FORM 10-QSB MARCH 31, 2000
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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
Commission file number: 0-24092
[GRAPHIC OMITED]
POSITRON
A Texas Corporation
I.D. No. 76-0083622
1304 Langham Creek Drive, Suite 300, Houston, Texas 77084
(281) 492-7100
Indicate by check mark whether the issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 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
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As of March 31, 2000, there were 57,474,554 shares of the Registrant's Common
Stock, $.01 par value outstanding.
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FORM 10-QSB MARCH 31, 2000
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POSITRON CORPORATION
TABLE OF CONTENTS
FORM 10-QSB FOR THE QUARTER ENDED MARCH 31, 2000
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<CAPTION>
<S> <C>
PART I - FINANCIAL INFORMATION PAGE
----
Item 1. Condensed Financial Statements
Condensed Balance Sheets as of March 31, 2000 and December 31, 1999 3
Condensed Statements of Operations for the three months ended
March 31, 2000 4
Condensed Statements of Cash Flows for the three months ended
March 31, 2000 5
Selected Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operation 8
Signature Page 9
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FORM 10-QSB MARCH 31, 2000
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POSITRON CORPORATION
CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
ASSETS (Unaudited) (Note)
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<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,760 $ 7,180
Accounts receivable, net 854 101
Inventories 1,001 683
Prepaid expenses 75 108
Other current assets 393 150
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Total current assets 8,083 8,222
Plant and equipment, net 111 110
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Total assets $ 8,194 $ 8,332
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LIABILITIES AND STOCKHOLDERS' DEFICIT
- ---------------------------------------------------------------
Current liabilities:
Accounts payable, trade and accrued liabilities $ 3,850 $ 3,766
Unearned revenue 109 168
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Total current liabilities 3,959 3,934
Other liabilities 39 45
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Total liabilities 3,998 3,979
Stockholders' equity:
Series A Preferred Stock: $1.00 par value; 8% cumulative,
Convertible, redeemable; $1.00 par value; 5,450,000 shares
Authorized; 980,942 shares issued and outstanding
at March 31, 2000 and December 31, 1999. 981 981
Common Stock: $0.01 par value; 100,000,000 shares
Authorized; 57,534,710 shares issued and 57,474,554 shares
outstanding at March 31, 2000 and December 31, 1999. 575 575
Additional paid-in capital 53,917 53,917
Subscription receivable (30) (30)
Accumulated deficit (51,232) (51,075)
Treasury Stock: 60,156 shares at cost (15) (15)
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Total stockholders' equity 4,196 4,353
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Total liabilities and stockholders' equity $ 8,194 $ 8,332
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</TABLE>
Note: The consolidated balance sheet at December 31, 1999 has been derived from
the audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. See accompanying notes.
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FORM 10-QSB MARCH 31, 2000
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POSITRON CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
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<CAPTION>
Three Months Ended
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March 31, March 31,
2000 1999
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<S> <C> <C>
Revenues:
System sales $ 800 $ --
Upgrades -- 77
Service and component 369 311
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Total Revenue: 1,169 388
Costs of sales and services:
System sales 398 --
Upgrades -- 28
Service, warranty and component 115 114
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Total costs of revenues 513 142
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Gross profit 656 246
Operating expenses:
Research and development 255 69
Selling and marketing 248 --
General and administrative 395 91
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Total operating expenses 898 160
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Income (loss) from operations (242) 86
Interest income/(expense) 85 (52)
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Income (loss) from operations (242) 86
Total other income (expense) 85 (52)
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Net income (loss) $ (157) $ 34
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Basic and diluted earnings (loss) per common share $ 0.00 $ 0.00
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Weighted average number of basic Common shares outstanding 57,535 14,440
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Weighted average number of diluted Common shares outstanding 57,535 16,207
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Common shares outstanding
</TABLE>
See accompanying notes
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FORM 10-QSB MARCH 31, 2000
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POSITRON CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended
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March 31, March 31,
2000 1999
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<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (157) $ 34
Adjustment to reconcile net income (loss) to net cash
provided (used) in operating activities
Depreciation 15 15
Changes in operating assets and liabilities:
Accounts receivable (753) (103)
Inventory (318) 6
Prepaid expenses 33 --
Other current assets (243) --
Accrued liabilities 84 (19)
Unearned revenue (59) 67
Other liabilities (6) --
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Net cash used in operating activities (1,404) --
Cash flows from investing activities:
Capital expenditures (16) --
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Net cash used in investing activities (16) --
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Net decrease in cash and cash equivalents $ (1,420) $ --
Cash and cash equivalents, beginning of period 7,180 8
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Cash and cash equivalents, end of period $ 5,760 $ 8
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</TABLE>
See accompanying notes
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FORM 10-QSB MARCH 31, 2000
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POSITRON CORPORATION
SELECTED NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
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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 of Form 10-KSB for the year ended
December 31, 1999. 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,
1999, as reported in the Form 10-KSB, have been omitted.
2. COMPREHENSIVE INCOME
---------------------
Effective January 1, 1998, the Company adopted Statement of Financial
Accounting Standard ("SFAS") No. 130, "Reporting Comprehensive Income."
Comprehensive income includes such items as unrealized gains or losses on
certain investment securities and certain foreign currency translation
adjustments. The Company's financial statements include none of the
additional elements that affect comprehensive income. Accordingly,
comprehensive income and net income are identical.
3. EARNINGS PER SHARE
--------------------
Basic earnings per common share are based on the weighted average number of
common shares outstanding in each year and after preferred stock dividend
requirements. Diluted earnings per common share assume that any dilutive
convertible preferred shares outstanding at the beginning of each year were
converted at those dates, with related interest, preferred stock dividend
requirements and outstanding common shares adjusted accordingly. It also
assumes that outstanding common shares were increased by shares issuable
upon exercise of those stock options for which market price exceeds
exercise price, less shares which could have been purchased by the Company
with related proceeds. The convertible preferred stock and outstanding
stock options and warrants were not included in the computation of diluted
earnings per common share for 2000 since it would have resulted in an
antidilutive effect.
The following table sets forth the computation of diluted weighted average
shares outstanding:
<TABLE>
<CAPTION>
Three Months Ended
======================
March 31, March 31,
(In Thousands) 2000 1999
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<S> <C> <C>
Numerator:
Net income (loss) $ (157) $ 34
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Denominator:
Denominator for basic earnings per share-weighted
average shares 57,535 14,440
Effect of dilutive securities:
Convertible Series A preferred stock -- 1,142
Convertible Series B preferred stock -- 625
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Dilutive potential common shares -- 1,767
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Denominator for diluted earnings per Share-adjusted weighted
average shares and assumed conversions 57,535 16,207
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FORM 10-QSB MARCH 31, 2000
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4. INCOME TAX
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The difference between the Federal statutory income tax rate and the
Company's effective income tax rate is primarily attributable to increases
in valuation allowances for deferred tax assets relating to net operating
losses.
5. IMATRON TRANSACTION
--------------------
In May 1998, the Company entered into an agreement (the "Imatron
Transaction") with Imatron Inc. ("Imatron"), pursuant to which in January
1999, Imatron acquired a majority ownership of the Company. In conjunction
with the Imatron Transaction, Imatron made working capital advances to the
Company of $600,000 to enable the Company to meet a portion of its current
obligations.
Upon consummation of the Imatron Transaction in January 1999, Imatron
acquired a majority ownership of the outstanding common stock of the
Company on a fully-diluted and as-if-converted basis (excluding
out-of-the-money warrants and options determined at the time of issuance of
the shares of Imatron) and was issued nine million of the Company's common
stock in return for a nominal cash payment in the amount of $100.
Imatron, in addition to providing limited working capital financing, agreed
to support the Company's marketing program particularly with regard to
Imatron's affiliate, Imatron Japan, Inc. by agreeing to make all reasonable
efforts to cause the placement of 10 POSICAM systems over the next three
years. During 1998 the Company shipped a POSICAM system to Imatron Japan as
the first delivery under a three-year distribution agreement entered into
during 1997. Imatron Japan, an affiliate of Imatron, is a major distributor
for Imatron's Ultrafast CT and for the products of certain other high
technology companies. Imatron owns a 24 percent minority interest in
Imatron Japan.
Imatron has also agreed to help facilitate the recapitalization of the
Company and to support its re-entry into the medical imaging market by
using its best efforts, after the share issuance closing date, to arrange
for additional third-party equity financing for the Company over an
eighteen-month period in an aggregate amount of at least $8,000,000. There
can be no assurances, however, that any such sales will actually be
consummated or that Imatron will be able to successfully assist the Company
in raising additional capital.
In connection with the Imatron Transaction, the Company, Imatron, and two,
then current lenders, to the Company, Uro-Tech and ProFutures, entered into
certain agreements whereby (a) ProFutures waived all past defaults and
extended the maturity of the ProFutures Loan in return for a $50,000
payment and the issuance of warrants to purchase 1,150,000 shares of the
Company's common stock at $0.25 per share. The ProFutures Loan was
subsequently repaid in November 1998; (b) Imatron agreed to subordinate its
loan to the ProFutures Loan, (c) Uro-Tech agreed to subordinate its loan
(with a current balance of approximately $792,000 plus accrued interest
payable of approximately $272,000 at December 31, 1998) to Imatron's loan.
In August of 1999, Imatron successfully completed raising a net $11.4
million of equity capital for the Company. This reduced Imatron's current
ownership in the company to approximately 18%. Consistent with the
completion of the financing, the Company has repaid the Imatron bridge loan
plus interest and paid the Uro-tech loan plus interest. The Company's
President has resigned as Imatron's CFO and Imatron no longer has operating
or voting control of the company.
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FORM 10-QSB MARCH 31, 2000
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ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
We are including the following cautionary statement in this Quarterly Report on
Form 10-QSB to make applicable and utilize the safe harbor provision of the
Private Securities Litigation Reform Act of 1995 regarding any forward-looking
statements made by, or on behalf of, the Company. Forward-looking statements
include statements concerning plans, objectives, goals, strategies, future
events or performance and underlying assumptions and other statements, which are
other than statements of historical facts. Certain statements contained herein
are forward-looking statements and, accordingly, involve risks and
uncertainties, which could cause actual results or outcomes to differ materially
from those expressed in the forward-looking statements.
Our expectations, beliefs and projections are expressed in good faith and are
believed by us to have a reasonable basis, including without limitations, our
examination of historical operating trends, data contained in our records and
other data available from third parties, but there can be no assurance that our
expectations, beliefs or projections will result, or be achieved, or be
accomplished.
COMPARISON OF THE RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31,
- --------------------------------------------------------------------------------
2000 AND 1999.
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We generated a loss of $157,000 for the three months ended March 31, 2000
compared to a profit of $34,000 for the three months ended March 31, 1999. Our
current year loss was primarily the result of the hiring of additional personnel
and increased operating expenses as we resumed full operation and production.
We generated system revenue of $800,000 during the three months ended March 31,
2000 on one system sale versus no system revenue for the same period in 1999.
We received no upgrade revenue for the quarter versus $77,000 in 1999. In
addition, service and component sales revenue increased $58,000 to $369,000 in
2000 from $311,000 during the same period in 1999 due to increased service work.
Service revenue increases are attributable to normal fluctuations in service.
Our gross profit for the three months ended March 31, 2000 increased $410,000 to
$656,000 compared to $246,000 for the three months in 1999. This increase was
due primarily to the sale of a system and slightly better margins on the service
and component revenue.
Total operating expense increased $738,000 to $898,000 for the three months
ended March 31, 2000 from $160,000 for 1999. The increase results primarily from
significant staff additions and related operating expenditures in all areas as
we went back into full operation and production.
Net interest income was $85,000 for the three months ended March 31, 2000 as
compared to net interest expense of $52,000 for the same three months in 1999
due primarily to the investment interest in first quarter 2000 on proceeds of
equity funding from August of 1999. During the first quarter of 1999,
interest was paid on the Imatron and Uro-Tech loans.
FINANCIAL CONDITION
- --------------------
As a result of the equity funding in August 1999, (see 5. Imatron Transaction
above), we began hiring personnel and incurring increasing operating expenses as
we resumed full operation and production. Our return to full operation resulted
in the sale of our first system in two years but also resulted in increased
overhead and operating expenses.
Despite the first quarter system sale, we have previously been unable to
sell our POSICAMTM systems in sufficient quantities to be profitable and there
is no guarantee that we will reach a system sales level that will generate
profits on a consistent basis. Consequently, we have sustained substantial
accumulated losses. Due to the sizeable selling prices of our systems and the
limited number of systems sold or placed in service each year, our revenues have
fluctuated significantly year-to-year. We have an accumulated deficit of
$51,232,000 at March 31, 2000.
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FORM 10-QSB MARCH 31, 2000
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
POSITRON CORPORATION
(Registrant)
Date: May 12, 2000 /s/ Gary H. Brooks
----------------------
Gary H. Brooks
President
(Duly Authorized Officer and
Principal Accounting Officer)
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9
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<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 5760
<SECURITIES> 0
<RECEIVABLES> 1796
<ALLOWANCES> 942
<INVENTORY> 1001
<CURRENT-ASSETS> 8083
<PP&E> 439
<DEPRECIATION> 328
<TOTAL-ASSETS> 8194
<CURRENT-LIABILITIES> 3959
<BONDS> 0
0
981
<COMMON> 575
<OTHER-SE> 2640
<TOTAL-LIABILITY-AND-EQUITY> 8194
<SALES> 800
<TOTAL-REVENUES> 1169
<CGS> 398
<TOTAL-COSTS> 1411
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (157)
<INCOME-TAX> 0
<INCOME-CONTINUING> (157)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (157)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
