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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
--------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________________ TO __________________
COMMISSION FILE NUMBER 0-24092
POSITRON CORPORATION
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(EXACT NAME OF SMALL BUSINESS ISSUER AS SPECIFIED IN ITS CHARTER)
TEXAS 76-0083622
- ------------------------------- -------------------
(STATE OF OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
16350 PARK TEN PLACE, HOUSTON, TEXAS 77084
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE, INCLUDING ZIP CODE)
281-492-7100
------------------------------------------------
(ISSUER'S TELEPHONE NUMBER, INCLUDING AREA CODE)
N/A
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(FORMER NAME, FORMER ADDRESS AND FORMER FISCAL YEAR, IF CHANGED SINCE LAST
REPORT)
CHECK WHETHER THE ISSUER, (1) FILED ALL REPORTS REQUIRED TO BE FILED BY
SECTION 13 OR 15(D) OF THE EXCHANGE ACT DURING THE PAST 12 MONTHS (OR FOR SUCH
SHORTER PERIOD 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 [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
CHECK WHETHER THE REGISTRANT FILED ALL DOCUMENTS AND REPORTS REQUIRED TO BE
FILED BY SECTION 12, 13 OR 15(D) OF THE EXCHANGE ACT AFTER THE DISTRIBUTION OF
SECURITIES UNDER A PLAN CONFIRMED BY A COURT.
YES [ ] NO [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
STATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON EQUITY, AS OF JUNE 12, 1997: 4,608,610
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POSITRON CORPORATION
Form 10-QSB for the quarter ended March 31, 1997
INDEX
Page
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BALANCE SHEETS AS OF DECEMBER 31, 1996 1
AND MARCH 31, 1997
STATEMENTS OF OPERATIONS FOR THE THREE 2
MONTHS ENDED MARCH 31, 1996 AND 1997
STATEMENTS OF CASH FLOWS FOR THE THREE 3
MONTHS ENDED MARCH 31, 1996 AND 1997
NOTES TO FINANCIAL STATEMENTS 4
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR 6
PLAN OF OPERATION
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS 8
ITEM 2. CHANGES IN SECURITIES 8
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF 8
SECURITY HOLDERS
ITEM 5. OTHER INFORMATION 8
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 8
SIGNATURE 9
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
POSITRON CORPORATION
Balance Sheets
(in thousands, except share data)
December 31, 1996 March 31, 1997
----------------- ---------------
ASSETS: (unaudited)
- -------
Current Assets:
Cash and cash equivalents $ 382 $ 0
Accounts receivable 520 675
Notes receivable 324 324
Inventory 2,633 2,654
Prepaid expenses 159 141
Other current assets 426 331
---------- ---------
Total current assets 4,444 4,125
Plant and Equipment, net 967 906
Intangible Assets, net 106 100
---------- ---------
Total assets $ 5,517 $ 5,131
========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES:
- ------------
Current Liabilities:
Accounts payable, trade $ 1,113 $ 1,432
Accrued liabilities 2,654 3,007
Revolving line of credit 75 107
Notes payable to affiliate 663 663
Notes payable, other 1,335 1,294
Unearned revenue 267 540
---------- ---------
Total current liabilities 6,107 7,043
---------- ---------
Other Liabilities 68 66
---------- ---------
SHAREHOLDERS' EQUITY
Common stock, $0.01 par, 15,000,000
shares authorized 4,312,182 and
4,608,610 issued and outstanding
at December 31, 1996 and
March 31, 1997 43 46
Preferred stock, Series A 8%
Cumulative Convertible
Redeemable, $1.00 par, 2,404,624
shares authorized, issued and
outstanding 2,405 2,405
Preferred stock, Series B 8%
Cumulative Convertible
Redeemable, $1.00 par, 25,000
shares authorized, issued and
outstanding 25 25
Additional paid-in capital 41,374 41,386
Accumulated deficit (44,505) (45,840)
---------- ---------
Total shareholders' deficit (658) (1,978)
---------- ---------
Total liabilities and shareholders'
equity $ 5,517 $ 5,131
========== =========
The accompanying notes are an integral part of these financial statements.
1
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POSITRON CORPORATION
Statement of Operations
(in thousands, except per share amounts)
(Unaudited)
Three months ended March 31,
----------------------------
1996 1997
----------- -----------
REVENUE:
- --------
System sales $ 650 $
Fee per scan 139 123
Service and components 416 499
---------- ----------
1,205 622
---------- ----------
Cost of system sales 316
Cost of fee per scan 48 39
Cost of service and components 109 108
Provision for loss on system exchange 1,000
---------- ----------
1,473 147
---------- ----------
Gross profit (268) 475
---------- ----------
OPERATING EXPENSE:
- ------------------
Research and development 535 474
Selling and marketing 241 201
General and administrative 996 995
---------- ----------
1,772 1,670
---------- ----------
Operating loss (2,040) (1,195)
---------- ----------
OTHER INCOME (EXPENSE):
- -----------------------
Interest and other income 77 2
Interest and other expense (114) (141)
---------- ----------
(37) (139)
---------- ----------
Net loss $ (2,077) $ (1,334)
========== ==========
Net loss per share $(.57) $(.30)
========== ==========
Weighted average shares used in computing 3,637,320 4,473,566
net loss per share ========== ==========
The accompanying notes are an integral part of these financial statements.
2
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POSITRON CORPORATION
Statements of Cash Flows
(in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended March 31,
----------------------------
1996 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
- -------------------------------------
Net loss $ (2,077) $(1,334)
Adjustments to reconcile net loss to net cash
used by operating activities -
Depreciation 92 61
Amortization of intangible assets 6 6
Change in assets and liabilities -
(Increase) decrease in accounts receivable (187) (155)
(Increase) decrease in inventories 270 (21)
(Increase) decrease in prepaid expenses 16 18
(Increase) decrease in other current assets (7) 95
Increase (decrease) in accounts payable, trade (899) 319
Increase (decrease) in accrued liabilities 975 353
Increase (decrease) in notes payable to affiliate (410)
Increase (decrease) in revolving line of credit -- 32
Increase (decrease) in unearned revenue (271) 273
Increase (decrease) in other liabilities (2) (2)
-------- -------
Net cash used by operating activities (2,494) (355)
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
- ------------------------------------
Capital expenditures (11) 0
-------- -------
Net cash provided by investing activities (11) 0
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
- ------------------------------------
Proceeds from issuance of preferred stock 2,800
Conversion of notes payable to affiliates to
preferred stock 650
Repayment of notes payable, other (41)
Proceeds from exercise of warrants 14
Offering costs (506)
-------- -------
Net cash used by financing activities 2,944 (27)
-------- -------
Net (decrease) increase in cash and cash equivalents 439 (382)
Cash and cash equivalents at the beginning of the period 102 382
-------- -------
Cash and cash equivalents at the end of the period $ 541 $ 0
======== =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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POSITRON CORPORATION
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
1. Basis of Presentation:
The accompanying unaudited interim financial statements have been prepared
in accordance with generally accepted accounting principles and the rules of the
U.S. Securities and Exchange Commission, and should be read in conjunction with
the audited financial statements and notes thereto contained in the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1996. In the
opinion of management, all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of financial position and the
results of operations for the interim periods presented have been reflected
herein. The results of operations for interim periods are not necessarily
indicative of the results to be expected for the full year. Notes to the
financial statements which would substantially duplicate the disclosure
contained in the audited financial statements for the most recent fiscal year
ended December 31, 1996, as reported in the Form 10-KSB, have been omitted.
2. Company Operations
Since its inception the Company has been unable to sell its POSICAM/TM/
systems in sufficient quantities to be profitable. Consequently, the Company
has sustained substantial losses. Net losses for the year ended December 31,
1996 and the quarter ended March 31, 1997 were $6,375,000 and $1,334,000,
respectively. The Company had an accumulated deficit of $45,840,000 at March 31,
1997. Due to the sizeable selling prices of the Company's systems and the
limited number of systems sold or placed in service, the Company's revenues have
fluctuated significantly period to period.
At March 31, 1997, the Company had a book overdraft of approximately $1,000
compared to cash and cash equivalents totaling approximately $382,000 at
December 31, 1996. During the first quarter of 1997, the Company has been
unable to meet certain of its obligations as they came due. As a result of the
Company's liquidity problem, certain management level employees have deferred
payment of 1997 salaries through May 30, 1997 totaling approximately $215,000.
Additionally, the Company is in arrears to many of its vendors and suppliers. As
of May 30, 1997, such amount owed totaled approximately $1,500,000. The Company
has had discussions with a number of potential investors regarding the sale of
additional equity securities to such investors. If the Company is successful in
raising additional capital, it is its intention to utilize a portion of such
funds to significantly reduce the level of its past due obligations to its
employees, vendors and suppliers.
Although the Company has been actively pursuing the above financing
alternative, no assurances can be given that the Company will be able to
successfully alleviate its current financial difficulties. Failure of the
Company to obtain an alternate source of capital is likely to have a material
adverse effect on the Company's ability to continue as a going concern.
Additionally, the Company currently has no shares of its Common Stock
available for issuance and all authorized shares have either been issued or
reserved for issuance in respect of outstanding options and warrants or
convertible securities. The lack of such available shares significantly
restricts the Company's ability to raise capital through the issuance of
additional equity securities. While the Company believes that its shareholders
will approve an increase in the number of authorized shares of Common Stock at
its Annual Meeting of Shareholders, no assurance can be given that such increase
in authorized shares will be approved by the Company's shareholders.
3. Net Loss Per Share
Net loss per common share for the quarters ended March 31, 1995 and 1996
have been computed by dividing net loss by the weighted average number of shares
of Common Stock outstanding during these periods. All common stock equivalents
were anti-dilutive.
4
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4. Reclassifications:
Certain amounts have been reclassified in order to conform to current-
period presentations.
5. Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets or liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
5
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POSITRON CORPORATION
(Form 10-QSB for the quarter ended March 31, 1997)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following information should be read in conjunction with the financial
statements and the notes thereto and in conjunction with Management's Discussion
and Analysis of Financial Condition and Results of Operations in the Company's
Annual Report on Form 10-KSB for the year ended December 31, 1996. This
analysis is provided pursuant to applicable Securities and Exchange Commission
regulations and is not intended to serve as a basis for projections of future
events.
Comparison of the Results of Operations for the three months ended March 31,
1996 and 1997.
Total revenue decreased $583,000 or 48% from $1,205,000 for the quarter
ended March 31, 1996, to $622,000 for the quarter ended March 31, 1997.
Revenue from system sales was $650,000 for the first quarter of 1996
compared to $0 in the first quarter of 1997. Fee-per-scan revenue decreased
aproximately $16,000 or 12% due to fewer first quater 1997 scans at Buffalo
Cardiology. Service revenue increased $83,000 or approximately 20% from
$416,00 for the quarter ended March 31, 1996, to $499,000 for the first quarter
of 1997. The increase is attributable to a one time charge for the relocation
of a system at a customers site which was performed by the Company in the first
quarter of 1997.
Gross profit (loss) for the first quarter of 1996 was $(268,000) compared
to $475,000 for the first quarter of 1997, an increase of $743,000. The
increase is due principally to lack of a provision for loss on the anticipated
exchange of a scanner explained below.
The Company was notified in early 1996 by the customer who purchased the
initial production model HZL series scanner that the scanner was not performing
to certain of the contracted for specifications. These specifications are
higher than those customarily provided to purchasers of the HZL scanner.
Additionally, the scanner experienced certain reliability problems related to
detector module failures which have been corrected by the Company.
The Company agreed with the customer to replace the scanner with a new
scanner if it is unable to bring the existing scanner up to the contracted
specification. If necessary, the Company anticipates that the defective scanner
will be replaced in mid-1997. If the replacement scanner does not meet the
contracted specifications, the customer could, among other things return the
system and demand a full refund of the approximate net purchase price of
$1,500,000; or, request a discount (partial refund) from the contracted purchase
price.
In anticipation of the losses to be realized in correcting these problems
the Company increased its reserve for replacement of the scanner by $1 million
in the first quarter of 1996.
Total operating expense decreased $102,000 or approximately 6% from
$1,772,000 for the quarter ended March 31, 1996, to $1,670,000 for the same
quarter in 1997.
Research and development expense decreased $61,000 or 11% from $535,000 in
the first quarter of 1996 to $474,000 for the first quarter of 1997. The
decrease is principally due to a reduction in personnel related costs from the
first quarter of 1996 to the first quarter of 1997.
6
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Selling and marketing expense decreased $40,000 or 17% from $241,000 for
the quarter ended March 31, 1996, to $201,000 for the quarter ended
March 31, 1997. The decrease is principally due to reduced personnel cost as
well as lower travel & entertainment expenditures.
General and administrative expense remained relatively unchanged from
quarter to quarter.
Financial Condition
Since its inception the Company has been unable to sell its POSICAM/TM/
systems in sufficient quantities to be profitable. Consequently, the Company
has sustained substantial losses. Net losses for the year ended December 31,
1996 and the quarter ended March 31, 1997 were $6,375,000 and $1,334,000,
respectively. The Company had an accumulated deficit of $45,840,000 at March
31, 1997. Due to the sizeable selling prices of the Company's systems and the
limited number of systems sold or placed in service, the Company's revenues have
fluctuated significantly period to period.
At March 31, 1997, the Company had a book overdraft of approximately $1,000
compared to cash and cash equivalents totaling approximately $382,000 at
December 31, 1996. During the first quarter of 1997, the Company has been
unable to meet certain of its obligations as they came due. As a result of the
Company's liquidity problem, certain management level employees have deferred
payment of 1997 salaries through May 30, 1997 totaling approximately $215,000.
Additionally, the Company is in arrears to many of its vendors and suppliers. As
of May 30, 1997, such amount owed totaled approximately $1,500,000. The Company
has had discussions with a number of potential investors regarding the sale of
additional equity securities to such investors. If the Company is successful in
raising additional capital, it is its intention to utilize a portion of such
funds to significantly reduce the level of its past due obligations to its
employees, vendors and suppliers.(1)
Although the Company has been actively pursuing the above financing
alternative, no assurances can be given that the Company will be able to
successfully alleviate its current financial difficulties. Failure of the
Company to obtain an alternate source of capital is likely to have a material
adverse effect on the Company's ability to continue as a going concern.(1)
Additionally, the Company currently has no shares of its Common Stock
available for issuance and all authorized shares have either been issued or
reserved for issuance in respect of outstanding options and warrants or
convertible securities. The lack of such available shares significantly
restricts the Company's ability to raise capital through the issuance of
additional equity securities. While the Company believes that its shareholders
will approve an increase in the number of authorized shares of Common Stock at
its Annual Meeting of Shareholders, no assurance can be given that such increase
in authorized shares will be approved by the Company's shareholders.(1)
(1) This statement is a forward looking statement that involves risks and
uncertainties. Accordingly, no assurances can be given that the actual
events and results will not be materially different than the anticipated
results described in the forward looking statement. See the discussion of
the Company's business and a description of the various factors that could
materially affect the ability of the Company to achieve the anticipated
results described in the forward looking statement which is included in
Item 1 of the Company's Annual Report on Form 10-KSB for the year ended
December 31, 1996.
7
<PAGE>
PART II - OTHER INFORMATION
POSITRON CORPORATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGE IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS: THE FOLLOWING DOCUMENT IS FILED AS AN EXHIBIT
TO THIS REPORT
11.0 COMPUTATION OF LOSS PER COMMON SHARE
27 Financial Data Schedule
(b) REPORTS ON FORM 8-K:
None
8
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SIGNATURES
Pursuant to the requirements of the Exchange Act, the Registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
POSITRON CORPORATION
(Registrant)
Date: June 19, 1997 /s/ DAVID O. RODRIGUE
---------------------------------
David O. Rodrigue
Vice President, Chief Financial Officer
(Duly Authorized Officer and Principal
Accounting Officer)
9
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POSITRON CORPORATION
STATEMENT RE: COMPUTATION OF PER SHARE LOSS
FOR THE THREE MONTHS ENDED MARCH 31,
(IN THOUSANDS, EXCEPT SHARE DATA)
EXHIBIT 11.0
1996 1997
----------- -----------
Net loss $ (2,077) $ (1,334)
=========== ===========
Weighted average common shares used in computing
net loss per share 3,637,320 4,473,566
=========== ===========
Net loss per share ($0.57) ($0.30)
=========== ===========
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 675
<ALLOWANCES> 0
<INVENTORY> 2,654
<CURRENT-ASSETS> 4,125
<PP&E> 967
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,131
<CURRENT-LIABILITIES> 7,043
<BONDS> 0
0
2,430
<COMMON> 46
<OTHER-SE> (4,454)
<TOTAL-LIABILITY-AND-EQUITY> 5,131
<SALES> 0
<TOTAL-REVENUES> 622
<CGS> 147
<TOTAL-COSTS> 1,670
<OTHER-EXPENSES> (139)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 141
<INCOME-PRETAX> (139)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (139)
<EPS-PRIMARY> (.30)
<EPS-DILUTED> (.30)
</TABLE>
