 from $749,000 in 1995 due primarily to higher marketing costs for
Heartscan, a wholly-owned subsidiary of Imatron. General and administrative
expenses increased by 47% from $578,000 in 1995 to $848,000 in 1996 due to the
high level of costs related to the increase in number of clinics operating in
1996.
Other income decreased due to the elimination of the $4,000,000 term loan with
Siemens in 1995 in exchange for the transfer of 5 Imatron EBT patents to Siemens
and the cancellation of Siemens' existing minimum purchase obligations under the
previous distribution agreement.
The increase in interest expense is related to the capital lease obligations for
certain equipment including two Heartscan clinic scanners entered into by the
Company.
Liquidity and Capital Resources:
Working capital decreased 10% to $12,884,000 during the three month period ended
March 31, 1996. The decrease is primarily due to the operating loss incurred
during the quarter. The decrease in cash and investments was partially offset by
increases in receivables and inventories. The increase in inventory resulted
from the completion of scanners which were placed into finished goods. Other
accrued liabilities decreased by $968,000 primarily due to the recognition of
customer deposits to revenue.
The Company's management believes that the cash, cash equivalents and short-term
investments existing at March 31, 1996 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.
<PAGE>
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 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.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
No. 11 - Computation of per share earnings
<PAGE>
Exhibit No. 11
IMATRON INC.
Computation of Per Share Earnings
(In thousands, except per share data)
(Unaudited)
March 31, March 31,
1996 1995
---------- ----------
PRIMARY
Average shares outstanding 69,112 53,779
Conversion of preferred stock
Net effect of dilutive stock options - 6,539
based on the treasury stock method
using the average market price - 1,456
Net effect of dilutive stock warrants
based on the treasury stock method
using the average market price - 773
----------- -----------
TOTAL 69,112 62,547
=========== ============
Net income $ (2,191) $ 2,316
=========== ============
Net income per share $ (0.03) $ 0.04
=========== =============
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 14, 1996
IMATRON INC.
(Registrant)
/s/Gary H. Brooks
-----------------
Gary H. Brooks
Vice President, Finance/
Administration and Chief Financial
Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from Imatron Inc.'s
CONSOLIDATED CONDENSED STATEMENTS OF INCOME AND CONSOLIDATED CONDENSED BALANCE
SHEETS and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 1079
<SECURITIES> 3293
<RECEIVABLES> 6868
<ALLOWANCES> 0
<INVENTORY> 9931
<CURRENT-ASSETS> 22049
<PP&E> 12609
<DEPRECIATION> 6389
<TOTAL-ASSETS> 28555
<CURRENT-LIABILITIES> 9165
<BONDS> 0
0
0
<COMMON> 73330
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 28555
<SALES> 6090
<TOTAL-REVENUES> 6090
<CGS> 5578
<TOTAL-COSTS> 5578
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 120
<INCOME-PRETAX> (2191)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2191)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2191)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
