Imatron Corporate Profile
Company Overview
Imatron Inc., headquartered in South San Francisco, California, is a
technology-based company principally engaged in the business of designing,
manufacturing and marketing a high performance Computed Tomography (CT) scanner.
This scanner, called the Ultrafast CT(R), uses the Company's patented Electron
Beam Tomography (EBT) technology. The Ultrafast CT scanner is used in over 75
large and mid-sized hospitals and free-standing imaging clinics, including The
Mayo Clinic, National Institutes of Health, UCLA, Tokyo University Hospital and
other major hospital centers around the world. The Company also provides
service, parts and maintenance to hospitals and clinics that operate its
scanners. In addition, Imatron is engaged in performing contract EBT imaging
research and development.
Market Overview The Ultrafast CT scanner is directed toward the
specialized, high volume screening applications of Cardiology, Pulmonology and
Endoscopy together with general radiological whole body imaging. The principal
market for Imatron's scanner is "high end" cardiology facilities in the U.S. and
high volume general purpose CT facilities worldwide. The Ultrafast CT is the
only technology capable of quantifying the small calcium deposits in coronary
arteries. This procedure, known as the coronary artery scan (CAS), provides
low-cost and non-invasive detection of even the very early stages of coronary
artery disease. The American Heart Association stated in a press release on June
1, 1996, that the CAS was "many times more powerful than the best available
non-invasive test in predicting heart attacks and other coronary disease
episodes, even in apparently healthy people."
HeartScan Imaging, Inc. Subsidiary
With coronary artery disease being the single largest killer of American males
and females, HeartScan Imaging, Inc. was created to capture the growing
fee-revenue stream from Imatron's Ultrafast CT CAS procedure and to become the
largest customer of Imatron's EBT scanners. HeartScan Imaging currently operates
Coronary Artery Disease Risk Assessment Centers which are located in San
Francisco, Seattle, Houston, Pittsburgh and Washington D.C. HeartScan's plans
are to open additional centers affiliated with leading medical institutions and
healthcare providers in the United States and Europe. After successful
completion of a HeartScan Imaging private placement in July, 1996, Imatron
presently has a 49.5% ownership position in HeartScan.
Management Team
Imatron is led by S. Lewis Meyer, President and Chief Executive Officer, who
joined the company in 1993 after founding American Health Services Corp., now
Insight Health Services Corp. Mr. Meyer has 24 years management experience in
the high tech medical equipment field. Gary H. Brooks, Vice President, Finance &
Administration and Chief Financial Officer, has 20 years experience in financial
management. He previously served five years as Chief Financial Officer for
Avocet, a privately held sports electronics manufacturer. Dr. Douglas P. Boyd,
Chairman of the Board, is a founder of Imatron and the inventor of the Electron
Beam Tomography technology. He was previously a Professor of Radiology (Physics)
at University of California, San Francisco, and currently serves as an Adjunct
Professor.
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To Our Shareholders:
In 1996 we achieved a number of strategic objectives critical to Imatron's
long-term growth and success. These achievements, while continuing to build on
our established foundation, also underscored the challenges we face in launching
a revolutionary technology in today's complex and rapidly changing medical
marketplace.
Even though Imatron experienced significant operating losses this year as
compared to last, we were witness to an unprecedented volume of positive,
independently published, comprehensive medical research which continues to
support and confirm our Ultrafast CT scanner's vital role in the early detection
of heart disease. In addition, the rising medical and economic debate over the
use of cholesterol lowering drugs to treat heart disease has presented Imatron
with the biggest opportunity in its operating history: How does the medical
community determine who can most directly benefit from these effective, but
costly, cholesterol-lowering drugs -- especially those individuals who show no
other signs of heart disease? We believe that our Ultrafast CT scanner is
precisely the answer to this dilemma and intend to take advantage of this
opportunity for the maximum benefit of our shareholders.
During 1996, Imatron achieved a significant breakthrough in public awareness of
the importance and significance of coronary artery scanning (CAS) and Ultrafast
CT. From network television to national circulation print media, Imatron, CAS
and Ultrafast CT have risen to a new level of worldwide visibility. With market
forces, medical research and public knowledge now converging in our favor, I am
pleased to have this opportunity to review the notable events of 1996 and share
with you our vision for 1997 and beyond.
1996 Operating Results
For 1996, Imatron posted revenues of $25.8 million, with a net loss of $10.5
million, or $0.14 per share, compared with revenues of $26.7 million, with a net
loss of $2.4 million, or $0.04 per share, a year ago. Simply put, we were
disappointed with the operating results in 1996 and attribute the losses
principally to: Imatron's 100 percent consolidation of our HeartScan Imaging
subsidiary; a fourth quarter adjustment to revenues caused by a breach of a
sales contract on the part of the buyer of one of our Ultrafast CT scanners;
lower margins on flat scanner sales; operating losses associated with existing
HeartScan centers; and the opening of two additional HeartScan Coronary Artery
Disease Risk Assessment centers.
On December 31, 1996, Imatron's working capital had increased 130 percent to
$32.8 million as a result of proceeds realized from private equity placements
and the exercise of previously issued stock purchase warrants and options.
Shareholders' equity increased as well, to $23.5 million from $16.2 million a
year ago. This enhanced financial strength, provides Imatron with the
flexibility to take advantage of a variety of business growth opportunities open
to us.
Although Imatron presently owns only 49.5 percent of our HeartScan Imaging, Inc.
subsidiary after the completion of a private HeartScan equity placement in July
1996, Imatron is consolidating 100 percent of HeartScan's operating results into
our 1996 fiscal year financial statements. There is an exchange provision built
into the HeartScan private placement, which provides the HeartScan investors an
opportunity to exchange their HeartScan Series A Preferred shares for Imatron
common stock over a four year period. Due to this exchange provision, and after
further analysis and consultation with our accountants, we have decided to fully
consolidate HeartScan's operating results until either the conclusion of the
four year exchange period or a HeartScan initial public offering. HeartScan
accounts for 44 percent, or $4.6 million, of Imatron's 1996 net loss.
While we regret the negative results of this consolidation, we believe that
HeartScan will become the engine of Imatron's future growth by developing into a
significant customer for our Ultrafast CT scanners. Throughout 1997, we intend
to concentrate HeartScan's resources on specific marketing strategies to
increase the public and medical community awareness of our Ultrafast CT's
application and validity.
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Heart disease is a reversible, treatable disease when detected in its early
stages. With the advent of the Ultrafast CT and CAS, there is no need for the
human suffering and economic loss associated with heart disease today. The
unique role of CAS in this early detection of coronary artery disease is an
issue that virtually every individual can relate to and share in. HeartScan's
primary mission this year is to further promote this message to both the general
public and healthcare providers.
While Imatron's Electron Beam Tomography (EBT) technology and Ultrafast CT have
received major support from a growing body of medical research over the past
year, our experience has clearly shown that it takes time for this information
to disseminate within the medical community and result in increased sales of our
scanners. Based on the multi-system orders from South Africa and Malaysia and
other sales thus far this year, I am confident that Imatron's scanner shipments
in 1997 will be more indicative of the widespread recognition our technology has
received over the past 18 months.
1996 Achievements
1996 was also a milestone year with respect to product development. In December
1996, our engineering team completed its work on version 12.3 software. This new
software triples the image acquisition capability on our Ultrafast CT C-150
scanner to 140 images in 15 seconds and represents the most significant system
performance upgrade in five years. Now we will be able to expand our
applications directed to the chest and abdomen, as well as to improve our
Ultrafast CT scanner's ability to scan patients who are unable to remain
motion-free for extended periods of time. After the completion of clinical Beta
testing expected in early 1997, we will be able to market this enhancement to
our new and existing customer base.
Also in December, Imatron began marketing our new, desktop 3D workstation, the
Ultra Access. When connected to the Ultrafast CT scanner, this workstation
significantly increases the functionality of cross-sectional scanning. Images
can now be viewed in 2D, 3D, maximum intensity projections and real-time
multi-planar reformatting. Other Ultra Access capabilities include auto filming,
auto archiving and DICOM (digital imaging and communications in medicine) image
transfer. Its multi-tasking feature and superior image display create
efficiencies for our users by providing increased time for sophisticated image
processing and reconstruction. Thus far, response to the Ultra Access has been
extremely favorable.
The Ultra Access workstation is the first product to result from the cooperative
working relationship between Imatron and ISG Technologies. We expect that full
implementation of the ISG development platform into our product line will
greatly reduce the time to market for future Imatron products.
In our quest to achieve higher engineering and manufacturing standards, Imatron
has met the requirements of the European Union's Electro Magnetic Compatibility
Directive: 89/336/EEC. Imatron may affix the CE mark to its Ultrafast CT scanner
indicating compliance to this directive.
Our corporate partnership with Siemens has provided the necessary funds ($12.5
million to date) for our engineering group to continue to tackle major EBT
development projects. These projects will continue to provide new and existing
Ultrafast CT users with a pipeline of state-of-the-art CT imaging technology.
These developments solidify Imatron's technological superiority, providing a
formidable barrier against competitors entering the field of EBT. Based on the
recent receipt of Ultrafast CT scanner orders from Siemens, we believe the
distribution component of our Siemens relationship will generate increased sales
revenue to Imatron during 1997.
Another critical element in our plan for company growth was completed in July,
1996. We closed an equity financing for our wholly-owned subsidiary, HeartScan
Imaging, Inc. In this private placement, we sold a 40 percent fully-diluted
interest in HeartScan in the form of 100,000 Series A Preferred shares, for $16
million. With this $16 million equity infusion, HeartScan was able to move
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forward with its strategy of opening additional Coronary Artery Disease Risk
Assessment Centers in conjunction with leading medical institutions and
cardiology groups nationwide. In September, HeartScan-Pittsburgh was opened in
affiliation with the University of Pittsburgh Medical Center.
HeartScan-Washington D.C., affiliated with The George Washington University
Medical Center, followed in November.
HeartScan had planned to have seven centers open by the 1996 year end, however,
management decided to slow HeartScan's growth in order to concentrate on
fundamentals at its existing sites and to effectively manage HeartScan's
business expansion. A total of five centers are now open, located in South San
Francisco, Seattle, Houston, Pittsburgh and Washington D.C.
1997 Objectives
During the coming year we intend to focus on the following goals and objectives:
Improve Imatron's operating results through increased international sales,
sales to Siemens, and HeartScan center profitability.
Continue to educate the medical community and general public on the value and
benefits of Imatron's Coronary Artery Scan, which uniquely enables early,
non-invasive and inexpensive detection of coronary artery disease, the nation's
number one killer of both men and women.
Obtain increased managed care and indemnity insurance coverage for the CAS.
Deliver important new clinical capabilities to our new and existing customer
base.
Achieve Imatron Quality System Certification to the ISO (International
Organization of Standardization) 9001 standard.
Expand our customer service base to ensure customer satisfaction and increased
service contract revenues.
Focus on profitability and fundamental marketing strategies at existing centers
in HeartScan Imaging's network.
Effective commercialization of our Ultrafast CT technology is clearly the
greatest challenge facing Imatron today. We are dedicated to communicating our
powerful message to the general public, medical professional, managed care and
indemnity insurance communities, in order to establish widespread acceptance of
the CAS' ability to detect heart disease, predict heart attacks and reduce the
costs associated with the treatment of coronary artery disease.
A mountain of research data exists today which confirms our scanner's unique
role in the management and diagnosis of heart disease. During the coming year we
intend to capitalize on this data and the `grass roots' momentum we have created
in order to establish and sustain profitability for both Imatron and HeartScan
Imaging.
In closing, I would like to welcome Rear Admiral (Ret.) William McDaniel, M.D.
and Jose Filipe Guedes to Imatron's board of directors. Admiral McDaniel's years
of service and experience as Surgeon of the U.S. Pacific Command for the U.S.
Navy, along with Mr. Guedes' comprehensive background in the manufacturing
industry in Portugal, will be invaluable as they advise Imatron during this
period of development and growth. I would also like to express my gratitude to
Drs. Ugo Busatti and Giovanni Lanzara, of Italimprese, SpA, who both retired
from our board during 1996. Drs. Busatti and Lanzara, who became members of our
board in 1993 and 1994, respectively, were key advisors during Imatron's
management transition.
We look forward to the future with confidence and enthusiasm about Imatron's
opportunities for success. Your continued support and confidence are greatly
appreciated.
S. Lewis Meyer
President and Chief Executive Officer
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IMATRON'S UNIQUE ULTRAFAST CT SCANNER
Imatron has pioneered the innovative design and is exclusively responsible for
the manufacture of the Ultrafast Computed Tomography (CT) scanner. Protected by
24 patents and proprietary know-how, the Ultrafast CT system is capable of
scanning speeds dramatically faster than conventional Computed Tomography
scanners, often referred to as CT or CAT scanners. This rapid scan speed
provides the Ultrafast CT with the ability to exclusively perform a variety of
important cardiac imaging procedures.
IMATRON'S EXCLUSIVE CORONARY ARTERY SCAN
The two-dimensional set of cross-sectional, Ultrafast CT images of the heart and
coronary arteries is more commonly referred to as the coronary artery scan
(CAS). The CAS is a unique, new diagnostic test for the early detection of heart
disease. It is low-cost, non-invasive and the most sensitive method currently
available to detect small calcium deposits in the coronary arteries. Numerous
studies have proven that calcium in the coronary arteries is a marker for
atherosclerosis, a condition recognized as the leading cause of heart disease.
The CAS procedure takes less than ten minutes, requires no injections and
delivers an x-ray dose less than a conventional abdominal x-ray. The procedure
is recommended for men over 40 and women over 45 who show no symptoms of heart
disease, but have conventional risk factors. In September of 1996, the American
Heart Association issued a Medical/Scientific Statement which concurred with
these patient guidelines for the CAS procedure. If you have concerns about your
risk of heart disease, please talk to your physician about the coronary artery
scan.
IMATRON'S EXCLUSIVE 3-D VISUALIZATION OF THE CORONARY ARTERIES
3-D visualization of the coronary arteries begins with a contrast-enhanced,
two-dimensional set of Ultrafast CT scan data of the cardiac region, which is
then reconstructed through the use of a powerful, desktop computer workstation
into three-dimensional images of the heart. These three-dimensional images
clearly show the coronary arteries, coronary bypass grafts and any significant
blockages that might be present. In contrast to the two-dimensional coronary
artery scan, patients must have an intravenous injection of x-ray contrast
medium in the arm.
3-D visualization of the coronary arteries, also known as 3-D CT Angiography, is
rapidly gaining acceptance as a potential replacement for coronary angiography,
the invasive, `gold standard' procedure which requires x-ray contrast injection
through a thin catheter inserted into the femoral artery until it reaches the
aorta. Many research studies, conducted by medical institutions such as
Harbor-UCLA Medical Center, the University of Erlangen in Nurnberg,
Germany, Hiroshima University of Hiroshima, Japan and the FuWai Hospital of
Peking, People's Republic of China, have provided compelling data to support
this case.
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OTHER APPLICATIONS OF THE ULTRAFAST CT SCANNER
It is important to note that the Ultrafast CT scanner is capable of imaging
other parts of the body. Even though our scanner's unique niche is in the area
of the heart, this amazing technology certainly has applications which extend
well beyond cardiology. The Ultrafast CT scanner can be used to scan: the lungs,
head, abdomen, spine and brain; the heart, lungs, kidneys and liver to measure
blood flow; and in pediatrics, geriatrics and trauma where scanning speed to
freeze motion is also critical. In addition, 3-D reconstructions of the colon
and bronchus can be produced in superb quality from sets of two-dimensional
Ultrafast CT scan data. The ultimate goal of this 3-D procedure is to eliminate
the cost and invasive nature of bronchoscopy and colonoscopy. At present, these
applications are in clinical research and development at major medical research
facilities around the world.
IMATRON'S EXCLUSIVE ELECTRON BEAM TOMOGRAPHY (EBT) TECHNOLOGY
Imatron's Ultrafast Computed Tomography (CT) scanner uses patented Electron
Beam Tomography (EBT) technology. Invented by Dr. Douglas Boyd, Chairman of
Imatron's Board of Directors, this completely electronic technology enables
scanning up to 20 times faster than conventional, mechanical Computed Tomography
scanners. Conventional Computed Tomography scanners employ a heavy x-ray tube
which revolves around the body. Imatron's scanner has no moving parts, and can
acquire data faster thanks to the electronically steered electron beam.
Acquired EBT scan data is a set of two-dimensional, cross-sectional images.
Three-dimensional imaging is accomplished by transferring the set of images to a
powerful, desktop computer workstation for conversion into a 3-D visualization.
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PUBLISHED EBCT RESEARCH: A CHORUS OF CONTINUING WIDESPREAD VALIDATION
In the past year, numerous research studies continued to validate the
effectiveness of Imatron's Electron Beam Computed Tomography (EBCT) technology:
Circulation (March 1, 1996), -- the American Heart Association journal -
Reported the coronary artery scan by Ultrafast CT detected coronary artery
disease in 95 percent of 710 patients with blockages documented by invasive
coronary angiography. Author Dr. Bruce Brundage and colleagues concluded that
Ultrafast CT scanning has "excellent sensitivity for the detection of coronary
artery disease."
45th Annual Scientific Sessions of the American College of Cardiology
(March 1996) - Ten papers presented regarding Ultrafast CT applications,
including a 19 month follow-up study of nearly 1,200 asymptomatic patients which
reported coronary artery scanning to be "highly effective in predicting
cardiovascular events, including heart attacks, in the large sample of
asymptomatic persons."
Mayo Clinic Proceedings (April 1996) -- Major review article reported that
EBCT has a sensitivity of 94 to 97 percent for detecting coronary vessel
narrowing, and is greater than 95 percent effective in ruling out obstructive
coronary artery disease.
Circulation (June 1, 1996), -- the American Heart Association journal -
Reported the coronary artery scan by Ultrafast CT is "more powerful than the
best available non-invasive test in predicting heart attacks and other coronary
disease episodes, even in apparently healthy people." By comparing data from a
19 month follow-up study of nearly 1,200 asymptomatic patients with a 12 year
study on cholesterol testing, the researchers concluded the coronary artery scan
"is a better predictor of cardiovascular disease events in a much shorter time
period."
Circulation (September 1, 1996), -- American Heart Association
Medical/Scientific Statement - Expansion of its former position on Imatron's
Electron Beam Computed Tomography (EBCT) technology by acknowledging its role in
the diagnosis and management of coronary heart disease. Statement authors
conclude that "because EBCT has been shown to be sufficiently accurate for
predicting the presence of angiographic stenoses somewhere in the coronary
arteries and for predicting the likelihood of clinical end points in symptomatic
patients, it can be used as part of a cardiological examination done under the
supervision of a physician knowledgeable about the significance of scan results
and the management of coronary heart disease."
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International Symposium on Electron Beam Tomography (October 1996) -
Sponsored by the University of Iowa and Harbor-UCLA Medical Center - 32 papers
presented regarding clinical applications of Imatron's Ultrafast CT. Five papers
focused on the sensitive and specific application of Ultrafast CT in the 3-D
evaluation of coronary artery bypass grafts and restenosis after coronary
angioplasty.
69th Annual Scientific Sessions of the American Heart Association (November
1996) - Ten papers presented on Ultrafast CT involving the diagnosis of coronary
artery disease, with six presentations addressing coronary artery calcification
and atherosclerosis. Of the ten papers presented at the Sessions, Dr. Arthur
Agatston and colleagues from Mt. Sinai Medical Center determined that coronary
calcification as detected by Electron Beam Computed Tomography is highly
predictive of future heart attack risk, even in individuals who have no
symptoms. Dr. Agatston's research group based their findings on a three to six
year follow up study of 367 middle-aged men and women.
82nd Scientific Assembly of the Radiological Society of North America
(December 1996) - More than 12 papers and seminars featured Electron Beam
Computed Tomography technology, which corresponded with the unprecedented
interest at Imatron's technical exhibit.
American Journal of Cardiology (January 15, 1997) - Reported coronary
calcification as detected by Ultrafast CT is a predictor of unsuspected
blockages in the coronary arteries of asymptomatic individuals. Basing their
study on 18 asymptomatic individuals who showed above average calcium scores,
Dr. Alan Guerci and colleagues used coronary angiography to demonstrate a highly
significant relationship between calcium score and coronary artery disease.
Journal of the American College of Cardiology (February 1997) - Reported
that the extent of coronary calcification correlated well with overall
atherosclerotic plaque burden. Dr. Gary Mintz and colleagues from the Washington
Hospital Center based their findings on 1,422 patients who underwent
intravascular ultrasound to examine the extent and composition of
atherosclerotic plaque. This study provides independent verification of the
rationale supporting CAS.
46th Annual Scientific Sessions of the American College of Cardiology
(March 1997) - Ten papers presented regarding Ultrafast CT applications,
including three presentations unveiling new Ultrafast CT obtained images of
blockages in the coronary arteries. Dr. Matthew Budoff and colleagues from the
Harbor-UCLA Medical Center concluded that "intravenous Ultrafast CT angiography
is a safe and non-invasive technique with great potential impact for the
diagnosis and treatment of coronary artery disease."
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ULTRAFAST CT: THE ANSWER TO TODAY'S MOST CRITICAL HEALTHCARE ISSUE
This massive amount of clinical research further elaborates on the more than 160
papers already published on the important role of Imatron's EBT scanner in the
early diagnosis of heart disease. Multi-year follow-up studies and population
samples in the thousands all provide a compelling case for widespread use of
Ultrafast CT and the CAS. As we enter 1997, we are committed to converting this
tremendous volume of research into increased sales of our Ultrafast CT scanner.
Probably the most important publication for Imatron in 1996 was the American
Heart Association's (AHA) new `Medical/Scientific Statement'. The statement,
which was published in Circulation in September, 1996, recognized our scanner's
unique role in the diagnosis and management of heart disease. The authors stated
that this technique could help in identifying the presence of early coronary
artery disease in asymptomatic people with known risk factors. This new
`Medical/Scientific Statement' stands in sharp contrast to the AHA's previous
position statement issued almost four years ago, which did not recommend the use
of Ultrafast CT for coronary artery disease screening until further research had
been conducted.
In addition to the AHA's `Medical/Scientific Statement', there is an important,
developing health care trend emphasizing the power of Imatron's Ultrafast CT
scanner. Previously published studies, such as the West of Scotland Study and
Scandinavian Simvastatin Survival Study (4S), have proven that the treatment of
patients with, or suspected of having, coronary artery disease (CAD) with newly
developed cholesterol-lowering medications is highly effective. In the medical
community, broad consensus exists today for treating patients with established
CAD, and patients at high risk for CAD, with these medications. However, there
has been a great deal of controversy over how to determine who is at high risk.
The Cholesterol and Recurrent Events Study published in the October 3, 1996
issue of the New England Journal of Medicine further proved there is no direct
connection between cholesterol and heart disease. In the study, researchers
found that the benefits of cholesterol lowering drug therapy also extend to
heart disease patients with "average" or "normal" cholesterol levels. According
to Dr. Alan Guerci, Director of Research at St. Francis Hospital in Roslyn, NY,
"Available data indicates that the majority of people with clinical coronary
disease have normal cholesterol levels."
The actual risk of heart attack and coronary disease episodes varies widely in
individuals depending on several complicated factors; The very high cost of the
cholesterol-lowering medications reinforces the necessity to successfully
identify treatment candidates. A front page article in the December 6, 1996 Wall
Street Journal brought this fact home. The article was titled, "Pricey
Prescription; Powerful Medications for Cholesterol Pose a Paradox for HMOs;
Curbing the Future Expense of Heart Disease Raises Concerns on Present Costs;
What is an Acceptable Risk?"
Acording to Dr. Alan Wasserman, Chairman of the Division of Cardiology at George
Washington University Medical Center, "Recent research shows that the Coronary
Artery Scan by Ultrafast CT is precisely the answer to the dilemma facing the
medical community today - who to treat aggressively with cholesterol lowering
medication independent of an individual's specific cholesterol level.
"If our other tests were perfect we wouldn't look for new diagnostic
methodologies. Exercise testing, in addition to other diagnostic tests, carries
a high degree of false positives along with some false negatives. Clearly, no
other test today has as good a sensitivity as Imatron's Ultrafast CT Coronary
Artery Scan."
Dr. Bruce Brundage, Chief of Cardiology at Harbor-UCLA Medical Center, also
comments, "The single best test for screening asymptomatic people for risk of
coronary artery disease is Electron Beam CT scanning, unequivocal in my
opinion."
Dr. Robert Roberts, Chairman, Cardiology Section at the Baylor College of
Medicine in Houston, Texas states, "Independent of coronary artery scanning,
there is no doubt today that we are entering an era where prevention of
atherosclerosis is clearly the way to go. The treatment for the twenty-first
century is not going to be treating myocardial infarction. It is going to be
treating atherosclerosis in the vessel wall and preventing its development. One
of the reasons I ever got involved with coronary artery scanning is to take my
group into the twenty-first century."
We at Imatron firmly believe that our Ultrafast CT scanner can determine who
will most directly benefit from effective, but costly, cholesterol-lowering
medications -- even if they show no signs of heart disease. Numerous studies
have stated the case for the efficacy and utilization of Ultrafast CT in
diagnosing those at risk for coronary artery disease. With the support of many
nationally prominent cardiologists, we intend to capitalize on this opportunity
and pass the benefits onto you, our shareholders.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1996, the Company had working capital of $33.0 million which was
a 131% increase compared to working capital of $14.3 million at December 31,
1995. The current ratio increased to 4.4:1.0 from 2.4:1.0 at December 31, 1995.
The Company's assets increased in 1996 by 72% to $53.2 million compared to
December 31, 1995 total assets of $30.9 million primarily due to proceeds
realized of $31.7 million (net of offering costs) from private placement
offerings and exercises of warrants and stock options. In addition, property and
equipment increased by $2.5 million exclusive of $2.7 million in additions that
are related to capitalized leases. Capital lease obligations were entered into
in 1996 principally due to the establishment of two new HeartScan clinic
scanners. The deferred income of $1.4 million is related to deferred profit on
sales of scanners under 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 purchase obligations.
Management believes that cash, cash equivalents and short-term investments
existing at December 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, 1997.
HeartScan anticipates that 1997 capital equipment acquisitions will increase
from 1996 due to the expansion of clinic base.
To satisfy the Company's capital and operating requirements beyond 1997,
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
1996 vs. 1995
Overall revenues decreased 3% from $26,700,000 in 1995 to $25,768,000 in 1996.
Product sales, including $1.8 million under sale-leaseback arrangements with
various leasing companies in both 1996 and 1995, increased 6% due to a higher
option/upgrade revenues. There were 10 scanners and 1 refurbished unit sold in
1996 versus 10 scanners in 1995. Service revenues decreased 37% from $5,529,000
in 1995 to $3,465,000 in 1996 primarily due to lower spare parts shipment.
Research and development contract revenues decreased by 11% to $5,000,000
compared to $5,637,000 in 1995 due to the lower revenue recognized under the
Memorandum of Understanding with Siemens as compared to the previous Siemens
development agreement that was terminated in March 1995. Clinic revenues related
to the HeartScan subsidiary increased by 181% to $1,293,000 in 1996 compared to
$460,000 in 1995 as a result of additional coronary artery disease risk
assessment centers (clinics) operating in 1996.
The costs of revenues as a percent of revenues for 1996 is higher at 96% as
compared to 89% in 1995. Product cost of revenues as a percent of product
revenues increased to 90% in 1996 from 89% in 1995 as a result of lower realized
margin on scanners sold. Service cost of revenues as a percent of service
revenues increased to 91% in 1996 as compared to 71% in 1995 due primarily to
lower volume of spares shipped. Development contract revenue and cost of revenue
is identical in 1996 due to the terms of the three year Memorandum of
Understanding with Siemens. In 1995, development revenue also included a
development contract with Siemens which provided a higher gross margin to the
Company. This contract was terminated in 1995. Clinic cost of revenues as a
percent of clinic revenues decreased to 173% in 1996 as compared to 293% in 1995
primarily due to additional revenues related to the establishment of new
Heartscan clinics.
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Operating expenses of $13,390,000 for 1996 increased by 45% as compared to 1995
expenses of $9,225,000. Research and development expenses of $3,318,000 reflect
the research and development spending not covered by the Siemens research and
development contract. Marketing and sales expenses increased to $4,676,000 from
$3,137,000 in 1995 primarily due to higher advertising expenses incurred by
HeartScan and expenses related to studies conducted promoting the benefit of the
Company's product. General and administrative expenses increased to $5,396,000
from $2,658,000 in 1995 mainly due to increases in bad debt expense related to
Imatron receivables and overhead expenses related to the establishment of new
HeartScan clinics.
Other income decreased to $2,508,000 from $4,021,000 in 1995 as a result of the
transaction recorded in 1995 eliminating 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 . In 1996, the Company recognized $1,756,000 in other income from the
sale of 59,090 shares of Invision Technologies common stock.
Interest expense increased to $564,000 from $312,000 in 1995 due primarily to an
increase in capitalized scanners leased back by HeartScan.
1995 vs. 1994
Overall revenues decreased 20% from $33,571,000 in 1994 to $26,700,000 in 1995.
Product sales, including $1,820,000 under the sale-leaseback arrangements in
1995, 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 $4,750,000 in
1994 to $5,529,000 in 1995 primarily due to higher spare parts shipment.
Research and development contract revenues went up by 5% to $5,637,000 compared
to $5,380,000 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 was the result of lower realized per unit revenue and overhead
expenses being allocated to a smaller number of units. The cost of service
revenues as a percentage of revenues decreased to 71% in 1995 versus 85% in
1994. This decrease was 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. 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
$4,000,000 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 $4,000,000 term loan with Siemens.
<PAGE>
<TABLE>
Consolidated Balance Sheets
(Amounts in thousands)
<CAPTION>
December 31,
ASSETS 1996 1995
- ------
-------------------- ------------------
<S> <C> <C>
Current assets
Cash and cash equivalents $ 10,862 $ 7,269
Short-term investments 14,171 1,266
Accounts receivable (net of allowance for doubtful acccounts
of $1,110 and $171 at December 31, 1996 and 1995):
Trade accounts receivable 2,940 3,083
Accounts receivable from affiliate 2,660 2,957
Notes receivable - 250
Inventories 10,393 8,937
Prepaid expenses 1,659 563
-------------------- ------------------
Total current assets 42,685 24,325
Property and equipment, net 10,102 6,260
Other assets 405 291
------------------ ------------------
Total assets $ 53,192 $ 30,876
=================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Borrowings under line of credit $ - $ 992
Accounts payable 2,461 2,785
Other accrued liabilities 5,994 5,607
Captial lease obligations - due within one year 1,188 689
------------------- ------------------
Total current liabilities 9,643 10,073
Deferred income on sale leaseback transactions 1,419 1,267
Capital lease obligations 4,604 3,311
------------------ ------------------
Total liabilities 15,666 14,651
Commitments and contingencies - Note 3 and 6
Minority interest 14,941 -
Shareholders' equity
Common stock, no par value; authorized-100,000 shares; issued
and outstanding-77,919 shares in 1996 and 68,835 shares in 1995 89,223 72,282
Deferred compensation (116) -
Additional paid-in capital 1,500 1,500
Accumulated deficit (68,022) (57,557)
------------------ -----------------
Total shareholders' equity 22,585 16,225
----------------- ------------------
Total liabilities and shareholders' equity $ 53,192 $ 30,876
================= ==================
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Operations
(Amounts in thousands, except per share amounts)
<CAPTION>
Years ended December 31,
1996 1995 1994
--------------- --------------- --------------
<S> <C> <C> <C>
Revenues
Product sales $ 14,236 $ 13,254 $ 23,210
Product sale-leaseback arrangements 1,774 1,820 -
Service 3,465 5,529 4,750
Development contracts 5,000 5,637 5,380
Clinics 1,293 460 231
--------------- --------------- --------------
Total revenues 25,768 26,700 33,571
--------------- --------------- --------------
Cost of revenues
Product sales 12,617 11,533 16,556
Product sale-leaseback arrangements 1,774 1,820 -
Service 3,158 3,952 4,021
Development contracts 5,000 4,978 5,227
Clinics 2,238 1,350 521
--------------- --------------- --------------
Total cost of revenues 24,787 23,633 26,325
--------------- --------------- --------------
Gross profit 981 3,067 7,246
Operating expenses
Research and development 3,318 3,430 2,101
Marketing and sales 4,676 3,137 2,077
General and administrative 5,396 2,658 2,519
--------------- --------------- --------------
Total operating expenses 13,390 9,225 6,697
--------------- --------------- --------------
Operating income (loss) (12,409) (6,158) 549
Interest and other income 2,508 4,021 2,342
Interest expense (564) (312) (558)
--------------- --------------- --------------
Income (loss) before provision for income taxes (10,465) (2,449) 2,333
--------------- --------------- --------------
Provision for income taxes - - (23)
--------------- --------------- --------------
Net income (loss) $ (10,465) $ (2,449) $ 2,310
=============== =============== ==============
Net income (loss) per common share $ (.14 ) $ (.04 ) $ .04
=============== =============== ==============
Number of shares used in per share calculations 74,406 57,598 62,102
=============== =============== ==============
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Shareholders' Equity
(Amounts in thousands)
<CAPTION>
Additional
Preferred Stock Common Stock paid-in Accumulated
--------------- ------------ Deferred
Shares Amount Shares Amount Compensation Capital Deficit Total
----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances at December 31, 1993 2,008 $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 plan,
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 bonus and purchase plans,
and exercise of employee stock
options - - 1,656 1,147 - - - 1,147
Warrants exercised - - 550 775 - - - 775
Net income - - - - - - (2,449) (2,449)
---------------------------------------------------------------------------------------
Balances at December 31, 1995 - - 68,835 72,282 - 1,500 (57,557) 16,225
Common stock sold in a private
placement, net of offering costs - - 4,559 11,348 - - - 11,348
Common stock issued for employee
stock purchase plans, stock bonus,
and exercise of employee stock
options - - 1,188 1,194 - - - 1,194
Common stock issued for services 115 269 - 269
Deferred compensation from issuance
of stock options by consolidated subsidiary - - - - (143) - - (143)
Amortization of deferred compensation - - - - 27 - - 27
Warrants exercised - - 3,222 4,130 - - - 4,130
Net loss - - - - - - (10,465) (10,465)
---------------------------------------------------------------------------------------
Balances at December 31, 1996 - $ - 77,919 $89,223 $(116) $1,500 $(68,022) $22,585
=======================================================================================
<FN>
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows
(Amounts in thousands)
<CAPTION>
Years Ended December 31,
1996 1995 1994
--------------- ----------------- ----------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income(loss) $(10,465) $ (2,449) $ 2,310
Adjustments to reconcile net income(loss)to net
cash used in operating activities:
Depreciation and amortization 1,374 1,709 1,786
Other income - (4,000) -
Amortization of deferred compensation 27 - -
Common stock issued for services 269 - 85
Changes in operating assets and liabilities:
Accounts and notes receivable 690 1,216 (2,945)
Inventories (1,456) (701) (3,343)
Prepaid expenses (1,096) 53 (252)
Other assets 140 (26) (414)
Accounts payable (324) (1,457) 2,232
Other accrued liabilities 387 538 584
Deferred income 152 1,267 (778)
--------------- ----------------- ----------------
Net cash used in operating activities (10,302) (3,850) (735)
--------------- ----------------- ----------------
Cash flows from investing activities:
Capital expenditures (2,489) (1,132) (621)
Purchases of available-for-sale securities (38,891) - -
Purchases of held-to-maturity securities - (1,000) -
Maturities of available-for-sale securities 24,720 - -
Maturities of held-to-maturity securities 1,000 - -
--------------- ----------------- ----------------
Net cash used in investing activities (15,660) (2,132) (621)
--------------- ----------------- ----------------
Cash flows from financing activities:
Payments of obligations under capital leases (923) (247) -
Payment of notes payable (992) - -
Proceeeds from issuance of common stock 16,672 11,804 837
Proceeeds from issuance of preferred stock
of consolidated subsidiary 14,798 - -
--------------- ----------------- ----------------
Net cash provided by financing activities 29,555 11,557 837
--------------- ----------------- ----------------
Net increase(decrease)in cash and cash equivalents 3,593 5,575 (519)
Cash and cash equivalents, at beginning of year 7,269 1,694 2,213
--------------- ----------------- ----------------
Cash and cash equivalents, at end of year $ 10,862 $ 7,269 $ 1,694
=============== ================= ================
Supplemental Disclosure of Noncash Investing
and Financing Activities:
Deferred compensation from common stock
option grant of consolidated subsidiary $ 143 $ - $ -
=============== ================= =================
Preferred stock converted to common stock $ - $ 2,602 $ 1,395
================ ================ ==================
Equipment acquired under capital leases $ 2,715 $ 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, 1996
Note 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF COMPANY
Imatron Inc., 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. In addition, the Company operates coronary
artery scanning test facilities through its consolidated subsidary HeartScan
Imaging, Inc. ("HeartScan"),in the United States.
The consolidated financial statements include the accounts of Imatron Inc. and
its subsidiary HeartScan Imaging, Inc. (collectively the "Company"). All
intercompany accounts and transactions have been eliminated in consolidation.
HeartScan was incorporated in Delaware in 1994. As of December 31, 1996
Imatron's interest in HeartScan is 49.5% (see Note 7). On June 28, 1996 Imatron
sold 100,000 shares of HeartScan Series A preferred stock to unaffiliated third
parties. The sale reduced the Company's ownership interest in HeartScan to
48.3%. Imatron originally reported $554,000 (48.3%) of HeartScan losses in its
third quarter of fiscal 1996 using the equity method of accounting. The
remaining losses of $594,000 were attributed to the preferred stock ownership
interest of HeartScan in the third quarter of fiscal 1996. Due to certain equity
exchange provisions provided to these HeartScan preferred shareholders (see note
7), HeartScan's 1996 results of operations have been fully consolidated for the
year ended December 31, 1996 in the accompanying consolidated financial
statements. The result of the consolidation of HeartScan was to increase the
Company's net loss by $4,573,000 for the year ended December 31, 1996. Of this
amount, $594,000 of losses that were originally attributed to the preferred
shareholders' ownership interest in the third quarter of 1996 have now been
consolidated with the Company's 1996 losses. No future HeartScan operating
losses will be attributed to the preferred shareholders until the preferred
stock exchange provisions are extinguished. Additionally, the net proceeds
realized from the Heartscan preferred stock offering will be classified as a
minority interest in the Company's balance sheet until the exchange provisions
are extinguished.
The Company's results of operations in fiscal 1996 includes revenues of
$1,293,000 attributed to HeartScan's operations.
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 AND SHORT-TERM INVESTMENTS
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 all 1996 purchases of
investments 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, if material. Fair values of
investments are based on quoted market prices. Short-term investments at
December 31, 1996 consist of A1, P1 commercial papers and government securities.
As of December 31, 1995, the company classified certain investments as
held-for-maturity. All held-to-maturity investments matured during 1996.
<PAGE>
Management determines the appropriate classification of marketable securities at
the time of purchase and reevaluates such designation as of each balance sheet
date.
Realized gains and losses, and declines in value judged to be
other-than-temporary are included in other income. The cost of securities sold
is based on the specific identification method.
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 in the
United States, Europe, Canada, India, Imatron Japan, Inc. in Japan, 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 short-term instruments with at least an
A1/P1 credit rating. These funds have virtually no principal risk and have a
variable interest rate. The Company has not experienced any principal losses on
its investments.
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
Property and equipment are stated at cost and are depreciated on a straight-line
method over their estimated useful lives (3-5 years). Equipment under capital
leases, except for scanner equipment, 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.
Scanner equipment under capital lease is amortized over a period using the
units-of-production method based on the estimated usage of the equipment. It is
reasonably possible that the estimates of anticipated scans, the remaining
useful lives, or both will be reduced significantly in the near term. As a
result, the carrying amount of the scanner equipment could be reduced materially
in future periods.
<PAGE>
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
$160,000 and $155,000 at December 31,1996 and 1995 respectively. These this
restricted cash amounts have been classified as non-current assets (included in
other assets).
JOINT VENTURE COMPANY
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 in the Joint Venture, which is being funded by the other joint venture
partners.
The Company recognized revenues of $8,726,000 and $9,213,000 in 1996 and 1995,
respectively, from sales to the Joint Venture and has $2,660,000 and $2,957,000
in accounts receivable from the Joint Venture at December 31, 1996 and 1995,
respectively.
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.
NET INCOME / (LOSS) PER SHARE
Net loss per common share in 1996 and 1995 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 - INVESTMENTS
Investments as of December 31, were as follows (in thousands):
1996 1995
----------------- ----------------
Money market mutual funds $4,262 $ 352
U.S. government obligations 8,077 1,000
Certificate of deposit 96 266
Commercial paper 12,231 -
----------------- ----------------
Total investments 24,666 1,618
Less amounts classified as cash equivalents (10,495) (352)
----------------- ----------------
Short-term investments $ 14,171 $ 1,266
================= ================
As of December 31, 1996, all investments were classified as available for sale.
As of December 31, 1995, all investments were classified as held-to-maturity,
other than money market mutual funds, which were classified as
available-for-sale. There were no material gross realized or unrealized gains or
losses in any category of investment in 1996 or 1995.
<PAGE>
Note 3 - TRANSACTIONS WITH SIEMENS CORPORATION
In March 1995, the Company and Siemens Corporation ("Siemens") entered into
a Memorandum of Understanding. Under the terms of the Memorandum, Siemens agreed
to provide a maximum $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. Imatron funds a portion equal to a minimum
fifty percent of Siemens' contribution for the sole purpose of conducting the
collaborative agreement. In connection with this agreement, 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
$5,000,000 and $3,884,000 of revenue under the collaborative development
agreement in 1996 and 1995, respectively. Under the now expired product
development agreement with Siemens, the Company recognized $0, $1,753,000 and
$5,013,000 in revenue in 1996, 1995 and 1994, respectively.
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.
In September 1995, Siemens 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 substituted a patent, subject to existing
license-back, currently used in its technology, for the previously transferred
patent. Representatives of Siemens have agreed with the Company to these terms.
Note 4 - BALANCE SHEET DETAIL
(in thousands)
December 31,
1996 1995
------------- ------------
Inventories consist of:
Purchased parts and sub-assemblies $ 2,994 $ 2,594
Service parts 1,142 1,079
Work-in-process 2,574 2,403
Finished product 3,683 2,861
------------- -------------
Inventories $ 10,393 $ 8,937
============= ==============
Property and equipment, at cost, consist of:
Machinery and equipment $ 11,964 $ 9,266
Furniture and fixtures 1,408 1,444
Leasehold improvements 3,442 2,380
--------------- --------------
16,814 13,090
Less accumulated depreciation and amortization (6,712) (6,830)
--------------- --------------
Net property and equipment $ 10,102 $ 6,260
=============== ==============
Other accrued liabilities consist of:
Warranty and product upgrades $ 1,867 $ 1,740
Customer deposits 2,345 2,331
Employee compensation 758 628
Deferred service revenues 225 265
Other 799 643
--------------- --------------
Other accrued liabilities $ 5,994 $ 5,607
============== ==============
<PAGE>
Note 5 - DEBT
At December 31, 1995, debt consisted of borrowings due under a line of credit,
at prime rate plus one percent. At December 31, 1996, the Company has $5,000,000
available under a line of credit.Interest paid was $582,000, $386,000 and
$479,000 in 1996, 1995 and 1994, respectively.
Note 6 - COMMITMENTS, CONTINGENCIES AND OTHER
OPERATING LEASES
The Company leases its present facilities under various operating leases
expiring between December 31, 1996 and December 31, 2005. Future minimum rental
payments under the leases as of December 31, 1996 are as follows (in thousands):
1997 $ 1,168
1998 1,118
1999 1,047
2000 1,046
2001 834
Thereafter 353
------------
Total remaining $5,566
============
Rent expense for all leases totaled $1,080,000, $921,000 and $855,000 in 1996,
1995 and 1994, respectively.
CAPITAL LEASE OBLIGATIONS
The Company leases certain equipment under noncancelable lease agreements. In
addition, HeartScan leases four scanners for its clinics, payments of which are
guaranteed by Imatron. The equipment leased by Imatron and HeartScan are
accounted for as capital leases. As of December 31, 1996, equipment under the
capital lease arrangements and included in property and equipment, aggregated
$6,962,000. Accumulated amortization totalled $674,000 at December 31, 1996.
Amortization expense is included in depreciation and amortization.
Future minimum lease payments under capital lease obligations at December 31,
1996 are as follows (in thousands):
1997 $ 1,718
1998 1,764
1999 1,759
2000 1,477
2001 431
-----------------
Total minimum payments 7,149
Less amounts representing interest (1,357)
-----------------
Total principal 5,792
Less portion due within one year (1,188)
-----------------
Long-term portion $ 4,604
=================
The Company sold two scanners to leasing finance institutions during fiscal 1996
and 1995, which were immediately leased back to HeartScan. The sales were
accounted for as sales-leaseback transactions. Remaining deferred income on
sale-leaseback transactions amounted to $1,419,000 and $1,267,000 at December
31, 1996 and 1995, respectively.
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 1996, 1995
and 1994 were $91,470, $91,470 and $151,980, respectively.
<PAGE>
Note 7 - CAPITAL STOCK
COMMON STOCK
In 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.
In 1996, Imatron sold 4,500,000 shares of common stock and issued warrants to
purchase common shares in two private placement offerings, netting proceeds of
$11,348,000. In addition, in 1996, the company issued additional 59,093 shares
of common stock as a result of the adjustment on the stock price based on the
60-day average price pertaining to the previous 1995 private placement. As of
December 31, 1996, no further rights for adjustments remain for the common
stock.
HEARTSCAN EQUITY TRANSACTIONS
In June 1996, Imatron completed a private placement offering whereby 100,000
shares of HeartScan Series A Preferred Stock were sold at $160 per share and
realized net proceeds of $14,798,000. 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 will 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 b) 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 the
greater of $1.50 per share or a 27% discount from the weighted average closing
price of Imatron common stock for the 90 day period immediately preceding 24
months of the Preferred Stock closing and each date that is 3 months thereafter
to and including the 48th month of the Preferred Stock closing.
<PAGE>
Due to the exchange provision built into the private offering as discussed in
the preceding paragraph, Imatron will include HeartScan's results of operations
in its consolidated financial statements until either the conclusion of the four
year exchange period or a HeartScan initial public offering.
The HeartScan Series A Preferred Stock is held entirely by an unaffiliated third
parties and is classified in the accompanying consolidated balance sheet at
December 31, 1996 as a 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 Shares include 1,000,000 authorized shares
and 100,000 issued and outstanding shares at December 31, 1996.
As of December 31, 1996, 30,002 warrants to purchase one share each of HeartScan
Common Stock were issued in connection with the above-mentioned private
placement. These warrants are exercisable at $16.00 per share and expire in June
2001.
<PAGE>
<TABLE>
WARRANTS
<CAPTION>
At December 31, 1996, 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 2000, to purchase shares of common stock at $2.31 per 826,038
share issued under the October 1995 private placement
Warrants, expiring in 2001, to purchase shares of common stock at $1.71 per 162,609
share issued to Sitrick & Company in lieu of investor relation fees
Warrants, expiring in 1999, to purchase shares of common stock at $3.25 per 1,200,000
share issued under the May 1996 private placement
Warrants, expiring in 1999, to purchase shares of common stock at $3.75 per 800,000
share issued under the May 1996 private placement
Warrants, expiring in 2001, to purchase shares of common stock at $6.20 per 182,803
share issued under the 1996 HeartScan private placement -------------------------
Total at December 31, 1996 3,171,450
===========================
<FN>
In 1995, warrants were exercised to purchase a total of 550,000 shares of common
stock at prices ranging from $1.00 to $1.50 per share.
In 1996, warrants were exercised to purchase a total of 3,222,000 shares of
common stock at prices ranging from $0.40 to $2.31 per share.
</FN>
</TABLE>
<PAGE>
Note 8 - STOCK BONUS PLAN AND STOCK OPTION PLANS
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. In 1996, the Company granted 19,409 shares under the plan.
There were no shares granted under the plan in 1995 and 1994. As of December 31,
1996, 770,910 common shares are 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 425,000 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 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. During 1995, the shareholders
approved an increase in the number of shares reserved for the 1993 Plan from
3,000,000 to 5,500,000.
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.
STOCK BASED COMPENSATION
The Company has elected to follow Accounting Principles Board Opinion No. 25, "
Accounting for Stock Issued to Employees ("APB 25") and related Interpretations
in accounting for its employee stock options because, as discussed below, the
alternative fair value accounting provided for under FASB Statement No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), requires use of option
valuation models that were not developed for use in valuing stock options. Under
APB 25, compensation expense is measured as the excess of the market price of
the underlying stock over the exercise price on the date of the grant, if any.
Pro forma information regarding net loss and loss per share is required by SFAS
123, and has been determined as if the Company has accounted for its employee
stock options under the fair value method of that Statement. The fair value of
these options was estimated at the date of grant using a Black-Scholes option
pricing model with the following weighted-average assumptions:
1996 1995
---- ----
Expected stock price volatility 80.2% 80.2%
Risk-free interest rate 6.25% 6.37%
Expected life - Years 3.64 3.55
Expected dividend yield 0.00% 0.00%
The Black- Scholes option valuation model was developed for use in estimating
the fair value of traded options which have no vesting restrictions and are
fully transferable. In addition, option valuation models require the input of
highly subjective assumptions including the expected stock price volatility.
Because the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options.
<PAGE>
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized to expense over the options' vesting period. Had the Company
elected to recognize compensation expense based on the fair value of the options
granted at grant dates as prescribed by SFAS 123, net loss and loss per share
would have been increased to the pro forma amounts indicated in the table below
(in thousands):
1996 1995
---------- ----------
Net loss - as reported ($10,465) ($2,449)
Net loss - pro forma ($10,884) ($2,620)
Loss per share - as reported ($0.14) ($0.04)
Loss per share - pro forma ($0.15) ($0.05)
The weighted average fair value of options granted in 1996 and 1995 was $2.63
and $1.24 per share, respectively. The weighted average remaining contractual
life of all options at December 31, 1996 is 3.64 years.
The pro forma effect on net loss for 1996 is not representative of the pro forma
effect on net income in future years because it does not take into consideration
pro forma compensation expense related to grants prior to 1995, and the
compensation expense that will be recognized in future years as the graded
vesting periods become exercisable.
<TABLE>
A summary of the activity under the stock option plans is as follows:
<CAPTION>
Outstanding Options
Shares --------------------- Aggregate
available Number Price per Exercise
for grant of shares share price(in thousands)
----------- ---------- ------------- ----------
<S> <C> <C> <C> <C>
Balances at December 31, 1993 2,392,000 3,745,216 $0.48 - $0.56 $2,523
Options granted (2,230,808) 2,230,808 $0.43 - $1.22 2,052
Options exercised - (1,147,002) $0.48 - $0.61 (616)
Options cancelled 236,263 (236,263) $0.48 - $1.22 (173)
1983 option plan termination (28,563) - $0.51 - $0.56 (159)
------------- ----------- ------------- -------
Balances at December 31, 1994 368,892 4,592,759 $0.43 - $1.22 $3,627
Shares reserved - 1993 Plan 2,500,000 - -
1983 option plan termination (83,950) - $0.51 - $0.56 (45)
Options granted (413,800) 413,800 $1.03 426
Options exercised - (1,320,377) $0.51 - $1.22 (981)
Options cancelled 301,125 (301,125) $0.56 - $1.22 (288)
--------------- ------------ ------------- --------
Balances at December 31, 1995 2,672,267 3,385,057 $0.43 - $1.22 $2,739
1983 option plan termination (5,550) - $0.51 - $0.56 (3)
Options granted (514,728) 514,728 $2.06 1,060
Options exercised - (940,235) $0.51 - $2.06 (795)
Options cancelled 102,175 (102,175) $0.56 - $1.22 (93)
---------------- ------------- ------------- ----------
Balances at December 31, 1996 2,254,164 2,857,375 $0.43 - $2.06 $2,908
================ ============= ============= ==========
</TABLE>
<TABLE>
<PAGE>
The following table summarizes information concerning outstanding and
exercisable options as of December 31, 1996 (In thousands except per share
amounts):
<CAPTION>
Options Outstanding Options Exercisable
Weighted
Average
Range of Exercise Remaining Weighted Weighted Average
Prices Number of Contractual Average Number of Exercise Price
------ Shares Life Exercise Price Shares
-------------- --------------- --------------- ----------------- --------------------
<S> <C> <C> <C> <C> <C>
$0.51 - $2.00 2,421 3.30 $0.75 1,534 $0.75
$2.01 - $3.50 361 4.00 $2.06 55 $2.06
$3.51 - $5.00 75 4.70 $4.67 0 0
-------------- ---------------- --------------- ----------------- --------------------
2,857 3.64 $1.02 1,589 $0.92
============== ================ =============== ================= ====================
<FN>
Options for 1,588,533 and 1,406,997 shares of the Company's common stock were
exercisable under the plans at December 31, 1996 and 1995 at an aggregate
exercise price of $1,460,599 and $1,146,916, respectively.
</FN>
</TABLE>
<PAGE>
In October 1995, HeartScan approved the adoption of the HeartScan Imaging Inc.
1995 Stock Option Plan ("HSI 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. 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 annually over four years following the grant date and has a
maximum term of ten years.
<TABLE>
A summary of the activity under the HSI Stock Option Plan is as follows:
<CAPTION>
Outstanding Options
Shares -------------------- Aggregate
available Number Price per Exercise
for grant of shares share Price(in thousands)
<S> <C> <C> <C> <C>
Balances at December 31, 1994 - - - -
Shares reserved - 1995 Plan 250,000 - - -
Options granted (112,500) 112,500 $0.001 -
---------------- ------------ -------------- -----------
Balances at December 31, 1995 137,500 112,500 $0.001 -
Options granted (75,000) 75,000 $0.10 $8
Options exercised - (72,656) $0.001 -
---------------- ------------- ------------- -----------
Balances at December 31, 1996 62,500 114,844 $0.07 $8
================ ============= =========== ===========
<FN>
At December 31, 1996, options to purchase 18,750 shares of HeartScan common
stock were exercisable at an aggregate exercise price of $1,875.
</FN>
</TABLE>
The difference between the exercise price and fair market value, of the
HeartScan's common stock at the date of issue of the stock options, totalling
$143,000 has been recorded as deferred compensation and a component of
stockholders' equity. Of this amount, $27,000 has been recognized as an expense
through December 31, 1996. The remaining $116,000 will be recognized as an
expense as the shares vest over a period of up to four years.
<PAGE>
COMMON STOCK RESERVED
At December 31, 1996, the Company has reserved shares of common stock for future
issuances as follows (in thousands):
Stock option plans 5,111
Stock options outside the plans 1,500
Stock purchase plan 727
Stock warrants 3,347
Stock bonus plan 771
Conversion of HeartScan Preferred A 10,667
---------------
Total 22,123
===============
Note 9 - STOCK PURCHASE PLAN AND RETIREMENT SAVINGS PLAN
EMPLOYEE STOCK PURCHASE PLAN
In March 1994, 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 offering period or end of each
three-month interim offering period. The maximum number of shares offered under
the Plan is 1,800,000 shares of common stock. At December 31, 1996, 727,095
shares were reserved and available for future issuance under the plan. A total
of 228,222, 334,975 and 503,243 shares were issued at an average price of $1.44,
$0.75 and $0.75 per share in 1996, 1995 and 1994, respectively.
RETIREMENT SAVINGS PLAN
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 $212,000, $169,000 and $76,000 in 1996, 1995 and 1994,
respectively.
<PAGE>
Note 10 - INCOME TAXES
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.
<TABLE>
Significant components of the Company's deferred tax assets and liabilities as
of December 31, are as follows (in thousands):
<CAPTION>
1996 1995
--------------- -------------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 24,489 $ 19,733
Federal credit carryforwards 842 880
Expenses not currently deductible for tax purposes 3,446 -
Deferred revenue previously taxed 614 -
Other 150 2,807
Deferred tax assets - -
--------------- -------------
29,541 23,420
Valuation allowance
(28,838) (22,407)
--------------- -------------
Net deferred tax assets
703 1,013
Deferred tax liabilities:
Capitalized development costs - 42
State income taxes 479 504
Other 224 467
--------------- -------------
Deferred tax liabilities 703 1,013
Net deferred taxes $ - $ -
=============== =============
</TABLE>
The net change in the valuation allowance was $6,431,000, $925,000, and
($1,792,000) for 1996, 1995 and 1994, 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:
1996 1995 1994
----------- ---------- -----------
Federal statutory rate (34%) (34%) 34%
Net operating loss carry forwards - - (33%)
Valuation Allowance 34% 34% -
------------ ---------- -----------
Effective tax rate 0% 0% 1%
=========== =========== ==========
Due to the issuance of preferred stock which occurred June 28, 1996, utilization
of the net operating loss and tax credit carryforwards for the Company and its
subsidiary, HeartScan, will be subjected to separate return limitations.
At December 31, 1996 the Company has net operating loss carryforwards for
federal and state income tax purposes of approximately $61,200,000 and
$10,600,000 respectively. Additionally, the Company has research and development
and alternative minimum tax credit carryforwards of approximately $842,000 at
December 31, 1996. The net operating loss and the research and development tax
credit carryforwards expire in various years from 1998 through 2011.
In addition, HeartScan has net operating loss carryforwards for federal and
state income tax purposes of approximately $7,500,000 and $1,800,000,
respectively. The net operating loss carryforwards expire in various years from
2001 through 2011.
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.
<PAGE>
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. Sales of products to
end-users outside the United States were $11,528,000, $13,254,000 and
$14,990,000 in 1996, 1995 and 1994, respectively.
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, 1996 and 1995, and the related consolidated statements of
operations, shareholders' equity, and cash flows for each of the three years in
the period ended December 31, 1996. Our audits also included the financial
statement schedule listed in the index at Item 14 (a). These consolidated
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule 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, 1996 and 1995, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
ERNST & YOUNG LLP
San Francisco, California
February 14, 1997
<PAGE>
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.
1996 1995
-------------- ---------------
Quarter: High Low High Low
----------- ------------ ----------- --------
First $ 3.50 $ 1.75 $ 1.31 $ .97
Second 8.38 3.00 1.22 .81
Third 6.63 3.94 3.63 .75
Fourth 4.81 2.50 2.97 1.47
As of March 18, 1997 there were approximately 6,823 holders of record of the
Company's common stock. On March 18, 1997 the closing price of the Company's
common stock on Nasdaq was $ 2.28.
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.
<PAGE>
SELECTED FINANCIAL DATA
SELECTED FINANCIAL INFORMATION
(In thousands, except per share amounts)
OPERATING INFORMATION
Year Ended December 31 1996 1995 1994 1993 1992
- --------------------- --------- -------- -------- ------- ------
Total revenues $25,768 $26,700 $33,571 $25,111 $14,263
Net income(loss) $(10,465) $(2,449) $ 2,310 $(2,871) $(6,523)
Net income(loss)per share $ (0.14) $ (0.04) $ 0.04 $ (0.06) $ (0.15)
Number of shares used
in per share calculations 74,406 57,598 62,102 47,865 43,294
BALANCE SHEET INFORMATION
At December 31 1996 1995 1994 1993 1992
- --------------- --------- --------- --------- --------- --------
Working capital $ 33,042 $ 14,252 $ 8,741 $ 5,536 $ 6,971
Total assets $ 53,192 $ 30,876 $21,173 $15,903 $18,602
Long-term debt $ - $ - $ 4,992 $ 4,992 $ 4,992
Total liabilities $ 15,666 $ 14,651 $14,303 $12,265 $12,332
Minority Interest $ 14,941 $ - $ - $ - $ -
Shareholders' equity $ 22,585 $ 16,225 $ 6,870 $ 3,638 $ 6,270
The Company did not pay any cash dividends on its Common Stock during any of the
periods presented above.
<PAGE>
Corporate Directory
DIRECTORS AND OFFICERS INDEPENDENT PUBLIC
ACCOUNTANTS
S.Lewis Meyer
President and Chief Executive Officer Ernst & Young
Director San Francisco, California
Douglas P. Boyd GENERAL COUNSEL
Chairman of the Board and
Chief Technology Officer Severson & Werson
Director San Francisco, California
Gary H. Brooks TRANSFER AGENT
Vice President, Finance and Administration
and Chief Financial Officer Continental Stock Transfer
Secretary Two Broadway
New York, New York 10004
John L. Couch
Vice President
Research & Development ANNUAL MEETING
Director
The annual meeting of
Jose Filipe Guedes shareholders of Imatron
Director Inc. will be held on
Managing Partner, Ceramic S.A. June 30, 1997 at 10:00 a.m.
at the Embassy Suites
Rear Admiral (Ret.) William J. McDaniel, M.D. Hotel, South San Francisco.
Director
Medical Corps, U.S. Navy
Surgeon, U.S. Pacific Command FORM 10-K
Terry Ross The Company's annual report
Director to the Securities and
President, CEMAX, Inc. Exchange Commission on Form
10-K may be obtained
Aldo Test without charge by writing
Director, Attorney-At-Law to:
Partner, Flehr, Hohback, Test, Investor Relations
Albritton & Herbert Imatron Inc.
CORPORATE ADDRESS
Imatron Inc.
389 Oyster Point Boulevard
So.San Francisco, CA 94080
Telephone: 415-583-9964
Fax: 415-871-0418
