SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 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 July 31, 1996, 76,692,822 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
June 30, 1996 (unaudited) and December 31, 1995.
Condensed Consolidated Statements of 4
Operations - Three and Six Months Ended
June 30, 1996 and 1995 (unaudited).
Condensed Consolidated Statements of 5
Cash Flows - Six Months Ended
June 30, 1996 and 1995 (unaudited).
Notes to Condensed Consolidated Financial 6
Statements (unaudited).
Item 2. Management's Discussion and Analysis of Financial 9
Condition and Results of Operations.
PART II. OTHER INFORMATION 11
SIGNATURES 13
<PAGE>
<TABLE>
IMATRON INC.
Condensed Consolidated Balance Sheets
(Amounts in thousands)
<CAPTION>
June 30, December 31,
1996 1995
------------------ ----------------
(Unaudited)
ASSETS:
<S> <C> <C>
Current Assets
Cash and cash equivalents $ 18,417 $ 7,269
Short-term investments 10,745 1,266
Accounts receivable, net 4,680 3,083
Accounts receivable from affiliate 2,535 2,957
Notes receivable 250 250
Inventories 9,865 8,937
Prepaid expenses 765 563
------------------ ----------------
Total current assets 47,257 24,325
Property and equipment, net 9,243 6,260
Other assets, net 285 291
------------------ ----------------
Total assets $ 56,785 $ 30,876
================== ================
LIABILITIES & SHAREHOLDERS' EQUITY:
Current liabilities
Borrowings under line of credit $ - $ 992
Accounts payable 2,393 2,785
Other accrued liabilities 5,656 5,607
Capital lease obligations - due within one year 1,170 689
------------------ ----------------
Total current liabilities 9,219 10,073
Deferred income on sale leaseback transactions 1,670 1,267
Capital lease obligations 5,202 3,311
------------------ ----------------
Total liabilities 16,091 14,651
Minority Interest 14,922 -
SHAREHOLDERS' EQUITY
Imatron: Common stock, no par value; authorized - 100,000
shares; issued and outstanding 76,601 shares at 1996 and
68,835 at 1995; 86,995 72,282
Additional paid-in capital 1,500 1,500
Deferred compensation (143) -
Accumulated deficit (62,580) (57,557)
------------------ ----------------
Total shareholders' equity 25,772 16,225
------------------ ----------------
Total liabilities and shareholders' equity $ 56,785 $ 30,876
================== ================
<FN>
The accompanying notes are an integral part of these condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
IMATRON INC.
Condensed Consolidated Statements of Operations
(Amounts in thousands, except per share data)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30
------------------------------------- ------------------------------------
1996 1995 1996 1995
--------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Revenues:
Product sales $ 2,226 $ 6,334 $ 6,017 $ 9,287
Product sale-leaseback
arrangements 1,774 953 1,774 953
Service 821 2,606 1,588 3,502
Development contracts 1,250 1,384 2,500 3,137
Clinic 292 91 574 139
--------------- --------------- --------------- ---------------
Total revenues 6,363 11,368 12,453 17,018
--------------- --------------- --------------- ---------------
Cost of revenues:
Product 2,178 4,631 5,371 7,326
Product sale-leaseback
arrangements 1,774 953 1,774 953
Service 774 1,285 1,472 2,274
Development contracts 1,250 1,384 2,500 2,478
Clinic 529 367 966 564
--------------- --------------- --------------- ---------------
Total cost of revenues 6,505 8,620 12,083 13,595
--------------- --------------- --------------- ---------------
Gross profit (142) 2,748 370 3,423
Operating expenses:
Research and development 798 776 1,501 1,760
Marketing and sales 898 811 1,981 1,560
Gen. and admin 990 592 1,838 1,169
--------------- --------------- --------------- ---------------
Total operating expenses 2,686 2,179 5,320 4,489
--------------- --------------- --------------- ---------------
Total operating income (loss) (2,828) 569 (4,950) (1,066)
Other income, net 110 11 161 4,000
Interest expense (114) (25) (234) (63)
--------------- --------------- --------------- ---------------
Net income (loss)
before income taxes (2,832) 555 (5,023) 2,871
--------------- --------------- --------------- ---------------
Provision for income taxes - (36) - (36)
--------------- --------------- --------------- ---------------
Net income (loss) $ (2,832) $ 519 $ (5,023) $ 2,835
=============== =============== =============== ===============
Net income (loss) per share $ (0.04) $ 0.01 $ (0.07) $ 0.05
=============== =============== =============== ===============
Number of shares used
in per share calculation 73,980 62,490 71,546 62,519
=============== =============== =============== ===============
<FN>
The accompanying notes are an integral part of these condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
IMATRON INC.
Condensed Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
<CAPTION>
Six Months Ended June 30,
--------------------------------------------------
1996 1995
----------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (5,023) $ 2,835
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Depreciation and amortization 555 828
Other Income - (4,000)
Changes in:
Accounts and notes receivable (1,175) (1,526)
Inventories (928) 918
Prepaid expenses and deposits (202) (60)
Other assets (11) (59)
Accounts payable (392) (1,200)
Other accrued liabilities 49 1,970
Deferred income 403 -
----------------- -----------------
Net cash used in operating activities (6,724) (294)
Cash flows from investing activities:
Capital expenditures (835) (744)
Purchases of marketable securities (11,501) -
Maturities of marketable securities 1,013 -
Sales of marketable securities 1,014 -
----------------- -----------------
Net cash used in investing activities (10,309) (744)
Cash flows from financing activities:
Payment of obligation under capitalized leases (319) -
Payment of notes payable (992) -
Proceeds from issuance of notes payable - 1,100
Issuance of common and preferred stocks 29,492 218
----------------- -----------------
Net cash provided by financing activities 28,181 1,318
----------------- -----------------
Net increase in cash and
cash equivalents 11,148 280
Cash and cash equivalents, at beginning
of the period 7,269 1,694
----------------- -----------------
Cash and cash equivalents, at end of the
period $ 18,417 $ 1,974
================= =================
<FN>
The accompanying notes are an integral part of these condensed consolidated financial statements.
</FN>
</TABLE>
<PAGE>
IMATRON INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
- -------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions
to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not
include all of the information and footnotes required by generally
accepted accounting principles for annual consolidated financial
statements. In the opinion of management, adjustments (consisting of
normal recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the three and six month
periods ended June 30, 1996 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1996. 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.
(HeartScan). All intercompany accounts and transactions have been
eliminated in the consolidation.
3. SHORT-TERM INVESTMENTS
Short-term investments consist of certificates of deposit and debt
securities. The certificates of deposit have been classified as held to
maturity and the debt securities have been classified as available for
sale. The maturity of all debt securities is less than one year and the
unrealized gain/loss of the securities is immaterial at June 30, 1996.
4. INVENTORIES
Inventories consist of (in thousands of dollars):
June 30, December 31,
1996 1995
-------------- --------------
Purchased parts and sub-assemblies 3,250 2,594
Service parts 720 1,079
Work-in-process 4,454 2,403
Finished goods 1,441 2,861
============= ==============
9,865 8,937
============= ==============
5. INCOME (LOSS) PER SHARE
Net income per common and common equivalent share is computed using the
weighted average number of common shares outstanding after considering
the dilutive effect of stock options, convertible preferred stock and
warrants.
<PAGE>
Net loss per common share is computed using the weighted average number
of common shares outstanding. Stock options, convertible preferred
stock and warrants have not been included in the computation as their
effect would have been antidilutive.
6. 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 Six months ended
June 30, June 30,
------------------- -----------------
1996 1995 1996 1995
---- ---- ---- ----
Net product sales 5% 22% 4% 16%
Service 17% 38% 16% 40%
Development contracts 100% 100% 100% 100%
Percentage to total
revenues 25% 36% 24% 37%
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 furture
period if resolved unfavorably.
7. JOINT VENTURE
As of June 30, 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 June
30, 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 Six months ended
June 30, June 30,
------------------- ----------------
1996 1995 1996 1995
-------- -------- -------- -----
Net product sales 36% 53% 63% 61%
Service 20% 35% 22% 25%
Percentage to total
revenues 25% 41% 42% 42%
<PAGE>
8. EQUITY TRANSACTIONS
In May 1996, Imatron sold 4,000,000 shares of common stock in a private
placement offering, netting proceeds of $10,400,000.
In June 1996, Imatron completed an offering whereby Imatron's
wholly-owned subsidiary, HeartScan, sold 100,000 shares of Series A
Preferred Stock at $160 per share. The preferred stock is convertible
on a ten-to-one basis into HeartScan common shares at any time.
Mandatory conversion of the preferred stock into common stock would
occur upon the successful completion of a HeartScan initial public
offering. The HeartScan Series A Preferred Stock may be exchanged at
the sole option of the holder into Imatron common stock at an exchange
price of $5.00 per share until the earlier of a) two year period
following closing of the Preferred Stock offering; or a HeartScan
initial public offering. If there is no initial public offering within
24 months of the Preferred Stock closing, holders may convert the
HeartScan Series A Preferred Stock into Imatron common stock at a
conversion price equal to 27% discount from the weighted average
closing price of Imatron common stock for the 90 day period immediately
preceding the pricing date.
In accordance with the Private Placement Summary Offering Memorandum
(including the supplement thereto) dated March 1996, Imatron and
HeartScan covenanted and agreed with the purchasers of "the Shares",
that on the Closing Date no less than $12,000,000 of the net proceeds
from the sale of "the Shares" less all expenses of the offering, would
be contributed to the capital of HeartScan without additional
consideration.
The HeartScan Series A Preferred Stock is held entirely by an
unaffiliated third party and is classified in the accompanying balance
sheet at June 30, 1996 as minority interest.
The terms of the preferred stock provide certain additional rights to
the holders including participation and approval of any future
HeartScan equity financing and approval of transactions with
affiliates.
The terms of the Series A Preferred Stock include 1,000,000 authorized
shares and 100,000 issued and outstanding shares at June 30, 1996.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations:
Three months ended June 30, 1996 versus 1995
Overall revenues for the second quarter ended June 30, 1996 of $ 6,363,000
decreased $ 5,005,000 or 44% compared to 1995 revenues of $ 11,368,000. Net
product revenues, including $1,863,000 under the sale-leaseback arrangements,
decreased 45% to $ 4,000,000 from $7,287,000 in 1995 primarily because of a
decrease in scanner shipments from five in 1995 to three in 1996 and product
upgrade revenues. Service revenues decreased 68% to $821,000 due to a lower
volume of spares shipments. Development contract revenue decreased 10% from
$1,384,000 to $1,250,000 due to the income recognized in 1995 related to the
termination of the previous development agreement with Siemens in March 1995 .
Clinic revenues related to the HeartScan Imaging subsidiary increased to 292,000
in 1996 from 91,000 in 1995 because of additional coronary artery disease risk
assessment centers (clinics) operating in 1996.
Total cost of revenues as a percent of revenues for the second quarter of 1996
is higher at 102% as compared to 76% in 1995. Product cost of revenues as a
percent of product revenues increased to 99% in 1996 from 77% in 1995 due to
lower margins resulting from the accounting treatment on the two sale-leaseback
transactions to HeartScan. Service cost of revenues as a percent of service
revenue increased 94% in 1996 from 49% in 1995 due primarily to a lower volume
of spares shipments. Development contract revenue and cost of revenue is equal
due to the terms of the three year Memorandum of Understanding with Siemens.
Clinic cost of revenues as a percent of clinic revenues decreased to 181% as
compared to 403% primarily due to additional revenues related to the
establishment of new HeartScan clinics.
Operating expenses of $2,686,000 increased $507,000 or 23% compared to 1995
expenses of $2,179,000. R&D expenses of $798,000 in 1996 reflect the portion of
R&D spending not covered by the Siemens research and development contract.
Selling expenses increased to $898,000 from $811,000 in 1995 due primarily to
higher marketing costs for HeartScan clinics which was partially offset by lower
commissions on sales of C-150 ultrafast CT systems. Administrative expenses
increased $398,000 to $990,000 due to increases in investor relations expenses
and overhead expenses related to the establishment of new HeartScan clinics
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations:
Six months ended June 30, 1996 versus 1995
Overall revenues for the six months ended 1996 of $12,453,000 decreased
$4,565,000 or 27% compared to revenues of $17,018,000 for the same period in
1995. Net product revenues, including $1,952,000 under the sale-leaseback
arrangements, decreased 24% to $7,791,000 in 1996 from $10,240,000 in 1995 due
to five scanners shipped in 1996 compared to seven in 1995. Service revenues
decreased 55% to $1,588,000 in 1996 due primarily to a lower volume of spares
shipments made during the second quarter. The decrease in development contract
revenue of 20% to $2,500,000 in 1996 resulted from lower revenue recognized
under the Memorandum of Understanding entered into with Siemens as compared to
the previous development agreement terminated in March 1995. Clinic revenues
related to the HeartScan Imaging subsidiary increased to $574,000 in 1996 from
$139,000 in 1995 due to an increase in the number of clinics operating in 1996.
Total cost of revenues as a percent of revenues for the first six months of 1996
is higher at 97% in 1996 compared to 80% in 1995. Product cost of revenues as a
percent of product revenues increased to 92% in 1996 from 81% in 1995 due to
lower margins on sale-leaseback scanners and product upgrades. Service cost of
revenues as a percent of service revenues increased to 93% in 1996 from 65% in
1995 due primarily to a decrease in spares shipments. Development contract cost
of revenues is equal to the revenue recognized under the Memorandum of
Understanding with Siemens. Clinic cost of revenues as a percent of clinic
revenues decreased to 168% in 1996 from 406% in 1995 due primarily to revenues
resulting from the additional HeartScan clinics operating in 1996.
<PAGE>
Operating expenses of $5,320,000 in 1996 increased $831,000 or 19% compared to
1995 expenses of $4,489,000. R&D expenses of $1,501,000 in 1996 reflect the
portion of R&D spending not related to the Siemens research and development
contract. Selling expenses increased to $1,981,000 in 1996 from $1,560,000 in
1995 due primarily to higher marketing expenses incurred by the HeartScan
Imaging subsidiary. Administrative expenses increased $669,000 to $1,838,000 due
to increases in investor relations expenses and overhead expenses related to the
establishment of new Heartscan clinics
Other income decreased to $161,000 in 1996 from $4,000,000 in 1995. The
$4,000,000 was received in consideration for the transfer of five 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 four Heartscan clinic scanners entered into by the
Company.
Liquidity and Capital Resources:
At June 30, 1996, the Company has a working capital of $38,038,000 which was a
167% increase compared to working capital of $14,252,000 at December 31, 1995.
the current ratio increased to 5.1:1 from 2.4:1 at December 31, 1995.
The Company's assets increased in 1996 by 84% to $56,785,000 compared to
December 31, 1995 total assets of $30,876,000 primarily due to proceeds of
$26,400,000 from the second quarter Heartscan private placement and the sale of
4,000,000 shares of Imatron common stock. The increase in cash and investments
was partially offset by the operating loss incurred during the year and payment
of the borrowings under the line of credit with San Paolo Bank. Accounts
receivable also increased by 19% as a result of slow payment by some customers.
Inventories are higher by 10% due to the increase in work in process. Lease
obligations increased to $6,400,000 principally due to the scanner
sale-leaseback transactions for the two new HeartScan clinics.
The Company's management believes that the cash, cash equivalents and short-term
investments existing at June 30, 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.
The company anticipates that the 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 or 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
The Company's Annual Meeting of Shareholders was held on June
28, 1996. At the meeting all existing directors were
re-elected. In addition, a proposal to increase the
additional shares eligible for sale under the Company's 1994
Employee Stock Option Plan from 1,000,000 to 1,800,000 shares
was approved. The proposal received 50,150,046 votes for,
1,403,348 against, and 288,719 abstentions.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
No. 11 - Computation of per share earnings.
(b) Form 8-K Reports:
Not applicable.
<PAGE>
Exhibit No. 11
<TABLE>
IMATRON INC.
Computation of Per Share Earnings
(Amounts in thousands, except per share data)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- -----------------
1996 1995 1996 1995
------- -------- -------- -----
(000's omitted, except per share data)
<S> <C> <C> <C> <C>
PRIMARY:
Average shares outstanding 73,980 54,402 71,546 54,091
Conversion of preferred stock 6,039 6,289
Net effect of dilutive stock options
based on the treasury stock method
using the average market price 1,302 1,379
Net effect of dilutive stock warrants
based on the treasury stock method
using the average market price 747 760
------- -------- --------- ------
TOTAL 73,980 62,490 71,546 62,519
====== ====== ======== ======
Net income / (loss) $ (2,832) $ 519 $ (5,023) $ 2,835
======= ======== ========== ======
Net income / (loss) per share $ (0.04) $ 0.01 $ (0.07) $ 0.05
======= ======== ========== =======
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: August 14, 1996
IMATRON INC.
(Registrant)
Gary H. Brooks
-----------------
/s/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>
<CIK> 0000720477
<NAME> Imatron Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 18417
<SECURITIES> 10745
<RECEIVABLES> 7215
<ALLOWANCES> 0
<INVENTORY> 9865
<CURRENT-ASSETS> 47257
<PP&E> 15158
<DEPRECIATION> 5915
<TOTAL-ASSETS> 56785
<CURRENT-LIABILITIES> 9219
<BONDS> 0
0
0
<COMMON> 86995
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 56785
<SALES> 6363
<TOTAL-REVENUES> 6363
<CGS> 6505
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<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 114
<INCOME-PRETAX> (2832)
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<CHANGES> 0
<NET-INCOME> (2832)
<EPS-PRIMARY> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
