SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997.
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 April 30, 1997, 78,216,111 shares of the Registrant's common stock (no par
value) were issued and outstanding.
Total Number of Pages: 13
<PAGE>
IMATRON INC.
TABLE OF CONTENTS
- -------------------------------------------------------------------------------
PART I. FINANCIAL INFORMATION PAGE
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets - 3
March 31, 1997 (unaudited) and December 31, 1996.
Condensed Consolidated Statements of 4
Operations - Three Months Ended
March 31, 1997 and 1996 (unaudited).
Condensed Consolidated Statements of 5
Cash Flows - Three Months Ended
March 31, 1997 and 1996 (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>
ASSETS March 31, December 31,
1997 1996
------------- --------------
(unaudited)
-------------------- ------------------
Current assets
<S> <C> <C>
Cash and cash equivalents $ 16,996 $ 10,862
Short-term investments 5,082 14,171
Accounts receivable (net of allowance for doubtful accounts
of $1,155 at March 31, 1997 and $1,110 at December 31, 1996):
Trade accounts receivable 5,315 2,940
Accounts receivable from affiliate 2,581 2,660
Inventories 11,120 10,393
Prepaid expenses 876 1,659
-------------------- ------------------
Total current assets 41,970 42,685
Property and equipment, net 9,721 10,102
Other assets 395 405
-------------------- ------------------
Total assets $ 52,086 $ 53,192
==================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 2,417 $ 2,461
Other accrued liabilities 5,571 5,994
Capital lease obligations - due within one year 1,257 1,188
-------------------- ------------------
Total current liabilities 9,245 9,643
Deferred income on sale leaseback transactions 1,293 1,419
Capital lease obligations 4,260 4,604
-------------------- ------------------
Total liabilities 14,798 15,666
Minority interest 14,941 14,941
Shareholders' equity
Common stock, no par value; authorized-100,000 shares;
issued and outstanding - 78,203 shares in 1997 and 77,919
shares in 1996 89,810 89,223
Deferred compensation (107) (116)
Additional paid-in capital 1,500 1,500
Accumulated deficit (68,856) (68,022)
-------------------- ------------------
Total shareholders' equity 22,347 22,585
-------------------- ------------------
Total liabilities and shareholders' equity $ 52,086 $ 53,192
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
IMATRON INC.
Condensed Consolidated Statements of Operations
(Amounts in thousands, except per share amounts)
(Unaudited)
<CAPTION>
Three Months Ended March 31,
-----------------------------------------------
1997 1996
-------------------- --------------------
Revenues
<S> <C> <C>
Product sales $ 7,791 $ 3,791
Service 1,030 767
Development contracts 1,250 1,250
Clinics 506 282
-------------------- --------------------
Total revenues 10,577 6,090
-------------------- --------------------
Cost of revenues
Product sales 5,441 3,193
Service 705 698
Development contracts 1,250 1,250
Clinics 755 437
-------------------- --------------------
Total cost of revenues 8,151 5,578
-------------------- --------------------
Gross profit 2,426 512
Operating expenses
Research and development 922 703
Marketing and sales 1,363 1,083
General and administrative 1,111 848
-------------------- --------------------
Total operating expenses 3,396 2,634
-------------------- --------------------
Operating loss (970) (2,122)
Interest income 310 51
Interest expense (174) (120)
-------------------- --------------------
Net loss $ (834) $(2,191)
==================== ====================
Net loss per common share $ (0.01) $ (0.03)
==================== ====================
Number of shares used in per share calculations
78,109 69,112
==================== ====================
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
IMATRON INC.
Condensed Consolidated Statements of Cash Flows
(Amounts in thousands)
(Unaudited)
<CAPTION>
Three Months Ended March 31,
----------------------------------------------------
1997 1996
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (834) $ (2,191)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 520 257
Amortization of deferred compensation 9 -
Common stock issued for services 78 40
Changes in:
Accounts and notes receivable (2,296) (828)
Inventories (727) (994)
Prepaid expenses 783 (65)
Other assets 10 (7)
Accounts payable (44) 34
Other accrued liabilities (423) (968)
Deferred revenue (126) (89)
----------------- -----------------
Net cash (used in)/ provided by
operating activities (3,050) (4,811)
----------------- -----------------
Cash flows from investing activities:
Capital expenditures (139) (205)
Purchases of marketable securities (5,082) (2,027)
Maturities of marketable securities 14,171 -
----------------- -----------------
Net cash provided by/ (used in) investing activities 8,950 (2,232)
Cash flows from financing activities:
Payment of obligation under capitalized leases (275) (155)
Proceeds from issuance of common stock 509 1,008
----------------- -----------------
Net cash provided by
financing activities 234 853
----------------- -----------------
Net increase/(decrease) in cash and
cash equivalents 6,134 (6,190)
Cash and cash equivalents, at beginning
of the period 10,862 7,269
----------------- -----------------
Cash and cash equivalents, at end of the
period $ 16,996 $ 1,079
================= =================
<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 statement
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 month
period ended March 31, 1997 are not necessarily indicative of the
results that may be expected for the year ended December 31, 1997. 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, 1996.
2. PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Imatron
Inc. and its subsidiary HeartScan Imaging, Inc. (HeartScan). All
intercompany accounts and transactions have been eliminated in
consolidation.
3. 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 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 investment's at March 31, 1997 consist of A1, P1 commercial
papers and government securities. 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.
4. INVENTORIES
Inventories consist of (in thousands of dollars):
March 31, December 31,
1997 1996
------------ ------------
Purchased parts and sub-assemblies $ 3,423 $ 2,994
Service parts 1,215 1,142
Work-in-process 4,205 2,574
Finished goods 2,277 3,683
=========== ===========
TOTAL $ 11,120 $ 10,393
=========== ===========
<PAGE>
5. INCOME (LOSS) PER SHARE
Net loss per common share is computed using the weighted average number of
common shares outstanding. Stock options and warrants have not been
included in the computation as their effect would have been antidilutive.
In February 1997, the Financial Accounting Standards Board issued Statement
No. 128, Earnings per Share, which is required to be adopted on December
31, 1997. At that time, the Company will be required to change the method
currently used to compute earnings per share and to restate all prior
periods. Under the new requirements for calculating primary earnings per
share, the dilutive effect of stock options will be excluded. The impact of
Statement 128 on calculations of basic and fully diluted earnings per share
is not expected to be material for the first quarter ended March 31, 1997
and March 31, 1996.
6. TRANSACTIONS WITH SIEMENS CORPORATION
The following table represents the percent of revenues attributable to the
development and distribution agreements between the Company an Siemens
Corporation:
Three months ended March 31
------------------------------
1997 1996
-------- --------
-------------------------------
Net product sales 21% 3%
-------------------------------
Service 27% 44%
-------------------------------
Development contracts 100% 100%
-------------------------------
-------------------------------
Total revenues 30% 40%
Siemens has asserted a claim against the Company regarding the lapse of
certain foreign registrations of one of the patents assigned to Siemens by
the Company in connection with the March 31, 1995 agreement between the
companies. The technology involved in the patent is not used presently in
any of the Company's products. The Company 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. In April 1997, Imatron and Siemens entered into a service
support agreement, whereby the Company will provide customer services for
C-150 scanners sold by Siemens. For an agreed amount, Imatron will provide
all pre-installation site planning, installation and application support,
as well as, warranty and post-warranty services, as a subcontractor to
Siemens.
7. JOINT VENTURE
As of March 31, 1997 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 at the Joint Venture can demonstrate that it will be able to
sustain profitable operations. Once profitable operations are sustained,
the Company will account for the Joint Venture investment on the equity
method. Summarized financial information for the Joint Venture is not
included in the notes to the consolidated financial statements for the
period ended or as of March 31, 1997, as such information is not considered
material to the operations of Imatron Inc.
<PAGE>
The following table represents the percent of revenues attributable
to the Joint Venture between the Company and Imatron Japan Inc.:
Three months ended
March 31,
------------ ------------
1997 1996
------------ ------------
Net product sales 18% 97%
Service 13% 9%
Total revenues 15% 52%
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations:
Three months ended March 31, 1997 versus 1996
Overall revenues for the first quarter ended March 31, 1997 of $10,577,000
increased $4,487,000 or 74% compared to 1996 revenues of $6,090,000. Net product
revenues increased to $4,000,000 in 1997 from $3,791,000 in 1996 primarily
because of increases in scanner shipments from five in 1997 to two in 1996.
Service revenues increase to $1,030,000 in 1997 from $767,000 in 1996 due to an
increase in scanners under service contract. Development contract revenue is
identical in 1996 due to the terms of the three year Memorandum of Understanding
entered into with Siemens in March 1995. Clinic revenues related to the
HeartScan Imaging, Inc. (HeartScan) increased by 79% to $506,000 in 1997
compared to $282,000 in 1996 as a result of five coronary artery disease risk
assessment centers (clinics) operating in 1997 compared to two in 1996.
Total cost of revenues as a percent of revenues for the first quarter of 1997
was lower at 77% as compared with92% in 1996. Product cost of revenues as a
percent of product revenues decreased to 70% in 1997 from 84% in 1996 due to
shipment of five scanners with higher realized gross margin compared to two
shipments in 1996. Service cost of revenues as a percent of service revenue
decreased to 68% in 1997 from 91% in 1996 due to higher margins on spares
shipments and lower scanner maintenance costs. Development contract revenue and
cost of revenue is equal due to the terms of the three year Memorandum of
Understanding with Siemens.
Operating expenses of $3,396,000 increased $762,000 or 29% compared to 1996
expenses of $2,634,000. R&D expenses of $922,000 in 1997 reflect the portion of
R&D spending not covered by the Siemens research and development contract.
Selling expenses increased to $1,363,000 from $1,083,000 in 1996 primarily due
to higher advertising expenses incurred by HeartScan for its five clinics.
Administrative expenses increased $263,000 to $1,111,000 due to increases in
HeartScan headcount and start-up expenses related to the establishment of new
clinics.
Liquidity and Capital Resources:
At March 31, 1997, working capital slightly decreased to $32,725,000 compared to
December 31, 1996 working capital of $33,042,000 primarily as a result of the
operating losses sustained by HeartScan amounting to $1,573,000. The current
ratio was flat at 4.5:1 at March 31, 1997 and 4.4:1 a December 31, 1996.
The Company's assets decreased to $52,086,000 compared to December 31, 1996
total assets of $53,192,000 primarily due to decreases in cash, cash equivalents
and short-term investments partially offset by increases in receivables and
inventories. There were four scanners receivable at the end of March 1997
compared to three at December 31, 1996.
The Company's management believes that the cash, cash equivalents and short-term
investments existing at March31, 1997 and the estimated proceeds from ongoing
sales of products and services in 1997 will provide the Company with sufficient
cash for operating activities and capital requirements through December 31,
1997.
To satisfy the Company's capital and operating requirements beyond 1997,
profitable operations, additional public or private financing or the incurrence
of debt may be required. If future public or private financing is required by
the Company, holders of the Company's securities may experience dilution. There
can be no assurance that equity or debt sources, if required, will be available
or, if available, will be on terms favorable to the Company or its shareholders.
The Company does not believe that inflation has had a material effect on its
revenues or results of operations.
<PAGE>
This Form 10Q contains forward-looking statements which involve risk and
uncertainties. The company's actual results may differ significantly from the
results discussed in the forward-looking statements as a result of certain risk
factors set forth in the company's Annual Report on Form 10-K for the year ended
December 31, 1996.
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable.
Item 2. Changes in Securities
Not applicable.
Item 3. Defaults upon Senior Securities
Not applicable.
Item 4. Submission of Matters to a vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
No. 11 - Computation of per share earnings.
(b) Form 8-K Reports:
Not applicable.
<PAGE>
<TABLE>
Exhibit No. 11
IMATRON INC.
Computation of Per Share Earnings
(Amounts in thousands, except per share data)
(Unaudited)
<CAPTION>
March 31, March 31,
1997 1996
---------------- ---------------
PRIMARY:
<S> <C> <C>
Average shares outstanding Conversion of preferred stock 78,109 66,112
Net effect of dilutive stock options based on the treasury stock
method using the average market price - -
Net effect of dilutive stock warrants based on the treasury stock - -
method using the average market price
================ ===============
TOTAL 78,109 69,112
================ ===============
Net income / (loss) $ (834) $ (2,191)
================ ===============
Net income / (loss) per share $ (0.01) $(0.03)
================ ===============
</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: May 13, 1997
IMATRON INC.
(Registrant)
/s/Gary H. Brooks
-----------------
Gary H. Brooks Vice President,
Finance/Administration,
Chief Financial Officer, and Secretary
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from Imatron
Inc.'s consolidated condensed statements of income and consolidated
condensed balance sheets and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<CIK> 0000720477
<NAME> Imatron Inc.
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-1-1997
<PERIOD-END> Mar-31-1997
<EXCHANGE-RATE> 1
<CASH> 16996
<SECURITIES> 5082
<RECEIVABLES> 9051
<ALLOWANCES> (1155)
<INVENTORY> 11120
<CURRENT-ASSETS> 41970
<PP&E> 16950
<DEPRECIATION> (7229)
<TOTAL-ASSETS> 52086
<CURRENT-LIABILITIES> 9245
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0
0
<COMMON> 89953
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<CHANGES> 0
<NET-INCOME> (834)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
