SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
Commission file number 0-12405
[GRAPHIC OMITTED]
a New Jersey Corporation
I.D. No. 94-2880078
389 Oyster Point Blvd, South San Francisco, CA 94080
Telephone (650) 583-9964
Securities Registered Pursuant to Section 12 (6) of the Act: : NONE Securities
Registered Pursuant to Section 12 (9) of the Act: : COMMON STOCK, WITHOUT PAR
VALUE
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter periods that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes ____x__ No_________
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The aggregate market value of the voting stock (which is the outstanding Common
Stock) of the Registrant held by non-affiliates thereof, based upon the closing
sale price of the Common Stock on February 2, 1998, on the Nasdaq National
Market System ($2.47 per share) was approximately $190,248,556. For the purpose
of the foregoing computation, only the directors and executive officers of the
Registrant were deemed to be affiliates. This determination of affiliate status
is not necessarily a conclusive determination for other purposes.
As of February 2, 1998, Registrant had 78,926,522 outstanding shares of Common
Stock, no par value, which is the only class of shares publicly traded.
DOCUMENTS INCORPORATED BY REFERENCE
Parts of the Proxy Statement for Registrant's 1998 Annual Meeting of
Shareholders, to be filed with the Commission on, or before 120 days after the
end of the 1997 fiscal year, are incorporated by reference into Part III hereof.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained to the best
of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K ( ).
THIS ANNUAL REPORT ON FORM 10-K CONTAINS FORWARD LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION
21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. ACTUAL RESULTS MAY
DIFFER MATERIALLY FROM THOSE DESCRIBED IN ANY SUCH FORWARD LOOKING STATEMENTS.
RISKS INHERENT IN IMATRON'S BUSINESS AND FACTORS THAT COULD CAUSE OR CONTIBUTE
TO SUCH DIFFERENCES INCLUDE, WITHOUT LIMITATION, THE CONSIDERATIONS SET FORTH
UNDER "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS." THE COMPANY EXPRESSLY DISCLAIMS ANY OBLIGATION TO UPDATE ANY
FORWARD LOOKING STATEMENTS.
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
PART I
ITEM 1 - BUSINESS
GENERAL
Imatron Inc. ("Imatron" or the "Company"), a New Jersey corporation incorporated
in 1983, is a technology-based company principally engaged in the business of
designing, manufacturing and marketing a high performance computed tomography
("CT") scanner. This scanner uses Electron Beam Tomography ("EBT") technology
based on a scanning electron beam. The scanner is used in large and midsize
hospitals and free-standing imaging clinics. In addition to providing service,
parts and maintenance to hospitals and clinics that operate its scanners, the
Company also offers its service capability to other manufacturers of high tech
medical equipment.
HeartScan Imaging, Inc. ("HeartScan"), incorporated in Delaware in 1993, is a
diagnostic services subsidiary of the Company. After completion of a private
placement that raised $14,798,000 in net proceeds in July 1996 and the exercise
of certain incentive stock options by HeartScan and Imatron management team
members at December 1997, Imatron has a 49.3% interest in HeartScan which
Imatron has fully consolidated for financial reporting purposes as a result of
certain exchange provisions included in the private placement agreement.
HeartScan offers coronary artery scanning ("CAS") and Coronary Artery Disease
("CAD") risk assessment services through its five centers in South San
Francisco, California; Seattle, Washington; Houston, Texas; Pittsburgh,
Pennsylvania; and Washington D.C.. HeartScan is engaged in developing marketing
programs and promotional materials; supporting cost benefit analysis and
clinical applications development; leading negotiations with third party payers
and managed care organizations in order to achieve profitable operations at
HeartScan centers and to demonstrate the commercial viability of coronary artery
scanning for the benefit of users and potential purchasers of Imatron Ultrafast
CT scanners.
PRODUCT AND SERVICES
ULTRAFAST CT
PRODUCT DESCRIPTION
A conventional CT scanner is a diagnostic imaging device in which a
cross-sectional (tomographic) image of a patient's anatomy is acquired from
multiple intensity readings (samplings) taken as an x-ray source rotates around
the patient during a scanning cycle. The acquired x-ray data are processed
through a complex mathematical algorithm relating variations in the intensity of
x-rays passing through a patient's body to tissue density differences. The
acquired data are subsequently reconstructed and displayed as images on a video
monitor, typically with white corresponding to high density matter, such as bone
or calcium, and with black corresponding to low density matter, such as air. In
this manner, the patient's anatomy can be displayed in a succession of
cross-sectional, anatomical gray-scale representations.
The Imatron Ultrafast CT scanner design differs from conventional CT scanners in
two important ways. First, the mechanically rotating x-ray tube technology of
conventional CT scanners is replaced by a high power electron gun that generates
a focused, high-intensity electron beam which is steered along stationary target
rings to produce a rotating fan-shaped x-ray beam. This patented electron beam
technology permits significantly faster scanning speeds. The Company's scanner
can acquire CT images at a rate of 50 to 100 milliseconds per slice in contrast
to conventional CT scanners that require between 0.7 and 3 seconds per slice to
acquire an image. Second, the Imatron Ultrafast CT permits rapid scanning of
multiple contiguous images without moving the patient. With these features, the
Ultrafast CT scanner can perform stop-action or dynamic studies of the heart and
various other organs, contributing to the scanner's usefulness for both
diagnostic imaging and functional evaluation.
The Ultrafast CT scanner can be operated in three scanning modes: Single Slice
mode, Multi-Slice mode and Continuous Volume Scanning mode. The Single Slice
mode can acquire up to 140 images per acquisition and can be timed to the heart
cycle with ECG triggering. This mode employs scan times from 100 milliseconds to
2
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seconds as compared to 0.7 to 3 second exposure times of conventional CT
scanners. The Multi-Slice mode incorporates scan times of 50 milliseconds and
can acquire up to 180 images in 6 seconds. This mode can also be timed over the
cardiac cycle with ECG triggering. The Continuous Volume Scanning mode can
acquire up to 140 images in 15 seconds, outperforming spiral or helical scanning
modes on conventional CT scanners. Advantages include excellent slice
registration for 3D reconstruction, respiratory motion-free pulmonary imaging,
pediatric scanning, trauma, IV contrast reduction, and increased patient
throughput.
PRODUCT DEVELOPMENT
In December 1996, the Company completed its version 12.3 software which more
than tripled the image acquisition capability on the Company's C-150 model
Ultrafast CT scanner. Furthermore, improvements were made in image
reconstruction algorithms, ECG triggering capabilities, and Continuous Volume
Scanning modes. After completion of Beta testing in early 1997, version 12.3
software became available for sale.
In addition, the Company began marketing its new workstation, the Ultra Access,
which increases the functionality and flexibility of cross-sectional scanning
when connected to the Ultrafast CT. Images can now be viewed in 2D, 3D, Maximum
Intensity Projections and real-time Multi-planar reformatting. This workstation
can also perform auto filming, auto archiving and DICOM (digital imaging and
communications in medicine) transfer. The Company believes that this
multi-tasking feature, along with superior image display and manipulation
capabilities, creates a workstation which will provide the user with increased
capacity to process, view, manipulate, and store the data produced by the
Ultrafast CT scanner.
In October 1997, the Company received the 510(K) market clearance from the
Federal Food and Drug Administration ("FDA") for cardiac specific applications
included on the UltraAccess workstation. These applications include 3-D "Calcium
Scoring" and cardiac perfusion. In November 1997 the Company received 510(K)
market clearance from the FDA for its new 3456 Channel Dual Slice Detector Array
C-150 Ultrafast CT scanner.
MARKETS
The Company sells its Ultrafast CT scanner in the diagnostic medical imaging
market. This market includes several different modalities such as CT,
ultrasound, nuclear medicine, digital subtraction angiography, and magnetic
resonance imaging. These imaging modalities are based upon the ability of
x-rays, sound waves, gamma rays, or magnetic fields to penetrate human tissue
and be detected by electronic devices for image presentation on a video monitor.
In some cases, these imaging modalities compete with one another for the same
type of procedure.
All of these systems have been evaluated in the diagnosis of cardiac diseases,
but the extent of application of several is limited due to image degradation,
artifacts, and distortions arising from the heart's motion as it beats at a
frequency greater than the scanning speed of these systems. The fast speed of
the Ultrafast CT allows it to "freeze" the motion of the beating heart in order
to image and quantify small calcium deposits in the coronary arteries. The
images that result are sharp and free of motion related artifacts. This
procedure for measuring coronary artery calcification is known as the coronary
artery scan ("CAS").
Cardiovascular disease is the number one cause of death in the United States
accounting for more than 950,000 deaths annually. Of these deaths, coronary
heart disease accounts for approximately 500,000 deaths. Of particular
importance is the fact that in approximately 150,000 cases annually, the first,
last and only symptom of coronary heart disease is a fatal heart attack. The
Company believes that this widespread incidence of coronary heart disease in the
United States, coupled with the fact that a large number of asymptomatic
individuals (650,000) experience heart attacks each year, indicates a clear need
for a safe and effective screening test for the earliest stages of coronary
heart disease. The correlation between calcium in the coronary arteries,
atherosclerosis, and myocardial infraction (heart attack) has been known since
the 1950's. By the mid-1960's, selective coronary angiography was introduced and
soon became routine. Since that time, coronary angiography, which demonstrates
narrowing or occlusion of the coronary arteries, has become the "gold standard"
for positive identification of coronary artery disease. Abnormal results from
screening tests, such as exercise electrocardiography ("ECG"), thallium stress
nuclear medicine and stress echocardiography are commonly used as an indication
for coronary angiography. These tests produce a significant percentage of false
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abnormal results such that as many as twenty-five to thirty-five percent of the
coronary angiograms conducted are deemed to be normal. Since coronary
angiography is both expensive and invasive, the patient in these cases is
unnecessarily exposed to some risk of morbidity, or even death, as well as a
significant radiation dose. In addition, statistics indicate that some patients
die suddenly after receiving a "normal" stress ECG study and are then found,
upon autopsy, to have had significant coronary artery disease. The Company
believes these statistics illustrate the inadequate predictive value of the
standard, noninvasive screening tests for diagnosing coronary artery disease.
The Company further believes that research demonstrates CAS has the potential to
accurately identify those people who are developing early coronary artery
disease. CAS can then serve as a feedback mechanism to monitor the treatment of
those with early coronary artery disease, a disease which may slow, stop, or
even regress in response to treatment. Until now, the only way to directly
determine the effect of life-style modification and lipid-lowering pharmacologic
treatment on coronary artery disease was to perform repeated invasive coronary
angiography or intravascular ultrasound.
For those patients in whom CAS detects advanced coronary artery disease,
intervention may help prevent a crippling heart attack or sudden death. The CAS
test also has great potential for reducing the costs associated with the
unnecessary treatment of those who have coronary risk factors, but show no sign
of coronary artery disease. It is estimated that thirty to thirty-five percent
of people with elevated cholesterol levels do not develop coronary artery
disease. Since there has not been, until the advent of the Ultrafast CT scanner,
a method to find those who are beginning to develop coronary disease, everyone
with a high cholesterol reading has been treated as if they will develop the
disease. The Company believes that CAS is a powerful and cost-effective method
for detecting, or ruling out coronary artery disease and represents a unique
market. Currently, only the Ultrafast CT scanner can provide the necessary
technological capability to address these clinical application requirements.
Notwithstanding the foregoing, to date, CAS has not been broadly accepted as a
method of identifying coronary artery disease, and there is no assurance that a
significant market will develop for this procedure.
Imatron believes that possible factors affecting the demand for CT products
include, among others, potential customers' budgetary constraints including
those imposed by government regulation, changes in the reimbursement policies of
the government and third party insurers, replacement of older equipment,
advancements in technology, and the introduction of new medical procedures.
CUSTOMER SERVICE
The Company and its distributors provide installation, customer service, and
warranty service to their respective customers. Imatron provides warranty on the
Ultrafast CT scanner during the 12 month period following installation. In
addition, the Company provides other product support services, including a
telephone hotline for customer inquiries, product enhancements and maintenance
releases. The Company also offers training at customers' locations and the
Company's facilities to both end-users and distributors.
In 1997, Imatron expanded its service business to include installation,
warranty, repair, training and support services to other manufacturers of high
tech medical equipment. In conjunction with this transaction, Imatron entered
into a two-year service support agreement in February 1998, with AccuImage
Diagnostics, to provide worldwide customer support service for its
Three-Dimensional Volume Visualization Workstation.
The Company maintains a customer support center in South San Francisco
California and field service forces in the United States, Europe and Asia for
its service business. Together with its distributors, the Company services over
87 installed systems worldwide including approximately 20 systems manufactured
by vendors other than Imatron. The Company generates service revenues under
service contracts with Imatron and non-Imatron customers, providing service on a
contract and time and material bases to such customers after the warranty
period.
CORONARY ARTERY SCANNING - HEARTSCAN IMAGING, INC.
In 1993, the Company organized HeartScan Imaging, Inc. as a wholly-owned
subsidiary. During that year, HeartScan opened a CAS pilot facility at the
Company's headquarters in South San Francisco, California. The principal
purposes of the facility are to test market a variety of consumer advertising
and professional education programs, software developments for the Company's
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scanner, and serve as a corporate demonstration site for the Company's products
and services.
The services of such centers are being marketed to physicians, insurers,
employers and directly to the public. As of December 31, 1997, five CAD risk
assessment centers were owned and operated by HeartScan.
The success of HeartScan's CAD risk assessment centers depends on a number of
factors including, but not limited to, the ability to obtain and operate in
compliance with appropriate licensing from applicable regulatory authorities; to
develop working relationships with local groups of cardiologists; to educate
patients, referring physicians and third party payers about the benefits of the
CAS and HeartScan's centers; and to successfully manage the operations of the
centers. HeartScan anticipates negative cash flow and substantial operating
losses during the next several years of its operation; there is no certainty
that HeartScan can operate profitably.
In June 1996, Imatron completed a private offering whereby Imatron sold 100,000
shares of HeartScan Series A preferred stock to unaffiliated third parties at
$160.00 per share with realized proceeds of $14,798,000 (net of offering costs).
The sale of such shares, together with the exercise of certain incentive stock
options by members of the HeartScan and Imatron management team, reduced
Imatron's control in HeartScan to 49.3% as of December 31, 1997. Imatron's
controlling interest of 49.3% in HeartScan is comprised of its ownership of
100,000 shares of HeartScan Series B Preferred Shares on an as converted basis
plus 41,155 common shares of two individuals from HeartScan who are also working
for Imatron. The 50.7% held by investors outside of Imatron is calculated on the
basis of 100,000 shares of HeartScan Series A Preferred Stock outstanding on an
as converted basis plus the 70,312 common shares of HeartScan's President who is
not an employee of Imatron.
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) a two year period following closing of the Preferred
Stock offering (June 26, 1996) ; 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
following the Preferred Stock closing. The quoted closing price of Imatron's
common stock at the date of the closing of the HeartScan Series A Preferred
Stock offering was $5.75 (See Notes 1, 7 and 12 to the Notes to the Consolidated
Financial Statements).
HeartScan believes the net proceeds from the private offering, together with
lease and debt financing, will enable it to support its existing centers. In
addition, a portion of the funds will be used to develop a program to heighten
public awareness of the value of coronary artery scanning and support and expand
collaborative research to develop and further refine potential new tests that
could be offered at HeartScan centers. To satisfy HeartScan's future capital and
operating requirements, additional financing may be required. There is no
certainty that HeartScan will, in the future, be able to sell its securities
privately or in a registered public offering. If additional future public or
private financing is required by HeartScan, Imatron may experience dilution of
its current ownership position in HeartScan, along with other holders of
HeartScan's securities. If such financing cannot be obtained, HeartScan may not
be able to complete its business plan and may seek to sell some or all of its
assets, or to merge with another company.
HeartScan is dependent on Imatron for the scanners used in its CAD risk
assessment centers. HeartScan does not believe there are any other machines
which can accomplish the same tests. In the event that Imatron, for any reason,
should cease manufacturing such equipment, HeartScan would be unable to complete
its business plan. HeartScan's competitors are clinics and hospitals using
either Ultrafast CT scanners or advanced conventional CT scanners for coronary
artery screening. In order to compete successfully against these competitors, it
must develop a good working relationship with cardiologists and educate the
public and health insurance companies about the benefits of coronary artery
screening tests, as opposed to other testing modalities with respect to
accuracy, cost, time, and degree of invasiveness.
HeartScan's 1998 objectives include, but are not limited to, improved operating
results, re-deployment of non-productive assets, development and implementation
of marketing programs and negotiations with third party payers and managed care
organization for coverage of coronary artery scanning. HeartScan does not plan
to develop any additional centers in the United States during 1998. However,
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HeartScan does plan to develop 3-4 joint venture projects in Europe during 1998.
HeartScan may seek to merge with or develop a joint venture relationship with
other companies either currently offering CAD risk assessment services or
desiring to enter the business.
Based on Imatron's entry April 1, 1998 into the direct sales of its Ultrafast CT
scanner in the United States and Europe, the company plans to carefully evaluate
and monitor the price of HeartScan in supporting the sale of Ultrafast CT
scanners in these markets.
RESEARCH AND DEVELOPMENT CONTRACTS
In March 1991, the Company entered into an agreement with Siemens Corporation
("Siemens") which included a Development Agreement (see "Transactions With
Siemens Corporation" below). Pursuant to the Development Agreement, the Company
and Siemens pursued the joint development of certain EBT technology products
partially funded by Siemens. Upon successful conclusion of the development of
such products, Siemens had the sole right to manufacture the products. Upon the
termination of the 1991 Basic Agreement, all the developed technology reverted
back to Imatron as per the contract. The Company recognized $0, $1,753,000 and
$5,013,000 of revenue under this Development Agreement in 1996,1995, and 1994,
respectively.
On March 31, 1995, the Company and Siemens entered into a new agreement (the
"Memorandum of Understanding") pursuant to which the parties agreed to terminate
the existing Development Agreement and substitute in its place a new
collaborative research agreement. Under the new collaborative research
agreement, the parties agreed to jointly conduct research and development over a
three year period directed toward certain improvements and enhancements to the
Company's C-150 product. Siemens agreed to fund an aggregate of $15 million of
Imatron-managed research and development for a three year period beginning April
1, 1995, subject to addressing mutually agreed upon goals and objectives. No
milestones or other performance related results are tied to the payment of funds
by Siemens. Pursuant to the funding, Imatron has contributed a portion equal to
no less than fifty percent of Siemens' contribution for the sole purpose of
conducting the collaborative research. Siemens has the right to audit the joint
development program and has done so. The primary goals of the research and
development program are to develop and enhance the Ultrafast CT scanner system
performance, increase product reliability, reduce manufacturing costs, and
improve system upgradability. The results of the collaborative research are
jointly owned by the parties and cross-licensed. The Company is recognizing
equal amount of revenue and cost of sales ratably over the three year period as
its commitment to perform research and development under the agreement is being
incurred ratably over the same period. The Company recognized $5,000,000,
$5,000,000 and $3,884,000 of revenue under the collaborative agreement in 1997,
1996, and 1995, respectively.
Imatron and Siemens intend to continue their close relationship after the
Memorandum of Understanding expires in March 31, 1998. Imatron has granted to
Siemens a right of first refusal to collaborate or work with Imatron on any
future research and development of new technologies or new products with respect
to EBT/CT medical imaging products proposed to be pursued by Imatron.
On July 22, 1997, the Company and TeraRecon, Inc., a privately-held company
engaged in the design of high-speed image processing devices for medical imaging
systems, entered into a development agreement. The agreement calls for the
delivery by TeraRecon to Imatron of a real-time image reconstruction system for
use in conjunction with Imatron's Ultrafast CT scanner. Upon completion of
prototypes and when delivered, the TeraRecon RTR-2000 system will be exclusive
to Imatron's Ultrafast CT scanner and will expand the Ultrafast CT scanner's
current applications to include, CT fluorography, real-time viewing of CT
images, CT guidance of minimally invasive surgical procedures and timings of
contrast studies.
In consideration for the successful development and delivery of RTR-2000
systems, the Company has agreed to issue an aggregate of 6,000,000 warrants to
purchase the Company's Common Stock at $4.50 per share. The warrants will be
issued in installments based on TeraRecon achieving certain milestones in
connection with the development of image reconstruction system. In addition,
TeraRecon has agreed to pay Imatron an aggregate of $2,000,000 for 4,000,000 of
the 6,000,000 warrants and to make royalty payments to Imatron equal to 3% of
net sales of certain RTR-2000 systems sold to third parties.
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As of October 21, 1997, the Company has issued a total of 3,000,000 warrants to
TeraRecon upon the successful delivery of 4 Prototype I units. Pursuant to the
development agreement, TeraRecon paid the Company $1,000,000 for the warrant to
purchase 2,000,000 shares of the Company's common stock at $4.50 per share.
MARKETING
The Company's Ultrafast CT scanners are utilized by a variety of customers
including large teaching and research hospitals, medium-size hospitals, and
imaging clinics.
The Company sells its Ultrafast CT scanner directly and through distributors.
The Company has, or had, the following distribution arrangements:
UNITED STATES, CANADA, AND EUROPE
In April 1995, pursuant to the Memorandum of Understanding above, the Company
entered into an agreement with Siemens giving Siemens the exclusive right to
distribute the Company's C-150 scanner in the United States, Canada, Europe and
India (see "Transactions With Siemens Corporation" below). As of April 1, 1998,
Imatron will take back exclusivity rights and assume worldwide distribution for
its scanners. Siemens purchased seven, two, and one C-150 scanners in 1997,
1996, and 1995, respectively.
JAPAN
Beginning in 1986, Mitsui & Co., Ltd. ("Mitsui") was the distributor of the
Company's products in Japan, either directly or through a third-party
distributor. On December 10, 1993, Imatron entered into two agreements with
Mitsui that became effective in January 1994: the Settlement Agreement and the
Transition Agreement. Pursuant to these agreements, Mitsui agreed to pay Imatron
$1.5 million in consideration of Imatron's agreement to relieve Mitsui of its
obligation to purchase additional Ultrafast CT scanners. Imatron agreed to
purchase certain Ultrafast CT scanner inventory from Mitsui and to undertake all
service and warranty responsibility for Ultrafast CT scanners installed in
Japan. Imatron further agreed to complete certain sales contracts currently in
place between Mitsui and various end users in Japan.
On January 7, 1994, Imatron entered into a Joint Company Agreement with Tobu
Land System Company and Kino Corporation pursuant to which a joint venture
company was established to market, sell, install and service Imatron Ultrafast
CT scanners. The joint venture was designated as Imatron Japan, Inc. and is
owned by Tobu Land System Company, Kino Corporation and Imatron in increments of
51%, 25% and 24% respectively.
On February 3, 1994, Imatron and Imatron Japan, Inc. entered into a
Distributorship Agreement pursuant to which Imatron Japan, Inc. has been
appointed as Imatron's exclusive Distributor in Japan. Imatron Japan, Inc. took
delivery of three, five, and five C-150 Ultrafast CT scanner systems from
Imatron in 1997, 1996, and 1995, respectively. Imatron Japan, Inc. also
purchased two refurbished Ultrafast CT systems in 1995. These units, paid for by
irrevocable letters of credit, are without a right-of-return provision and have
no special arrangements. In connection with these sales, the Company paid
$130,000 in commissions for each new C-150 Ultrafast CT scanner sold to Imatron
Japan, Inc. through 1996. From 1997 onwards, these commissions were reduced to
$60,000 per each new machine sold. Imatron Japan, Inc. has ordered five
additional Ultrafast CT scanner systems for delivery in 1998 with an option to
purchase three additional systems.
RELIANCE ON DISTRIBUTORS
Historically, a substantial portion of the Company's sales of its scanners is
done through distributors. There is no assurance that the Company's distributors
will actually meet their contractual minimum obligations on a timely basis.
Failure by the distributors to meet their obligations could adversely affect the
Company's operations and financial position.
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SALES INFORMATION
The scanner sales price varies depending on the customer requirements. In
particular, sales to Siemens, Imatron Japan, Inc. and third-party leasing
companies have a lower gross margin than sales to other third parties. The sales
price includes installation by field service personnel, system check and
certification, customer applications training, and a 12-month warranty. In
addition, local taxes and import duties may be added. This price, which is
significantly higher than that of conventional CT scanners, may serve to limit
sales of the Company's scanner to larger hospitals and medical imaging clinics
that are able to generate a higher than average patient volume to offset the
higher cost.
Unit scanner export sales (see Note 11, Segment Information and Foreign Sales)
for fiscal years ended December 31 are as follows:
1997 1996 1995
------------ ------------ ----------
Total export sales 15 8 7
TRANSACTIONS WITH SIEMENS CORPORATION
1991 AGREEMENT
In March 1991, the Company entered into a Basic Agreement with Siemens
Corporation ("Siemens") which consisted of four separate sub-agreements each of
which has been subsequently modified in various respects by the parties. These
agreements terminated on March 31, 1995.
Distribution Agreement - Siemens had exclusive rights to distribute the C-150
scanners worldwide (excluding Japan, Hong Kong, China and Taiwan). Under this
agreement Siemens was obligated to purchase a minimum number of C-150 scanners
at fixed prices. In November 1992, an amendment to the agreement reduced the
annual minimum purchase obligation by 50% from 12 to 6 scanners. The sale of
scanners to Siemens was accounted for as product sales upon shipment to Siemens.
Development Agreement - Imatron and Siemens agreed to the joint development of
other medical scanner products. Siemens provided the funding for the
development. Imatron recognized revenue under this agreement based on the
successful completion of milestones set forth in the agreement. Upon successful
conclusion of the development of other medical scanner products, Siemens had the
sole right to manufacture such products. Upon the termination of the 1991 Basic
Agreement, all developed technology reverted back to Imatron as per the
contract.
License Agreement - In connection with the above manufacturing rights, Imatron
agreed to grant Siemens a license for the applicable technology in exchange for
a license fee and future royalty payments. Imatron received a $4.0 million
non-refundable license fee in 1991. Siemens' rights under this agreement
terminated upon the termination of the 1991 Basic Agreement.
Loan Agreement - Imatron and Siemens entered into a loan agreement to provide a
loan facility of $4.0 million with an interest rate of prime plus 3%.
On March 31, 1995, the Company and Siemens entered into a three-year agreement
(the "Memorandum of Understanding" or "MOU") pursuant to which the relationship
of the parties as established by the Basic Agreement was substantially
restructured. Pursuant to the MOU, the sub-agreements of the Basic Agreement
were terminated and a number of new relationships were created. First, Siemens
agreed to exchange the Company's $4.0 million note for five patents subsequent
to an arms-length negotiation between the two parties subject to a
royalty-bearing license back to Imatron (see Patents and Licenses below). In
addition the minimum purchase provision of the previous distribution agreement
was canceled. The sale of the patents have no material impact on the Company as
Siemens granted to Imatron a non-exclusive, irrevocable, perpetual
royalty-bearing license on the transferred patents. These patents were not part
of the technology being developed under the Collaborative Research Agreement
between Siemens and Imatron. The gain calculated as the difference between the
patents' book value of $0 and the net carrying amount of the extinguished debt
of $4,000,000, was recognized as income for the period.
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Pursuant to the fee arrangements with regard to the use of the technology under
the transferred patents, Imatron will pay to Siemens royalties of $20,000 for
each new C-150 unit (or other EBT unit produced by Imatron after April 1, 1995),
commencing with the 21st C-150 (or other Imatron EBT) unit produced in any year
and continuing thereafter for ten years after such first quarter in which such
21st unit is produced. To date, Imatron has not produced more than 20 scanners
in any year, and therefore, no royalties have been due under this agreement.
Second, the parties agreed to terminate, as of March 31, 1995, the existing
Development Agreement and substitute in its place a new collaborative research
agreement pursuant to which the parties would jointly conduct research and
development over a three year period directed toward the electron beam
technology used in the Company's C-150 product. Both Siemens and Imatron have
irrevocable, perpetual, royalty free, fully paid- up licenses covering the
electron beam technology developed under the collaborative research, subject to
the following terms and conditions:
(a) During the term of the MOU, a complete copy of which was filed as
Exhibit 10.80 to the Company's 1994 Report on the Form 10-K, either Party
may sublicense, transfer or assign its rights in the electron beam
technology or use the same in whole or in part to develop or manufacture
medical products for third parties with prior written consent of the other
Party.
(b) Imatron may not grant to any third party any license in the field of
medical imaging under any or all of the electron beam technology during the
term of the MOU and three years thereafter.
(c) Either Party may sublicense the technology to its parent, subsidiaries or
50% or more owned affiliates.
(d) Either Party may sublicense, assign or transfer the technology as part
of its sale of the assets or business relating to the C-150.
(e) With regard to manufacturing C-150 scanners, the C-150 system can only
be manufactured by Siemens after fifty scanners are manufactured, sold,
transferred and/or delivered to Siemens by Imatron in any fiscal year; or
upon default or refusal of Imatron at any time to perform its obligations
to Siemens with respect to the design, manufacture, service, support,
supply of products and parts in order for Siemens to meet its obligations
to third parties.
Pursuant to the new collaborative research agreement, Siemens has agreed to fund
a maximum aggregate of $15 million of Imatron-managed research and development
over the three years, subject to addressing certain mutually agreed upon goals
and objectives. No milestones or other performance related results are tied to
the payment of funds by Siemens. The Company is recognizing equal amount of
revenue and cost of sales ratably over the three year period as its commitment
to perform research and development under the agreement is being incurred
ratably over the same period.
The Company is not obligated to return the amount funded by Siemens. However,
Siemens has the right to terminate the collaborative research upon three months
written notice in the event objectives agreed upon by both parties are not
achieving reasonable progress. The Company's obligations under this agreement
are as follows:
(a) Imatron is responsible for managing and performing all collaborative
research conducted under the MOU.
(b) The primary goals of Imatron include cost reductions, improved quality,
performance enhancement and upgradeability.
(c) Imatron funds an amount equal to 50% of Siemens' contribution for the sole
purpose of conducting the collaborative reasearch.
(d) Imatron provides Siemens detailed accounting on the use of monies
contributed pursuant to the agreement.
Third, Siemens was appointed Imatron's exclusive distributor for the Company's
C-150 Ultrafast CT scanner in the United States, Canada, Europe, and India for a
<PAGE>
three year period effective April 1, 1995, and ending March 31, 1998. Siemens
agreed to use its best efforts to distribute the Company's C-150 product in its
exclusive markets subject to no minimum purchase obligations.
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-upon 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. Revenues for warranty
services are recognized over the life of the contracts, while other service
revenues are recognized upon completion of work.
Effective April 1, 1998, Imatron's obligations and Siemens' contribution under
the MOU will terminate. In addition, Imatron will take back its exclusive
distribution rights and assume worldwide distribution for its C-150 scanners.
INVISION TECHNOLOGIES, INC.
In 1990, the Company established a joint venture company, InVision Technologies,
Inc. ("InVision") formerly known as Imatron Industrial Products, Inc., with
FI.M.A.I. Holding S.A. ("FI.M.A.I."), a former shareholder of Imatron, to
develop, manufacture, market, and support advanced CT technology in the baggage,
parcel, and freight scanning market. Upon organization, Imatron contributed
$250,000, certain parts, components and material and entered into a Technology
License Agreement.
The Technology License Agreement between the Company, FI.M.A.I. and InVision,
grants InVision an exclusive, worldwide, perpetual, and fully-paid license to
use the Company's technology and patents for the development, manufacture, use,
and sale of compact medical scanner products for military field applications,
mail, freight, parcel, or baggage scanner products. Also, InVision has agreed to
grant back to Imatron an exclusive, worldwide, perpetual, and fully-paid right
and license to use InVision's technology and patents outside of InVision's field
of use.
In July 1996, Imatron sold its remaining shares of InVision common stock.
InVision common stock was carried at no cost by Imatron. Imatron realized
$1,756,000 from the sale of InVision common stock. The gain on sale was recorded
as other income in the Company's consolidated financial statements for the year
ended December 31, 1996.
As of December 31, 1997, Imatron had no ownership interest in InVision.
COMPETITION
In the non-cardiac imaging applications market (comprised principally of
hospital radiology departments), the Company's principal competition is from
current manufacturers of conventional CT scanners, including General Electric
Company, Siemens Corporation, Elscint, Picker International, Inc., Philips
Medical Systems, Toshiba Medical Corporation and others. Non-invasive diagnostic
imaging techniques such as ultrasound, radioisotope imaging, digital subtraction
angiography, and magnetic resonance imaging are also partially competitive with
the Company's scanners. Each of the companies named above, as well as ATL,
Acuson and ADAC Laboratories, markets equipment using one or more of these
techniques. All of these companies have greater financial resources and larger
staffs than those of the Company and their products are, in most cases,
substantially less expensive than the Ultrafast CT scanner.
The Company believes that in order to compete successfully against these
competitors, it must continue to demonstrate that the Ultrafast CT scanner is
both an acceptable substitute for conventional CT scanners in areas of the body
where motion is not a limitation, and that the Ultrafast CT is a valuable
cardiac diagnostic tool capable of producing unique and useful images of the
heart. Although the Company believes that the Ultrafast CT can produce general
purpose images of a quality and resolution as good as, or superior to, images
produced by "state of the art" conventional CT scanners, it lacks certain
features that many competing premium scanners offer.
Also, the Company believes that customers and potential customers expect a
continuing development effort to improve the functionality and features of the
scanner. As a result, the Company continually seeks to develop product
enhancements and improve product reliability. Imatron's future success may
depend on its ability to complete certain product enhancement and reliability
<PAGE>
projects currently in progress, as well as on its continued ability to develop
new products or product enhancements in response to new products that may be
introduced by other companies. There can be no assurance that Imatron will be
able to continue to improve product reliability or introduce new product models
or enhancements as required to remain competitive.
Other factors, in addition to those described above, that a potential purchaser
might consider in the decision to replace a conventional CT scanner with an
Ultrafast CT scanner include purchase price, patient throughput capacity,
anticipated operating expenses, estimated useful life, and post-sale customer
service and support. The Company believes that its scanner is competitive with
respect to each of these factors.
MANUFACTURING
The Company manufactures its scanner at its South San Francisco, California,
headquarters facility. To date, the typical manufacturing cycle has required
approximately five months from the authorization of manufacturing to the
delivery of a scanner.
Many of the components and sub-assemblies used in the scanner have been
developed and designed by Imatron to its custom specifications, and are
obtainable from limited or single sources of supply. In view of the customized
nature of many of these components and sub-assemblies, there may be extended
delays between their order and delivery. Delays in such delivery could adversely
affect Imatron's present and future production schedules. The Company has made
and continues to make inventory investments to acquire long lead time components
and sub-assemblies to minimize the impact of such delays. In recent years, the
Company has developed alternative sources for many of its scanner subcomponents
and continues its programs to qualify new vendors for the remaining critical
parts. There can be no assurance that such actions will not adversely affect the
Company's production schedule and its ability to deliver products in a timely
manner.
GOVERNMENT REGULATION
Amendments to the Federal Food, Drug and, Cosmetic Act ("Amendments") enacted in
1976, and regulations issued or authorized thereunder, provide for regulation by
the FDA of the marketing, manufacturing, labeling, packaging, sale and
distribution of "medical devices", including the Company's scanner. Among these
regulations are requirements that medical device manufacturers register their
manufacturing facilities with the FDA, list devices manufactured by them, file
various reports and comply with specified Good Manufacturing Practice ("GMP")
regulations. The FDA enforces additional regulations regarding the safety of
equipment utilizing x-rays, which includes CT scanners. Various states also
impose similar regulations. The Amendments also impose certain requirements
which must be met prior to the initial marketing of medical devices introduced
into commerce after May 28, 1976. Other requirements imposed on medical device
manufacturers include a pre-market notification process commonly known as the
510(k) application to market a new or modified medical device. Additionally, and
specifically, if required by the FDA, a pre-market approval ("PMA") may be
required. This process is potentially expensive and time consuming and must be
completed prior to marketing a new medical device. The Company has received
appropriate clearances from the FDA to market the C-150 Ultrafast CT scanner.
The Company believes that it is presently in substantial compliance with the GMP
requirements and other regulatory issues promulgated by the FDA.
In October 1997, the Company received the 510(K) market clearance from the FDA
for cardiac specific applications included on the UltraAccess workstation. These
applications include 3-D "Calcium Scoring" and cardiac perfusion. In November
1997, the Company received 510(K) market clearance from the FDA for its new 3456
Channel Dual Slice Detector Array C-150 Ultrafast CT scanner.
The FDA also regulates the safety and efficacy of radiological devices. Although
the Company believes it is in compliance with all applicable radiological health
regulations established by the FDA, there can be no assurance that the Ultrafast
CT scanner will continue to comply with all such standards and regulations that
may be promulgated. In any event, compliance with all such requirements can be
costly and time consuming, and can have a material adverse effect on the
development of the Company's business and its future profitability.
<PAGE>
The Federal government and certain states have enacted cost-containment measures
such as the establishment of maximum fee standards in an attempt to limit the
extent and cost of governmental reimbursement of allowable medical expenses
under Medicare, Medicaid and similar governmental programs. A number of states
have adopted, or are considering the adoption, of similar measures. Such
limitations have led to a reduction in, and may further limit funds available
for, the purchase of diagnostic equipment such as the Company's scanner and in
the number of diagnostic imaging procedures performed in hospitals and other
medical institutions such as HeartScan's coronary artery disease risk assessment
centers.
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.
In some cases, state or local regulations may be stricter than regulations
imposed by the Federal government. The Company believes that it is in
substantial compliance with California regulations applicable to its business.
In January 1997, the FDA conducted routine inspections of Imatron's
manufacturing operations. The inspection concluded without Notices of
Observations. Imatron frequently provides field modifications or updates of
components and software to operational sites. Imatron voluntarily advised the
FDA during these inspections that certain field corrections were on going. The
FDA concurred with Imatron's decision to field upgrade certain sites and
assigned recall numbers Z304/307-7 and Z-289/299-7. Imatron is required to
notify the FDA periodically of the status of these corrections and again upon
completion. Imatron is complying with these requests and expects correction to
the above recall numbers by May 31, 1998. Imatron believes that is in
substantial compliance with the regulations.
Sales of medical devices outside the United States are subject to foreign
regulatory requirements that vary widely from country to country. These laws and
regulations range from simple product registration requirements in some
countries to complex clearance and production controls in others. As a result,
the processes and time periods required to obtain foreign marketing approval may
be longer or shorter than those necessary to obtain FDA approval. These
differences may affect the efficiency and timeless of international market
introduction of the Company's products, and there can be no assurance that the
Company will be able to obtain regulatory approvals or clearances for its
products in foreign countries.
In January 1995, CE mark certification procedures became available for medical
devices for countries in the European Union ("EU"). The successful completion of
which would allow certified devices to be placed on the market in all EU
countries. In order to obtain the right to affix the CE mark to its products,
medical device companies must obtain certification that its processes meet
European quality standards, including certification that its design and
manufacturing facility complies with ISO 9001 standards. After June 1998,
medical devices may not be sold in EU countries unless they display the CE mark.
The Company successfully obtained registration under the ISO 9001 standards in
December 1997 and is in the process of applying for CE mark certification. There
can be no assurance that the Company will be able to obtain CE mark
certification for its products. The inability or failure of the Company or its
international distributors to comply with varying foreign regulations or the
imposition of new regulations could restrict or, in certain countries, result in
the prohibition of the sale of the Company's business, financial condition and
results of operations.
HeartScan's activities are subject to extensive regulation, generally by state
and local governmental entities. Although HeartScan believes it is in
substantial compliance with all applicable regulations, there can be no
assurance that its business will continue to comply with all such standards and
regulations that may be established. In any event, compliance with all such
requirements can be costly and time consuming, and may have materially adverse
effect on the development of HeartScan's business and its future profitability.
HeartScan'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 FDA, OSHA, and the EPA. Changes in
governmental regulations on new regulations adopted in the future may materially
adversely affect Imatron's business. In some cases, state or local regulations
may be stricter than regulations imposed by the Federal government.
<PAGE>
PATENTS AND LICENSES
Imatron relies heavily on proprietary technology and intellectual property which
it attempts to protect through patents and trade secrets.
In February 1981, the Company was granted the exclusive use for five years and
non-exclusive use thereafter of certain technology and a patent pending, owned
by the University of California ("UC") under the terms of a license agreement
between UC and Emersub, a wholly-owned subsidiary of a former principal
shareholder of the Company, and a sublicense agreement between Emersub and
Imatron Associates (the predecessor to the Company), respectively. In June 1986,
the license and sublicense agreements were amended to extend the Company's
exclusive use of the technology through the remaining thirteen-year life of the
patent in exchange for modified minimum annual royalty payments. Under the terms
of Emersub's license with UC, Emersub was obligated to make certain additional
payments in connection with the license. In October 1990, pursuant to subsequent
amendments of the license and sublicense agreements the Company issued an
aggregate of 132,813 shares of Series A Preferred Stock to UC and Emersub in
satisfaction of this obligation. The University of California converted their
125,000 Series A Preferred Stock into 625,000 common stock shares in 1993.
Emersub converted their 7,813 Series A Preferred Stock into 39,065 common stock
shares in September 1995.
Under the continuing sublicense agreement, as amended, Imatron will make
payments to Emersub equal to 2.125% of net sales of new C-150 scanners sold by
Imatron in exchange for the Company's exclusive use of Patent #4,352,021, "X-ray
Transmission Scanning System and Method and Electron Beam X-ray Scan Tube for
Use Therewith", through the remaining life of such patent. The Company's
Chairman of the Board, Dr. Douglas P. Boyd, receives 6% of all of the royalties
paid by Emersub to UC. Loss by Imatron of its rights under the patent as a
result of termination of its sublicense from Emersub, or the underlying license,
could have a material adverse effect upon Imatron's business and future
prospects. There are no present disputes with either UC or Emersub. Royalty
payments to Emersub for 1997, 1996, and 1995 were $179,350, $91,470, and
$91,470, respectively.
Development of portions of the technology covered by the UC patent and
sublicensed to Imatron has been funded in substantial part through research
financing made available to UC by the National Institutes of Health. As a result
of such financing, it is possible that the U.S. Government may assert certain
claims in such UC patents, including the right to a royalty-free license for
governmental use.
In addition, Imatron holds twenty-eight U.S. Patents of its own (each with a
remaining life in excess of 3 years) and has filed three U.S. patent
applications covering various integral components of the scanner including,
among others, its electron beam assembly and its x-ray detector, and has filed
applications corresponding to several of these patents and applications in
various European Patent Convention countries, Canada, and Japan. There can be no
assurance that any such applications will result in the issuance of a patent to
the Company. Imatron's patents and patent applications have not been tested in
litigation and no assurance can be given that patent protection will be upheld
or will be as extensive as claimed. Furthermore, no assurance can be given as to
the Company's ability to finance litigation against parties which may infringe
upon such patents or parties which may claim that the Company's scanner
infringes upon their patents. However, the agreement signed by the Company and
Siemens Corporation in March 1991 allows Siemens Corporation to enter litigation
in favor of Imatron.
Pursuant to the Memorandum of Understanding with Siemens (see "Transactions With
Siemens Corporation"), the Company transferred five patents to Siemens, two of
which cover features of the Company's C-150 scanner, in complete consideration
of the cancellation by Siemens of the $4.0 million notes payable to the Company.
The transferred patents were as follows:
1. U.S. 4,521,901 - Scanning Electron Beam Computed Tomography Scanner with Ion
Aided Focusing.
This patent describes a method of regulating the rate of neutralization of
the electron beam due to ionization, by introducing an inert gas at
controlled pressure into the vacuum chamber. It is important to adjust the
pressure so that the neutralization of the beam reaches saturation, and
therefore, equilibrium before the beam hits the X-ray producing target.
<PAGE>
2. U.S. 4,531,226 - Multiple Electron Beam Target for use in X-Ray Scanner.
This patent describes a method of mounting the tungsten X-ray-producing
targets in an EBT scanner. For manufacturing reasons it is necessary for
each target to consist of several short sections, which must be joined so
as to form a continuous surface. The patent describes a clamping system
which ensures that the sections are properly positioned both relatively and
absolutely.
3. U.S. 4,535,243 - X-Ray Detector for High Speed X-Ray Scanning System.
This patent describes the basic configuration and structure of the X-ray
and EBT scanners. The detector consists of 2 rings of multiple
scintillators mounted on photodiodes connected to active low pass filter
amplifiers.
4. U.S. 4,736,396 - Tomosynthesis using High Speed CT Scanning System.
This patent describes a method of producing longitudinal tomograms of a
patient in an EBT scanner. X-ray exposure of the patient is minimal. This
view of a patient is a prerequisite to producing axial tomographic images
of the patient's anatomy.
5. U.S. 5,193,105 - Ion Controlling Electrode Assembly for a Scanning
Electron Beam Computed Tomography Scanner.
This patent describes a periodic axial field Ion Controlling Electrode
(ICE), a Rotatable field Ion Controlling Electrode (RICE) and a Positive
ion Electrode (PIE).
As part of the agreement, Siemens granted to the Company a non-exclusive,
irrevocable, perpetual license to the five patents. The license is subject to a
royalty of $20,000 for each new C-150 unit (or other EBT unit produced by
Imatron after April 1, 1995), commencing with the 21st C-150 (or other Imatron
EBT) unit produced in any year and continuing thereafter for ten years after
such first quarter in which such 21st unit is produced. To date, Imatron has not
produced more than 20 scanners in any year and, therefore, no royalties have
been due under this agreement.
In the event some or all of the Company's patent applications are denied and/or
some or all of its patents held invalid, the Company would be prevented from
precluding its competitors from using the protected technology set forth in such
patent applications or patents. Because the Company's products involve
confidential proprietary technology and know-how, the Company does not believe
such a loss of patent rights would have a materially adverse effect upon the
Company.
The Company also believes that many of its proprietary technologies are better
protected as trade secrets or copyrights than by patents. Moreover, although
protection of the Company's existing proprietary technologies is important,
other factors such as product development, customer support, and marketing
ability are also important to the development of the Company's business.
EMPLOYEES
As of February 1, 1998, the Company had 195 employees, including 33 employees in
service, 15 in sales/marketing, 63 scientists and engineers in research and
development, 65 employees in manufacturing, and 19 employees in finance and
administration. HeartScan had 32 employees, including 23 employees in
operations, 6 in sales and marketing, and 3 employees in corporate
administration. None of the employees are represented by a labor union and no
work stoppages or strikes have occurred. The Company believes that it has good
labor relations with its employees.
CERTAIN FACTORS
In evaluating the Company and its business, the following factors should be
given careful consideration, in addition to the information mentioned elsewhere
in this Form 10-K:
<PAGE>
OPERATING HISTORY
Imatron was incorporated in February 1983, and incurred losses each quarter from
inception through December 31, 1990. Its first recorded profitable year was the
year ended December 31, 1991 during which a $4,000,000 payment for the licensing
of technology to Siemens Corporation was received. The Company incurred
additional net losses in both 1992 and 1993. In 1994, the Company incurred its
first year of net income from operations amounting to $3,221,000 partially
offset by $911,000 of net losses incurred by HeartScan. In 1997, 1996, and 1995,
the Company incurred net losses of $11,422,000, $13,737,000, and $2,449,000,
respectively. The net losses are partially a result of the operating losses
incurred by HeartScan which amounted to $8,172,000, $7,845,000, and $2,132,000
in 1997, 1996, and 1995, respectively. The net losses incurred by HeartScan
reflect non-cash minority interest expense of $1,744,000 and $3,272,000 recorded
in 1997 and 1996, respectively as a result of the accounting treatment relative
to its convertible Series A Preferred Stock having "beneficial conversion
features". There is no assurance that Imatron or HeartScan can return to
profitable operations in the future.
In the past, Imatron has funded its losses primarily though the sale of
securities in two public offerings and a number of private placements, through
the exercise of options and warrants, through the 1991 license for medical uses
of its electron-beam technology to Siemens Corporation, and through revolving
lines of credit. In 1995, the Company raised $9,882,000 (net of offering costs)
in two offerings of Common Stock to certain institutional investors. In 1996,
the Company received $16,672,000 through the sale of shares of common stock and
the exercise of warrants and stock options for shares of common stock. Also in
1996, HeartScan raised $14,798,000 (net of offering costs) for use exclusively
to develop its operations (see notes 1, 7 and 12 to the Notes to the
Consolidated Financial Statement). As of December 31, 1997, the Company has a
consolidated accumulated deficit of $82,716,000. As of December 31, 1997,
HeartScan has an accumulated deficit of $20,044,000.
The Company's liquidity is affected by many factors, some based on the normal
ongoing operations of the business and others related to the uncertainties of
the industry and global economies. Although the cash requirements will fluctuate
based on timing and extent of these factors, management believes that cash, cash
equivalents, and short-term investments existing at December 31, 1997 together
with the borrowing capability, and the estimated proceeds from ongoing sales of
products and services in 1998 will provide the Company and HeartScan with
sufficient cash for operating activities and capital requirements through
December 31, 1998.
NEED FOR ADDITIONAL FINANCING
To satisfy the Company's future capital and operating requirements, profitable
operations or additional public or private financing will be required. If future
public or private financing is required by the Company, holders of the Company's
securities may experience dilution. If such financing cannot be obtained, the
Company may seek to sell or license additional portions of its technology, to
sell some or all of its other assets, or to merge with another company. In
addition, HeartScan may need additional financing to continue to fund its plan
to own and operate CAS centers. In the event HeartScan can no longer support its
operating expenses and is unable to raise additional funds, it will have to
curtail its center development and expansion activities.
MATERIAL DEPENDENCE UPON KEY PERSONNEL
The Company and HeartScan have been, and will continue to be, materially
dependent upon the technical expertise of its engineering and management
personnel. The loss of a significant number of such personnel would have a
materially adverse effect upon the Company's business and future prospects. The
Company does not maintain key-man life insurance.
HIGH COST OF SCANNER
The distributor list price of Imatron's Ultrafast CT scanner is significantly
higher than that of commercially available conventional CT scanners, and higher
than the price of "top-of-the-line" scanners. Such pricing may limit the market
for Imatron's product. Potential customers' budgetary limitations, including
those imposed by government regulation, may often compel the purchase of lower
cost, conventional CT scanners.
<PAGE>
LIMITED CLINICAL DEMONSTRATION OF CERTAIN ADVANTAGES OF THE COMPANY'S SCANNER
The Company's scanner has been used in a clinical environment since April 1983.
Clinical use of the C-100 XL scanner model began in February 1989. The C-150
Ultrafast CT scanner was first used in 1992. Eighty-seven C-150, C-100 and
C-150L scanners are currently installed in a clinical setting. The Company
believes that market acceptance of the Ultrafast CT scanner continues to depend
in substantial part upon the clinical demonstration of certain asserted
technological advantages and diagnostic capabilities. There is no assurance that
these asserted technological advantages and diagnostic capabilities will result
in the development of a significant market for the Ultrafast CT that will allow
the Company to operate profitably.
THIRD-PARTY REIMBURSEMENT OF COST OF CT SCANS
FDA clearance to market does not guarantee or imply reimbursement by third-party
payers such as Medicare, Medicaid, Blue Cross/Blue Shield or other private
health insurers. Medicare and Medicaid reimburse for procedures that are
generally accepted or that have been proven safe and effective. The Health Care
Financing Administration ("HCFA"), which oversees Medicare and Medicaid payment
policies, will not authorize payment for procedures which are considered to be
experimental. HCFA has determined that diagnostic examinations of the head and
other parts of the body performed by CT scanners are covered if the contractor
who administers the local Medicare program finds that medical and scientific
literature and opinion support the effective use of a scan for the particular
condition.
PRODUCT LIABILITY RISKS
As a manufacturer and marketer of medical diagnostic equipment, the Company is
subject to potential product liability claims. As a supplier of radiological
diagnostic services, HeartScan is also subject to potential liability claims.
For example, the exposure of normal human tissue to x-rays, which is inherent in
the use of CT scanners for diagnostic imaging, may result in potential injury to
patients subjecting the Company to possible liability claims. The Company
presently maintains primary and excess product liability insurance with
aggregate limits of $5.0 million per occurrence. No assurance can be given that
the Company's product liability insurance coverage will continue to be available
or, if available, that it can be obtained in sufficient amounts or at reasonable
cost, or that it will prove sufficient to pay any claims that may arise.
VOLATILITY OF STOCK PRICE
The market prices for securities of advanced technology companies have
historically been highly volatile, including the market price of shares of the
Company's Common Stock. Future announcements by the Company or its competitors,
including announcements concerning technological innovations or new commercial
products, results of clinical testing, changes in government regulations,
regulatory actions, healthcare reform, proprietary rights, litigation, and
public concerns as to the safety of the Company's or its collaborators'
products, as well as period-to-period variances in financial results could cause
the market price of the Common Stock to fluctuate substantially. In addition,
the stock market has experienced extreme price and volume fluctuations that have
particularly affected the market price for many advanced technology companies,
often being unrelated to the operating performance of these companies. These
broad market fluctuations may adversely affect the market price of the Company's
Common Stock.
NO DIVIDENDS ON PREFERRED AND COMMON STOCK
The Company has not paid dividends on its Preferred or Common Stock since
inception. Even if its future operations result in profitability, as to which
there can be no assurance, there is no present anticipation that dividends will
be paid. Rather, the Company expects that any future earnings will be applied
toward the further development of the Company's business.
<PAGE>
ITEM 2 - PROPERTIES
The Company's manufacturing, research and development, marketing and
administrative operations occupy approximately 70,000 square feet of leased
space in buildings located in South San Francisco, California, under leases
expiring in October 2001. Under certain future conditions the facilities could
be expanded to approximately 75,000 square feet.
The Company also leases business and residential properties in Germany under
operating leases expiring in March 2000 and July 2002. The business facility is
being used as a technical service center for its European customers while the
residence is for expatriates assigned in Germany.
The HeartScan centers located in Seattle, WA; Houston, TX; Washington, DC; and
Pittsburgh, PA; occupy approximately 3,000 square feet each of leased space in
medical buildings close to hospitals. The leases are renewable in July 1998, May
2000, December 2005, and June 2001, respectively. The San Francisco center is in
one of the buildings leased by Imatron located in South San Francisco,
California. The Company believes its facilities are adequate for its current
needs and that suitable additional or substitute space will be available as
needed to accommodate any future expansion of the Company's operations.
ITEM 3 - LEGAL PROCEEDINGS
None.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of Imatron's shareholders during the
quarter ended December 31, 1997.
<PAGE>
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Since April 1985, the Company's Common Stock has traded on the Nasdaq National
Market System under the Nasdaq symbol "IMAT."
The following table sets forth, for the periods indicated, the range of high and
low sales prices, all as reported by Nasdaq. These prices reflect inter-dealer
prices, without retail mark-up, mark-down or commission and may not necessarily
represent actual transactions.
1997 1996
------------------------- -------------------------
Quarter: High Low High Low
- ---------- ------------- --------- ------------ ------------
First $3.38 $1.88 $3.50 $1.75
Second 3.00 1.59 8.38 3.00
Third 2.94 2.34 6.63 3.94
Fourth 5.31 2.25 4.81 2.50
As of February 2, 1998, there were approximately 6,596 holders of record of the
Company's common stock. On February 2, 1998, the closing price of the Company's
common stock on Nasdaq was $2.47.
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>
<TABLE>
ITEM 6 - SELECTED FINANCIAL DATA
IMATRON INC.
SELECTED FINANCIAL INFORMATION
(in thousands, except per share amounts)
<CAPTION>
OPERATING INFORMATION
Year Ended December 31 1997 1996 1995 1994 1993
------------- ---------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Total revenues $ 39,423 $ 25,768 $ 26,700 $ 33,571 $ 25,111
Operating income (loss) $ (10,144) $ (12,409) $ ( 6,158) $ 549 $ (2,871)
Net income (loss) $( 11,422) $ (13,737) $ ( 2,449) $ 2,310 $ (2,871)
Basic and diluted net income
(loss) per share $ (0.15) $ (0.18) $ ( 0.04) $ $0.04 $ (0.06)
Number of shares used
in per share calculations 78,461 74,406 57,598 62,102 47,865
</TABLE>
<TABLE>
BALANCE SHEET INFORMATION
At December 31 1997 1996 1995 1994 1993
--------------- -------------- --------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Working capital $ 26,050 $ 33,042 $ 14,252 $ 8,741 $ 5,536
Total assets 49,223 53,192 30,876 21,173 15,903
Long term obligations
including capital lease
obligations 4,507 4,604 3,311 4,992 4,992
Total liabilities 17,898 15,666 14,651 14,303 12,265
Minority Interest 14,255 12,323 - - -
Preferred stock - - - 1,308 2,008
Shareholders' equity 17,070 25,203 16,225 6,870 3,638
<FN>
The Company did not pay any cash dividends on its Common Stock during any of the periods presented above.
</FN>
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1997, working capital decreased to $26,050,000 compared to
December 31, 1996 working capital of $33,042,000 primarily as a result of the
operating losses sustained by the Company amounting to $11,422,000. The current
ratio at December 31, 1997 decreased to 3.2:1 from 4.4:1 at December 31, 1996.
The Company's assets decreased to $49,223,000 compared to December 31, 1996
total assets of $53,192,000. Net cash used in operating activities during the
year ended December 31, 1997 was $10,791,000 compared to $10,302,000 in 1996.
The increase in accounts receivable resulted from increasing product sales, the
lengthening of customer payment terms due to delays in product installations
resulting from site preparation. The economic and currency related uncertainties
in other countries also resulted in a delay of payments. Accounts payable
decreased due to changes in the timing of payments, offset by an increase in
purchases related to the volume of business.
Cash provided by investing activities increased $28,756,000 to $13,096,000 in
1997 as compared to 1996 due to an increase in securities held for sale maturing
in three months and less and lower capital expenditures. Key financing
activities for the year ended 1996 included proceeds from a private offering
whereby Imatron sold 100,000 shares of HeartScan Series A preferred stock to
unaffiliated third parties with realized proceeds of $14,798,000 (net of
offering costs). During the same period, the Company also sold 4,500,000 shares
of its common stock in a private placement and issued warrants to purchase
common stock, netting proceeds of $11,348,000. Additionally, proceeds from stock
options, purchases in the employee stock purchase plan, and warrants decreased
to $2,463,000 during the twelve month period in 1997 as compared to $16,672,000
during the same period in 1996.
The Company's liquidity is affected by many factors, some based on the normal
ongoing operations of the business and others related to the uncertainties of
the industry and global economies. Although the cash requirements will fluctuate
based on timing and extent of these factors, management believes that cash, cash
equivalents, and short-term investments existing at December 31, 1997 together
with the borrowing capability, and the estimated proceeds from ongoing sales of
products and services in 1998 will provide the Company and HeartScan with
sufficient cash for operating activities and capital requirements through
December 31, 1998.
Currently, the Company and its subsidiary do not have significant capital
commitments in 1998.
To satisfy the Company's capital and operating requirements beyond 1998,
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.
RESULTS OF OPERATIONS
1997 vs. 1996
Total revenues for the year ended December 31, 1997, of $39,423,000 increased
$13,655,000 or 53% compared to 1996 revenues of $25,768,000. Net product
revenues increased to $27,368,000 in 1997 from $16,010,000 in 1996 due to
shipment of 18 scanners in 1997 as compared to 10 in 1996. Net product revenues
in 1997 and 1996 include sales under sale-leaseback arrangements amounting to
$927,000 and $1,774,000 in 1997 and 1996, respectively. Service revenues
<PAGE>
increased to $4,513,000 in 1997 from $3,465,000 in 1996 due to an increase in
scanners under service contracts. The increase primarily resulted from the
service support agreement entered into with Siemens (see Note 6 to Notes to
Consolidated Financial Statements - Transactions with Siemens Corporation).
Development contract revenue of $5,000,000 represents non-refundable payments
received from Siemens to compensate the Company for its research and development
efforts for which Siemens received certain rights under the three year
Memorandum of Understanding entered into in 1995.
Clinic revenues related to HeartScan Imaging, Inc. (HeartScan) increased by 97%
to $2,542,000 in 1997 compared to $1,293,000 in 1996 due primarily to an
increase in the number of clinics operating for the full year in 1997 from 3 in
1996 to 5 in 1997. In addition, the number of patient scans per clinic also
increased due to promotional and marketing efforts by HeartScan. Although clinic
revenues increased, the addition of new clinics increased net loss due to the
start-up expenses of these clinics. The Company anticipated that the start-up
period would range from twelve to eighteen months. The start-up phase for the
sites has taken longer than expected as acceptance of the coronary artery scan
within the medical community has been slower than projected.
HeartScan started operations in its San Francisco clinic in 1993, Seattle clinic
in 1995 and Houston, Washington D.C. and Pittsburgh clinics in 1996. As a result
of the opening schedule, only the following clinics have comparable annual
results:
<TABLE>
1997 1996 1995
------------------------- --------------------------- -------------------------------
Revenues Net Loss Revenues Net Loss Revenues Net Loss
----------- ------------ ----------- ----------- -------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
San Francisco $805,000 $ (772,000) $562,000 $ (512,000) $ 348,000 $ (831,000)
Seattle 382,000 (929,000) 285,000 (917,000)
Houston 461,000 (1,103,000) 345,000 (785,000)
</TABLE>
Clinic costs of revenues as a percentage of clinic revenues decreased to 127% in
1997 as compared to 173% in 1996 primarily due to an increase in revenues
related to the establishment of additional Heartscan clinics and an increase in
the number of patient scans. The increase in net loss for the San Franicsco
clinic was the result of allocation of capitalized scanner depreciation and
lease interest expenses from other sites in 1997.
HeartScan recorded depreciation expense on capital leased scanners amounting to
$1,121,000, $503,000, and $69,000 in 1997, 1996 and 1995, respectively. The
fluctuation in the depreciation and amortization expense of capital leased
scanners was due to the increase in scanners placed in service between 1995 and
1997. The Seattle HeartScan center opened in 1995 with the Houston, Washington
DC and Pittsburgh centers opening in 1996. The scanner located in San Francisco
was a development product of the Company which was depreciated starting in 1991
over a 5-year period. The scanner was transferred to HeartScan San Francisco in
1993 and was fully depreciated in 1995.
Total cost of revenues as a percent of revenues for 1997 was lower at 81% as
compared with 96% in 1996. The change in the cost of revenue as a percentage of
revenue for scanners from 89% in 1996 to 71% in 1997 was a result of a mix in
the sales prices of scanners to customer requirements. Although the cost of a
scanner remains constant for all scanner sales, the sales price varies depending
on the customer. In particular, sales to Siemens, Imatron Japan, Inc. and
third-party leasing companies (leasing scanners to HeartScan) have a lower gross
margin than sales to other parties. The decrease in the cost of revenue as a
percentage of revenue for scanners is due to the increase in scanner sales to
customers other than distributors to seven in fiscal year 1997 from three in
fiscal year 1996 offset by shipments of ten scanners to Siemens, Imatron Japan,
Inc. and third-party leasing companies in 1997 from seven in 1996. Service cost
of revenues as a percent of service revenue decreased to 86% in 1997 from 91% in
1996 due to an increase in gross margin on spare parts sold.
Total operating expenses of $17,688,000 increased $4,298,000 or 32% compared to
1996 expenses of $13,390,000. Research and development expenses of $4,713,000
increased from $3,318,000 in 1996 due to increases in headcount and materials
for projects undertaken in 1997. Additionally, the Company recorded non-cash
charges of $750,000 for warrants issued to TeraRecon for achieving certain
milestones in connection with the development of an image reconstruction system
and compensation expense of $150,000 for extending a stock option exercise
period. No such expenses were recorded in 1996. Selling expenses increased to
$6,821,000
<PAGE>
from $4,676,000 in 1996 primarily due to higher advertising expenses incurred by
HeartScan and expenses related to studies conducted promoting the benefits of
the Company's product. Administrative expenses increased to $6,154,000 from
$5,396,000 due primarily to increase in bad debt expense. Bad debt expense
increased to $1,648,000 in 1997 from $939,000 in 1996. The increase of 709,000
in 1997 was primarily the result of reserves created for receivables over 90
days related to spare parts sold to customers. At December 31, 1997, Imatron
Japan, Inc. had a total reserve of $1,323,000 against the Imatron Japan, Inc.
receivables of $1,438,000. The economic crisis in Japan has continued to limit
the Company's ability to pursue collection of these amounts.
Other income decreased to $1,044,000 from $2,508,000 in 1997 primarily due to
the income recognized in 1996 for the sale of 59,090 shares of InVision
Technologies common stock amounting to $1,756,000.
Interest expense paid in 1997 and 1996 were for capitalized lease obligations.
The Company incurred a non-cash charge to income of $1,744,000 and $3,272,000
recorded as a non-cash return of minority interest in 1997 and 1996,
respectively, in connection with certain beneficial conversion features granted
to the holders of the HeartScan convertible Series A Preferred Stock (see Notes
1, 7 and 12 to the Notes to the Consolidated Financial Statements).
RESULTS OF OPERATIONS
1996 vs. 1995
Overall revenues decreased 3% to $25,768,000 in 1996 from $26,700,000 in 1995.
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% to $3,465,000 in
1996 from $5,529,000 in 1995 primarily due to lower spare parts shipment. Spare
parts revenues declined to $1,540,000 in 1996 from $3,431,000 in 1995 due
primarily to a reduction in the purchase of spare parts by Siemens Corporation.
The reduction in spare parts purchased by Siemens was the result of the
termination of the 1991 Basic Agreement in 1995 wherein Siemens was no longer
required to purchase a minimum number of scanners per year, thereby decreasing
the amount of spare parts they required. Siemens purchases decreased by
$1,505,000 to $669,000 in 1996 from $2,174,000 in 1995. 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 operating in 1996.
There were five clinics operating in 1996 as compared to two in 1995. Of the
existing clinics, only San Francisco clinic had comparable annual results as it
was the only clinic opened for the full year in 1996 and 1995. Revenues for San
Francisco clinic increased by $214,000 or 61% due to an increase in number of
patient scans resulting from promotional and marketing efforts by HeartScan.
The costs of revenues as a percent of revenues for 1996 is higher at 96% as
compared to 89% in 1995. The change in the cost of revenue as a percentage of
revenue for scanners to 89% for the year ended December 31, 1996 from 87% for
the year ended December 31, 1995 is a result of a mix in the sales prices of
scanners to customers. Although the cost of a scanner remains constant for all
scanner sales, the sales price varies depending on the customer requirements. In
particular, sales to Siemens, Imatron Japan Inc. and third-party leasing
companies have a lower gross margin than sales to other third parties. The
increase in the cost of revenue as a percentage of revenue for scanners is
consistent with the increase in scanner sales to Siemens and Imatron Japan Inc.
to seven out of eleven in fiscal year 1996 from six out of ten in fiscal year
1995. 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 of $5,000,000 each 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.
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. Bad debt expense increased to $939,000 in 1996 from $11,000
in 1995. The increase of $939,000 in 1996 was primarily the result of reserves
created for receivables related to spare parts sold to two distributors, Imatron
Japan Inc. and CLCC, who were experiencing cash flow problems during that time.
Receivable from Imatron Japan, Inc. amounted to $2,660,000, of which, $725,000
was reserved as of December 31, 1996. $1,430,000 of this receivable was related
to the scanner sale, backed up by an irrevocable letter of credit and paid the
following month. The reserved amount represented oustanding receivable greater
than 90 days. The recent Asian crisis continues to limit the Company's ability
to pursue collection of these amounts.
Other income decreased to $2,508,000 from $4,021,000 in 1995 as a result of the
transaction recorded in 1995 canceling 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 in 1996 from $312,000 in 1995 due
primarily to an increase in capital lease obligations related to scanners leased
back by HeartScan.
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) 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.
In March 1997, subsequent to the Company finalizing its 1996 consolidated
financial statements, the Securities and Exchange Commission ("SEC") announced
its position on accounting for the issuance of convertible preferred stock with
a nondetachable conversion feature that is deemed "in the money" at the date of
issue (a "beneficial conversion feature"). The beneficial conversion feature is
initially recognized and measured by allocating a portion of the preferred stock
proceeds equal to the intrinsic value of that feature to additional
paid-in-capital. The intrinsic value is calculated at the date of issue as the
difference of the conversion price and the quoted market price of the Company's
common stock, into which the security is convertible, multiplied by the number
of shares into which the security is convertible. The discount resulting from
the allocation of proceeds to the beneficial conversion feature is treated as a
dividend and is recognized as a return to the preferred shareholders over the
minimum period in which the preferred shareholders can realize that return (i.e.
from the date the securities are issued to the date they are first convertible).
The accounting for the beneficial conversion feature requires the use of an
unadjusted quoted market price (i.e. no valuation discounts allowed) as the fair
value used in order to determine the intrinsic value dividend. Additionally,
preferred dividends of a subsidiary are included in minority interest as a
charge against income.
Prior to applying the accounting described above in its previously issued
financial statements, the Company had not recognized an intrinsic value dividend
on the HeartScan preferred stock which was issued in June 1996. The discounted
conversion features of this preferred stock into Imatron common stock (the
immediate conversion at $5.00 per share and the conversion in two years from the
date of the preferred stock issuance at a 27% discount) was provided to the
preferred shareholders, in essence to provide them with an exit strategy in the
absence of a HeartScan IPO (see Notes 1 and 7). Thus, the Company did not
believe a discount should be recognized on a contingently issuable security.
Furthermore, at the time of agreeing to the terms of the transaction the $5 per
share immediate conversion price was above the market price of the Company's
common stock but at the time the HeartScan preferred stock was actually issued,
the market price had increased to $5.75 and thereafter, it dropped below $5
again. Accordingly, the Company did not believe that any calculation of the
discount should include the impact of this short-term market fluctuation.
In December 1997, the staff of the SEC gave a speech further refining its March
1997 announcement. Based on discussions with the staff of the SEC in April 1998,
the staff concluded that the Company should retroactively apply its announcement
because it should be applied to contingently issuable securities and, as
discussed in the December speech, the portion attributable to the discount that
could have been obtained immediately on conversion (even though the shares had
not been registered yet) should be recognized on the day the preferred shares
were issued. The balance of the discount based on a market value of $5.75 per
common share is being recognized over two years from the date of issuance.
The consolidated financial statements as of and for the year ended December 31,
1996 have been restated to give effect to the accounting treatment described
above. The restatement resulted in (1) a reclassification in the consolidated
balance sheet of $5,890,000 reducing minority interests and increasing
additional paid-in capital (equity) and (2) the recognition of a minority
interest charge of $3,272,000 (including $2,400,000 as of the date of the
preferred shares were issued) in the consolidated statement of operations
increasing the Company's net loss from $10,465,000 to $13,737,000. The remaining
discount of $2,618,000 will be charged to minority interests through June 30,
1998.
The restatement of the previously issued 1996 consolidated financial statements,
in order to apply the accounting described herein for the intrinsic value of the
beneficial conversion features, does not affect the cash flows of the Company.
The minority interest is recognized as an increase in minority interest in the
balance sheet. If the preferred shareholders elect to convert their shares to
Imatron common stock, the minority interest will then convert to Imatron equity.
YEAR 2000 COMPLIANCE
Many currently installed computer systems and software products are coded to
accept only 2 digit entries in the date code field. Beginning in the year 2000,
these date code fields will need to accept 4 digit entries to distinguish 21st
century dates from the 20th century dates. Systems that do not properly
recognize such information could generate erroneous data or cause a system to
fail. As a result, in less than two years, computer systems/and or software used
by many companies may need to be upgraded to comply with such Year 2000
requirements. The Company is utilizing both internal and external resources to
identify, correct or reprogram, and test its internal systems, for the Year 2000
compliance. The total cost of compliance and its effect on the Company's future
results of operations is being determined as part of the detailed conversion
process.
<PAGE>
The Company is currently seeking to ensure that the software and operating
systems included in its Ultrafast CT scanner is Year 2000 compliant. Failure (or
perceived failure) of such product to be Year 2000 compliant could significantly
adversely affect sales of the Company. Additionally, year 2000 issues could
cause a significant number of companies, including current company customers, to
reevaluate their current system needs and as a result consider deferring
purchase of Ultrafast CT scanner. Any of the foregoing could result in a
material adverse effect on the Company's business, operating results and
financial condition.
ITEM 8 - CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Consolidated Financial Statements and Consolidated Financial Statement
Schedules listed in Item 14 (a) 1 and 2.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable
<PAGE>
PART III
ITEM 10 - EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the Company and their ages and positions are set forth
below. Uness otherwise indicated, officers are full-time employees and serve at
the discretion of the Board of Directors.
Name Age Position
----------------------- --------------- ----------------------------
Dr. Douglas P. Boyd 56 Chairman of the Board,
Chief Technology Officer
S. Lewis Meyer 53 President,
Chief Executive Officer
Gary H. Brooks 49 Vice President, Finance and
Administration, Chief
Financial Officer, Secretary
Dr. Douglas Boyd is a founder of Imatron and has held several positions with the
Company since its inception in 1983 including Chief Executive Officer,
President, Chief Technical Officer, and Director. Dr. Boyd is currently Chairman
of the Board and Chief Technology Officer. He is also an Adjunct Professor of
Radiology (Physics) at the University of California, San Francisco, where he
spends approximately five percent of his time on university duties. In addition,
Dr. Boyd is a Director for InVision Technologies, Inc., a publicly held company
engaged in the design and manufacture of explosives detection computed
tomography (CT) scanners for the baggage, parcel, and freight market. InVision
Technologies is a former Imatron joint venture company which was established in
1990.
Recognized internationally for his pioneering work in the development of
fan-beam CT scanners, Xenon detector arrays, and Electron Beam CT, Dr. Boyd has
been awarded ten U.S. patents. He has published more than 100 scientific papers
and is a frequent speaker at university seminars and other symposia. In 1993 he
was awarded the prestigious Conway Safe Sky's Award for contributions to airline
travel safety related to the development of a CT baggage explosives detection
system.
Dr. Boyd received his B.S. in Physics from the University of Rochester in 1963
and a Ph.D. in Physics from Rutgers University in 1968.
Lewis Meyer was appointed President, Chief Executive Officer and Director of
Imatron in June 1993. From April 1991 until joining the Company, he was Vice
President, Operations of Otsuka Electronics (U.S.A.) Inc., Fort Collins,
Colorado, a manufacturer of clinical magnetic resonance systems and analytical
nuclear magnetic resonance spectrometers. From August 1990 to April 1991, he was
a founding partner of Medical Capital Management, a company engaged in providing
consulting services to medical equipment manufacturers, imaging service
providers, and related medical professionals. Prior thereto, he was President
and Chief Executive Officer of American Health Services Corp. (now Insight
Health Services Corp.), a developer and operator of diagnostic imaging and
treatment centers. During his tenure at American Health Services Corp., it was
one of the fifty fastest growing public companies in the United States.
In addition to his duties as President and Chief Executive Officer of Imatron,
Mr. Meyer serves as a Director for BSD Medical Corp. and Finet Holdings Corp.,
publicly held companies engaged in the design and manufacture of medical
hypothermia equipment and electronic real estate and mortgage banking services,
respectively. Mr. Meyer also serves on the National Board of Directors of the
American Electronics Association (AEA).
<PAGE>
Furthermore, Mr. Meyer serves as Chief Executive Officer and Chairman of the
Board of Imatron's subsidiary, HeartScan Imaging, Inc., which provides coronary
artery disease risk assessment services in a nationwide network of diagnostic
centers.
Mr. Meyer received his B.S. degree in Physics from the University of the
Pacific, Stockton, California, in 1966, a M.S. degree in Physics from Purdue
University in 1968, and a Ph.D. in Physics from Purdue University in 1971.
Gary H. Brooks was appointed Vice President of Finance/Administration, Chief
Financial Officer, and Secretary of Imatron in December of 1993. Prior to
joining the Company, Mr. Brooks was Chief Financial Officer and Director for
five years at Avocet, a privately held, sports electronics manufacturer located
in Palo Alto, California. Prior thereto, he had progressively more responsible
positions in accounting and finance at several Fortune 500 companies including
Ford, Rockwell, Bendix, and ITT.
Mr. Brooks also serves as Chief Financial Officer of Imatron's subsidiary,
HeartScan Imaging, Inc.
Mr. Brooks received his B.A. in Zoology in 1970 from the University of
California, Berkeley, and a M.B.A. in Finance and Accounting in 1973 from the
University of California, Los Angeles.
ITEM 11 - EXECUTIVE COMPENSATION
The Summary Compensation Table shows certain compensation information for each
person who served as Chief Executive Officer during the year and the other most
highly compensated executive officers whose aggregate compensation exceeded
$100,000 for services rendered in all capacities during fiscal year 1997
(collectively referred to as the "Named Executive Officers"). Compensation data
is shown for the fiscal years ended December 31, 1997, 1996 and 1995. This
information includes the dollar value of base salaries, bonus awards, the number
of stock options granted, and certain other compensation, if any, whether paid
or deferred.
<TABLE>
Summary Compensation Table
<CAPTION>
Long Term
Annual Compensation All Other
Compensation Awards Compensation(b)
Name and Principal Options/
Position Year Salary($)(a) Bonus SARs
- ---------------------- --------- ------------------- ------------- ------------------- ----------------------
- ---------------------- --------- ------------------- ------------- ------------------- ----------------------
<S> <C> <C> <C> <C> <C>
Douglas P. Boyd 1997 174,300 4,750
Chairman of the Board 1996 166,000 4,700
1995 158,000 4,620
- ---------------------- --------- ------------------- ------------- ------------------- ----------------------
- ---------------------- --------- ------------------- ------------- ------------------- ----------------------
S. Lewis Meyer 1997 221,500 4,750
President and Chief 1996 211,000 75,000(c) 4,750
Executive Officer 1995 201,000 4,620
- ---------------------- --------- ------------------- ------------- ------------------- ----------------------
- ---------------------- --------- ------------------- ------------- ------------------- ----------------------
Gary H. Brooks Vice 1997 137,500 4,020
President and Chief 1996 131,000 40,000(d) 3,880
Financial Officer 1995 125,000 37,500(e) 3,627
- ---------------------- --------- ------------------- ------------- ------------------- ----------------------
<FN>
(a) Amounts shown include cash and non-cash compensation earned with respect to the year shown above.
(b) Represents the Company's matching contributions to its 401(k) plan.
(c) Represents portion of a $75,000 bonus payable to Mr. Meyer upon commencement of his employment with the Company.
(d) Represents options granted in March 1996 under the Company's 1993 Stock Option Plan.
(e) Represents HeartScan options granted in October 1995 under the HeartScan 1995 Stock Option Plan.
</FN>
</TABLE>
<TABLE>
Option Grants in Last Fiscal Year
The following table sets forth the options granted during the last fiscal year
to each of the named executive officers of the Company:
Option/SAR Grants In Last Fiscal Year
<CAPTION>
Potential Realizable Value
Individual Grants at Assumed Annual Rates
of Stock Price Appreciation
For Option Term
===================================================================== =================================================
- ------------------ ------------- ---------------- -------------- ------------ ---------------- ------------- ----------
Number of
Securities % Of Total
Under Options Granted
Options to Employees in Exercise or
Granted Fiscal Base Price Market Expiration
Name (#) Year ($/Sh) Price Date 0%($) 5%($)
- ------------------ ------------- ---------------- -------------- ----------- ---------------- ------------- ----------
- ------------------ ------------- ---------------- -------------- ------------ ---------------- ------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Douglas P. Boyd -0- -0- -0- -0- -0- -0- -0-
- ------------------ ------------- ---------------- -------------- ------------ ---------------- ------------- ----------
- ------------------ ------------- ---------------- -------------- ------------ ---------------- ------------- ----------
Gary Brooks -0- -0- -0- -0- -0- -0- -0-
- ------------------ ------------- ---------------- -------------- ------------ ---------------- ------------- ----------
- ------------------ ------------- ---------------- -------------- ------------ ---------------- ------------- ----------
S. Lewis Meyer -0- -0- -0- -0- -0- -0- -0-
- ------------------ ------------- ---------------- -------------- ------------ ---------------- ------------- ----------
</TABLE>
In October 1995, the Company's 49.5% owned subsidiary, HeartScan Imaging, Inc.
("HSI") approved the adoption of the HeartScan Imaging, Inc. 1995 Stock Option
Plan (the "HSI Option Plan"). The HSI Option Plan is intended to advance the
interests of HSI by inducing persons of outstanding ability and potential to
join and remain with HSI by enabling them to acquire proprietary interests in
HSI. The HSI Option Plan covers an aggregate of 250,000 shares of HSI Common
Stock. The Option Plan provides for the granting of two types of options:
"incentive stock options" and "nonstatutory stock options". The incentive stock
options (but not the nonstatutory stock options) are intended to qualify as
"incentive stock options" as defined in Section 422 of the Internal Revenue Code
of 1986, as amended. Options may be granted under the HSI Option Plan to all
employees including officers, directors (whether or not employees) and
consultants of HSI; provided, however, that incentive stock options may not be
granted to any non-employee director or consultant. HSI's Board of Directors has
the power, subject to the provisions of the HSI Option Plan, to determine the
persons to whom and the dates on which options will be granted, the number of
shares to be subject to each option, the time or times during the term of each
option within which all or a portion of such option may be exercised, and the
other terms of the options. The functions of HSI's Board of Directors under the
HSI Option Plan are presently being administered by the Compensation Committee
of Imatron's Board of Directors.
The maximum term of each option is ten years. Options granted under the HSI
Option Plan generally vest annually over a four-year period.
The exercise price of all nonstatutory stock options granted under the HSI
Option Plan must be at least equal to 85% of the fair market value of the
underlying stock on the date of grant. The exercise price of all incentive stock
options granted under the HSI Option Plan must be at least equal to the fair
market value of the underlying stock on the date of grant.
During HSI's last fiscal year, 153,500 options were granted under the HSI Option
Plan to various employees of HSI, but not to any Imatron executive officer. The
options were granted to purchase HSI Common Stock at $0.25 per share, and vest
over a four year period starting on the first anniversary of the grant. HSI has
reserved an additional 128,998 shares of Common Stock for future issuance to
employees under the Plan and under plans to be adopted. It is HSI's intention to
reserve, in the aggregate, approximately 20% of its capital HSI option stock for
grants to employees under the HSI Option Plan and under plans to be adopted.
Option Exercises in Last Fiscal Year and Year-End Option Values
<TABLE>
The following table sets forth the options exercised during the last fiscal year by Named Executive Officers of the Company:
Aggregated Options Exercised and Option Values in Fiscal Year 1997
<CAPTION>
- ------------------------ ------------------- -------------------- ------------------------- -------------------------
Number of securities Value of unexercised
underlying unexercised In-the-Money options at
options at year-end(#) year-end ($)
Shares acquired Value
on exercise (#) realized ($) exercisable/ exercisable/
Name unexercisable unexercisable
- ------------------------ ------------------- -------------------- ------------------------- -------------------------
- ------------------------ ------------------- -------------------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Douglas P. Boyd 4,950 $10,067 225,000/0 $404,250/0
- ------------------------ ------------------- -------------------- ------------------------- -------------------------
- ------------------------ ------------------- -------------------- ------------------------- -------------------------
S. Lewis Meyer -0- -0- 600,000/0 $1,050,000/0
- ------------------------ ------------------- -------------------- ------------------------- -------------------------
- ------------------------ ------------------- -------------------- ------------------------- -------------------------
Gary H. Brooks -0- -0- 117,500/22,500 $198,375/$5,625
- ------------------------ ------------------- -------------------- ------------------------- -------------------------
</TABLE>
Compensation of Directors
Aldo Test, a director of the Company, renders consulting services to the Company
on a month-to-month basis for which he received compensation of $16,200 during
1997, and may be expected to do so in the future. The law firm of Flehr,
Hohbach, Test, Albritton & Herbert, of which Mr. Test is a member, represents
the Company with respect to intellectual property matters and may be expected to
continue to do so in the future. The fees paid to the firm did not exceed five
percent of the law firm's gross revenues for the fiscal year. Terry Ross, a
director of the Company, renders consulting services to the Company pursuant to
a month-to-month consulting agreement which commenced in November 1993. In 1997
Mr. Ross received $18,000 pursuant to such agreement. Admiral McDaniel, a
director of the Company since January, 1997 renders consulting services to the
Company on a month-to-month basis for which he received compensation of $50,700
during 1997, and may be expected to do so in the future.
Non-Employee Director Options. In connection with their services to the Company,
directors who are not employees of the Company have periodically received stock
options under the 1991 Non-Employee Directors' Stock Option Plan (the
"Directors' Plan") to purchase shares of Common Stock. The directors and
shareholders approved the Directors' Plan in 1991 in order to attract and retain
highly qualified non-employee directors by providing each non-employee director
with an opportunity to purchase the Company's stock and to provide incentives
for such persons to exert maximum efforts on behalf of the Company. Subject to
provisions relating to adjustments upon changes in stock, the Directors' Plan
currently covers an aggregate of 550,000 shares of the Company's Common Stock.
The exercise price of the options is 85% of the fair market value of the Common
Stock on the date of grant as quoted on the NASDAQ National Market System.
Typically, the options granted to directors vest 25% per year starting with the
first anniversary of the date of grant, and have a term of five years. Each
option terminates prior to the expiration date if the optionee's service as a
non-employee director, or, subsequently as an employee, of the Company
terminates.
The Directors' Plan is administered by the Board of Directors. The Board may
suspend or terminate the Directors' Plan at any time. If no such termination
occurs, the Directors' Plan will terminate in the year 2001.
Options may be granted only to directors of the Company who are not employees of
the Company or any affiliate of the Company. The Directors' Plan provides for
the automatic grant of options to purchase shares of Common Stock of the Company
to non-employee directors. Each person elected for the first time to be a
Non-Employee Director automatically receives an option to purchase 25,000 shares
of the Company's Common Stock. The Directors' Plan also provides that every
non-employee director is to receive an option to purchase 25,000 shares on July
1st of each year if such director served continuously as such for the entire
preceding twelve months. The directors have approved certain amendments to the
Directors' Plan regarding, among other provisions, the timing of grants and
number of shares available for grant. These amendments are contained in a new
1998 Amended and Restated Non-Employee Directors' Stock Option Plan, which Plan
is being submitted to the shareholders for their approval. If approved, the 1998
Plan provides that every non-employee director is to receive an option to
purchase 25,000 shares on January 1st rather than July 1st of each year,
beginning with January 1, 1998.
The non-employee directors (Messrs. Guedes, McDaniel, Ross and Test) are
entitled to receive options to purchase 25,000 shares each under the 1991 plan
on July 1st of each year. Under that provision, Messrs. Ross and Test each
received 25,000 shares in fiscal year 1997 at an option price of $2.18 per
share. In October 1996, Mr. Guedes received 25,000 shares at an exercise price
of $3.99 per share upon his election as a director of the Company. In January
1997, Admiral McDaniel received 25,000 shares at an option price of $2.24 per
share upon his election as a director of the Company. In addition, directors who
are not officers of the Company are eligible for reimbursement in accordance
with Company policy for their expenses but not fees in connection with attending
meetings of the Board of Directors and any committees thereof.
Employee Director Compensation. Employees who serve as directors of the Company
(Dr. Boyd and Messrs. Meyer and Couch) receive no additional compensation for
such service. Dr. Boyd and Mr. Meyer are also named executive officers of the
Company and their compensation is reflected in the Summary Compensation Table
contained elsewhere in this statement.
ITEM 12- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables, based in part upon information supplied by officers,
directors and principal shareholders, set forth certain information regarding
the ownership of the Company's voting securities as of March 31, 1998 by (i) all
those known by the Company to be beneficial owners of more than five percent of
any class of the Company's voting securities; (ii) each director; (iii) each
named executive officer; and (iv) all executive officers and directors of the
Company as a group. Unless otherwise indicated, each of the shareholders has
sole voting and investment power with respect to the shares beneficially owned,
subject to community property laws where applicable.
Name and Address of Amount of Direct
Title of Class Beneficial Owner Beneficial Ownership Percent of Class
Common Marukin Corporation(bb) 5,471,617 7.0%
<TABLE>
Security Ownership of Directors and Executive Officers
The table below presents the security ownership of the Company's Directors and Named Executive Officers.
<CAPTION>
- -------------------------- ---------------------------------- ------------------------------- -----------------------
Name of Beneficial Owner Amount and Nature of Percent of Class(2)
Title of Class Beneficial Ownership(1)
<S> <C> <C> <C>
Common Douglas P. Boyd 2,055,801(3) 2.6%
Common Gary H. Brooks 134,358(4) *
Common John L. Couch 51,500(5) *
Common Jose Filipe Guedes 6,250(e) *
Common William J. McDaniel, M.D. 26,250(6) *
Common S. Lewis Meyer 610,656(7) *
Common Terry Ross 25,000(e) *
Common Aldo Test 63,750(8) *
Common All Directors and Executive 2,973,565(9) 3.8%
Officers as a Group
</TABLE>
<PAGE>
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
S. Lewis Meyer, President and Chief Executive Officer, is employed by the
Company pursuant to an employment agreement executed when he joined the Company
in June 1993 (filed as Exhibit 10.65 to Annual Report on Form 10-K for 1993).
Pursuant to that agreement, in the event of his termination, Mr. Meyer is
entitled to receive six months of compensation at the annual salary rate then in
effect.
Aldo Test, a director of the Company, is a member of the law firm of Flehr,
Hohbach, Test, Albritton & Herbert, which represents the Company with respect to
intellectual property matters and may be expected to continue to do so in the
future. The fees paid to the firm did not exceed five percent of the law firm's
gross revenues for the fiscal year.
- --------
(aa) Security ownership information for beneficial owners is taken from
statements filed with the Securities and Exchange Commission pursuant to
Sections 13(d), 13(g) and 16(a) and information made known to the company.
(bb) Marukin Corporation, 6, Rokuban-Cho Chiyoda-Ku, Tokyo 10
* Does not exceed 1% of the referenced class of securities.
(1) Ownership is direct unless indicated otherwise.
(2) Calculation based on 78,176,769 shares of Common Stock outstanding as of
March 18, 1997. based on 78,176,769 shares of Common Stock outstanding as
of March 18, 1997.
(3) Includes 1,830,801 shares owned directly and 225,000 shares issuable upon
the exercise of stock options that are exercisable as of March 31, 1998 or
that will become exercisable within 60 days thereafter.
(4) Includes 14,358 shares owned directly and 120,000 shares issuable upon
the exercise of stock options that are exercisable as of March 31, 1998 or
that will become exercisable within 60 days thereafter.
(5) All shares are issuable upon the exercise of stock options that are
exercisable as of March 31, 1998 or that will become exercisable within 60
days thereafter.
(6) Includes 20,000 shares owned directly and 6,250 shares issuable
upon the exercise of stock options that are exercisable as of March
31, 1998 or that will become exercisable within 60 days thereafter.
(7) Includes 10,656 shares owned directly and 600,000 shares issuable upon the
exercise of stock options exercisable as of March 31, 1998 or that will
become exercisable within 60 days thereafter.
(8) Includes 20,000 shares owned directly and 43,750 shares issuable upon the
exercise of stock options exercisable as of March 31, 1998 or that will
become exercisable within 60 days thereafter.
(9) percentage of beneficial ownership assumes the exercise of the aforesaid
options by officers and directors
<PAGE>
PART IV
ITEM 14 - EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Form:
1. Consolidated Financial Statements - See "Index to Consolidated Financial
Statements" attached hereto and made a part hereof.
2. Financial Statement Schedule - Schedule II - Valuation and qualifying
accounts. All other schedules are omitted because they are not applicable, or
the required information is shown in the financial statements or the notes
thereto
3. Exhibits - The exhibits listed on the accompanying "Index to Exhibits" are
filed or are incorporated herein by reference as part of this report.
(b) Form 8-K Reports:
Item 4 - Changes in Registrant's certifying accountants filed on July 2, 1997
Item 5 - Increase in authorized common stock filed on July 16, 1997
Item 5 - Development agreement with TeraRecon Inc. filed on August 5, 1997
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated: April 29, 1998 IMATRON INC.
-----------------------------------
By: S. Lewis Meyer
-----------------------------------
S. Lewis Meyer
President, Chief Executive Officer & Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant in
the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ------------------ ------------------------------------- -----------------
- -------------------
Douglas P. Boyd Chairman of the Board April 29, 1998
Director
- ------------------
William J. McDaniel Director April 29, 1998
- ------------------
John L. Couch Director April 29, 1998
- ------------------
Jose Filipe Guedes Director April 29, 1998
- ------------------ Director
S. Lewis Meyer President and Chief Executive April 29, 1998
Officer
(Principal Executive Officer)
- ------------------
Terry Ross Director April 29, 1998
- ------------------
Aldo J. Test Director April 29, 1998
- ------------------
Gary H. Brooks Chief Financial Officer, April 29, 1998
Vice President, Finance and
Administration, Secretary
(Principal Financial Officer and
Principal Accounting Officer)
<PAGE>
IMATRON INC.
Index to Consolidated Financial Statements
STATEMENT PAGE
----------------------------------------------------------------- ----
Report of KPMG Peat Marwick LLP, Independent Auditors 30
Report of Ernst & Young LLP, Independent Auditors 31
Consolidated Balance Sheets as of December 31, 1997, and 1996 32
Consolidated Statements of Operations for the years ended 33
December 31, 1997, 1996, and 1995
Consolidated Statements of Shareholders' Equity for the years ended 34
December 31, 1997, 1996, and 1995
Consolidated Statements of Cash Flows for the years ended December 31, 35
1997, 1996, and 1995
Notes to Consolidated Financial Statements 36
<PAGE>
Report of KPMG Peat Marwick LLP, Independent Auditors
The Board of Directors and Stockholders
Imatron Inc.:
We have audited the consolidated balance sheet of Imatron Inc. and subsidiary as
of December 31, 1997, and the related consolidated statements of operations,
shareholders' equity, and cash flows for the year then ended. Our audit 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
consolidated financial statements and financial schedule based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Imatron Inc. and
subsidiary as of December 31, 1997, and the results of its operations and their
cash flows for the year then ended, in conformity with generally accepted
accounting principles. Also in our opinion, the related financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly, in all material respects, the
information set forth therein.
KPMG Peat Marwick LLP
San Francisco, California
April 6, 1998
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
The Board of Directors and Stockholders
Imatron Inc.:
We have audited the consolidated balance sheet of Imatron Inc. and subsidiary as
of December 31, 1996, and the related consolidated statements of operations,
shareholders' equity, and cash flows for each of the years in the two-year
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 consolidated financial
statements and financial 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 financial position of Imatron Inc. and
subsidiary as of December 31, 1996, and the results of its operations and its
cash flows for each of the years in the two-year 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 consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
As discussed in Note 12 of the Notes to the Consolidated Financial Statements,
the Company has restated its 1996 Consolidated Financial Statements with regard
to accounting for convertible securities having beneficial conversion features.
Ernst & Young LLP
San Francisco, California
February 14, 1997, except for Note 12, as to which the date is April 10, 1998
<PAGE>
<TABLE>
<CAPTION>
IMATRON INC.
Consolidated Balance Sheets
(Amounts in Thousands)
December 31,
-----------------------------------
ASSETS 1997 1996
----------------- ---------------
(restated)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 14,425 $ 10,862
Short-term investments 180 14,171
Accounts receivable (net of allowance for doubtful accounts of $2,758
and $1,110 at December 31, 1997 and 1996:
Trade accounts receivable 8,215 2,940
Accounts receivable from affiliate 1,438 2,660
Inventories 12,926 10,393
Prepaid expenses 461 1,659
----------------- ---------------
Total current assets 37,645 42,685
Property and equipment, net 10,359 10,102
Other assets 1,219 405
----------------- ---------------
Total assets $ 49,223 $ 53,192
================= ===============
LIABLITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable 2,962 2,461
Other accrued liabilities 7,055 5,994
Capital lease obligations - due within one year 1,578 1,188
----------------- ---------------
Total current liabilities 11,595 9,643
Deferred income on sale leaseback transactions 1,376 1,419
Deferred income on service contract 420 -
Capital lease obligations 4,507 4,604
----------------- ---------------
Total liabilities 17,898 15,666
---------------- ---------------
Commitments and contingencies - Note 6
Minority interest - Notes 1, 7 and 12 14,255 12,323
---------------- ---------------
Shareholders' equity
Common stock, no par value; authorized-150,000 shares; issued and
outstanding 78,815 in 1997 and 77,919 shares in 1996 90,728 89,223
Deferred compensation (232) (116)
Additional paid-in capital 9,290 7,390
Accumulated deficit (82,716) (71,294)
----------------- ---------------
Total shareholders' equity 17,070 25,203
----------------- ---------------
Total liabilities and shareholders' equity $ 49,223 $ 53,192
================= ===============
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IMATRON INC.
Consolidated Statements of Operations
(Amounts in thousands, except per share amounts)
Years ended December 31,
--------------------------------------------------------
1997 1996 1995
--------------- ---------------- -----------------
(Restated)
<S> <C> <C> <C>
Revenues
Product sales $ 26,441 $ 14,236 $ 13,254
Product sale-leaseback arrangements 927 1,774 1,820
Service 4,513 3,465 5,529
Development contracts 5,000 5,000 5,637
Clinics 2,542 1,293 460
-------------- ---------------- -----------------
Total revenue 39,423 25,768 26,700
--------------- ---------------- -----------------
Cost of revenues
Product sales 18,820 12,617 11,533
Product sale-leaseback arrangements 927 1,774 1,820
Service 3,898 3,158 3,952
Development contracts 5,000 5,000 4,978
Clinics 3,234 2,238 1,350
--------------- ---------------- -----------------
Total cost of revenues 31,879 24,787 23,633
---------------- --------------- ---------------
Gross profit 7,544 981 3,067
Operating expenses
Research and development 4,713 3,318 3,430
Marketing and sales 6,821 4,676 3,137
General and administrative 6,154 5,396 2,658
--------------- ---------------- -----------------
Total operating expenses 17,688 13,390 9,225
--------------- ---------------- -----------------
Operating loss (10,144) (12,409) (6,158)
Interest and other income 1,044 2,508 4,021
Interest expense (578) (564) (312)
--------------- ---------------- -----------------
Loss before provision for income taxes (9,678) (10,465) (2,449)
Provision for income taxes - - -
--------------- ---------------- -----------------
Loss before minority interest expense (9,678) (10,465) (2,449)
Non cash return to minority interest (1,744) (3,272) -
--------------- ---------------- -----------------
Net loss $ (11,422) $ (13,737) $ (2,449)
=============== =============== ================
Basic and diluted net loss per common share $ (0.15) $ (0.18) $ (0.04)
=============== =============== ================
Number of shares used in basic and diluted per share calculations 78,461 74,406 57,598
=============== =============== ================
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
IMATRON INC.
Consolidated Statements of Shareholders' Equity
(Amounts in thousands)
Preferred Stock Common Stock
------------------- --------------------- Deferred Additional Accum-
Compen- Paid-in- lated
Shares Amount Shares Amount sation Capital deficit Total
--------- ---------- ---------- ----------- ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
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 and warrants
sold in a private
placement, net of offering - - 6,459 9,882 - - - 9,882
costs
Exercise of employee stock
options - - 1,656 1,147 - - - 1,147
Warrants exercised - - 550 775 - - 775
Net Loss - - - - - - (2,449) (2,449)
--------- ---------- ---------- ----------- ---------- ---------- ----------- ----------
Balances at December 31, 1995 - - 68,835 72,282 - 1,500 (57,557) 16,225
Common stock and warrants
sold in a private
placement, net of offering - - 4,559 11,348 - - - 11,348
costs
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
Issuance of subsidiary's
convertible Series A
preferred stock - - - - - 5,890 - 5,890
Net loss - - - - - - (13,737) (13,737)
--------- ---------- ---------- ----------- ---------- ---------- ----------- -------
Balances at December 31, 1996 - - 77,919 89,223 (116) 7,390 (71,294) 25,203
(restated)
Common stock issued for
employee stock purchase
plans, stock bonus, and
exercise of employee stock
options - - 596 899 - - - 899
Common stock issued for
services - - 16 42 - - - 42
Deferred compensation from
issuance of stock options
by consolidated subsidiary - - - - (186) - - (186)
Amortization of deferred
compensation - - - - 70 - - 70
Warrants exercised - - 284 564 - - - 564
Warrants issued for services - - - 1,000 - 1,000
Non-cash expense related to
warrants issued for - - - - - 750 - 750
services
Non-cash compensation expense
related to the extension
of the stock option
exercise period - - - - - 150 - 150
Net loss - - - - - - (11,422) (11,422)
========= ========== ========== =========== ========== ========== =========== ==========
Balances at December 31, 1997 - - 78,815 $ 90,728 $ (232) $9,290 $ (82,716) $17,070
========= ========== ========== =========== ========== ========== =========== ==========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
IMATRON INC.
Consolidated Statements of Cash Flows
(Amounts in thousands)
Years Ended December 31
<CAPTION>
1997 1996 1995
---------- ---------- -----------
(restated)
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (11,422) $ (13,737) $ (2,449)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation and amortization 2,318 1,374 1,709
Other income - - (4,000)
Amortization of deferred compensation 70 27 -
Non cash return to minority interest 1,744 3,272 -
Non cash compensation expense for extension of stock option 150 - -
exercise period
Warrant issued for services 750 - -
Common stock issued for services 42 269 -
Provision for bad debt 1,648 939 11
Changes in operating assets and liabilities:
Accounts and notes receivable (5,701) (249) 1,205
Inventories (2,533) (1,456) (701)
Prepaid expenses 1,198 (1,096) 53
Other assets (994) 140 (26)
Accounts payable 501 (324) (1,457)
Other accrued liabilities 1,061 387 538
Deferred income 377 152 1,267
-------------- -------------- --------------
Net cash used in operating activities: (10,791) (10,302) (3,850)
-------------- -------------- --------------
Cash flows from investing activities
Capital expenditures (1,075) (2,489) (1,132)
Purchases of available-for-sale securities (23,550) (38,891) -
Purchases of held-to-maturity securities - - (1,000)
Maturities of available-for-sale securities 37,721 24,720 -
Maturities of held-to-maturity securities - 1,000 -
-------------- -------------- --------------
Net cash provided by (used in) investing activities: 13,096 (15,660) (2,132)
-------------- -------------- --------------
Cash flows from financing activities:
Payments of obligations under capital leases (1,207) (923) (247)
Payment of notes payable - (992) -
Proceeds from issuance of warrant 1,000 - -
Proceeds from issuance of common stock 1,463 16,672 11,804
Proceeds from issuance of stock of consolidated subsidiary 2 14,798 -
-------------- -------------- --------------
Net cash provided by financing activities 1,258 29,555 11,557
-------------- -------------- --------------
Net increase in cash and cash equivalents 3,563 3,593 5,575
Cash and cash equivalents, at beginning of year 10,862 7,269 1,694
============== ============== ==============
Cash and cash equivalents, at end of year $ 14,425 $ 10,862 $ 7,269
============== ============== ==============
Supplemental Disclosure of Noncash Investing and Financing Activities:
Deferred compensation from common stock option grant of
consolidated subsidiary $ 186 $ 143 $ -
============== ============== =============
Cash paid for interest on capital lease obligations $ 521 $ 582 $ 386
============== ============== =============
Preferred stock converted to common stock $ - $ - $ 2,602
============== ============== =============
Equipment acquired under capital leases $ 1,500 $ 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, 1997
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, as well as medical equipment manufactured by
other companies. In addition, the Company operates coronary artery scanning
test facilities through its consolidated subsidiary HeartScan Imaging, Inc.
("HeartScan"), in the United States.
BASIS OF CONSOLIDATION
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. In October 1995, HeartScan
issued to Imatron, the Series A and Series B Preferred Stocks in exchange for
the issued and outstanding shares of HeartScan Common Stock held by Imatron and
the $8,000,000 advances to HeartScan by Imatron.
On June 26, 1996, Imatron sold 100,000 shares of HeartScan Series A preferred
stock to unaffiliated third parties. The sale reduced the Company's controlling
interest in HeartScan to 48.3%. Due to certain equity exchange provisions
provided to these HeartScan Series A preferred shareholders (see notes 7 and
12), HeartScan's results of operations have been fully consolidated in the
accompanying consolidated financial statements. Future HeartScan operating
losses will not 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 are classified as minority
interest in the Company's consolidated balance sheet.
The Company's results of operations attributed to HeartScan operations include
revenues of $2,542,000, $1,293,000, and $460,000, and net losses of $8,172,000,
$7,845,000 and $2,232,000 for the fiscal years 1997, 1996 and 1995,
respectively. The net losses include non-cash minority interest expense of
$1,744,000 and $3,272,000 recorded in both 1997 and 1996, respectively, as a
result of the accounting treatment relative to its convertible Series A
Preferred Stock having "beneficial conversion features".
As of December 31, 1997, Imatron's controlling interest in HeartScan is 49.3%
(see Note 7). Imatron's interest in HeartScan is comprised of its ownership of
100,000 shares of HeartScan Series B Preferred Shares on an as converted basis.
The HeartScan Series A and B Preferred Stock have the right to vote with the
HeartScan common stock holders on all HeartScan matters with a number of votes
equal to the number of shares of common stock into which the Preferred Stock is
convertible. 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.
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.
<PAGE>
NEW ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS
130), which will be effective for financial statements for periods beginning
after December 15, 1997, and establishes standards for reporting and display of
comprehensive income and its components in a full set of general purpose
financial statements. The Company will make the required reporting of
comprehensive income in its consolidated financial statements for the first
quarter ending March 31, 1998.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 "Disclosures about Segments of a Business
Enterprise" (SFAS 131) which will be effective for financial statements
beginning after December 15, 1997, and establishes standards for disclosures
about segments of an enterprise. In its consolidated financial statements for
the year December 31, 1998, the Company will make the required disclosures.
LONG-LIVED ASSETS
The Company accounts for long-lived assets under, SFAS No. 121, Accounting for
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of.
SFAS No. 121 requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of assets may not be
recoverable. Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows expected
to be generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the asset exceeds the fair value of the assets. Assets to be disposed
of are reported at the lower of the carrying amount or fair value less costs to
sell.
CASH EQUIVALENTS
Cash equivalents consist of liquid instruments purchased with a maturity date of
three months or less and money market funds.
FINANCIAL INSTRUMENTS
In accordance with Statement of Financial Accounting Standards No. 115,
"Accounting for Certain Investments in Debt and Equity Securities", the Company
has classified all 1997 and 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, 1997 consist of
certificates of deposit.
As of December 31, 1995, the company classified certain investments as
held-for-maturity. All held-to-maturity investments matured during 1996.
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.
The carrying amounts reported in the balance sheet for receivables, accounts
payable, accrued liabilities and capital lease obligations approximate fair
value due to their short-term maturities.
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
<PAGE>
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 Siemens in the United States,
Europe, Canada, and India; Imatron Japan, Inc. in Japan, as well as other
distributors in the Pacific rim. The Company generally requires cash deposits or
irrevocable letters of credit for scanners ordered and maintains allowances for
potential credit losses. There have been no losses arising from the sale of
scanners. Spare parts are sold on terms to distributors and end-users. Some
receivables relating to such sales are taking a longer time to collect due to
economic and currency uncertainties in Asia. The Company has provided for bad
debts related to spare part sales.
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's 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. The company policy is
to reserve 100% on obsolete inventories, defined as parts which are no longer
used in production, upgrades and repairs. The reserves are periodically reviewed
and verified by the Company's manufacturing department.
Parts that are not defined as obsolete are classified into different
subsections. The reserve percentages for each subsection represent the total
value of parts in each subsection that have the potential to be obsolete in the
next 12 months. The parts are identified by the Company's manufacturing and
customer service personnel, since they have the most knowledge and expertise on
the status of each part and how they can be best utilized to satisfy the
Company's manufacturing and customer service requirements.
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 the term of the lease
(five years), using the units-of-production method (number of scans) based on
the estimated usage of the equipment. Upon purchase of the scanner, the Company
produces a projection of its anticipated scans for a particular scanner at a
particular location. The average projected scans for all centers by year is as
follows:
<PAGE>
Year Budgeted Scans
1 2,530
2 6,160
3 7,216
4 7,920
5 7,920
----------
31,746
==========
Consistent with the schedule above, depreciation is recorded at the higher of
actual or budgeted scans so that the scanner is fully depreciated at the end of
five years.
RESTRICTED CASH
In connection with a sales agreement in 1994, the Company issued letters of
credit to a purchaser related to performance bond requirements. The letters of
credit were guaranteed by certificates of deposit totaling approximately
$160,000 and $155,000 at December 31, 1996, and 1995, respectively. These
restricted cash amounts were classified as non-current assets (included in other
assets). As of December 31, 1997, the related letters of credit have expired and
the underlying certificates of deposit amounting to $180,000 has been classified
under short term investments.
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. The Company expensed the $20,000 investment upon payment. Had the
Company accounted for its investment under Accounting Principles Board ("APB")
Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock,
there would not be a material impact on the Company's consolidated financial
statements as the Joint Venture has a cumulative loss since the time of the
Company's initial investment. No significant profits are anticipated in the
future. The Joint Venture agreement between Imatron and Imatron Japan, Inc. does
not require additional funding by Imatron. Imatron 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 $4,648,000, $8,726,000, and $9,213,000 in
1997, 1996, and 1995, respectively, from sales to the Joint Venture and has
$1,438,000, $2,660,000, and $2,957,000 in accounts receivable from the Joint
Venture at December 31, 1997, 1996, and 1995, respectively. All scanner sales to
Imatron Japan, Inc. are sold under irrevocable letters of credit without a right
of return.
STOCK-BASED COMPENSATION
The Company follows the provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation," and has elected to continue to account for stock-based
compensation using methods prescribed in Accounting Principles Board Opinion
("APB") No. 25, "Accounting for Stock Issued to Employees," and related
Interpretations.
INCOME TAXES
The Company accounts for income taxes in accordance with SFAS No. 109,
"Accounting for Income Taxes." Under SFAS No. 109, deferred income taxes are
recognized for tax consequences in future years of differences between the tax
bases of assets and liabilities and their financial reporting amounts at each
balance sheet date based on enacted tax laws and statutory tax rates expected to
apply in the periods in which the differences are expected to affect taxable
income.
RECLASSIFICATIONS
Certain amounts in the accompanying 1996 combined financial statements have been
reclassified or restated in order to conform to the 1997 presentation.
<PAGE>
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 as discussed in Note 5. Revenues from clinics are
recognized when services are performed for the clinic customer.
SALE LEASEBACK ARRANGEMENT
The Company sold one, two and two scanners to third-party leasing companies in
1997, 1996 and 1995, respectively. HeartScan, in turn, entered into leasing
arrangements with these third-party leasing companies to obtain use of these
scanners in its' clinics. The provisions of these leasing arrangements include
monthly rental payments over a 5 year term with a guarantee of the payments by
Imatron. The Company evaluated the criteria included in paragraph 7 of Statement
of Financial Accounting Standard ("SFAS") No. 28, Accounting for Sales with
Leaseback, and the Emerging Issues Task Force ("EITF") Issue No. 90-14,
Unsecured Guarantee by Parent of Subsidiary's Lease Payments in Sale-Leaseback
Transaction, and concluded that these transactions were normal leaseback's to be
accounted for as sale-leaseback transactions. At their inception, the leasebacks
satisfied the criteria in paragraph 7(d) of SFAS No. 13, Accounting for Leases,
and as such HeartScan accounts for these leases as capital leases. Imatron
recognized revenue equal to its scanner cost and has deferred the profit on its
sales to the leasing companies. The Company is amortizing its deferred profit to
product sales over the five year term of the HeartScan leases. Imatron amortized
$501,000, $428,000 and $157,000 to product sales for these leases for the years
ended December 31, 1997, 1996 and 1995, respectively.
RESEARCH AND DEVELOPMENT
Research and development expenditures are charged to operations as incurred.
NET LOSS PER SHARE
The Company adopted SFAS No. 128, "Earnings per Share", as of December 31, 1997.
SFAS No. 128 establishes standards for computing and presenting earnings per
share. Net loss per share (basic) is computed based on the weighted average
number of common shares outstanding, and net loss per share (diluted) is
computed based on the weighted average number of common shares and dilutive
potential common shares outstanding during the period. Stock options and
warrants have not been included in the computation as their effect would have
been antidilutive. All prior period net loss per share data was restated by the
Company upon the adoption of SFAS 128.
<TABLE>
(In thousands, except per share amounts) 1997 1996 1995
------------------ ----------------- ------------------
<S> <C> <C> <C>
Net loss $(11,422) $ (13,737) $ (2,449)
================== ================= ==================
Denominator for basic loss per share - weighted
average common shares 78,461 74,406 57,598
Dilutive stock options - - -
------------------ ----------------- ------------------
Denominator for diluted loss per share 78,461 74,406 57,598
================== ================= ==================
Basic loss per share (0.15) (0.18) (0.04)
================== ================= ==================
Diluted loss per share (0.15) (0.18) (0.04)
================== ================= ==================
</TABLE>
<PAGE>
Note 2 - FINANCIAL INSTRUMENTS
Investments as of December 31, were as follows (in thousands):
1997 1996
--------------- -----------------
Money market mutual funds $ 1,635 $ 4,262
U.S. government obligations 1,999 8,077
Certificate of deposit 180 96
Commercial paper 10,791 12,231
--------------- -----------------
Total investments 14,605 24,666
Less amounts classified as cash and (14,425) (10,495)
cash equivalents --------------- -----------------
Short-term investments $ 180 $ 14,171
=============== =================
<TABLE>
<CAPTION>
Note 3 - BALANCE SHEET DETAIL
(in thousands)
December 31,
--------------------------------------
1997 1996
----------------- -----------------
Inventories consist of: (Amount in thousands)
<S> <C> <C>
Purchased parts and sub-assemblies $ 3,212 $ 2,994
Service parts 1,398 1,142
Work-in-progress 3,611 2,574
Finished product 4,705 3,683
----------------- -----------------
Inventories $ 12,926 $ 10,393
================= =================
Property and equipment, at cost, consist of:
Machinery and equipment $ 14,191 $ 11,964
Furniture and fixtures 1,589 1,408
Leasehold improvements 3,599 3,442
----------------- -----------------
19,379 16,814
Less accumulated depreciation and amortization (9,020) (6,712)
----------------- -----------------
Net property and equipment $ 10,359 $ 10,102
================ =================
Other accrued liabilities consist of:
Warranty and product upgrades $ 2,322 $ 1,867
Customer deposits 2,162 2,345
Employee compensation 795 758
Deferred service revenues 662 225
Other 1,114 799
----------------- -----------------
Other accrued liabilities $ 7,055 $ 5,994
================= =================
</TABLE>
<PAGE>
Note 4 - LINE OF CREDIT
As of December 31, 1997, the Company has $5,000,000 available under a line of
credit. Interest under the line of credit is computed based on the average daily
loan balance at a rate equal to prime plus 0.25%. No amounts were outstanding as
of December 31, 1997 and 1996. The Company must comply with certain financial
ratios and profitability. The Company is in compliance with all financial
convenants at December 31, 1997.
Note 5 - COLLABORATION AGREEMENTS
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 $15.0 million to the Company's C-150 Evolution Ultrafast CT
scanner research and development program over a three year period in order to
improve and enhance the scanner. No milestones or other performance related
results are tied to the payment of funds by Siemens. Imatron funds a portion
equal to a minimum of fifty percent of Siemens' contribution or $2,500,000
annually for three years, for the sole purpose of conducting the collaborative
agreement. The Company is not obligated to return the amount funded by Siemens.
However, Siemens has the right to terminate the collaborative research upon
three months written notice in the event objectives agreed upon by both parties
are not achieving reasonable progress. The results of the collaborative research
are jointly owned by the parties and cross-licensed. 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 is recognizing revenue ratably over the three year period as its
commitment to perform research and development under the agreement is being
incurred ratably over the same period. The Company has recognized $5,000,000,
$5,000,000 and $3,884,000 of revenue under the collaborative development
agreement in 1997, 1996, and 1995, respectively. The revenues recognized relate
to non-refundable payments intended to compensate the Company for its research
and development efforts. Under the now expired product development agreement
with Siemens, the Company recognized $1,753,000 in revenue in 1995.
In conjunction with the Memorandum of Understanding, Imatron transfererd the
ownership of five Imatron EBT patents to Siemens and canceled the minimum
purchase provision of the previous distribution agreement in satisfaction of
Imatron's $4.0 million notes payable to Siemens. Siemens agreed to exchange the
Company's $4.0 million notes payable subsequent to an arms-length negotiation
between the two parties. These patents were not part of the technology developed
under the Collaborative Research Agreement between Siemens and Imatron. The gain
which was calculated as the difference between the patents' book value of $0 and
the net carrying amount of the extinguished debt of $4,000,000, was recognized
as income in 1995.
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-upon 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. Revenues for warranty
services are recognized over the life of the contracts, while other service
revenues are recognized upon completion of work.
Effective April 1, 1998, Imatron's obligations and Siemens funding under the MOU
will terminate. Siemens will also surrender its exclusive distribution rights
and Imatron will assume worldwide distribution for its C-150 scanners.
TERARECON INC.
On July 22, 1997, the Company and TeraRecon Inc., a technology company that
produces high speed image processing devices for medical imaging systems,
entered into a development agreement whereby TeraRecon will provide Imatron with
a real-time image reconstruction system for use in conjunction with Imatron's
Ultrafast CT scanner. Upon completion and when delivered, the RTR-2000 system
will be exclusive to Imatron's Ultrafast CT scanner and will expand its current
applications to include new three-dimensional, CT flurography or real-time
viewing of computerized tomography (CT) images. It is an accessory to the base
scanner which certain customers may find useful. It will not render any existing
equipment obsolete.
In consideration for the successful development and delivery of RTR-2000
systems, the Company has agreed to issue an aggregate of 6,000,000 warrants to
purchase the Company's Common Stock at $4.50 per share. The warrants will be
issued in installments based on TeraRecon achieving certain milestones in
connection with the development of image reconstruction systems. In addition,
TeraRecon has agreed to pay the Company an aggregate of $2,000,000 for 4,000,000
of the 6,000,000 warrants and to make royalty payments to Imatron equal to 3% of
net sales of certain RTR-2000 systems sold to third parties.
<PAGE>
On October 21, 1997, the Company issued a total of 3,000,000 warrants to
TeraRecon upon the successful delivery of 4 Prototype I units. Pursuant to the
development agreement, TeraRecon paid the Company $1,000,000 for the warrant to
purchase 2,000,000 shares of the Company's common stock at $4.50 per share.
As Imatron did not receive a license in the TeraRecon technology nor is there
any future alternative uses to the prototypes purchased by Imatron, in
accordance with SFAS No. 2, Accounting for Research and Development Costs, a
$750,000 charge to research and development expense was recognized upon
TeraRecon meeting the agreed-upon milestones. In accordance with SFAS No. 123,
Accounting for Stock-Based Compensation, the Company's recorded research and
development expense was based on the fair market value of the warrants at the
time of issuance using an option pricing model.
Note 6 - COMMITMENTS, CONTINGENCIES, AND OTHER
OPERATING LEASES
The Company leases its present facilities under various operating leases
expiring between July 1998, and December 2005. Future minimum rental payments
under the leases as of December 31, 1997, are as follows (in thousands):
1998 $ 1,147
1999 1,076
2000 1,043
2001 938
2002 102
Thereafter 215
================
Total $ 4,521
================
Rent expense for all leases totaled $1,211,000, $1,080,000, and $921,000 in
1997, 1996, and 1995, respectively.
<PAGE>
CAPITAL LEASE OBLIGATIONS
The Company leases certain equipment under non-cancelable lease agreements. In
addition, HeartScan leases five 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, 1997, equipment under the
capital lease arrangements and included in property and equipment aggregated
$8,462,000. Accumulated amortization related to this equipment totaled
$1,846,986 as of December 31, 1997. Amortization expense is included in
depreciation and amortization.
Future minimum lease payments under capital lease obligations at December 31,
1997, are as follows (in thousands):
1998 $ 2,075
1999 2,124
2000 1,842
2001 796
2002 365
----------------
Total minimum payments 7,202
Less amounts representing interest (1,117)
----------------
Total principal 6,085
Less portion due within one year (1,578)
================
Long-term portion $ 4,507
================
Remaining deferred income on sale-leaseback transactions amounted to $1,992,000,
$1,920,000, and $1,586,000 at December 31, 1997, 1996, and 1995, respectively.
Interest paid on long-term obligations including capital lease obligations was
$521,000, $582,000, and $386,000 in 1997, 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 #4,352,021, "X-ray
Transmission Scanning System and Method and Electron Beam X-ray Scan Tube for
Use Therewith" in exchange for modified annual royalty payments to Emersub equal
to 2.125% of net sales of the C-150 Ultrafast scanner. The Company is obligated
to make annual royalty payments through January 7, 2000. Charges to operations
for 1997, 1996, and 1995 were $179,350, $91,470, and $91,470, respectively.
Pursuant to the Memorandum of Understanding with Siemens, the Company
transferred five patents to Siemens, two of which cover features of the
Company's C-150 scanner, in complete consideration of the cancellation by
Siemens of the $4 million term loan to the Company. As part of the agreement,
Siemens granted to the Company a non-exclusive, irrevocable, perpetual license
to the five patents. The license is subject to a royalty of $20,000 for each new
C-150 unit (or other EBT unit produced by Imatron after April 1, 1995),
commencing with the 21st C-150 (or other Imatron EBT) unit produced in any year
and continuing thereafter for ten years after such first quarter in which such
21st unit is produced. To date, Imatron has not produced more than 20 scanners
in any year and, therefore, no royalties have been due under this agreement.
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 warrant to purchase one share of Imatron Common Stock at
$2.31 per share. 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 five-year
warrants to purchase 2,000,000 shares of common stock at an average price of
$3.45 per share, netting proceeds of $11,348,000. In addition, in 1996, the
company issued an 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.
On July 7, 1997, the Company filed an amendment to its Certificate of
Incorporation. The amendment, which was approved by the Board of Directors on
April 30, 1997, and by the shareholders at the annual meeting on June 30, 1997,
increases the number of authorized shares of the Company's Common Stock from 100
million shares to 150 million.
<PAGE>
HEARTSCAN EQUITY TRANSACTIONS
The terms of the Preferred Shares include 1,000,000 authorized shares with par
value of $.001. There are 200,000 issued and outstanding shares at December 31,
1997 for all series of preferred stock of which 100,000 designated as "Series A
Preferred Stock" and 100,000 designated as "Series B Preferred Stock" are
outstanding at December 31, 1997. The holders of outstanding shares of Series A
and B Preferred Stock are entitled to receive dividends in preference to the
payment of any dividends on common stock. Before any dividend may be paid on the
common stock, a dividend in an amount equal to or greater than the dividend
proposed to be paid on the common shares must be paid on the Series A and B
Preferred Stock.
Each share of Series A and B Preferred Stock is entitled to ten votes and is
convertible into ten shares of common stock. Series A Preferred Stock has a
preference in liquidation over the common stock and other series of preferred
stock in the amount of $160.00 per share plus all accumulated and unpaid
dividends. Series B Preferred Stock has a preference in liquidation of $80.00
per share plus all accumulated and unpaid dividends, after payment has been made
to the holders of the Series A Preferred Stock.
To date, no dividend has been distributed to the holders of preferred stock.
Imatron originally reported $554,000 (48.3%) of HeartScan losses in its third
quarter of 1996 using the equity method of accounting. The remaining net loss of
$594,000 was attributed to the preferred stock ownership interest in HeartScan
in the third quarter of 1996. The result of the consolidation of results of the
operations 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.
As of December 31, 1997, $8,172,000 of losses were attributed to HeartScan
operations.
As of December 31, 1997, Imatron's controlling interest in HeartScan is 49.3%.
Imatron's interest in HeartScan is comprised of its ownership of 100,000 shares
of HeartScan Series B Preferred Shares on an as converted basis plus 41,155
common shares of two individuals from HeartScan who are also working for
Imatron. The 50.7% held by investors outside of Imatron is calculated on the
basis of 100,000 shares of HeartScan Series A Preferred Stock outstanding on an
as converted basis plus the common shares of HeartScan's President as he is not
an employee of Imatron. Imatron continues to control the operations of HeartScan
and will continue to consolidate HeartScan unless it relinquishes its control
over HeartScan's operations.
The HeartScan Series A Preferred Stock is held entirely by unaffiliated third
parties and is classified in the accompanying consolidated balance sheets at
December 31, 1997 and 1996, as minority interest. The HeartScan Series B
Preferred Stock is held entirely by Imatron.
CONVERTIBLE PREFERRED STOCK OF HEARTSCAN
On June 26, 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) 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 (March 28, 1998 - June 25,
1998) and each date that is three months thereafter to, including the 48th month
following the Preferred Stock closing. The quoted closing price of Imatron's
common stock at the date of the closing of the HeartScan Series A Preferred
Stock offering was $5.75 (See Note 12).
<PAGE>
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>
WARRANTS
<TABLE>
At December 31, 1997, outstanding warrants to purchase shares of the Company's common stock were as follows:
<CAPTION>
Shares reserved for
exercise of warrants
--------------------------
<S> <C>
Warrants, expiring in 2000, to purchase shares of common stock at $2.31 per share issued
under the October 1995 private placement 404,547
Warrants, expiring in 2001, to purchase shares of common stock at $1.71 per share issued
under the October 1995 private placement 192,400
Warrants, expiring in 2001, to purchase shares of common stock at $1.71 per share issued to
Sitrick & Company in lieu of investor relation fees 107,300
Warrants, expiring in 2002, to purchase shares of common stock at $2.74 per
share issued to Sitrick & Company in lieu of investor relation fees 77,040
Warrants, expiring in 1999, to purchase shares of common stock at $3.25 per share issued
under the May 1996 private placement 1,200,000
Warrants, expiring in 1999, to purchase shares of common stock at $3.75 per share issued
under the May 1996 private placement 800,000
Warrants, expiring in 2001, to purchase shares of common stock at $6.20 per share issued
under the 1996 HeartScan private placement 182,903
Warrants, expiring in 2002, to purchase shares of common stock at $2.63 per share issued for
professional services rendered to the Company 200,000
Warrants, expiring in 2001, to purchase shares of common stock at $4.50 per share issued to
TeraRecon under the July 1997 development agreement 1,000,000
Warrants, expiring in 2001, to purchase shares of common stock at $4.50 per share issued to
TeraRecon under the July 1997 development agreement 2,000,000
--------------------------
Total at December 31, 1997 6,164,190
==========================
<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.
In 1997, warrants were exercised to purchase a total of 284,400 shares of common stock at prices ranging from $1.71 to $2.31 per
share
</FN>
</TABLE>
COMMON STOCK RESERVED
At December 31, 1997, the Company has reserved shares of common stock for future
issuances as follows (in thousands):
Stock option plans 4,792
Stock options outside the plans 1,500
Stock purchase plan 534
Stock warrants 6,164
Stock bonus plans 673
Conversion of HeartScan Preferred A 10,667
-----------
Total 24,330
===========
Note 8 - STOCK BASED COMPENSATION
STOCK BONUS PLAN
In February 1987, the Company adopted the 1987 Stock Bonus Plan which was
approved by the shareholders. The stock bonus plan was adopted to reward and to
provide incentive to participants for services. The total number of common
shares that may be granted is 1,200,000, with no more than 400,000 shares
awarded in any fiscal year. The Company granted 97,655, 19,409, and 0 shares
under the plan in 1997, 1996, and 1995, respectively. Accordingly, the Company
recorded compensation expense amounting to $261,000, $69,000 and $0 in 1997,
1996 and 1995, respectively. As of December 31, 1997, 673,255 common shares are
reserved for future grants.
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, 1997, 533,887
shares were reserved and available for future issuance under the plan. A total
of 193,208, 228,222, and 334,975 shares were issued at an average price of
$2.06, $1.44, and $0.75 per share in 1997, 1996, and 1995, respectively.
<PAGE>
STOCK OPTION PLANS
At December 31, 1997, Imatron has two and HeartScan has one stock option plan,
which are described below. The Company applies APB No. 25 and related
interpretations in accounting for its plans. Accordingly, no compensation cost
has been recognized for its fixed stock option plans and its stock purchase
plans.
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 an option pricing model
with the following weighted-average assumptions:
1997 1996 1995
----------- ---------- -----------
Expected stock price volatility 80.2% 80.2% 80.2%
Risk-free interest rate 6.27% 6.25% 6.37%
Expected life - years 3.54 3.64 3.55
Expected dividend yield 0.00% 0.00% 0.00%
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 basic and diluted
loss per share would have been increased to the pro forma amounts indicated in
the table below (in thousands):
1997 1996 1995
--------------- ------------- -----------
Net loss - as reported ($11,422) ($13,737) ($2,449)
Net loss - pro forma ($12,452) ($14,156) ($2,620)
Basic and diluted net loss per share -
as reported ($0.15) ($0.18) ($0.04)
Basic and diluted net loss per share -
pro forma ($0.16) ($0.19) ($0.05)
The weighted average fair value of options granted in 1997, 1996 and 1995 were
$2.57, $2.63 and $1.24 per share, respectively. The weighted average remaining
contractual life of all options at December 31, 1997, is 3.54 years.
The pro forma effect on net loss 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.
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.
All stock options under the Directors Plan are granted at 85% of the common
stock's fair market value at the grant date. Options granted under the plan
generally vest evenly over four years following the grant date and expire five
years from the grant date.
<PAGE>
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 non-statutory stock options
to non-employee 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 non-statutory 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.
<TABLE>
A summary of the activity under the Imatron stock option plans is as follows:
<CAPTION>
Outstanding Options
-------------------------------------------------------
Shares Exercise Aggregate
Available for Number of price per exercise price
Grant shares share (thousands)
--------------- -------------- ----------------- ---------------
<S> <C> <C> <C> <C>
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 canceled 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 canceled 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
1983 option plan termination (14,000) - $0.56 (8)
Options granted (1,219,360) 1,219,360 $1.78 - $3.31 3,129
Options exercised - (305,576) $0.48 - $2.63 (274)
Options canceled 83,273 (83,273) $0.56 - $2.63 (171)
--------------- -------------- ----------------- ---------------
Balances at December 31, 1997 1,104,077 3,687,886 $0.43 - $2.63 $ 5,584
=============== ============== ================= ===============
</TABLE>
<PAGE>
<TABLE>
The following table summarizes information concerning outstanding and exercisable options as of December 31, 1997 (in
thousands except per share amounts):
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------- -----------------------------------
Weighted
Average Weighted
Remaining Average
Range of Exercise Number of Contractual Weighted Average Number of
Prices Shares Life Exercise Price Shares Exercise Price
- ------------------------ ---------------- ------------- --- ----------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
$0.51 - $2.00 2,228 1.43 $0.79 1,727 $0.79
$2.01 - $3.50 1,385 3.92 $2.51 452 $2.51
$3.51 - $5.00 75 4.26 $4.66 6 $3.99
================ ================ ================== ================ ===============
3,688 2.42 $1.51 2,185 $1.16
================ ================ ================= ================ ===============
</TABLE>
Options for 2,185,394, 1,588,533, and 1,406,997 shares of the Company's common
stock were exercisable under the plans at December 31, 1997, 1996, and 1995 at
an aggregate exercise price of $2,527,620, $1,460,599, and $1,146,916,
respectively.
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 have a
maximum term of ten years.
<TABLE>
A summary of the activity under the HSI Stock Option Plan is as follows:
<CAPTION>
Shares Aggregate
available for Number of shares Aggregate exercise price
grant outstanding Price per share (in thousands)
----------------- ------------------ ------------------ --------------------
<S> <C> <C> <C> <C>
Balances at December 31, 1995 137,500 112,500 $ 0.001 $ -
Options granted (75,000) 75,000 0.100 8
Options exercised - (72,656) 0.001 -
----------------- ------------------ ------------------ -------------------
Balances at December 31, 1996 62,500 114,844 $ 0.07 $ 8
---------------- ---------------- ----------------- ------------------
Shares reserved 250,000 - - -
Options granted (153,500) 153,500 $ 0.25 $ 38
Warrants issued (30,002) 30,002 16.00 480
Options exercised - (38,811) 0.04 (2)
------------------ ------------------ -------------------- -------------------
Balances at December 31, 1997 128,998 259,535 $ 2.02 $ 524
================== ================== ==================== ===================
</TABLE>
At December 31, 1996, options to purchase 18,750 shares of HeartScan common
stock were exercisable at an aggregate exercise price of $1,875.
At December 31, 1997, there were 88,815 shares of HeartScan common stock
exercisable at an aggregate exercise price of $489,813.
The difference between the exercise price and fair market value of HeartScan's
common stock at the date of issue of the stock options totaling $329,000 has
been recorded as deferred compensation and a component of stockholders' equity.
Of this amount, $70,000 and $27,000 have been recognized as compensation expense
in 1997 and 1996, respectively. The remaining $231,000 will be recognized as an
expense as the shares vest over a period of up to four years. The value was
established at $2.00 per share based on the fair value of Imatron stock at the
time of issuance of the HeartScan options.
<PAGE>
<TABLE>
The following table summarizes information concerning HeartScan's outstanding and exercisable options as of December 31,
1997 (in thousands except per share amounts):
<CAPTION>
Options Outstanding Options Exercisable
------------------------------------- -----------------------------------
Weighted
Average Weighted
Remaining Average
Range of Exercise Number of Contractual Weighted Average Number of
Prices Shares Life Exercise Price Shares Exercise Price
- ------------------------ ---------------- ---------------- ----------------- ---------------- ---------------
<S> <C> <C> <C> <C>
$.001 7,033 7.83 $0.001 - -
$0.10 - $0.25 222,500 9.17 $ 0.20 58,813 $0.17
$16.00 30,002 7.83 $16.00 30,002 $16.00
================ ================ ================ ================ ===============
259,535 8.98 $2.02 88,815 $5.51
================ ================ ================= ================ ===============
</TABLE>
Note 9 - RETIREMENT SAVINGS PLAN
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 $259,000, $212,000, and $169,000 in 1997, 1996, and 1995,
respectively.
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.
Significant components of the Company's deferred tax assets and liabilities as
of December 31, are as follows (in thousands):
1997 1996
----------- --------------
Deferred tax assets:
Net operating loss carryforwards $ 26,890 $ 24,489
Federal credit carryforwards 970 842
Expenses not currently deductible for tax purposes 6,478 3,446
Deferred revenue previously taxed 394 614
Other 265 150
----------- --------------
Deferred tax assets 34,997 29,541
Valuation allowance (32,081) (28,838)
----------- --------------
Net deferred tax assets 2,916 703
----------- --------------
Deferred tax liabilities:
State income taxes 764 479
Other 2,152 224
----------- --------------
Deferred tax liabilities 2,916 703
----------- --------------
Net deferred taxes $ - $ -
============ =============
The net change in the valuation allowance was $3,243,000, $6,431,000, and
$925,000 for 1997, 1996 and, 1995 respectively, principally resulting from net
operating loss carry forwards.
The reconciliation of income tax attributable to continuing operations compared
at the U.S. federal statutory rates to income tax expense is as follows:
<PAGE>
1997 1996 1995
---------- ---------- ---------
Federal statutory rate (34%) (34%) (34%)
Valuation allowance 34% 34% 34%
========== ========== =========
Effective tax rate 0% 0% 0%
========== ========== =========
Due to the issuance of preferred stock which occurred June 26, 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, 1997, the Company has net operating loss carryforwards for
federal and state income tax purposes of approximately $62,237,000 and
$7,185,000, respectively. Additionally, the Company has research and development
and alternative minimum tax credit carryforwards of approximately $970,000 at
December 31, 1997. The net operating loss and the research and development tax
credit carry forwards expire in various years from 1998 through 2012. In
addition, HeartScan has net operating loss carryforwards for federal and state
income purposes of approximately $13,315,000 and $6,177,000, respectively. The
net operating loss carryforwards expire in various years from 2001 through 2012.
Pursuant to the Tax Reform Act of 1986, annual utilization of the Company's net
operating loss and tax credit carry forwards may be limited if a cumulative
change in ownership of more than 50% is deemed to occur within any three-year
period.
Note 11 - SEGMENT INFORMATION AND FOREIGN SALES
The Company operates in two industry segments. Imatron operates in one industry
segment in which it designs, manufactures, services and markets a computed
tomography scanner and HeartScan Imaging, Inc., which operates centers that
perform the coronary artery scan procedures. Imatron's identifiable assets
principally consist of cash and cash equivalents, receivables, inventories and
net investments in HeartScan. The scanners used by HeartScan clinics represent a
the majority of HeartScan's identifiable assets. The intercompany eliminations
include Imatron's net investments in HeartScan, intercompany profits and
intercomapany receivables. The following table summarizes the results of
operations for the Company's two major business segments for each year ended
December 31:
<PAGE>
<TABLE>
Imatron HeartScan Eliminations Consolidated
(In thousands) --------------- -------------- -------------- ----------------
1997:
<S> <C> <C> <C> <C>
Sales to unaffiliated customers $ 32,233 $ 2,542 $ - $ 34,775
Sales to affiliated customers 5,084 - (436) 4,648
Total Revenue 37,317 2,542 (436) 39,423
Operating profit loss (3,915) (6,229) - (10,144)
Identifiable assets 37,376 13,859 (2,012) 49,223
Depreciation and amortization expense for
the period 665 1,653 2,318
Capital expenditures for the period 1,015 60 1,075
1996:
Sales to unaffiliated customers $ 15,749 $ 1,293 $ - $ 17,042
Sales to affiliated customers 9,092 - (366) 8,726
Total revenue 24,841 1,293 (366) 25,768
Operating profit loss (8,046) (4,343) (20) (12,409)
Identifiable assets 35,164 20,478 (2,450) 53,192
Depreciation and amortization expense for
the period 580 794 - 1,374
Capital expenditures for the period 1,138 1,351 - 2,489
1995:
Sales to unaffiliated customers $ 17,027 $ 460 $ - $ 17,487
Sales to affiliated customers 9,346 - (133) 9,213
Total revenue 26,373 460 (133) 26,700
Operating loss (3,693) (2,465) (6,158)
Identifiable assets 27,061 5,057 (1,242) 30,876
Depreciation and amortization expense for
the period 1,269 440 - 1,709
Capital expenditures for the period 588 544 - 1,132
</TABLE>
Foreign based revenues relate to the sale of scanners by the Company. The sale
of scanners to end-users outside the United States were $22,290,000,
$10,398,000, and $11,300,000 in 1997, 1996, and 1995, respectively. The scanner
sales price varies depending on the customer requirements. In particular, sales
to Siemens, Imatron Japan, Inc. and third-party leasing companies have a lower
gross margin than sales to third parties. The following table represents the
scanner sales by significant geographic areas (in thousands):
1997 1996 1995
---------------- ---------------- ---------------
United States ( a ) $ 2,803 $ 2,747 $ 1,821
Europe ( b ) 5,064 1,748 1,000
Japan ( c ) 4,200 7,150 7,150
Asia Pacific ( d ) 10,896 1,500 3,150
South Africa 2,130 - -
================ ================ ==============
Total scanner sales (e) $ 25,093 $ 13,145 $ 13,121
================ ================ ==============
(a) Sales to third-party leasing companies under the sale-leaseback transactions
amounted to $1,774,000 and $1,821,000 , 1996 and 1995, respectively. Sales
to Siemens amounted to $1,603,000 in 1997.
(b) Sales to Siemens amounted to $4,137,000, $1,748,000 and $1,000,000 in 1997,
1996 and 1995, respectively. Sales to third-party leasing companies under
the sale-leaseback transactions amounted to $977,000 in 1997.
(c) Sales to an affiliated customer, Imatron Japan, Inc.
(d) Sales to customers in China, Malaysia, Singapore and Korea.
(e) All sales are denominated in US currency, therefore, there are no foreign
currency risk.
<PAGE>
A summary of identifiable assets of the HeartScan segment (in thousands):
1997 1996 1995
---------------- ------------- ---------------
Cash $ 6,025 $ 9,617 $ 187
Trade receivables 272 234 41
Prepaid expenses 63 63 51
---------------- ------------- ---------------
Current assets 6,360 9,914 279
Property and equipment, net 7,985 8,059 4,773
Other assets 5 2,505 5
---------------- ------------- ---------------
Total assets $ 14,350 $ 20,478 $ 5,057
================ ============= ===============
<PAGE>
Note 12 - RESTATEMENT
In March 1997, subsequent to the Company finalizing its 1996 consolidated
financial statements, the Securities and Exchange Commission ("SEC") announced
its position on accounting for the issuance of convertible preferred stock with
a nondetachable conversion feature that is deemed "in the money" at the date of
issue (a "beneficial conversion feature"). The beneficial conversion feature is
initially recognized and measured by allocating a portion of the preferred stock
proceeds equal to the intrinsic value of that feature to additional
paid-in-capital. The intrinsic value is calculated at the date of issue as the
difference of the conversion price and the quoted market price of the Company's
common stock, into which the security is convertible, multiplied by the number
of shares into which the security is convertible. The discount resulting from
the allocation of proceeds to the beneficial conversion feature is treated as a
dividend and is recognized as a return to the preferred shareholders over the
minimum period in which the preferred shareholders can realize that return (i.e.
from the date the securities are issued to the date they are first convertible).
The accounting for the beneficial conversion feature requires the use of an
unadjusted quoted market price (i.e. no valuation discounts allowed) as the fair
value used in order to determine the intrinsic value dividend. Additionally,
preferred dividends of a subsidiary are included in minority interest as a
charge against income.
Prior to applying the accounting described above in its previously issued
financial statements, the Company had not recognized an intrinsic value dividend
on the HeartScan preferred stock which was issued in June 1996. The discounted
conversion features of this preferred stock into Imatron common stock (the
immediate conversion at $5.00 per share and the conversion in two years from the
date of the preferred stock issuance at a 27% discount) was provided to the
preferred shareholders, in essence to provide them with an exit strategy in the
absence of a HeartScan IPO (see Notes 1 and 7). Thus, the Company did not
believe a discount should be recognized on a contingently issuable security.
Furthermore, at the time of agreeing to the terms of the transaction the $5 per
share immediate conversion price was above the market price of the Company's
common stock but at the time the HeartScan preferred stock was actually issued,
the market price had increased to $5.75 and thereafter, it dropped below $5
again. Accordingly, the Company did not believe that any calculation of the
discount should include the impact of this short-term market fluctuation.
In December 1997, the staff of the SEC gave a speech further refining its March
1997 announcement. Based on discussions with the staff of the SEC in April 1998,
the staff concluded that the Company should retroactively apply its announcement
because it should be applied to contingently issuable securities and, as
discussed in the December speech, the portion attributable to the discount that
could have been obtained immediately on conversion (even though the shares had
not been registered yet) should be recognized on the day the preferred shares
were issued. The balance of the discount based on a market value of $5.75 per
common share is being recognized over two years from the date of issuance.
The consolidated financial statements as of and for the year ended December 31,
1996 have been restated to give effect to the accounting treatment described
above. The restatement resulted in (1) a reclassification in the consolidated
balance sheet of $5,890,000 reducing minority interests and increasing
additional paid-in capital (equity) and (2) the recognition of a minority
interest charge of $3,272,000 (including $2,400,000 as of the date of the
preferred shares were issued) in the consolidated statement of operations
increasing the Company's net loss from $10,465,000 to $13,737,000. The remaining
discount of $2,618,000 will be charged to minority interests through June 30,
1998.
The restatement of the previously issued 1996 consolidated financial statements,
in order to apply the accounting described herein for the intrinsic value of the
beneficial conversion features, does not affect the cash flows of the Company.
The minority interest is recognized as an increase in minority interest in the
balance sheet. If the preferred shareholders elect to convert their shares to
Imatron common stock, the minority interest will then convert to Imatron equity.
<PAGE>
IMATRON INC.
Index of Exhibits
Exhibit SEC
Number Description Page No.
(See Footnotes)
3.1 (1) Certificate of Incorporation of the Company, as amended, as of
March 31, 1983.
3.3 (2) Certificate of Amendment of Certificate of Incorporation filed
with the New Jersey Secretary of State on June 17, 1988.
3.4 (2) Certificate of Amendment of Certificate of Incorporation filed
with the New Jersey Secretary of State on July 26, 1988.
3.5 (3) Certificate of Correction of Certificate of Amendment of
Certificate of Incorporation filed with the New Jersey
Secretary of State on February 7, 1989.
3.6 (4) Certificate of Amendment of Certificate of Incorporation filed
with the New Jersey Secretary of State on March 29, 1990.
3.7 (5) Certificate of Amendment of Certificate of Incorporation filed
with the New Jersey Secretary of State on December 7, 1990.
3.8 (6) Certificate of Amendment of Certificate of Incorporation filed
with the New Jersey Secretary of State on July 7, 1997.
3.9 (7) Bylaws, as amended April 30, 1992.
4.1 (8) Form of Warrant issued to investors in Private Offering
concluded October 19, 1995.
4.2 (9) Form of Warrant issued to investors in Private Offering
concluded May 24, 1996.
4.3 (10) Form of Warrant issued to Gary Post on March 8, 1996.
4.4 (10) Form of Warrant issued to investors in HeartScan Private
Offering concluded June 24, 1996.
4.5 Form of Warrant issued to TeraRecon Inc. on October 15, 1997.
4.6 Form of Warrant issued to TeraRecon Inc. on October 21, 1997.
4.7 Form of Warrant issued to investors in connection with a Private
Offering which concluded January 28, 1997
<PAGE>
Exhibit SEC
Number Description Page No.
(See Footnotes)
10.1 (1) Sublicense Agreement between the Company and Emersub
Incorporated dated February 1, 1981.
10.2 (11) Amendment to Sublicense Agreement between Registrant and Emersub
Incorporated dated June 30, 1986.
10.3 (4) License Agreement dated as of September 13, 1988 between the
Company and EMI Limited
10.4 (23) 1997 Stock Bonus Incentive Plan
10.5 (3) Amendment dated July 20, 1987 to Lease dated August 23, 1983 by
and between the Company and Diodati Property Trust and
Patrician Associates, Inc.
10.6 (7) Polly Force Distribution Agreement
10.7 (13)* Basic Agreement between the Company and Siemens Corporation
dated March 14, 1991
10.8 (13) Loan Agreement between the Company and Siemens Corporation dated
March 14, 1991
10.9 (13)* Exclusive Importer Agreement dated November 12, 1990 between the
Company and Mitsui & Co., Ltd.
10.10 (13)* Distributorship Agreement dated November 12, 1990 among the
Company, Mitsui & Co., Ltd. and PASCO Corporation
10.11 (13) Common Stock Purchase Agreement dated October 15,1990 between
the Company and PASCO Corporation
10.12 (14) 1991 Non-Employee Director's Stock Option Plan
10.13 (15) Lease Agreement between the Company and J. Grant Monahon, James
S. Keagy and Jeffrey H. Stevenson, as Trustees of AEW #79 Trust
for the premises located at 389 Oyster Point Boulevard, South
San Francisco, California, dated November 1, 1991
10.14 (15) Amendment No. 1 to Lease Agreement between the Company and J.
Grant Monahon, James S. Keagy and Jeffrey H. Stevenson, as
Trustees of AEW #79 Trust for the premises located at 389
Oyster Point Boulevard, California, dated June 15, 1992
10.15 (15) Second amendment to Sublicense Agreement between the Company and
Emersub Incorporated dated October 1, 1990
10.16 (15) Agreement dated October 31, 1991, to terminate Lease Agreement
dated August 23, 1983
<PAGE>
Exhibit SEC
Number Description Page No.
(See Footnotes)
10.17 (15) Release and Settlement Agreement between the Company and Arthur
P. Gould & Co. dated July 27, 1992
10.18 (16) Right of first refusal and option agreement between the Company
and FI.M.A.I. Holding, S.A. dated January 22, 1993
10.19 (16)* Amendment No.1 to Basic Agreement between the Company and
Siemens Corporation dated September 30, 1992
10.20 (16) Amendment No.1 to loan agreement between the Company and
Siemens Corporation dated December 31, 1992
10.21 (16) Amendment No.2 to loan agreement between the Company and
Siemens Corporation dated March 12, 1993
10.22 (16) Mortgage and Security Agreement dated as of March 12, 1993
between Imatron Inc. and Siemens Corporation
10.23 (16)* Patent License Agreement dated as of March 12, 1993 between
Imatron Inc. and Severson & Werson, A Professional
Corporation
10.24 (16) Escrow Holder Agreement dated as of March 12, 1993 by and among
Imatron Inc., Siemens Corporation and Severson & Werson, A
Professional Corporation
10.25 (16)* Sole License Agreement dated as of March 12, 1993 between
Imatron Inc. and Siemens Corporation
10.26 (16) C-150 License Agreement dated as of March 12, 1993 between
Imatron Inc. and Siemens Corporation
10.27 (16)* License Agreement dated as of March 12, 1993 between Imatron
Inc. and Siemens Corporation
10.28 (16) Amendment No. 2 to Lease Agreement between the Company and J.
Grant Monahon, James S. Keagy and Jeffrey H. Stevenson,
as Trustees of AEW #79 Trust for the premises located at 389
Oyster Point Boulevard, California dated December 31, 1992
10.29 (16) Termination Agreement dated December 9, 1992, terminating
Stockholders Agreement dated August 13,1990, between the
Company and FI.M.A.I Holding, S.A.
10.30 (16) Amendment No.1 dated February 23, 1993, to Release & Settlement
Agreement
10.31 (16) Form of Registration Rights Agreement between the Company and
investors in Private Offering concluded September 15,1992
10.32 (17) 1993 Stock Option Plan, as amended to date
10.33 (18) 1994 Employee Stock Purchase Plan, as amended to date
<PAGE>
Exhibit SEC
Number Description Page No.
(See Footnotes)
10.34 (19) Settlement Agreement dated December 10, 1993 between the
Company and Mitsui & Co., ltd.
10.35 (19) Transition Agreement dated December 10, 1993 between the
Company and Mitsui & Co., Ltd.
10.36 (20) Amendment No. 2 to Basic Agreement dated December 14, 1993
between the Company and Siemens Corporation.
10.37 (20) Amendment to Loan Agreement and Waiver dated December 14, 1993
between the Company and Siemens Corporation.
10.38 (21) Executive Employment Agreement dated as of June 11, 1993
between the Company and S. Lewis Meyer.
10.39 (21) Warrant Agreement dated June 7, 1993 between the Company and S.
Lewis Meyer.
10.40 (21) Employment Agreement dated December 15, 1993 between the
Company and Gary H. Brooks.
10.41 (21) Employment Agreement dated October 1, 1993 between the Company
and Dale Grant.
10.42 (21) Agreement and Joint Company Agreement between the Company, Tobu
Land System Company and Kino Corporation dated January 7, 1994
10.43 (21) Distributorship Agreement between the Company and Imatron Japan
K. K. dated February 3, 1994.
10.44 (21) First Amendment to Distributorship Agreement between the
Company and Imatron Japan K. K. dated February 8, 1994.
10.45 (21) Memorandum of Understanding dated February 2, 1994 between the
Company and Siemens AG, Medical Engineering Group.
10.46 (21) Memorandum of Understanding dated February 2, 1994 between
Company and Siemens AG, Medical Engineering Group (Evolution
Upgrade project and distribution agreement).
10.47 (21) Letter Agreement dated March 7, 1994 from FI.M.A.I. Holding S.A.
10.48 (22)* Amendment No. 3 to Basic Agreement dated March 1, 1994 between
the Company and Siemens Corporation.
10.49 (22)* Amendment No. 4 to Basic Agreement dated as of October 20, 1994
between the Company and Siemens Corporation.
<PAGE>
Exhibit SEC
Number Description Page No.
(See Footnotes)
10.50 (22)* Amendment No. 5 to Basic Agreement dated as of November 17, 1994
between the Company and Siemens Corporation.
10.51 (22)* Amendment No. 6 to Basic Agreement dated as of December 28,
1994 between the Company and Siemens Corporation and related
Letter Agreement dated December 29, 1994.
10.52 (22)* Amendment No. 7 to Basic Agreement dated as of February 28,
1995 between the Company and Siemens Corporation.
10.53 (22)* Memorandum of Understanding dated March 31, 1995 between the
Company and Siemens Corporation.
10.54 (24) Development Agreement dated July 22, 1997 between the Company
and TeraRecon Inc.
10.55 (25) Stock Purchase Agreement between the Company, HeartScan
Imaging, Inc., and investors in a Private Offering which
concluded June 24, 1996.
10.56 (10) Form of Warrant Purchase Agreement between the Company and
investors in the Private Offering which concluded June 24, 1996.
10.57 Agreement for Service Support dated February, 1997 between the
Company and Siemens Medical Systems, Inc.
10.58 Warrant Purchase Agreement between the Company and TeraRecon
Inc. dated October 15, 1997
10.59 Warrant Purchase Agreement between the Company and TeraRecon
Inc. dated October 21, 1997
11.0 Computation of Per Share Earnings.
23.01 Consent of Independent Auditors.
23.02 Consent of Independent Auditors.
27.01 Financial Data Schedule, 1996.
27.02 Financial Data Schedule, 1997.
_______________
* Confidential Treatment Request granted by the Securities and
Exchange Commission.
<PAGE>
(1) Filed as an Exhibit to the Company's Registration Statement on Form S-1
filed with the Commission on June 1, 1983 (File No. 2-84146) and
incorporated herein by reference.
(2) Filed as an Exhibit to the Company's Registration Statement on Form S-8
filed with the Commission on February 3, 1989 (File No. 33-26833) and
incorporated herein by reference.
(3) Filed as an Exhibit to the Form 8 Amendment Number 1 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1988
filed with the Commission on May 2, 1989 and incorporated herein by
reference.
(4) Filed as an Exhibit to the Company's Annual Report Form 10-K for the
Fiscal year ended December 31, 1989 and incorporated herein by
reference.
(5) Filed as an Exhibit to the Company's Registration Statement Form S-3
filed on January 24, 1991 (File No. 33-38676) and incorporated herein
by reference.
(6) Filed as an Exhibit to the Company's Registration Statement on Form 8-K
filed with the Commission on July 17, 1997 and incorporated herein by
reference.
(7) Filed as an Exhibit to Post-Effective Amendment Number 1 to the
Company's Registration Statement Form S-3 filed with the Commission
on May 5, 1992 (File No. 33-32218) and incorporated herein by
reference.
(8) Filed as an Exhibit to the Company's Registration Statement on Form S-3
filed on May 10, 1996 (Registration No. 333-3529) and incorporated
herein by reference.
(9) Filed as an Exhibit to the Company's Registration Statement on Form S-3
filed on June 25, 1996 (Registration No. 333-6749) and incorporated
herein by reference.
(10) Filed as an Exhibit to the Company's Registration Statement on Form S-3
filed on September 6, 1996 (Registration No.333-11515) and
incorporated herein by reference.
(11) Filed as an Exhibit to the Company's Registration Statement on Form S-1
filed with the Commission on September 11, 1986 (File No. 33-8668) and
incorporated herein by reference.
(12) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1983 and incorporated herein by
reference.
(13) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990 and incorporated herein by
reference.
(14) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1991 and incorporated herein by
reference.
(15) Filed as an Exhibit to the Company's Amendment No.1 to Post-Effective
Amendment No.1 to Form S-3 (file No. 33-32218) filed with the
Commission on August 7, 1992 and incorporated herein by reference.
(16) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended December, 1992 and incorporated herein by reference.
<PAGE>
(17) Filed as an Exhibit to the Company's Registration Statement on Form S-8
filed on August 3, 1993 (Registration No. 33-66992).
(18) Filed as an Exhibit to the Company's Registration Statement on Form S-8
filed on November 16, 1993 (Registration No. 33-71786).
(19) Filed as an Exhibit to the Company's Current Report on Form 8-K filed
on January 26, 1994 and incorporated herein by reference.
(20) Filed as an Exhibit to the Company's Current Report on Form 8-K filed
on February 4, 1994 and incorporated herein by reference.
(21) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31 1993, and incorporated herein by
reference.
(22) Filed as an Exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31,1994 and incorporated herein by
reference.
(23) Filed as an Exhibit to the Company's Registration Statement on Form S-8
filed on October 30, 1996 (Registration No.333-15081) and incorporated
herein by reference.
(24) Filed as an Exhibit to the Company's Current Report on Form 8-K filed
on July 22, 1997 and incorporated herein by reference.
(25) Filed as an Exhibit to the Company's Current Report of Form 8-K filed
on July 1, 1996 and incorporated herein by reference.
<PAGE>
Exhibit 4.5
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY SALE, TRANSFER,
PLEDGE OR OTHER DISPOSITION THEREOF MAY BE MADE ONLY (i) IN A REGISTRATION UNDER
SAID ACT OR (ii) IF AN EXEMPTION FROM REGISTRATION UNDER SAID ACT IS AVAILABLE
AND THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL TO THAT EFFECT REASONABLY
SATISFACTORY TO IT
IMATRON INC.
COMMON STOCK PURCHASE WARRANT
This Warrant Expires October 15, 2001
Warrant No. 97-TR1 Shares: 1,000,000
THIS CERTIFIES that, subject to the terms and conditions herein set forth,
TeraRecon Inc. (the "Holder") is entitled to purchase from Imatron Inc., a New
Jersey corporation (the "Company"), at any time or from time to time during the
Exercise Period (as hereinafter defined) the number of shares of fully paid and
non-assessable shares of Common Stock of the Company (the "Shares") as provided
herein upon surrender hereof at the principal office of the Company, and, at the
election of the holder hereof, upon payment of the purchase price at said office
in cash or by cashier's check or by the wire transfer of funds in a dollar
amount equal to the purchase price of the Shares for which the consideration is
being given.
This Warrant shall be exercisable for that number of Shares as set forth above.
A. Purchase Price. Subject to adjustment as hereinafter provided, the purchase
price of one share of Common Stock (or such securities as may be substituted for
one share of Common Stock pursuant to the provisions hereinafter set forth)
shall be Four Dollars and Fifty Cents ($4.50) per share. The purchase price of
one share of Common Stock is referred to herein as the "Warrant Price".
B. Exercise Period. The exercise Period shall mean the period commencing on the
date hereof and ending four years thereafter.
C. Adjustment of Warrant Price and Number of Shares. The number and kind of
securities issuable upon the exercise of this Warrant shall be subject to
adjustment from time to time upon the happening of certain events as follows:
1. Adjustment of Warrant Price and Number of Shares. The Warrant Price and the
number of shares purchasable upon the exercise of this Warrant shall be subject
to adjustment from time to time upon the occurrence of certain events described
in this Section
3. Upon each adjustment of the Warrant Price, the Holder of this Warrant shall
thereafter be entitled to purchase, at the Warrant Price resulting from such
adjustment, the number of shares obtained by multiplying the Warrant Price in
effect immediately prior to such adjustment by the number of shares purchasable
pursuant hereto immediately prior to such adjustment, and dividing the product
thereof by the Warrant Price resulting from such adjustment. In case the Company
shall at any time subdivide its outstanding shares of Common Stock into a
greater number of shares, the Warrant Price in effect immediately prior to such
subdivision shall be proportionately reduced, and conversely, in case the
outstanding shares of Common Stock of the Company shall be combined into a
smaller number of shares, the Warrant Price in effect immediately prior to such
combination shall be proportionately increased.
2. Adjustment for Dividends in Stock. In case at any time or from time to time
on or after the date hereof the holders of the Common Stock of the Company (or
any shares of stock or other securities at the time receivable upon the exercise
of this Warrant) shall have received, or, on or after the record date fixed for
the determination of eligible stockholders, shall have become entitled to
receive, without payment therefor, other or additional stock of the Company by
way of dividend (other than as provided for in Paragraph 2(b) herein), then and
in each such case, the holder of this Warrant shall, upon the exercise hereof,
be entitled to receive, in addition to the number of shares of Common shall,
upon the exercise hereof, be entitled to receive, in addition to the number of
shares of Common Stock receivable thereupon, and without payment of any
additional consideration therefor, the amount of such other or additional stock
of the Company which such holder would hold on the date of such exercise had it
been the holder of record of such Common Stock on the date hereof and had
thereafter, during the period from the date hereof to and including the date of
such exercise, retained such shares and/or all other additional stock receivable
by it as aforesaid during such period, given effect to all adjustments called
for during such period by this Paragraph 3. The Company shall give the Holder
thirty (30) days advance written notice of any dividend causing an adjustment
pursuant to this subsection.
3. Adjustment for Changes in Common Stock. In the event changes in the
outstanding Common Stock of the Company by reason of split-ups,
recapitalizations, reclassifications, mergers, consolidations, combinations or
exchanges of shares, separations, reorganizations, liquidations, or the like,
are effected in such a way that holders of Common Stock shall be entitled to
receive stock, securities, or other assets or property (an "Organic Change"),
then, as a condition of such Organic Change, lawful and adequate provisions
shall be made by the Company whereby the Holder hereof shall thereafter have the
right to purchase and receive (in lieu of the shares of the Common Stock of the
Company immediately therefore purchasable and receivable upon the exercise of
the rights represented hereby) such shares of stock, securities or other assets
or property as may be issued or payable with respect to or in exchange for a
number of outstanding shares of such Common Stock equal to the number of shares
of such stock immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby; provided, however, that in the event
the value of the stock, securities or other assets or property (determined in
good faith by the Board of Directors of the Company) issuable or payable with
respect to one share of the Common Stock of the Company immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby is
in excess of the Warrant Price hereof effective at the time of a merger and
securities received in such reorganization, if any, are publicly traded, then
this Warrant shall expire unless exercised prior to such Organic Change. In the
event of any Organic Change, appropriate provision shall be made by the Company
with respect to the rights and interests of the Holder of this Warrant to the
end that the provisions hereof (including, without limitation, provisions for
adjustments of the Warrant Price and of the number of shares purchasable and
receivable upon the exercise of this Warrant) shall thereafter be applicable, in
relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise hereof.
4. Certain Events. If any change in the outstanding Common Stock of the Company
or any other event occurs as to which the other provisions of this Section 3 are
not strictly applicable or if strictly applicable would not fairly protect the
purchase rights of the Holder of the Warrant in accordance with such provisions,
then the Board of Directors of the Company shall make an adjustment in the
number and class of shares available under the Warrant, the Warrant Price or the
application of such provisions, so as to protect such purchase rights as
aforesaid. The adjustment shall be such as will give the Holder of the Warrant
upon exercise for the same aggregate Warrant Price the total number, class and
kind of shares as he would have owned had the Warrant been exercised prior to
the event and had he continued to hold such shares until after the event
requiring adjustment.
D.No Fractional Shares. No fractional shares of Common Stock will be issued in
connection with any subscription hereunder. In lieu of any fractional shares
which would otherwise be issuable, the Company shall pay cash equal to the
product of such fraction multiplied by the fair market value of one share of
Common Stock on the date of exercise, as determined by the fair market value of
one share of the Company's Common Stock on the date of exercise as determined by
the average of the closing or last reported sale prices on the NASDAQ National
Market over the 5-day period ending five days prior to the time of such
exercise.
E. No Stockholder Rights. This Warrant shall not entitle its holder to any of
the rights of a stockholder of the Company prior to exercise thereof.
F. Representations, Warranties and Covenants. This Warrant is issued and
delivered by the Company and accepted by each Holder on the basis of the
following representations, warranties and covenants made by the Company:
1. The Company has all necessary authority to issue, execute and deliver this
Warrant and to perform its obligations hereunder. This Warrant has been duly
authorized, issued, executed and delivered by the Company and is the valid and
binding obligation of the Company, enforceable in accordance with its terms.
2. The share of the Common Stock issuable upon the exercise of this Warrant have
been duly authorized and reserved for issuance by the Company and, when issued
in accordance with the terms hereof, will be validly issued, fully paid and
nonassessable. The Company further covenants that during the period this Warrant
is exercisable, the Company will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of Common Stock
upon the exercise of this Warrant.
3. The issuance, execution and delivery of this Warrant do not, and the issuance
of the share of Common Stock upon the exercise of this Warrant in accordance
with the terms hereof will not, (i) violate or contravene the Company's Articles
or by-laws, or any law, statute, regulation, rule, judgment or order applicable
to the Company, (ii) violate, contravene or result in a breach or default under
any material contract, agreement or instrument to which the Company is a party
or by which the Company or any of its assets are bound, or (iii) require the
consent of approval of or the filing of any notice or registration with any
person or entity except for the filing of notice pursuant to federal and state
securities laws which, if required, the Company covenants and agrees to file
within the prescribed period.
4. The Company agrees that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificate for shares of Common
Stock upon the exercise of this Warrant.
G. Exercise of Warrant. This Warrant may be exercised by the registered holder
or its registered assigns, in whole or in part, by the surrender of this Warrant
at the principal office of the Company, together with the form of subscription
hereof duly executed, accompanied by payment in full of the amount of the
Warrant Price in the form described in this Warrant. Upon partial exercise
hereof, a new warrant or warrants containing the same date and provisions as
this Warrant shall be issued by the Company to the registered holder for the
number of shares of Common Stock with respect to which this Warrant shall not
have been exercised. A Warrant shall be deemed to have been exercised
immediately prior to the close of business on the date of its surrender for
exercise as provided above, and the person entitled to receive the shares of
Common Stock issuable upon such exercise shall be treated for all purposes as
the holder of such shares of record as of the close of business on such date. As
promptly as practicable on or after such date, the Company shall issue and
deliver to the person or persons entitled to receive the same, a certificate or
certificates for the number of full shares of Common Stock issuable upon such
exercise, together with cash in lieu of any fraction of a share as provided
above.
H. Certificate of Adjustment. Whenever the Warrant Price is adjusted as herein
provided, the Company shall promptly deliver to the record holder of this
Warrant a certificate of an officer of the Company setting forth the relevant
Warrant Price or number of shares after such adjustment and setting forth a
brief statement of the facts requiring such adjustment.
I. Compliance With Securities Act. The holder of this Warrant, by acceptance
hereof, agrees that this Warrant and the shares of Common Stock to be issued
upon exercise hereof (or shares of any security into which such Common Stock may
be converted) are being acquired for investment and that the holder will not
offer, sell or otherwise dispose of this Warrant and any shares of Common Stock
to be issued upon exercise hereof (or shares of any security into which such
Common Stock may be converted) except under circumstances which will not result
in a violation of the Securities Act of 1933, as amended (the "Act"). Upon
exercise of this Warrant, the holder hereof shall, if requested by the Company,
confirm in writing its investment purpose and acceptance of the restrictions on
transfer of the shares of Common Stock.
J.Registration Rights. The Company grants to the Holder those registration
rights contained in that certain Warrant Purchase Agreement of even date
herewith between the Company and the Holder.
K. Subdivision of Warrant. At the request of the holder of this Warrant in
connection with a transfer or exercise of a portion of the Warrant, upon
surrender of such Warrant for such purpose to the Company, the Company at its
expense (except for any transfer tax payable) will issue and exchange therefor
warrants of like tenor and date representing in the aggregate the right to
purchase such number of shares of such Common Stock as shall be designated by
such holder at the time of such surrender; provided, however, that the Company's
obligations to subdivide securities under this section shall be subject to and
conditioned upon the compliance of any such subdivision with applicable state
securities laws and with the Act.
L.Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the Company
of evidence reasonably satisfactory to it of the loss, theft, destruction or
mutilation of this Warrant, and in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to it, and upon reimbursement to
the Company of all reasonable expenses incidental thereto, and upon surrender
and cancellation of this Warrant, if mutilated, the Company will make and
deliver a new Warrant of like tenor and dates as of such cancellation, in lieu
of this Warrant.
M. No Impairment. The Company will not, by amendment of its Articles or through
any reclassification, capital reorganization, consolidation, merger, sale or
conveyance of assets, dissolution, liquidation, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the Holder.
N. Successors and Assigns. This Warrant shall be binding upon the Company's
successors and assigns and shall inure to the benefit of the Holder's
successors, legal representatives and permitted assigns.
O. Miscellaneous. This Warrant shall be governed by the laws of the State of
California. The headings in this Warrant are for purposes of convenience and
reference only, and shall not be deemed to constitute a part hereof. Neither
this Warrant nor any term hereof may be changed, waived, discharged or
terminated orally but only by an instrument in writing signed by the Company and
the registered holder hereof. All notices and other communications from the
Company to the holder of this Warrant shall be by telecopy or expedited courier
service to the address furnished to the Company in writing by the last holder of
this Warrant who shall have furnished an address to the Company in writing.
ISSUED this 15th day of October, 1997.
ATTEST: IMATRON INC.
__________________________________ By_________________________________
S. Lewis Meyer, President
Exhibit 4.6
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY SALE, TRANSFER,
PLEDGE OR OTHER DISPOSITION THEREOF MAY BE MADE ONLY (i) IN A REGISTRATION UNDER
SAID ACT OR (ii) IF AN EXEMPTION FROM REGISTRATION UNDER SAID ACT IS AVAILABLE
AND THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL TO THAT EFFECT REASONABLY
SATISFACTORY TO IT
IMATRON INC.
COMMON STOCK PURCHASE WARRANT
This Warrant Expires October 21, 2001
Warrant No. 97-TR2 Shares: 2,000,000
THIS CERTIFIES that, subject to the terms and conditions herein set forth,
TeraRecon Inc. (the "Holder") is entitled to purchase from Imatron Inc., a New
Jersey corporation (the "Company"), at any time or from time to time during the
Exercise Period (as hereinafter defined) the number of shares of fully paid and
non-assessable shares of Common Stock of the Company (the "Shares") as provided
herein upon surrender hereof at the principal office of the Company, and, at the
election of the holder hereof, upon payment of the purchase price at said office
in cash or by cashier's check or by the wire transfer of funds in a dollar
amount equal to the purchase price of the Shares for which the consideration is
being given.
This Warrant shall be exercisable for that number of Shares as set forth above.
1. Purchase Price. Subject to adjustment as hereinafter provided, the purchase
price of one share of Common Stock (or such securities as may be substituted for
one share of Common Stock pursuant to the provisions hereinafter set forth)
shall be Four Dollars and Fifty Cents ($4.50) per share. The purchase price of
one share of Common Stock is referred to herein as the "Warrant Price".
2. Exercise Period. The exercise Period shall mean the period commencing on the
date hereof and ending four years thereafter.
3. Adjustment of Warrant Price and Number of Shares. The number and kind of
securities issuable upon the exercise of this Warrant shall be subject to
adjustment from time to time upon the happening of certain events as follows:
(a) Adjustment of Warrant Price and Number of Shares. The Warrant Price and the
number of shares purchasable upon the exercise of this Warrant shall be subject
to adjustment from time to time upon the occurrence of certain events described
in this Section 3. Upon each adjustment of the Warrant Price, the Holder of this
Warrant shall thereafter be entitled to purchase, at the Warrant Price resulting
from such adjustment, the number of shares obtained by multiplying the Warrant
Price in effect immediately prior to such adjustment by the number of shares
purchasable pursuant hereto immediately prior to such adjustment, and dividing
the product thereof by the Warrant Price resulting from such adjustment. In case
the Company shall at any time subdivide its outstanding shares of Common Stock
into a greater number of shares, the Warrant Price in effect immediately prior
to such subdivision shall be proportionately reduced, and conversely, in case
the outstanding shares of Common Stock of the Company shall be combined into a
smaller number of shares, the Warrant Price in effect immediately prior to such
combination shall be proportionately increased.
(b) Adjustment for Dividends in Stock. In case at any time or from time to time
on or after the date hereof the holders of the Common Stock of the Company (or
any shares of stock or other securities at the time receivable upon the exercise
of this Warrant) shall have received, or, on or after the record date fixed for
the determination of eligible stockholders, shall have become entitled to
receive, without payment therefor, other or additional stock of the Company by
way of dividend (other than as provided for in Paragraph 2(b) herein), then and
in each such case, the holder of this Warrant shall, upon the exercise hereof,
be entitled to receive, in addition to the number of shares of Common shall,
upon the exercise hereof, be entitled to receive, in addition to the number of
shares of Common Stock receivable thereupon, and without payment of any
additional consideration therefor, the amount of such other or additional stock
of the Company which such holder would hold on the date of such exercise had it
been the holder of record of such Common Stock on the date hereof and had
thereafter, during the period from the date hereof to and including the date of
such exercise, retained such shares and/or all other additional stock receivable
by it as aforesaid during such period, given effect to all adjustments called
for during such period by this Paragraph 3. The Company shall give the Holder
thirty (30) days advance written notice of any dividend causing an adjustment
pursuant to this subsection.
(c) Adjustment for Changes in Common Stock. In the event changes in the
outstanding Common Stock of the Company by reason of split-ups,
recapitalizations, reclassifications, mergers, consolidations, combinations or
exchanges of shares, separations, reorganizations, liquidations, or the like,
are effected in such a way that holders of Common Stock shall be entitled to
receive stock, securities, or other assets or property (an "Organic Change"),
then, as a condition of such Organic Change, lawful and adequate provisions
shall be made by the Company whereby the Holder hereof shall thereafter have the
right to purchase and receive (in lieu of the shares of the Common Stock of the
Company immediately therefore purchasable and receivable upon the exercise of
the rights represented hereby) such shares of stock, securities or other assets
or property as may be issued or payable with respect to or in exchange for a
number of outstanding shares of such Common Stock equal to the number of shares
of such stock immediately theretofore purchasable and receivable upon the
exercise of the rights represented hereby; provided, however, that in the event
the value of the stock, securities or other assets or property (determined in
good faith by the Board of Directors of the Company) issuable or payable with
respect to one share of the Common Stock of the Company immediately theretofore
purchasable and receivable upon the exercise of the rights represented hereby is
in excess of the Warrant Price hereof effective at the time of a merger and
securities received in such reorganization, if any, are publicly traded, then
this Warrant shall expire unless exercised prior to such Organic Change. In the
event of any Organic Change, appropriate provision shall be made by the Company
with respect to the rights and interests of the Holder of this Warrant to the
end that the provisions hereof (including, without limitation, provisions for
adjustments of the Warrant Price and of the number of shares purchasable and
receivable upon the exercise of this Warrant) shall thereafter be applicable, in
relation to any shares of stock, securities or assets thereafter deliverable
upon the exercise hereof.
(d) Certain Events. If any change in the outstanding Common Stock of the Company
or any other event occurs as to which the other provisions of this Section 3 are
not strictly applicable or if strictly applicable would not fairly protect the
purchase rights of the Holder of the Warrant in accordance with such provisions,
then the Board of Directors of the Company shall make an adjustment in the
number and class of shares available under the Warrant, the Warrant Price or the
application of such provisions, so as to protect such purchase rights as
aforesaid. The adjustment shall be such as will give the Holder of the Warrant
upon exercise for the same aggregate Warrant Price the total number, class and
kind of shares as he would have owned had the Warrant been exercised prior to
the event and had he continued to hold such shares until after the event
requiring adjustment.
4. No Fractional Shares. No fractional shares of Common Stock will be issued in
connection with any subscription hereunder. In lieu of any fractional shares
which would otherwise be issuable, the Company shall pay cash equal to the
product of such fraction multiplied by the fair market value of one share of
Common Stock on the date of exercise, as determined by the fair market value of
one share of the Company's Common Stock on the date of exercise as determined by
the average of the closing or last reported sale prices on the NASDAQ National
Market over the 5-day period ending five days prior to the time of such
exercise.
5. No Stockholder Rights. This Warrant shall not entitle its holder to any of
the rights of a stockholder of the Company prior to exercise thereof.
6. Representations, Warranties and Covenants. This Warrant is issued and
delivered by the Company and accepted by each Holder on the basis of the
following representations, warranties and covenants made by the Company:
(a) The Company has all necessary authority to issue, execute and deliver this
Warrant and to perform its obligations hereunder. This Warrant has been duly
authorized, issued, executed and delivered by the Company and is the valid and
binding obligation of the Company, enforceable in accordance with its terms.
(b) The share of the Common Stock issuable upon the exercise of this Warrant
have been duly authorized and reserved for issuance by the Company and, when
issued in accordance with the terms hereof, will be validly issued, fully paid
and nonassessable. The Company further covenants that during the period this
Warrant is exercisable, the Company will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the issuance
of Common Stock upon the exercise of this Warrant.
(c) The issuance, execution and delivery of this Warrant do not, and the
issuance of the share of Common Stock upon the exercise of this Warrant in
accordance with the terms hereof will not,
(i) violate or contravene the Company's Articles or by-laws, or any law,
statute, regulation, rule, judgment or order applicable to the Company,
(ii) violate, contravene or result in a breach or default under any material
contract, agreement or instrument to which the Company is a party or by which
the Company or any of its assets are bound, or
(iii) require the consent of approval of or the filing of any notice or
registration with any person or entity except for the filing of notice pursuant
to federal and state securities laws which, if required, the Company covenants
and agrees to file within the prescribed period.
(d) The Company agrees that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificate for shares of Common
Stock upon the exercise of this Warrant.
7. Exercise of Warrant. This Warrant may be exercised by the registered holder
or its registered assigns, in whole or in part, by the surrender of this Warrant
at the principal office of the Company, together with the form of subscription
hereof duly executed, accompanied by payment in full of the amount of the
Warrant Price in the form described in this Warrant. Upon partial exercise
hereof, a new warrant or warrants containing the same date and provisions as
this Warrant shall be issued by the Company to the registered holder for the
number of shares of Common Stock with respect to which this Warrant shall not
have been exercised. A Warrant shall be deemed to have been exercised
immediately prior to the close of business on the date of its surrender for
exercise as provided above, and the person entitled to receive the shares of
Common Stock issuable upon such exercise shall be treated for all purposes as
the holder of such shares of record as of the close of business on such date. As
promptly as practicable on or after such date, the Company shall issue and
deliver to the person or persons entitled to receive the same, a certificate or
certificates for the number of full shares of Common Stock issuable upon such
exercise, together with cash in lieu of any fraction of a share as provided
above.
8. Certificate of Adjustment. Whenever the Warrant Price is adjusted as herein
provided, the Company shall promptly deliver to the record holder of this
Warrant a certificate of an officer of the Company setting forth the relevant
Warrant Price or number of shares after such adjustment and setting forth a
brief statement of the facts requiring such adjustment.
9. Compliance With Securities Act. The holder of this Warrant, by acceptance
hereof, agrees that this Warrant and the shares of Common Stock to be issued
upon exercise hereof (or shares of any security into which such Common Stock may
be converted) are being acquired for investment and that the holder will not
offer, sell or otherwise dispose of this Warrant and any shares of Common Stock
to be issued upon exercise hereof (or shares of any security into which such
Common Stock may be converted) except under circumstances which will not result
in a violation of the Securities Act of 1933, as amended (the "Act"). Upon
exercise of this Warrant, the holder hereof shall, if requested by the Company,
confirm in writing its investment purpose and acceptance of the restrictions on
transfer of the shares of Common Stock.
10. Registration Rights. The Company grants to the Holder those registration
rights contained in that certain Warrant Purchase Agreement of even date
herewith between the Company and the Holder.
11. Subdivision of Warrant. At the request of the holder of this Warrant in
connection with a transfer or exercise of a portion of the Warrant, upon
surrender of such Warrant for such purpose to the Company, the Company at its
expense (except for any transfer tax payable) will issue and exchange therefor
warrants of like tenor and date representing in the aggregate the right to
purchase such number of shares of such Common Stock as shall be designated by
such holder at the time of such surrender; provided, however, that the Company's
obligations to subdivide securities under this section shall be subject to and
conditioned upon the compliance of any such subdivision with applicable state
securities laws and with the Act.
12. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
make and deliver a new Warrant of like tenor and dates as of such cancellation,
in lieu of this Warrant.
13. No Impairment. The Company will not, by amendment of its Articles or through
any reclassification, capital reorganization, consolidation, merger, sale or
conveyance of assets, dissolution, liquidation, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the Holder.
14. Successors and Assigns. This Warrant shall be binding upon the Company's
successors and assigns and shall inure to the benefit of the Holder's
successors, legal representatives and permitted assigns.
15. Miscellaneous. This Warrant shall be governed by the laws of the State of
California. The headings in this Warrant are for purposes of convenience and
reference only, and shall not be deemed to constitute a part hereof. Neither
this Warrant nor any term hereof may be changed, waived, discharged or
terminated orally but only by an instrument in writing signed by the Company and
the registered holder hereof. All notices and other communications from the
Company to the holder of this Warrant shall be by telecopy or expedited courier
service to the address furnished to the Company in writing by the last holder of
this Warrant who shall have furnished an address to the Company in writing.
ISSUED this 21st day of October, 1997.
ATTEST: IMATRON
__________________________________ By____________________________________
S. Lewis Meyer, President
Exhibit 4.7
THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY SALE, TRANSFER,
PLEDGE OR OTHER DISPOSITION THEREOF MAY BE MADE ONLY (i) IN A REGISTRATION UNDER
SAID ACT OR (ii) IF AN EXEMPTION FROM REGISTRATION UNDER SAID ACT IS AVAILABLE
AND THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL TO THAT EFFECT REASONABLY
SATISFACTORY TO IT.
IMATRON INC.
COMMON STOCK PURCHASE WARRANT
This Warrant Expires January 28, 2002
Warrant No. 97-[____] Shares: [Number of shares]
THIS CERTIFIES that, subject to the terms and conditions herein set forth, [Name
of Warrant Holder] (the "Holder") is entitled to purchase from Imatron Inc., a
New Jersey corporation (the "Company"), at any time or from time to time during
the Exercise Period (as hereinafter defined) the number of fully paid and
non--assessable shares of Common Stock of the Company (the "Shares") as provided
herein upon surrender hereof at the principal office of the Company, and, at the
election of the holder hereof, upon payment of the purchase price at said office
in cash or by cashier's check or by the wire transfer of funds in a dollar
amount equal to the purchase price of the Shares for which the consideration is
being given.
his Warrant shall be exercisable for that number of Shares as set forth above.
I. Purchase Price. Subject to adjustment as hereinafter provided, the purchase
price of one share of Common Stock (or such securities as may be substituted for
one share of Common Stock pursuant to the provisions hereinafter set forth) (the
"Warrant Price") shall be Two Dollars and Twenty-Four Cents ($2.24).
II. Adjustment of Warrant Price and Number of Shares. In addition to the
adjustment provided for in Section 1 above, the number and kind of securities
issuable upon the exercise of this Warrant shall be subject to adjustment from
time to time upon the happening of certain events as follows:
A. Adjustment for Dividends in Stock. In case at any time or from time to time
on or after the date hereof the holders of the Common Stock of the Company (or
any shares of stock or other securities at the time receivable upon the exercise
of this Warrant) shall have received, or, on or after the record date fixed for
the determination of eligible stockholders, shall have become entitled to
receive, without payment therefor, other or additional stock of the Company by
way of dividend (other than as provided for in Paragraph 2(b) below), then and
in each such case, the holder of this Warrant shall, upon the exercise hereof,
be entitled to receive, in addition to the number of shares of Common Stock
receivable thereupon, and without payment of any additional consideration
therefor, the amount of such other or additional stock of the Company which such
holder would hold on the date of such exercise had it been the holder of record
of such Common Stock on the date hereof and had thereafter, during the period
from the date hereof to and including the date of such exercise, retained such
shares and/or all other additional stock receivable by it as aforesaid during
such period, given effect to all adjustments called for during such period by
this Paragraph.
B. Adjustment for Changes in Common Stock. In the event of changes in the
outstanding Common Stock of the Company by reason of split--ups,
recapitalizations, reclassifications, mergers, consolidations, combinations or
exchanges of shares, separations, reorganizations, liquidations, or the like,
the number and class of shares available under the Warrant in the aggregate and
the Warrant Price shall be correspondingly adjusted by the Board of Directors of
the Company. The adjustment shall be such as will give the holder of the Warrant
on exercise for the same aggregate Warrant Price the total number, class, and
kind of shares as he would have owned had the Warrant been exercised prior to
the event and had he continued to hold such shares until after the event
requiring adjustment.
II. No Fractional Shares. No fractional shares of Common Stock will be issued in
connection with any subscription hereunder. In lieu of any fractional shares
which would otherwise be issuable, the Company shall pay cash equal to the
product of such fraction multiplied by the fair market value of one share of
Common Stock on the date of exercise, as determined by the fair market value of
one share of the Company's Common Stock on the date of exercise as determined in
good faith by the Company's Board of Directors.
IV. No Stockholder Rights. This Warrant shall not entitle its holder to any of
the rights of a stockholder of the Company prior to exercise thereof.
V. Reservation of Stock. The Company covenants that during the period this
Warrant is exercisable, the Company will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the
issuance of Common Stock upon the exercise of this Warrant. The Company
agrees that its issuance of this Warrant shall constitute full authority to
its officers who are charged with the duty of executing stock certificates
to execute and issue the necessary certificates for shares of Common Stock
upon the exercise of this Warrant.
VI. Exercise of Warrant. This Warrant may be exercised by the registered holder
or its registered assigns, in whole or in part, by the surrender of this Warrant
at the principal office of the Company, together with the form of subscription
hereof duly executed, accompanied by payment in full of the amount of the
Warrant Price in the form described in this Warrant. Upon partial exercise
hereof, a new warrant or warrants containing the same date and provisions as
this Warrant shall be issued by the Company to the registered holder for the
number of shares of Common Stock with respect to which this Warrant shall not
have been exercised. A Warrant shall be deemed to have been exercised
immediately prior to the close of business on the date of its surrender for
exercise as provided above, and the person entitled to receive the shares of
Common Stock issuable upon such exercise shall be treated for all purposes as
the holder of such shares of record as of the close of business on such date. As
promptly as practicable on or after such date, the Company shall issue and
deliver to the person or persons entitled to receive the same, a certificate or
certificates for the number of full shares of Common Stock issuable upon such
exercise, together with cash in lieu of any fraction of a share as provided
above.
VII. Certificate of Adjustment. Whenever the Warrant Price is adjusted as herein
provided, the Company shall promptly deliver to the record holder of this
Warrant a certificate of an officer of the Company setting forth the relevant
Warrant Price or number of shares after such adjustment and setting forth a
brief statement of the facts requiring such adjustment.
VIII. Compliance With Securities Act. The holder of this Warrant, by acceptance
hereof, agrees that this Warrant and the shares of Common Stock to be issued
upon exercise hereof (or shares of any security into which such Common Stock may
be converted) are being acquired for investment and that the holder will not
offer, sell, or otherwise dispose of this Warrant and any shares of Common Stock
to be issued upon exercise hereof (or shares of any security into which such
Common Stock may be converted) except under circumstances which will not result
in a violation of the Securities Act of 1933, as amended (the "Act"). Upon
exercise of this Warrant, the holder hereof shall, if requested by the Company,
confirm in writing its investment purpose and acceptance of the restrictions on
transfer of the shares of Common Stock.
IX. Subdivision of Warrant. At the request of the holder of this Warrant in
connection with a transfer or exercise of a portion of the Warrant, upon
surrender of such Warrant for such purpose to the Company, the Company at its
expense (except for any transfer tax payable) will issue and exchange therefor
warrants of like tenor and date representing in the aggregate the right to
purchase such number of shares of such Common Stock as shall be designated by
such holder at the time of such surrender; provided, however, that the Company's
obligations to subdivide securities under this section shall be subject to and
conditioned upon the compliance of any such subdivision with applicable state
securities laws and with the Act.
X. Notices of Record Date. In case
A. the Company shall take a record of the holders of its Common Stock (or other
stock or securities at the time receivable upon the exercise of the Warrant) for
the purpose of entitling them to receive any dividend or other distribution, or
any rights to subscribe for or purchase any shares of stock of any class or any
other securities, or to receive any other right, or
B. of any capital reorganization of the Company, any reclassification of the
capital stock of the Company, any consolidation or merger of the Company with or
into another corporation, or any conveyance of all or substantially all of the
assets of the Company to another corporation, or
C. of any voluntary dissolution, liquidation or winding-up of the Company,
then, and in each such case, the Company will mail or cause to be mailed to each
holder of a Warrant at the time outstanding a notice specifying, as the case may
be, (i) the date on which a record is to be taken for the purpose of such
dividend, distribution or right, and stating the amount and character of such
dividend, distribution or right, or (ii) the date on which such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock or such other stock or securities at the
time receivable upon the exercise of the Warrant shall be entitled to exchange
their shares of Common Stock (or such other stock or securities) for securities
or other property deliverable upon such reorganization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or winding-up. Such
notice shall be mailed at least 30 days prior to the date therein specified.
XI. Loss, Theft, Destruction, or Mutilation of Warrant. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction, or mutilation of this Warrant, and in case of loss, theft, or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable expenses incidental thereto, and
upon surrender and cancellation of this Warrant, if mutilated, the Company will
make and deliver a new Warrant of like tenor and dates as of such cancellation,
in lieu of this Warrant.
XII. Miscellaneous. This Warrant shall be governed by the laws of the State of
California. The headings in this Warrant are for purposes of convenience and
reference only, and shall not be deemed to constitute a part hereof. Neither
this Warrant nor any term hereof may be changed, waived, discharged, or
terminated orally but only by an instrument in writing signed by the Company and
the registered holder hereof. All notices and other communications from the
Company to the holder of this Warrant shall be by telecopy or expedited courier
service to the address furnished to the Company in writing by the last holder of
this Warrant who shall have furnished an address to the Company in writing.
XIII. Exercise Period. The Exercise Period shall mean the period commencing on
the date hereof and ending on January 28, 2002.
ISSUED this January 28, 1997.
COMPANY:
IMATRON INC.
By:
IMATRON INC. FORM 10-K
Schedule to Exhibit 4.7
Pursuant to Instruction No. 2 to Item 601
of Regulation S-K
The form of Common Stock Purchase Warrant filed as Exhibit 4.7 to this Report is
substantially identical in all material respects to each of the Common Stock
Purchase Warrants issued by the Company to investors in connection with a
Private Offering conducted by the Company which concluded January 28, 1997. The
Schedule sets forth the material details of all such warrants which differ from
the form of exhibit file herewith.
Name of Warrantholder Number of Common Shares Exercisable
Xing-Rong Chen 25,000
Bruce Brundage 50,000
Charles Higgens 25,000
Gerhard Sennewald 100,000
EXHIBIT 10.57
AGREEMENT FOR SERVICE SUPPORT
THIS AGREEMENT (this "Agreement") is made and entered into as of this ___ day of
February, 1997, by and between SIEMENS MEDICAL SYSTEMS, INC., a Delaware
corporation, doing business at 186 Wood Avenue South, Iselin, New Jersey 08830
(hereinafter referred to as "Siemens Medical Systems" or "Siemens") and IMATRON
INC., a New Jersey corporation, doing business at 389 Oyster Point Boulevard,
South San Francisco, California 94080 (hereinafter referred to as "Imatron").
RECITALS
WHEREAS, Imatron is the manufacturer of the Imatron C-150 (hereinafter referred
to as the "Imatron C-150") product, and pursuant to a Memorandum of
Understanding dated March 31, 1995 (the "Memorandum of Understanding"), sells
and supplies for resale the same to Siemens Medical Systems, and to other
companies which are affiliates of Siemens Medical Systems (Siemens Medical
Systems and its affiliates are hereinafter sometimes referred to as the"Siemens
Companies"; and
WHEREAS, pursuant to the Memorandum of Understanding, Siemens Medical Systems
has exclusive rights commencing April 1, 1995, and continuing thereafter for
three years, to market, sell, distribute, service and support the Imatron C-150
product (including present and future versions, generations, derivatives,
modifications, enhancements and improvements, and
upgrades thereto) in the Territory, as defined in the Memorandum of
Understanding, and the Siemens Companies are engaged in the marketing, sale,
distribution, service and support of the Imatron C-150 in the Territory; and
WHEREAS, Siemens Medical Systems desires to contract with Imatron for services
as described in this Agreement, with respect to and including Imatron C-150
hardware and software, such services to be provided to the Siemens Companies,
their designated respective customer/end-users, and their respective personnel,
with respect to the Imatron C-150 ("Services"), in the Territory on the terms
and conditions set forth in this Agreement, and
WHEREAS, Imatron is willing to provide such Services in the Territory to the
Siemens Companies and their customers/end-users of the Imatron C-150, upon the
terms and conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, it is mutually agreed by the Parties as follows:
DEFINITIONS.
The following defined terms wherever used in this Agreement shall have the
following respective meanings unless indicated otherwise by the context
where the respective term is used:
"Customer" or "customer/end-user" (singular or plural) are used
interchangeably and mean the named customer or end-user of the Imatron
C-150 unit who has rightful possession of and is engaged in the
operation and use of said Imatron C-150 unit. Attachment A, as amended
from time to time, sets forth the names of those designated
customers/end-users of the respective Siemens Companies to whom
Imatron shall provide assistance and services as provided in this
Agreement and the respective related purchase orders and other
agreements referred to in this Agreement.
EXISTING IMATRON OBLIGATIONS.
Nothing contained herein or in any subcontract or purchase order for
services to Imatron by a Siemens Company is intended to or shall
operate to amend, alter or affect, reduce or limit the liability and
obligations of Imatron under the Memorandum of Understanding for the
Imatron C-150 products, or under any and all Imatron warranties as
manufacturer and supplier of the Imatron C-150 products against errors
or defects in design, material and workmanship, or as provided in the
Memorandum of Understanding that the Imatron C-150 products shall be
delivered ready for commercial sale and shall meet all governmental
and regulatory requirements in the U.S.A., Canada, and Europe and ISO
9001, IEC-601-1-2, CE and EMC. Further, Imatron confirms its
obligation contained in the Memorandum of Understanding that Imatron
shall upon request of Siemens, provide Siemens and its customers and
end-users with full repair, service, replacement, support and
maintenance for the life of the product at a fair and reasonable
price. Imatron agrees that the price for a one year labor only
warranty agreement with coverage commencing upon completion of
installation shall not exceed US$65,000 per machine and the price of a
one year full service agreement shall not exceed US$130,000 per
machine. The foregoing prices shall be effective for a one year period
from the Effective Date.
Nothing contained herein is intended to or shall operate to amend,
alter or affect the rights and licenses, or obligations of Imatron and
Siemens Medical Systems pursuant to the Memorandum of Understanding,
with respect to patents, copyrights, know-how, 064 results, or the
results of the Collaborative Research described in the Memorandum of
Understanding.
It is expressly agreed and understood that in addition to providing
services, support (such as those related to hotline), assistance under
this Agreement to Siemens Medical Systems, Imatron shall provide such
same services, support, and assistance to each of the following
Siemens Companies, who are intended as third party beneficiaries of
this Agreement:
Siemens Aktiengesellschaft
Siemens AG Osterreich
Siemens Nederland N.V.
Siemens S.A. (France)
Each of the foregoing Siemens Companies shall be entitled to
(i)-request and issue purchase orders to Imatron in the same manner
and to the same extent as Siemens Medical Systems, i.e. the terms of
such shall be at all times subject to the terms and conditions of this
Agreement as amended from time to time by mutual written agreement of
Siemens Medical Systems and Imatron, and (ii-any claims and disputes
between such Siemens Companies and Imatron shall be resolved in
accordance with the arbitration provisions set forth in this
Agreement. Any and all correspondence, invoices, and requests for
payment shall be issued to such respective Siemens Company requesting
or ordering such services and assistance, in accordance with and
subject to the terms of this Agreement. Imatron agrees to promptly
advise Siemens Medical Systems of (a)-the status of any request of
such Siemens Companies and particularly any requests or proposals by
any persons for terms and conditions which vary materially from the
terms and conditions agreed to by Siemens Medical Systems and Imatron,
(b)-any payments which may be more than thirty days past due to or
from such Siemens Companies, and (c)-any claims and disputes with such
Siemens Companies; and Siemens Medical Systems agrees to assist
Imatron and such Siemens Companies in resolving outstanding claims and
disputes including but not limited to any relating to payments which
are past due.
SUPPORT FUNCTIONS; HOTLINE.
In order to enable the respective Siemens Companies personnel
(including the respective Siemens Companies' Field Services Engineers
("FSE" or "Siemens FSE")) and the respective designated Siemens
Companies' Imatron C-150 customers/end-users in the Territory to
obtain prompt response to any Imatron C-150 related questions, and
prompt warranty or other Imatron C-150 product service, as the case
may be, Imatron agrees to put in place upon execution of this
Agreement and maintain at all times, a hotline telephone number, 24
hours a day, seven days a week, including holidays.
All escalated service calls from the Siemens FSE may be directed to
such 24 hour hotline. The respective Siemens Companies' field
organizations may at all times utilize Imatron's 24 hours hotline for
assistance and support in the installation of Imatron C-150 products
at such Siemens Companies' designated customer(s) site(s) and support
of such customer(s)/end-user(s). Imatron agrees to promptly respond to
any and all technical questions and/or inquiries regarding Imatron
C-150 products and assist Siemens FSE in the diagnosis and/or analysis
of any product problems. Further, Imatron agrees to immediately
respond to any questions from the respective Siemens Companies'
personnel and/or respective Siemens Companies' Imatron C-150
designated customer/end-users regarding operation and/or use of the
Imatron C-150 product; Imatron agrees to promptly assist such
customer/end-users with any problems experienced with the Imatron
C-150 and promptly diagnose and provide, at agreed upon prices, any
application support which may become necessary.
At Siemens' request, Imatron agrees to maintain and make available to
Siemens all records related to the delivery of services, charges (if
any), repair, support and maintenance, under this Agreement to the
designated customer/end-user.
Imatron agrees to immediately add 1 fully trained and qualified person
to the existing 9 Imatron service and application support staff at
Imatron's South San Francisco facility. Imatron agrees to add other
qualified and trained personnel as may reasonably be necessary from
time to time to service additional customer(s)/end-users added under
this Agreement or because of increased demand for assistance, services
and support under this Agreement.
For the hotline support function (Sections 3.1 to 3.3) (which will be
accounted for on a twelve month basis from January 1 to December 31),
each Siemens Company (with respect to its designated
customers/end-users) shall pay Imatron US $8,000 per year (12 months)
for each Imatron C-150 unit sold and installed to date and hereinafter
sold and installed by Siemens. Such sum of US $8,000 shall be due on
April 1, 1997, for each of the C-150 units installed on the date this
Agreement is signed; if any additional Imatron C-150 unit(s) is/are
added during the first twelve months after the execution of this
Agreement, such US$8,000 shall be adjusted proportionately to reflect
the actual number of months of hotline service provided with respect
to such additional unit(s); after the initial twelve months said sum
shall thereafter be due on December 1 for each year (12 month period),
in the same manner, per Imatron C-150 unit for which such hotline
service is requested by Siemens and provided by Imatron.
STANFORD UNIVERSITY.
Stanford University has a newly installed Imatron C-150 unit. The
Siemens warranty to Stanford commences in September 1996. Imatron
agrees to perform all warranty, repair, support and maintenance
obligations agreed to be provided by Siemens to Stanford, bear all
cost and expenses (including labor costs and charges, costs of parts,
freight, shipment, installation, costs of repairs), and warrant such
work for 12 months. The price for Imatron to perform all of such work
is US$40,000 which shall be paid to Imatron by Siemens within ten days
after the signing and execution of this Agreement by the parties.
INSTALLATION ASSISTANCE AND SERVICES.
Imatron agrees to provide the respective Siemens Companies and
customers/end-users with services and assistance in the installation
of the Imatron C-150 as well as the application training of
customer/end-user personnel, at customer/end-user site, in the
Territory. The price that shall be paid to Imatron for providing such
installation and application training is as follows:
Pre-Installation Site Planning
Imatron, for a fee of $5,000 plus travel and living expenses,
will provide site oversight, power and magnetic field testing,
and site measurement verification (one visit). One set of
preliminary drawings, ongoing planning review,
architect/contractor phone support and one pre-installation site
sign off visit. The fee shall be due and payable to Imatron upon
delivery by Imatron of the preliminary planning document set.
Where Imatron does the entire installation and training without
any Siemens FSE participating (i.e., Imatron provides all site
review prior to installation, installation, training, services
and assistance associated with installation, testing, and
acceptance by the customer/end-user), the total price to be paid
by Siemens to Imatron for such services with respect to each such
C-150 unit shall be the sum of the following:
US$40,000 (including all travel and all other out-of-pocket costs
and expenses) (pre-Application).
US$8,000 (Application - at least two full weeks) plus actual
travel costs not to exceed the cost of coach air travel and per
diem expenses of $200.00 (domestic) and $300.00 (international).
US$4,000 (Application one full week follow-up within six months)
plus actual travel costs not to exceed the cost of coach air
travel and per diem expenses of $200.00 (domestic) and $300.00
(international).
Imatron shall be provided with a purchase order prior to the
commencement of any services. Payment for services will be due
upon completion.
Where a Siemens FSE participates in the installation and/or
training, and/or in site review prior to installation, and
performs services and assistance associated with installation,
training, testing, acceptance by customer/end-user: the total
price (in addition to the fees for pre-installation site planning
as provided above) for such services to be paid by Siemens to
Imatron with respect to each such C-150 unit shall be the sum of
the following:
US$25,000 (including all travel and other out-of-pocket costs and
expenses) (pre-Application).
US$8,000 (Application - at least two full weeks) plus actual
travel costs not to exceed the cost of coach air travel and per
diem expenses of $200.00 (domestic) and $300.00 (international).
US$4,000 (Application one full week follow-up within six months)
plus actual travel costs not to exceed the cost of coach air
travel and per diem expenses of $200.00 (domestic) and $300.00
(international).
Imatron shall be provided with a purchase order prior to the
commencement of any services. Payment for services will be due
upon completion
TRAINING.
Imatron will make available in scheduled C-150 training classes a
minimum of one position in classes meeting a minimum size
of two students.
A charge of $2,000 per week or portion of a week per student.
Minimum of five (5) weeks. Cancellations accepted for four (4)
weeks in advance of start date without penalty. Fifty percent
(50%) of tuition shall be paid if any student cancels with less
than four (4) weeks notice. Imatron shall be provided with a
purchase order prior to the commencement of any services. Payment
for services will be due upon completion
If Imatron enters into a maintenance agreement for warranty
and/or annual maintenance within 12 months from the completion of
the training, Imatron will rebate the tuition to the contracting
organization on the service agreement.
TRAINED AND QUALIFIED PERSONNEL.
Imatron represents and warrants to each of the respective Siemens
Companies that all Imatron services to be provided to it in
accordance with this Agreement shall be provided by fully
trained, experienced and technically qualified personnel of
Imatron who are familiar with the Imatron C-150 product, and who
are qualified to carry out the service, repair, support, and
maintenance thereof in accordance with the highest standards
observed in the industry with respect to comparable medical
imaging products.
SIEMENS CUSTOMER RELATIONSHIP.
At the point Imatron is successful in obtaining a 90 percent
penetration of eligible sites for maintenance agreements, Imatron
will reduce the cost associated with the Help Desk "Hot Line" to
$6,000 per machine, per year for hotline support.
Imatron represents and warrants to each of the respective Siemens
Companies that it will promptly notify it of any complaints
received from its customers/end-users with respect to any
products or services described in this Agreement. Imatron
personnel will refrain from any acts which may adversely affect
the business relationship between such Siemens Company and its
customers/end users.
CONFIDENTIAL AND PROPRIETARY INFORMATION.
No right or license is granted by this Agreement to Imatron with
respect to any confidential or proprietary information of Siemens
Companies. The Siemens Companies respectively retain all right,
title and interest in and to all of their respective confidential
and proprietary information.
No right or license is granted to Imatron by this Agreement under
any patents, copyrights, other intellectual property rights, or
trademarks of the Siemens Companies. Imatron shall not make any
use of any trademarks (including tradenames or service marks) of
the Siemens Companies in any manner, without the prior written
consent of the Siemens Companies.
Any news release, public announcement, advertisement, or
publicity proposed to be released by any party with respect to
this Agreement or the discussions and pursuits of the parties
pursuant to this Agreement shall be subject to reasonable
opportunity to review by the other parties prior to release. All
matters discussed between the parties including their discussions
and progress shall be maintained in confidence by the parties.
Imatron agrees to receive and maintain in confidence for three
years after first receipt thereof pursuant to this Agreement, any
and all confidential information disclosed by the Siemens
Companies to Imatron; provided that such confidential information
shall be so identified in advance as such by the Siemens
Companies, and provided further that Imatron's obligations shall
not apply to any information that: (i)-Is in the public domain
through no act or omission by Imatron, its employees, agents or
others working on its behalf; (ii)-Is demonstrated by Imatron to
have been independently developed by Imatron (or by a third party
and lawfully disclosed to Imatron); or (iii)-Is rightfully
received by Imatron from third parties who were entitled to
receive and transfer the information.
TERM AND TERMINATION.
The initial term of this Agreement shall commence on April 1,
1997 (the "Effective Date"), and shall continue thereafter until
March 31, 1998. This Agreement may be renewed by mutual
agreement, for an additional renewal term of 12 months, by
delivery of written notice of Siemens' intentions to Imatron, no
later than 3 months prior to the expiration of the initial term.
Any party to this Agreement shall have the right to terminate
this Agreement as follows:
Upon any material breach of this Agreement or any purchase order
pursuant to this Agreement, the non-breaching party may elect to
terminate this Agreement by delivery of ninety days notice
specifying such breach and giving notice of intent to terminate;
if such breach is cured within the ninety days, such notice shall
expire and have no further effect; if such breach is not cured
within the ninety days, this Agreement shall expire and terminate
at the end of the ninety days;
Upon any filing in bankruptcy or insolvency by or inability of
Siemens Medical Systems or Imatron to meet its liability and
obligations to its creditors; commencement by any of these
parties of any proceedings or any decision by it to wind up,
liquidate, and/or dissolve or indefinitely suspend or discontinue
its conduct of the business which is the subject of this
Agreement, or the appointment of a trustee or receiver over the
assets or business of any of these parties, then the other party
may elect to terminate this Agreement by delivery of written
notice to the other parties; or
Upon any change in ownership or control of Siemens Medical
Systems or Imatron by merger with or acquisition by a third party
of a substantial portion of the voting shares of such party or
the assets of such party, then the other party may elect to
terminate this Agreement by delivery of written notice.
Companies terminating or renewing this Agreement.
INDEMNIFICATION.
Imatron agrees to defend the Siemens Companies against any third
party claims and indemnify and hold the Siemens Companies
harmless from any costs, expenses, losses or damages resulting
therefrom, alleging injury to tangible personal property, real
property, or personal injury as a result of any acts or omissions
of Imatron in the performance of the support, service,
installation, repair, warranties and maintenance of the Imatron
C-150 product pursuant to this Agreement.
Imatron agrees to indemnify and hold the Siemens Companies
harmless from any damages or losses to Imatron C-150 units owned
by the Siemens Companies, resulting from any acts or omissions of
Imatron in the performance of the support, service, repairs,
warranty and maintenance pursuant to this Agreement.
Siemens agrees to defend Imatron against any third party claims
and indemnify and hold Imatron harmless from any costs, expenses,
losses or damages resulting therefrom, alleging injury to
tangible personal property, real property, or personal injury
(i) as a result of any acts or omissions of Siemens in the
performance of the support, service, installation, repair,
warranties and maintenance of the Imatron C-150 product prior to
the commencement of Imatron service pursuant to this Agreement,
or (ii) as a result of any obligations incurred by Siemens to
customers or end users beyond those specifically assumed by
Imatron pursuant to this Agreement.
Any and all notices required to be given hereunder shall be in
writing and shall be deemed made or given if (a) delivered
personally in hand, (b) sent first class mail postage prepaid, or
(c) sent by international commercial courier for next day
delivery, addressed as follows:
If to Siemens Medical Systems: Siemens Medical Systems, Inc.
186 Wood Avenue South
Iselin, New Jersey 08830
Attention: Diane Cerny
If to Imatron: Imatron Inc.
389 Oyster Point Boulevard
South San Francisco, CA 94080
Attention: President
or to such other addresses as a party may determine from time to
time, by notice given in the same manner.
MISCELLANEOUS.
The parties are independent contractors. None of the parties is
the agent or representative of the other party. None of the
parties is authorized to enter into any agreement on behalf of or
to bind the other party to any obligation or agreement. None of
the parties shall attempt to enter into any obligation on behalf
of the other party or to bind it to any agreement or undertaking
APPLICABLE LAW; ARBITRATION.
This Agreement shall be interpreted and construed in accordance
with the laws of the State of New York, U.S.A.
This Agreement may not be modified or amended except in writing
by a document setting forth the intent of the parties to amend
this Agreement. Rights and obligations under this Agreement may
not be waived or released except in writing by mutual agreement
of the parties.
In the event any purchase order, acceptance, or other document
pursuant to this Agreement contains preprinted terms and
conditions, such preprinted terms and conditions shall be
disregarded and shall be deemed excluded.
This Agreement supersedes all prior discussions, negotiations,
understandings, and agreements, written or oral, with respect to
the subject matter hereof.
Any and all claims, disputes and controversies which may arise at
any time relating to this Agreement, including without limitation
its interpretation, enforceability, or breach, or with respect to
any confidential information disclosed pursuant to this Agreement
or breach of confidentiality, which are not resolved by an
amicable effort of the parties, shall be finally resolved by
binding arbitration to be conducted pursuant to a strict
confidentiality agreement in Denver, Colorado, in accordance with
the International Arbitration Rules of the American Arbitration
Association, by the American Arbitration Association ("AAA"), by
three impartial arbitrators, one appointed by Siemens
Aktiengesellschaft, one appointed by Imatron, and the third by
the two so appointed. Any vacancy unfilled within thirty days
shall be filled by the AAA. The parties agree to use their best
reasonable efforts to expedite the conduct and conclusion of the
arbitration proceedings. The award of a majority of the
arbitration tribunal shall be final and binding, and judgment on
the award may be entered or filed for enforcement purposes by or
against a party in any court having proper jurisdiction. The
arbitration tribunal may not award and no party shall seek to
recover or be obligated to pay an award of consequential,
incidental, special, punitive or exemplary damages or attorneys
fees and costs related to the same. With respect to any and all
claims, disputes and controversies which may arise under this
Agreement, Imatron waives any and all rights or claims it may
have or make that Siemens Aktiengesellschaft, Siemens AG
Osterreich, Siemens Nederland N.V., or Siemens S.A. (France) is
subject to the jurisdiction of the courts of the United States of
America or any of the states, countries or local jurisdictions
within the United States of America.
This Agreement and any agreement entered into pursuant to this
Agreement, including any purchase order for service, repair,
support and maintenance, may not be assigned or transferred to a
third party in whole or in part without the prior written consent
of all of the parties hereto and any attempted assignment or
transfer contrary to these provisions shall be null and void.
Imatron may not delegate or transfer the performance of its
obligations hereunder or under any purchase order or other
agreement pursuant to this Agreement to any third party without
the prior written consent of Siemens, any assignment, transfer or
delegation shall not operate to release Imatron from any
liability for the performance thereof in accordance with the
terms and conditions hereof and thereof, and Imatron shall
continue to remain liable therefor. Any and all monies required
to be paid hereunder shall be paid in U.S. dollars and remitted
to such bank accounts, persons and addresses, as may be indicated
by the payee party from time to time in writing.
IN WITNESS WHEREOF, the parties have entered into this Agreement
on the dates set forth below, intending to be bound.
SIEMENS MEDICAL SYSTEMS, INC. IMATRON INC.
By: ___________________________ By: ______________________
Date: ___________________________ Date: ______________________
ATTACHMENT A
Customer/ Country, Customer
Siemens Company Customer/End-User Address (Site) Type(s) of Service
Exhibit 10.58
WARRANT PURCHASE AGREEMENT
THIS WARRANT PURCHASE AGREEMENT (the "Agreement") is made and entered into this
15th day of October, 1997 by and between IMATRON INC., a New Jersey corporation
(the "Company") and TeraRecon Inc., a California corporation (the "Investor").
R E C I T A L S:
WHEREAS, the Company desires to issue to Investor and the Investor desires to
purchase from the Company a warrant (the "Warrant") to purchase 1,000,000 shares
of the Company's common stock (the "Shares") all on the terms and conditions
hereinafter provided. The Warrant and the Shares are hereafter collectively
referred to as the "Securities".
NOW, THEREFORE, IT IS AGREED AS FOLLOWS:
1. Issuance of Warrant. For good and valuable consideration the receipt and
sufficiency of which is acknowledged by the Company, the Company agrees to issue
to Investor the Warrant, the form of which is attached hereto as Exhibit A.
2. Investor Representations. Investor hereby represents and warrants to the
Company as follows:
(a) The Investor understands that: (a) The offer and sale of the Securities by
the Company to Investor has not been registered under the Securities Act of 1933
(the "Securities Act"), in reliance on an exemption from such registration
available under the Securities Act and rules adopted thereunder; (b) The
Investor must hold the Warrant indefinitely unless the Securities are
subsequently registered under the Securities Act and qualified under applicable
state securities laws, or unless an exemption from such registration and
qualification is available.
(b) The Investor is acquiring the Securities for his or her own account, for
investment, and not with a view to any sale or distribution of any interest
therein.
(c) The Investor has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of an investment in
the Securities, and the Investor is able to bear the economic risks of such an
investment.
(d) All statements made, and information furnished, by the Investor in this
certificate and all other information furnished by the Investor to the Company,
are true and complete, to the best of the Investor's knowledge.
3. Restrictions on Transfer. The Investor agrees that:
(a) The Investor will not attempt to transfer the Securities in violation of the
restrictions set forth in
this Agreement.
(b) The Company may note such restrictions on transfer in its records and refuse
to recognize any transfer which violates this agreement or for which the Company
has not received an acceptable opinion of counsel stating that such transfer
will not violate such restrictions.
(c) One or more legends indicating a lack of registration under the Securities
Act and a lack of qualification under state securities laws will be imprinted on
the Securities. One such legend shall read substantially as follows:
THE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY SALE, TRANSFER,
PLEDGE OR OTHER DISPOSITION THEREOF MAY BE MADE ONLY (i) IN A REGISTRATION UNDER
SAID ACT OR (ii) IF AN EXEMPTION FROM REGISTRATION UNDER SAID ACT IS AVAILABLE
AND THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL TO THAT EFFECT REASONABLY
SATISFACTORY TO IT.
4. Binding on Successors; Indemnification. The Investor agrees that the above
representations and warranties are binding on the Investor's successors and
assigns and are made for the benefit of the Company and any other persons who
may become liable for violations of federal or state securities laws as a result
of the falsity of any of the Investor's representations or warranties. The
Investor agrees to indemnify, defend, and hold harmless such persons from any
liability arising from the falsity of any of the Investor's representations or
warranties or from the breach of any covenant of Investor contained herein.
5. Registration Rights. The Company hereby grants to Investor the following
registration rights with respect to the Shares:
(a) Definitions.
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act of 1933 (the
"Securities Act").
"Register," "registered," and "registration" refer to a registration effected by
preparing and filing a registration statement in compliance with the Securities
Act of 1933, and the declaration or ordering of the effectiveness of such
registration statement.
"Registration Expenses" shall mean all expenses incurred by the Company in
compliance with the provisions of this Section 5, including, without limitation,
all registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses, and the expenses of any
special audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company, which shall be paid in any
event by the Company).
"Selling Expenses" shall mean all underwriting discounts and selling commissions
applicable to the sale of Shares and all fees and disbursements of counsel to
Investor.
"Shares" means the shares of the Company's common stock exercisable upon
exercise of the Warrant and any common stock issued with respect thereto (e.g.
upon a stock split or stock dividend.
"Investor" means the person set forth above and any permitted assignee.
(b) Company Registration.
i) Notice of Registration. If, at any time after July 1, 1998, the Company shall
determine to register any of its securities either for its own account or the
account of a security holder or holders exercising their respective demand
registration rights, other than a registration relating solely to employee
benefit plans, or a registration relating solely to a Commission Rule 145
transaction, or a registration on any registration form which does not permit
secondary sales, the Company will:
a) promptly give to Investor written notice thereof (which shall include a list
of the jurisdictions in which the Company intends to attempt to qualify such
securities under the applicable blue sky or other state securities laws); and
b) include in such registration (and any related qualification under blue sky
laws or other compliance), and in any underwriting involved therein, all the
Shares specified in a written request or requests, made by Investor within
fifteen (15) days after receipt of the written notice from the Company described
in this clause (i), except as set forth in Section 5(b)(ii) below.
ii) Underwriting. If the registration of which the Company gives notice is for a
registered public offering involving an underwriting: the Company shall so
advise Investor as part of the written notice given pursuant to Section 5(b)
hereof. In such event, the right of Investor to registration pursuant to this
Section 5 shall be conditioned upon Investor's participation in such
underwriting and the inclusion of Investor's Shares in the underwriting to the
extent provided herein. Investor shall (together with the Company, its directors
and officers, and any other shareholders distributing their securities through
such underwriting) enter into an underwriting agreement in customary form with
the underwriter or underwriters selected for underwriting by the Company.
Notwithstanding any other provision of this Section 5, if the underwriter
determines that marketing factors require a limitation on the number of shares
to be underwritten, the underwriter may exclude from such registration and
underwriting some or all of the Shares which would otherwise be underwritten
pursuant hereto. Any securities so excluded shall be apportioned pro rata among
Investor and any other shareholders distributing their securities through such
underwriting according to the total amount of securities otherwise entitled to
be included therein owned by such shareholders or in such other proportions as
shall mutually be agreed upon.
If Investor disapproves of the terms of any such underwriting, it may elect to
withdraw therefrom by written notice to the Company and the underwriter. Any
Shares excluded or withdrawn from such underwriting shall be withdrawn from such
registration.
The Company shall bear all Registration Expenses incurred in connection with any
registration, qualification and compliance by the Company pursuant to this
Section 5. All Selling Expenses shall be borne by the holders of the securities
so registered pro rata on the basis of the number of their shares so registered.
iii) Registration Procedures. In the case of registration effected by the
Company pursuant to this Agreement, the Company will keep Investor advised in
writing as to the initiation of registration and as to the completion thereof.
At its expense, the Company will:
a) keep such registration effective for a period of one year or until Investor
has completed the distribution described in the registration statement relating
thereto, whichever first occurs;
b) furnish such number of prospectuses and other documents incident thereto as
Investor from time to time may reasonably request; and
c) use its best efforts to register or qualify the Shares under the securities
or blue sky laws of such jurisdictions as Investor may request; provided,
however, that the Company shall not be obligated to register or qualify such
Shares in any particular jurisdiction in which the Company would be required to
execute a general consent to service of process in order to effect such
registration, qualification, or compliance, unless the Company is already
subject to service in such jurisdiction and except as may be required by the
Securities Act or applicable rules or regulations thereunder.
d) Notify the holder of Shares covered by such registration statement at any
time when a prospectus relating thereto is required to be delivered under the
Act of the happening of any event as a result of which the prospectus included
in such registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances then existing.
(c) Indemnification.
i) The Company will indemnify the Investor, each of its officers, directors and
partners, and each person controlling such Investor within the meaning of
Section 15 of the Securities Act or the 1934 Act, with respect to which
registration, qualification or compliance has been effected pursuant to this
Agreement, and each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Securities Act or the 1934
Act, against all expenses, claims, losses, damages or liabilities (or actions in
respect thereof), arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any registration statement,
prospectus, offering circular or other document, or any amendment or supplement
thereto, incident to any such registration, qualification or compliance, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances in which they were made, not misleading, or any
violation by the Company of the Securities Act, or the 1934 Act, or any rule or
regulation promulgated under the Securities Act, or the 1934 Act, or under any
state securities law or under common law, applicable to the Company in
connection with any such registration, qualification or compliance, and the
Company will reimburse the Investor, each of its officers, directors and
partners, and each person controlling the Investor, each such underwriter and
each person who controls any such underwriter, for any legal and any other
expenses reasonably incurred, in connection with investigating, preparing or
defending any such claim, loss, damage, liability or action; provided, however,
that the Company will not be liable (i) for amounts paid in settlement of any
such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Company (which consent shall not be unreasonably
withheld) and (ii) in any such case to the extent that any such claim, loss,
damage, liability or expense arises out of or is based on any untrue statement
or omission or alleged untrue statement or omission, made in reliance upon and
in conformity with written information furnished to the Company by an instrument
duly executed by the Investor, controlling person or underwriter and stated to
be specifically for use therein.
ii) The Investor will, if Shares held by the Investor are included in the
securities as to which such registration, qualification or compliance is being
effected, indemnify the Company, each of its directors and officers, each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company or such underwriter within the
meaning of Section 15 of the Securities Act against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company, such directors, officers, persons,
underwriters or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by the Investor and
stated to be specifically for use therein. Notwithstanding the foregoing, the
liability of the Investor under this subsection shall be limited in an amount
equal to the aggregate net proceeds of the shares sold by the Investor, except
to the extent such liability arises out of or is based on willful misconduct by
the Investor.
iii) Each party entitled to indemnification under this Section 5(c) (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Agreement except to the extent that the failure to
give such notice is materially prejudicial to an Indemnifying Party's ability to
defend such action and provided further, that the Indemnifying Party shall not
assume the defense for matters as to which there is an actual or potential
conflict of interest or separate and different defenses, but shall pay the fees
and expenses of one separate counsel retained by the Indemnified Party in the
event of such conflict of interest. No Indemnifying Party, in the defense of any
such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation.
iv) If the indemnification provided for in this Section 5(c) is held by a court
of competent jurisdiction to be unavailable to an indemnified party with respect
to any loss, liability, claim, damage, or expense referred to therein, then the
Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such loss, liability, claim, damage, or expense in such proportion as
is appropriate to reflect the relative fault of the Indemnifying Party on the
one hand and of the Indemnified Party on the other in connection with the
statements or omissions that resulted in such loss, liability, claim, damage, or
expense as well as any other relevant equitable considerations. The relative
fault of the Indemnifying Party and of the Indemnified Party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information, and opportunity
to correct or prevent such statement or omission.
v) Information by Investor. The Investor of Shares included in any registration
shall furnish to the Company such information regarding Investor, the Shares
held by it and the distribution proposed by such Investor as the Company may
reasonably request in writing and as shall be reasonably required in connection
with any registration, qualification or compliance referred to in this
Agreement.
vi) Transfer of Registration Rights. The rights to cause the Company to register
securities granted Holders under Section 5 may be assigned to a transferee or
assignee in connection with any transfer or assignment of Shares by a Holder
provided that: (i) such transfer may otherwise be effected in accordance with
applicable securities laws and (ii) such assignee or transferee becomes a party
to this Agreement and assumes all of the obligations of the transferring Holder
under Section 5.
6. Rule 144 Reporting. With a view to making available the benefits of certain
rules and regulations of the Commission which may at any time permit the sale of
the Shares to the public without registration, Imatron agrees to use its best
efforts to:
(a) Make and keep public information available, as those terms are understood
and defined in Rule 144 under the Securities Act, at all times after the
effective date that Imatron becomes subject to the reporting requirements of the
Securities Act or the Securities Exchange Act of 1934, as amended.
(b) File with the Commission in a timely manner all reports and other documents
required of Imatron under the Securities Act and the Securities Exchange Act of
1934, as amended (at any time after it has become subject to such reporting
requirements); and
(c) So long as Investor owns any Shares, to furnish to the Purchaser forthwith
upon request a written statement by Imatron as to its compliance with the
reporting requirements of said Rule 144 (at any time after ninety (90) days
after the effective date of the first registration statement filed by Imatron
for an offering of its securities to the general public), and of the Securities
Act and the Securities Exchange Act of 1934 (at any time after it has become
subject to such reporting requirements), a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents of Imatron
and other information in the possession of or reasonably obtainable by Imatron
as a Shareholder may reasonably request in availing itself of any rule or
regulation of the Commission allowing a Shareholder to sell any such securities
without registration.
7. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
8. Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall constitute
one instrument.
IN WITNESS WHEREOF, the undersigned purchasers of securities and the Company
have executed this Agreement as of the day and year first above written.
COMPANY:
IMATRON INC.
By:
President
INVESTOR:
TERARECON INC.
By:
Its
Exhibit 10.59
WARRANT PURCHASE AGREEMENT
THIS WARRANT PURCHASE AGREEMENT (the "Agreement") is made and entered into this
21st day of October, 1997 by and between IMATRON INC., a New Jersey corporation
(the "Company") and TeraRecon Inc., a Delaware corporation (the "Investor").
R E C I T A L S:
WHEREAS, the Company desires to issue to Investor and the Investor desires to
purchase from the Company a warrant (the "Warrant") to purchase 2,000,000 shares
of the Company's common stock (the "Shares") all on the terms and conditions
hereinafter provided. The Warrant and the Shares are hereafter collectively
referred to as the "Securities".
NOW, THEREFORE, IT IS AGREED AS FOLLOWS:
1. Issuance of Warrant. For an aggregate purchase price of One Million Dollars
($1,000,000), the receipt and sufficiency of which is acknowledged by the
Company, the Company agrees to issue to Investor the Warrant, the form of which
is attached hereto as Exhibit A.
2. Investor Representations. Investor hereby represents and warrants to the
Company as follows:
(a) The Investor understands that: (a) The offer and sale of the Securities by
the Company to Investor has not been registered under the Securities Act of 1933
(the "Securities Act"), in reliance on an exemption from such registration
available under the Securities Act and rules adopted thereunder; (b) The
Investor must hold the Warrant indefinitely unless the Securities are
subsequently registered under the Securities Act and qualified under applicable
state securities laws, or unless an exemption from such registration and
qualification is available.
(b) The Investor is acquiring the Securities for his or her own account, for
investment, and not with a view to any sale or distribution of any interest
therein.
(c) The Investor has such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of an investment in
the Securities, and the Investor is able to bear the economic risks of such an
investment.
(d) All statements made, and information furnished, by the Investor in this
certificate and all other information furnished by the Investor to the Company,
are true and complete, to the best of the Investor's knowledge.
3. Restrictions on Transfer. The Investor agrees that:
(a) The Investor will not attempt to transfer the Securities in violation of the
restrictions set forth in this Agreement.
(b) The Company may note such restrictions on transfer in its records and refuse
to recognize any transfer which violates this agreement or for which the Company
has not received an acceptable opinion of counsel stating that such transfer
will not violate such restrictions.
(c) One or more legends indicating a lack of registration under the Securities
Act and a lack of qualification under state securities laws will be imprinted on
the Securities. One such legend shall read substantially as follows:
THE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY SALE, TRANSFER,
PLEDGE OR OTHER DISPOSITION THEREOF MAY BE MADE ONLY (i) IN A REGISTRATION UNDER
SAID ACT OR (ii) IF AN EXEMPTION FROM REGISTRATION UNDER SAID ACT IS AVAILABLE
AND THE COMPANY HAS RECEIVED AN OPINION OF COUNSEL TO THAT EFFECT REASONABLY
SATISFACTORY TO IT.
4. Binding on Successors; Indemnification. The Investor agrees that the above
representations and warranties are binding on the Investor's successors and
assigns and are made for the benefit of the Company and any other persons who
may become liable for violations of federal or state securities laws as a result
of the falsity of any of the Investor's representations or warranties. The
Investor agrees to indemnify, defend, and hold harmless such persons from any
liability arising from the falsity of any of the Investor's representations or
warranties or from the breach of any covenant of Investor contained herein.
5. Registration Rights. The Company hereby grants to Investor the following
registration rights with respect to the Shares:
(a) Definitions.
"Commission" shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act of 1933 (the
"Securities Act").
"Register," "registered," and "registration" refer to a registration effected by
preparing and filing a registration statement in compliance with the Securities
Act of 1933, and the declaration or ordering of the effectiveness of such
registration statement.
"Registration Expenses" shall mean all expenses incurred by the Company in
compliance with the provisions of this Section 5, including, without limitation,
all registration and filing fees, printing expenses, fees and disbursements of
counsel for the Company, blue sky fees and expenses, and the expenses of any
special audits incident to or required by any such registration (but excluding
the compensation of regular employees of the Company, which shall be paid in any
event by the Company).
"Selling Expenses" shall mean all underwriting discounts and selling commissions
applicable to the sale of Shares and all fees and disbursements of counsel to
Investor.
"Shares" means the shares of the Company's common stock exercisable upon
exercise of the Warrant and any common stock issued with respect thereto (e.g.
upon a stock split or stock dividend.
"Investor" means the person set forth above and any permitted assignee.
(b) Company Registration.
i) Notice of Registration. If, at any time after the date hereof, the Company
shall determine to register any of its securities either for its own account or
the account of a security holder or holders exercising their respective demand
registration rights, other than a registration relating solely to employee
benefit plans, or a registration relating solely to a Commission Rule 145
transaction, or a registration on any registration form which does not permit
secondary sales, the Company will:
a) promptly give to Investor written notice thereof (which shall include a list
of the jurisdictions in which the Company intends to attempt to qualify such
securities under the applicable blue sky or other state
securities laws); and
b) include in such registration (and any related qualification under blue sky
laws or other compliance), and in any underwriting involved therein, all the
Shares specified in a written request or requests, made by Investor within
fifteen (15) days after receipt of the written notice from the Company described
in this clause (i), except as set forth in
Section 5(b)(ii) below.
ii) Underwriting. If the registration of which the Company gives notice is for a
registered public offering involving an underwriting: the Company shall so
advise Investor as part of the written notice given pursuant to Section 5(b)
hereof. In such event, the right of Investor to registration pursuant to this
Section 5 shall be conditioned upon Investor's participation in such
underwriting and the inclusion of Investor's Shares in the underwriting to the
extent provided herein. Investor shall (together with the Company, its directors
and officers, and any other shareholders distributing their securities through
such underwriting) enter into an underwriting agreement in customary form with
the underwriter or underwriters selected for underwriting by the Company.
Notwithstanding any other provision of this Section 5, if the underwriter
determines that marketing factors require a limitation on the number of shares
to be underwritten, the underwriter may exclude from such registration and
underwriting some or all of the Shares which would otherwise be underwritten
pursuant hereto. Any securities so excluded shall be apportioned pro rata among
Investor and any other shareholders distributing their securities through such
underwriting according to the total amount of securities otherwise entitled to
be included therein owned by such shareholders or in such other proportions as
shall mutually be agreed upon.
If Investor disapproves of the terms of any such underwriting, it may elect to
withdraw therefrom by written notice to the Company and the underwriter. Any
Shares excluded or withdrawn from such underwriting shall be withdrawn from such
registration.
The Company shall bear all Registration Expenses incurred in connection with any
registration, qualification and compliance by the Company pursuant to this
Section 5(b). All Selling Expenses shall be borne by the holders of the
securities so registered pro rata on the basis of the number of their shares so
registered.
iii) Registration Procedures. In the case of registration effected by the
Company pursuant to this Agreement, the Company will keep Investor advised in
writing as to the initiation of registration and as to the completion thereof.
At its expense, the Company will:
a) keep such registration effective for a period of one year or until Investor
has completed the distribution described in the registration statement relating
thereto, whichever first occurs;
b) furnish such number of prospectuses and other documents incident thereto as
Investor from time to time may reasonably request; and
c) use its best efforts to register or qualify the Shares under the securities
or blue sky laws of such jurisdictions as Investor may request; provided,
however, that the Company shall not be obligated to register or qualify such
Shares in any particular jurisdiction in which the Company would be required to
execute a general consent to service of process in order to effect such
registration, qualification, or compliance, unless the Company is already
subject to service in such jurisdiction and except as may be required by the
Securities Act or applicable rules or regulations thereunder.
d) Notify the holder of Shares covered by such registration statement at any
time when a prospectus relating thereto is required to be delivered under the
Act of the happening of any event as a result of which the prospectus included
in such registration statement, as then in effect, includes an untrue statement
of a material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in the light
of the circumstances then existing.
(c) Request for Registration. In case the Company shall receive from the
Investor a written request that the Company effect any registration,
qualification, or compliance with respect to all or a part of the Shares the
Company will: (i) as soon as practicable, use its diligent best efforts to
effect all such registrations, qualifications and compliances (including,
without limitations, the execution of an undertaking to file post-effective
amendments, appropriate qualifications under the applicable blue sky or other
state securities laws and appropriate compliance with exemptive regulations
issued under the Securities Act and any other governmental requirements or
regulations) as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of the Investor's Shares as are
specified in such request, together with all or such portion of the Shares of
any Holder or Holders joining in such request as are specified in a written
request given within thirty days after receipt of such written notice from the
Company; provided that the Company shall not be obligated to take any action to
effect such registration, qualification or compliance pursuant to this
subparagraph 5(c): (A) After the Company has effected two such registrations
pursuant to this subparagraph 5(c) and such registrations have been declared or
ordered effective; or (B) If the amount of securities being offered for sale is
less than 25 percent of the Shares.
Subject to the foregoing clauses (A) through (B), the Company shall file a
registration statement covering the Shares so requested to be registered as soon
as practical, but in any event within ninety days, after receipt of the request
or requests of the Investor; provided, however, that if the Company shall
furnish to such Investor a certificate signed by the President of the Company
stating that in the good faith judgment of the Board of Directors it would be
seriously detrimental to the Company and it stockholders for such registration
statement to be filed at the date filing would be required and it is therefore
essential to defer the filing of such registration statement, the Company shall
have an additional period of not more than ninety days within which to file such
registration statement.
The Investor shall bear all Registration Expenses incurred in connection with
any registration, qualification and compliance by the Company pursuant to this
Section 5(c). All Selling Expenses shall be borne by the Holders of the
securities so registered pro rata on the basis of the number of their shares so
registered.
(d) Indemnification.
i) The Company will indemnify the Investor, each of its officers, directors and
partners, and each person controlling such Investor within the meaning of
Section 15 of the Securities Act or the 1934 Act, with respect to which
registration, qualification or compliance has been effected pursuant to this
Agreement, and each underwriter, if any, and each person who controls any
underwriter within the meaning of Section 15 of the Securities Act or the 1934
Act, against all expenses, claims, losses, damages or liabilities (or actions in
respect thereof), including any of the foregoing incurred in settlement of any
litigation, commenced or threatened, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any
registration statement, prospectus, offering circular or other document, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances in which they were
made, not misleading, or any violation by the Company of the Securities Act, or
the 1934 Act, or any rule or regulation promulgated under the Securities Act, or
the 1934 Act, or under any state securities law or under common law, applicable
to the Company in connection with any such registration, qualification or
compliance, and the Company will reimburse the Investor, each of its officers,
directors and partners, and each person controlling the Investor, each such
underwriter and each person who controls any such underwriter, for any legal and
any other expenses reasonably incurred, as such expenses are incurred, in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action; provided, however, that the Company will not be
liable (i) for amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company (which consent shall not be unreasonably withheld) and (ii) in any such
case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission or alleged untrue
statement or omission, made in reliance upon and in conformity with written
information furnished to the Company by an instrument duly executed by the
Investor, controlling person or underwriter and stated to be specifically for
use therein.
ii) The Investor will, if Shares held by the Investor are included in the
securities as to which such registration, qualification or compliance is being
effected, indemnify the Company, each of its directors and officers, each
underwriter, if any, of the Company's securities covered by such a registration
statement, each person who controls the Company or such underwriter within the
meaning of Section 15 of the Securities Act against all claims, losses, damages
and liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company, such directors, officers, persons,
underwriters or control persons for any legal or any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance upon and in conformity with written information
furnished to the Company by an instrument duly executed by the Investor and
stated to be specifically for use therein. Notwithstanding the foregoing, the
liability of the Investor under this subsection shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability or action if such
settlement is effected without the consent of the Investor (which consent shall
not be unreasonably withheld), and (ii) shall be limited in an amount equal to
the aggregate net proceeds of the shares sold by the Investor, except to the
extent such liability arises out of or is based on willful misconduct by the
Investor.
iii) Each party entitled to indemnification under this Section 5(d) (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense, and provided further that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Agreement except to the extent that the failure to
give such notice is materially prejudicial to an Indemnifying Party's ability to
defend such action and provided further, that the Indemnifying Party shall not
assume the defense for matters as to which there is a conflict of interest or
separate and different defenses, but shall pay the fees and expenses of one
separate counsel retained by the Indemnified Party in the event of such conflict
of interest. No Indemnifying Party, in the defense of any such claim or
litigation, shall, except with the consent of each Indemnified Party, consent to
entry of any judgment or enter into any settle-ment which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim or
litigation.
iv) If the indemnification provided for in this Section 5(d) is held by a court
of competent jurisdiction to be unavailable to an indemnified party with respect
to any loss, liability, claim, damage, or expense referred to therein, then the
Indemnifying Party, in lieu of indemnifying such Indemnified Party hereunder,
shall contribute to the amount paid or payable by such Indemnified Party as a
result of such loss, liability, claim, damage, or expense in such proportion as
is appropriate to reflect the relative fault of the Indemnifying Party on the
one hand and of the Indemnified Party on the other in connection with the
statements or omissions that resulted in such loss, liability, claim, damage, or
expense as well as any other relevant equitable considerations. The relative
fault of the Indemnifying Party and of the Indemnified Party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the indemnifying party or by the indemnified party and
the parties' relative intent, knowledge, access to information, and opportunity
to correct or prevent such statement or omission.
v) The obligations of the Company and the Investor under this Section 5(d) shall
survive the completion of any offering of Shares in a registration statement
under this Section 5 and otherwise.
vi) Information by Investor. The Investor of Shares included in any registration
shall furnish to the Company such information regarding Investor, the Shares
held by it and the distribution proposed by such Investor as the Company may
reasonably request in writing and as shall be reasonably required in connection
with any registration, qualification or compliance referred to in this
Agreement.
vii) Transfer of Registration Rights. The rights to cause the Company to
register securities granted Holders under Section 5 may be assigned to a
transferee or assignee in connection with any transfer or assignment of Shares
by a Holder provided that: (i) such transfer may otherwise be effected in
accordance with applicable securities laws and (ii) such assignee or transferee
becomes a party to this Agreement and assumes all of the obligations of the
transferring Holder under Section 5.
6. Rule 144 Reporting. With a view to making available the benefits of certain
rules and regulations of the Commission which may at any time permit the sale of
the Shares to the public without registration, Imatron agrees to use its best
efforts to:
(a) Make and keep public information available, as those terms are understood
and defined in Rule 144 under the Securities Act, at all times after the
effective date that Imatron becomes subject to the reporting requirements of the
Securities Act or the Securities
Exchange Act of 1934, as amended.
(b) File with the Commission in a timely manner all reports and other documents
required of Imatron under the Securities Act and the Securities Exchange Act of
1934, as amended (at any time after it has become subject to such reporting
requirements); and
(c) So long as Investor owns any Shares, to furnish to the Purchaser forthwith
upon request a written statement by Imatron as to its compliance with the
reporting requirements of said Rule 144 (at any time after ninety (90) days
after the effective date of the first registration state-ment filed by Imatron
for an offering of its securities to the general public), and of the Securities
Act and the Securities Exchange Act of 1934 (at any time after it has become
subject to such reporting requirements), a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents of Imatron
and other information in the possession of or reasonably obtainable by Imatron
as a Shareholder may reasonably request in availing itself of any rule or
regulation of the Commission allowing a Shareholder to sell any such securities
without registration.
7. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
8. Counterparts. This Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall constitute
one instrument.
IN WITNESS WHEREOF, the undersigned purchasers of securities and the Company
have executed this Agreement as of the day and year first above written.
COMPANY:
IMATRON INC.
By:
President
INVESTOR:
TERARECON INC.
By:
Its
<TABLE>
EXHIBIT No. 11
IMATRON INC.
Computation of Per Share Earnings
(in thousands, except per share data)
<CAPTION>
Year ended December Year ended December Year ended December
BASIC AND DILUTED 31, 1997 31, 1996 31, 1995
- ----------------------------- ------------------- --------------------- ----------------------
<S> <C> <C> <C>
Weighted average common shares
outstanding 78,461 74,406 57,598
------------------ --------------------- ----------------------
Total 78,461 74,406 57,598
------------------ --------------------- ----------------------
Net loss $ (11,422) $ (13,737) $ (2,449)
------------------ --------------------- ----------------------
Basic and diluted
net loss per share $ (0.15) $ (0.18) $ (0.04)
================== ===================== ======================
</TABLE>
<PAGE>
<TABLE>
SCHEDULE II
IMATRON INC.
Valuation and Qualifying Accounts and Reserves
(In thousands)
<CAPTION>
Balance at
Beginning of Charged to Costs Balance at End
Description Period and Expenses of the Period
- -------------------------------------------------------- ------------------ ------------------ ----------------
<S> <C> <C> <C>
Balances for the year ended December 31, 1995:
Allowance for doubtful accounts receivable $160 $ 11 $ 171
Balances for the year ended December 31, 1996:
Allowance for doubtful accounts receivable 171 939 1,110
Balances for the year ended December 31, 1997:
Allowance for doubtful accounts receivable 1,110 1,648 2,758
</TABLE>
Exhibit 23.01
Consent of KPMG Peat Marwick LLP, Independent Auditors
The Board of Directors
Imatron Inc.:
We consent to incorporation by reference in the registration statements (File
Nos. 333-11515, 333-6749, 333-3529, 333-647 and 33-63123 on Form S-3 and File
Nos. 333-15081, 333-9989, 33-61179, 33-71786, 33-66992, 33-66952, 33-40391,
33-28662 and 33-26833 on Form S-8) of Imatron Inc. of our report dated April 6,
1998, relating to the consolidated balance sheet of Imatron Inc. and subsidiary
as of December 31, 1997, and the related consolidated statements of operations,
shareholders' equity and cash flows for the year then ended, and the related
schedule, which report appears in the December 31, 1997 annual report on Form
10-K of Imatron Inc.
KPMG Peat Marwick LLP
San Francisco, California
April 14, 1998
EXHIBIT 24.1
Consent of Ernst and Young LLP Independent Auditors
We consent to the incorporation by reference in:
- - Form S-8 (Registration No. 333-15081) dated October 30, 1996 pertaining to
Imatron Inc. Stock Bonus Incentive Plan
- - Form S-3 (Registration No. 333-11515) dated September 6, 1996 and related
Prospectus
- - Form S-8 (Registration No. 333-9989) dated August 12, 1996 pertaining to
Imatron Inc. 1994 Employee Stock Purchase Plan
- - Form S-3 (Registration No. 333-6749) dated June 25, 1996 and related
Prospectus
- - Form S-3 (Registration No. 333-3529) dated May 10, 1996 and related
Prospectus
- - Form S-3 (Registration No. 333-647) dated February 2, 1996 and related
Prospectus
- - Form S-3 (Registration No. 333-63123) dated October 2, 1995 and related
Prospectus
- - Form S-8 (Registration No. 33-61179) dated July 20, 1995 pertaining to 1993
Stock Option Plan
- - Form S-8 (Registration No. 33-71786) dated November 15, 1993 pertaining to
1994 Employee Stock Purchase Plan
- - Form S-8 (Registration No. 33-66992) dated August 3, 1993 pertaining to 1993
Stock Option Plan
- - Form S-8 (Registration No. 33-66952) dated August 3, 1993 pertaining to 1991
Non-Employee Directors' Stock Option Plan
- - Form S-8 (Registration No. 33-40391) dated May 6, 1991 pertaining to Director
Stock Option Grant
- - Form S-8 (Registration No. 33-28662) dated May 11, 1989 pertaining to 1983
Stock Option Plan
- - Form S-8 (Registration No. 33-26833) dated February 3, 1989 pertaining to
1984 Employee Stock Participation Plan
of our report dated February 14, 1997, except for Note 12 as to which the date
is April 10, 1998 with respect to the consolidated financial statements and
schedule of Imatron Inc. for the year ended December 31, 1996 (restated) and
1995 included in the Annual Report on Form 10K for the year ended December 31,
1997.
ERNST & YOUNG LLP
San Francisco, California
April 24, 1998
<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
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 10862
<SECURITIES> 14171
<RECEIVABLES> 6710
<ALLOWANCES> (1110)
<INVENTORY> 10393
<CURRENT-ASSETS> 42685
<PP&E> 16814
<DEPRECIATION> (6712)
<TOTAL-ASSETS> 53192
<CURRENT-LIABILITIES> 9643
<BONDS> 0
0
0
<COMMON> 89223
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 40,869
<SALES> 25768
<TOTAL-REVENUES> 25768
<CGS> 24787
<TOTAL-COSTS> 24787
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 564
<INCOME-PRETAX> 13,737
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (13,737)
<NET-INCOME> (13,737)
<EPS-PRIMARY> (0.18)
<EPS-DILUTED> (0.18)
</TABLE>
<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> $
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 14,425
<SECURITIES> 180
<RECEIVABLES> 9,653
<ALLOWANCES> 2,758
<INVENTORY> 12,926
<CURRENT-ASSETS> 37,645
<PP&E> 19,379
<DEPRECIATION> 9,020
<TOTAL-ASSETS> 49,223
<CURRENT-LIABILITIES> 11,595
<BONDS> 0
0
0
<COMMON> 90,728
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 34,968
<SALES> 39,423
<TOTAL-REVENUES> 39,423
<CGS> 31,879
<TOTAL-COSTS> 31,879
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 578
<INCOME-PRETAX> (9,678)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,422)
<EPS-PRIMARY> (0.15)
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</TABLE>
