FY 2000                             IMATRON INC.                       FORM 10-K
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                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    FORM 10-K


                                  ANNUAL REPORT
     PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934


                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
                         Commission file number 0-12405

                                  IMATRON INC.

                            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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FY 2000                             IMATRON INC.                       FORM 10-K
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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 March 20, 2001, on the Nasdaq  National Market
System ($1.56 per share) was approximately $149,700,000.  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 March 20, 2001,  Registrant had 104,890,553  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   2001  Annual  Meeting  of
Shareholders,  to be filed with the  Commission  on or before 120 days after the
end of the 2000 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 (x).

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 ANYALYSIS OF FINANCIAL CONDITION AND RESULTS
OF  OPERATIONS."  THE COMPANY  EXPRESSLY  DISCLAIMS ANY OBLIGATION TO UPDATE ANY
FORWARD LOOKING STATEMENTS.


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FY 2000                             IMATRON INC.                       FORM 10-K
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                                     PART I

ITEM 1 - BUSINESS

                                     GENERAL

Imatron Inc. was  incorporated  in New Jersey in 1983.  References  in this Form
10-K to "Imatron," "the Company," "we," "our," and "us" refer to Imatron Inc., a
New Jersey  Corporation.  The Company is a technology-based  company principally
engaged  in the  business  of  designing,  manufacturing  and  marketing  a high
performance electron beam tomography ("EBT") scanner. This scanner uses Electron
Beam Tomography  ("EBT") technology based on a fixed scanning electron beam. The
scanner is used in large and midsize hospitals and freestanding  imaging clinics
worldwide.  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, was a
diagnostic services subsidiary of the Company. HeartScan offered Coronary Artery
Scanning  ("CAS") and Coronary Artery Disease ("CAD") risk assessment  services.
Its five  centers in the United  States  were sold in 1999.  The last  remaining
scanner located in Cascais, Portugal was sold in fourth quarter of 2000.

                              PRODUCT AND SERVICES

                                   EBT SCANNER

PRODUCT DESCRIPTION

A  conventional  CT scanner is a diagnostic  imaging device in which a single or
multiple  cross-sectional  (tomographic)  image of a  patient's  anatomy  are/is
acquired from multiple intensity readings  (samplings) from an x-ray source that
mechanically  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 EBT scanner  design  differs  significantly  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 x-ray 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 scan  speed of 50 to 100
milliseconds  per slice in contrast to  conventional  CT scanners  that  require
between 0.5 and 3 seconds per slice to acquire an image. Second, the Imatron EBT
scanner permits rapid scanning of multiple  contiguous images without moving the
patient. With these features, the EBT 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 EBT  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  prospective  ECG  triggering.  This  mode  employs  scan  times  from  100
milliseconds  to 2 seconds  as  compared  to 0.5 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 prospective ECG triggering.  The Continuous
Volume  Scanning mode can acquire up to 140 images in 15 seconds,  outperforming
spiral or helical scanning modes on


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FY 2000                             IMATRON INC.                       FORM 10-K
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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 1998, the Company  completed its version 12.4 software  development.
Software  version  12.4  brings the  C-150XP  and  C-150LXP  into full year 2000
compliance,  using 4 digits for all dates.  The new  software  version  also has
algorithmic improvements which affect image quality, allowing improved images of
the head,  chest,  and abdomen,  especially with the high  resolution  detector.
Software  version 12.4 was thoroughly  tested in late 1998, and was released for
general use in January 1999.

In March 1998, the Company  developed and released for sale to its customers the
High  Resolution  Detector  System  (HRDS)  for its EBT  scanners.  The new HRDS
increased  the spatial  resolution  of the single  slice mode from 7 to 9.5 line
pairs per  centimeter  and the  multi-slice  mode from 3 to 4.50 line  pairs per
centimeter. The increased spatial resolution improved the scanner's performance,
especially  in  neurologic,  pulmonary,  and  abdominal  applications.  It  also
increased the total number of detector  channels  from 1,296 to 3,456,  improved
image data correction during reconstruction, and enhanced overall image quality.

In October 1997, the Company  received 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
EBT scanner.

In November 1999, the Company  received 510(k) market clearance from the FDA for
the Electron Beam Angiography  (EBA) application of its scanner to function as a
diagnostic  x-ray system that can produce two- and  three-dimensional  images of
the heart, blood vessels, or lymphatic system from a data set of cross-sectional
anatomical   images.   In  addition,   the  EBA  application  can  also  present
three-dimensional  images of the heart in a time-sequenced  or cine fashion;  in
essence,  a  four-dimensional  evaluation of cardiac  function,  with the fourth
dimension being time.

In April 2000, the Company received 510(k) market clearance from the FDA for its
EBT  scanners  to  perform  low  dose,  single  breath  hold  lung  scans to aid
physicians in diagnosing lung anomalies.

In November 2000, the Company  received 510(k) market clearance from the FDA for
the Electron Beam Colonography (EB-Colonography(TM)) application of its scanner,
a minimally invasive procedure permitting  visualization of the interior surface
of the colon from the perspective of a virtual "fly-through'" mode.

MARKETS

The Company sells its EBT scanner in the diagnostic medical imaging market. This
market includes several  different  modalities such as CT,  ultrasound,  nuclear
medicine,  coronary 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.

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 scanning speed of the
EBT scanner  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.  The procedure for
accurately  measuring the volume and extent of coronary artery  calcification is
known as the coronary artery scan ("CAS").


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FY 2000                             IMATRON INC.                       FORM 10-K
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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 State  indicates a clear need for a safe and effective test to detect the
earliest stages of coronary heart disease.

The correlation between calcium in the coronary arteries,  atherosclerosis,  and
myocardial  infarction  (heart  attack) has been known since the 1950's.  By the
mid-1960's,  selective  coronary  angiography  was  introduced and soon became a
routine procedure.  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  abnormal  results such that as many as 25% - 35% percent of
the  coronary  angiograms  conducted  are  deemed to be normal.  Since  coronary
angiography is both expensive and invasive,  the patient in these false abnormal
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 tests for diagnosing coronary artery disease.

The  Company  further  believes  that  research  demonstrates  that  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 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,  costly
coronary angiography or invasive 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
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  30%  - 35%  of  people  with  elevated
cholesterol  levels do not develop coronary artery disease.  Since there has not
been,  until the advent of the EBT scanner,  a method to identify  those who are
beginning  to develop  coronary  disease,  individuals  with a high  cholesterol
reading  have been treated as if they will develop  heart  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 EBT  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.

In addition to the CAS, the Company's EBT technology  received market  clearance
from the FDA in  November  1999 for a new  application  known as  Electron  Beam
Angiography ("EBA").  This unique procedure utilizes a less invasive intravenous
injection of x-ray  contrast  agent as opposed to threading a catheter  into the
femoral  artery  to  the  heart  as  required  by  conventional  x-ray  coronary
angiography.  In the EBA  procedure,  a series of contiguous  contrast  enhanced
images is obtained  and  electronically  transmitted  to a powerful  desktop 3-D
workstation.  The  resulting  three  dimensional  EB  angiogram  can be  used to
determine  the  potency  of  coronary  artery  bypass  grafts,  stents  and  the
effectiveness of "balloon" angioplasty procedures.  EBA offers the potential for
significant  cost savings when  evaluating  patients with atypical chest pain by
detecting   significant   levels  of  coronary  stenosis   non-invasively.   The
combination of the Company's EBT scanner's  unparalleled image acquisition speed
with new, powerful PC  microprocessor  driven  workstations  provides unique 3-D
imaging capability in the heart, lungs, colon, and other organs.

Imatron  believes  that possible  factors  affecting the demand for its products
include,  among others,  potential  customers' budgetary  constraints  including
those imposed by government regulation, changes in the


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FY 2000                             IMATRON INC.                       FORM 10-K
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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 warranty,  and
service to their  respective  customers.  Imatron  provides  warranty on the EBT
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.  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.  This  agreement  was  renewed  in 2000  with  the same  terms  and
conditions.

The  Company  maintains   customer  support  centers  in  South  San  Francisco,
California and field service personnel in the United States, Europe and Asia for
its service business. Together with its distributors,  the Company services over
135  installed  EBT  systems  worldwide   including   approximately  50  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"  basis  to such
customers after the warranty period.

                            RESEARCH AND DEVELOPMENT

The  Company's  research and  development  efforts are focused on enhancing  its
existing  product and expanding  its  applications.  The Company's  research and
development personnel also are involved in establishing  protocols,  monitoring,
and  interpreting  and  submitting  test  data to the FDA and  other  regulatory
agencies to obtain the requisite clearances and approvals for its product.

                                    MARKETING

The  Company's  EBT scanners  are  utilized by a variety of customers  including
large  teaching  and  research  hospitals,  medium-size  hospitals,  and imaging
clinics.

The Company sells its product in domestic and  international  markets  through a
direct  sales  force,  as well  as  independent  distributors.  In the  past,  a
substantial  portion of the  Company's  sales of its  scanners  was done through
distributors or sales agents.  Imatron no longer has any exclusive  distributors
in the United States.  During 1999, the Company expanded its direct sales force,
conducted  extensive  training of its  distributors,  and added  distributors in
Germany, Korea, Argentina,  Greece, Egypt, Saudi Arabia and Turkey. In 2000, the
Company has 16 domestic and  international  direct full-time sales people.  Each
salesperson  is responsible  for a specific  geographic  area. In addition,  the
Company has or had distribution arrangements as follows:

JAPAN

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.  In October 2000,  the
joint  venture  agreement  with  Imatron  Japan,  Inc.  was  terminated  and the
exclusive  distribution  rights and service  contracts were purchased by Imatron
for $2,779,000 in accounts receivable from Imatron Japan owed to the Company.


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In  November  2000,  the  Company   entered  into  an  agreement  with  Marubeni
Corporation and its wholly owned subsidiary  Meditec  Corporation  (collectively
"Marubeni").  Pursuant to the  agreement the Company  appointed  Marubeni as its
exclusive  importer,  distributor and customer service provider for EBT scanners
in Japan.  The Company  also sold all assets and rights to the service  business
previously  acquired from its related party Imatron Japan, Inc. In consideration
for the  rights  and  assets  acquired,  Marubeni  agreed  to pay a total of 500
million  yen,  or  approximately  $4,654,000.  The  total  transaction  fee  was
allocated to different  elements of the arrangement based on their relative fair
values.  The Company deferred revenue in the amount of $350,000 which represents
estimated  fair  value of the  distributorship  rights  based  on a third  party
valuation.  The deferred revenue will be amortized to net income over the period
of  three  years,  the  term of the  distributorship  agreement.  The  remaining
arrangement  fee totaled  $4,304,000 and was recognized as proceeds from sale of
the service  business  offset by the cost of the service  business of $2,779,000
and was recorded as other income.

SALES INFORMATION

The  scanner  sales  price  varies  depending  on  customer   requirements.   In
particular, sales to Siemens, Imatron Japan, Inc. and certain distributors/sales
agents have a lower gross  margin than sales to other third  parties.  The sales
price (with the sole exception of Imatron Japan, Inc.) includes  installation by
customer  service  personnel,  system  check and  certification,  and a 12-month
warranty.  In addition,  local taxes and import duties may be added. This price,
which is 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 for fiscal years ended December 31 are as follows:

                                   2000            1999             1998
                               ------------    ------------      ----------

      Total export sales            2               4                6


                                   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,  Marconi Medical Systems, 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 markets  equipment
using one or more of these  technologies.  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 Imatron's EBT
scanner.

The  Company  believes  that in  order to  compete  successfully  against  these
competitors,  it must  continue to  demonstrate  that the EBT scanner is both an
acceptable  substitute for  conventional  CT scanners in areas of the body where
motion  is  not  a   limitation,   and  that  the  EBT  Scanner  is  a  valuable
cardiopulmonary diagnostic tool capable of producing unique and useful images of
the heart and lung.  Although  the  Company  believes  that the EBT  Scanner 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
projects  currently in progress,  as well as on its continued


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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 and 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 EBT
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  and Hayward,
California  facilities.  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.  On January 6, 1999
Imatron purchased one of its suppliers,  Caral  Manufacturing,  Inc. (Caral), to
assure itself of a steady,  low cost supply of certain critical  stainless steel
parts. 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  Quality System  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 EBT scanner.  The Company  believes  that it is
presently  in  substantial  compliance  with  the  QSR  requirements  and  other
regulatory issues promulgated by the FDA.

On May 4, 1999 the Food and Drug  Administration's  (FDA) Center for Devices and
Radiological Health, Promotion and Advertising Staff, issued a Warning Letter to
Imatron.  The Warning Letter expressed FDA's objection with certain  promotional
materials and press releases made by Imatron.  It also indicated FDA's objection
to claims  made on  Imatron's  web site.  Upon  receipt of this  letter  Imatron
responded to the FDA in writing.  This  response  clearly  enumerates  Imatron's
position and details,  where necessary,  specific actions to alleviate the FDA's
concern and began a good faith  dialog  between  Imatron and the FDA to properly
resolve these  issues.  This dialog  continues and Imatron  believes such dialog
will resolve the matter fully and finally.


================================================================================
                                       8
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


In November 2000, the Company  received its most current 510(k) market clearance
from  the  FDA  for  the  Electron   Beam   Colonography   (EB-Colonography(TM))
application  of  its  scanner,  a  minimally   invasive   procedure   permitting
visualization  of the interior  surface of the colon from the  perspective  of a
virtual  "fly-through'" mode. Such use is consistent with uses classified by the
FDA.

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 EBT
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.

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.

The  Company's  primary  customers  operate in the highly  regulated  healthcare
industry.  Existing and future  governmental  regulations could adversely impact
the market  for the  Company's  EBT  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
("OSHA") and the Environmental  Protection Agency ("EPA").  In some cases, state
or local regulations may be more strict 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 ongoing.  The FDA concurred with Imatron's
decision to field upgrade certain sites and assigned  recall numbers  Z304/307-7
and  Z-289/299-7.  There have been no recalls or notices of  observations by the
FDA in 1999 or 2000.

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  timeliness 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
the  designated  procedures  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. In May 1998, Imatron received the CE Marking, which indicates that the EBT
scanner meets the safety  requirements  for  marketing in all EU  countries.  In
addition,  the Company  successfully  obtained  registration  under the ISO 9001
standards  in  December  1997.  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.


================================================================================
                                       9
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


                              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.  Under the
continuing  sublicense agreement,  as amended,  Imatron made 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,  received 6% of all of the royalties paid by Emersub to UC.
UC cancelled the license to Emersub on October 8, 1997 and granted the Company a
license for the remaining life of the patent on substantially  the same terms as
the Emersub license agreement. The patent expired on September 28, 1999. Royalty
expenses  related to the sublicense  agreement for 2000, 1999, and 1998 were $0,
$77,790, and $137,775, respectively.

In  addition,  Imatron  holds  twenty-two  U.S.  Patents of its own (each with a
remaining  life  in  excess  of one  year)  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.

    2.   U.S.  4,531,226  -  Multiple  Electron  Beam  Target  for use in  X-Ray
         Scanner.

    3.   U.S. 4,535,243 - X-Ray Detector for High Speed X-Ray Scanning System.

    4.   U.S. 4,736,396 - Tomosynthesis using High Speed CT Scanning System.

    5.   U.S.  5,193,105 - Ion  Controlling  Electrode  Assembly  for a Scanning
         Electron Beam Computed Tomography Scanner.

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. In the fiscal year 2000,
Imatron  produced 26 scanners  and has accrued  $120,000 of royalty  expenses in
accordance with 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


================================================================================
                                       10
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


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 December  31,  2000,  the Company and its  subsidiary  had 281  employees,
including 72 employees in service,  33 in  sales/marketing,  56  scientists  and
engineers in research and  development,  87 employees in  manufacturing,  and 33
employees in finance and  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:

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.  Except in 1994, the Company
incurred  additional  net losses from 1992 through  1999.  In 1994,  the Company
incurred its first year of net income from  continuing  operations  amounting to
$3,221,000  partially  offset by $911,000 of net losses incurred by discontinued
operations  of  HeartScan.  In 2000,  the  Company  reported a net  income  from
continuing  operations of $6,105,000 due to improved  product sales and the sale
of its customer service  business in Japan amounting to $4,304,000.  Income from
discontinued  operations  in 2000 was  $207,000,  which  resulted  from net gain
realized  on the sale of  Portugal  scanner  amounting  to  $427,000  offset  by
operating losses of $220,000.  In 1999 and 1998, the Company incurred net losses
of $6,586,000 and $14,781,000,  respectively. Net losses were partially a result
of the operating  losses incurred by discontinued  operations of HeartScan which
amounted to $1,989,000 and $4,507,000, in 1999 and 1998, respectively.  In 1999,
the operating  losses from  discontinued  operations were partially  offset by a
gain on sale of assets  amounting  to  $1,049,000.  There is no  assurance  that
Imatron can sustain 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.  In 1999, the Company raised  $8,621,000 for the sale
of shares of common stock and common stock  warrants to its  President and other
institutional  investors (see Note 11 to the Notes to the Consolidated Financial
Statement).  As of December 31, 2000, the Company has a consolidated accumulated
deficit of $97,800,000.

The  Company's  liquidity  is affected  by many  factors,  including  the normal
ongoing   operations  of  the  business  and  other   factors   related  to  the
uncertainties  of  the  industry  and  global   economies.   Although  the  cash
requirements


================================================================================
                                       11
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


will fluctuate based on timing and extent of these factors,  management believes
that cash existing at December 31, 2000  together  with the  estimated  proceeds
from ongoing sales of products and services and the funds available under a line
of credit with  Silicon  Valley Bank,  will provide the Company with  sufficient
cash for operating  activities  and capital  requirements  through  December 31,
2001.

NEED FOR ADDITIONAL FINANCING

To satisfy  the  Company's  capital  and  operating  requirements  beyond  2000,
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.

MATERIAL DEPENDENCE UPON KEY PERSONNEL

The Company has 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 EBT 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.

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 EBT
scanner  was  first  used in 1992.  87  C-150,  C-100 and  C-150L  scanners  are
currently  installed in a clinical  setting.  The Company  believes  that market
acceptance of the EBT 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  EBT  that  will  allow  the  Company  to  operate
profitably.

THIRD-PARTY REIMBURSEMENT OF COST OF EBT SCANS

The Company is dependent,  in part, upon the ability of healthcare  providers to
obtain satisfactory reimbursement from third-party payors for medical procedures
in which the EBT scanner is used.  Coverage and the level of payment provided by
U.S. and foreign  third-party  payors  varies  according to a number of factors,
including the medical procedure, payor, location, outcome and cost. In the U.S.,
many private health care insurance  carriers follow the  recommendations  of the
Health Care Financing Administration,  or HCFA, which establishes guidelines for
the coverage of  procedures,  services and medical  equipment and the payment of
healthcare  providers  treating  Medicare  patients.  The amount  that  Medicare
generally pays a medical institution for in-patient care of Medicare patients is
based on a number of considerations,  including a patient's diagnosis regardless
of the services that are provided. Physicians,  however, bill separately for the
procedures that they perform.  HCFA has determined that diagnostic  examinations
of the head and other parts of the body performed by EBT 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. Certain private health insurers and managed care providers


================================================================================
                                       12
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


provide  incremental  reimbursement  to both the medical  institutions and their
physicians. Reimbursement systems in international markets vary significantly by
country and by region within some countries, and reimbursement approvals must be
obtained  on  a  country-by-country   basis.  Many  international  markets  have
government-managed  health  care  systems  that  control  reimbursement  for new
products and procedures.  Market acceptance of the EBT scanners in international
markets depends,  in part, on the availability  and level of  reimbursement.  In
certain  countries,  medical  center  budgets are fixed  regardless of levels of
patient treatment.

Prior to approving  coverage for new medical devices,  most  third-party  payors
require  evidence  that the product has received FDA  approval,  European  Union
approval, or clearance for marketing, is safe and effective and not experimental
or investigational,  and is medically necessary and appropriate for the specific
patient for whom the product is being used.  Increasing  numbers of  third-party
payors  require  evidence that the procedures in which the products are used, as
well as the products themselves, are cost-effective.  There is no assurance that
the EBT scanner will meet the criteria  for coverage and  reimbursement  or that
third-party payors will reimburse  physicians and medical institutions at levels
sufficient to encourage the widespread use of the product. Moreover, the Company
is unable to predict what additional legislation or regulation, if any, relating
to the health care industry or  third-party  coverage and  reimbursement  may be
enacted in the future,  or what effect such legislation or regulation would have
on the Company. Political, economic and regulatory influences are subjecting the
health care industry in the United  States to  fundamental  change.  The Company
anticipates  that  Congress,  state  legislatures  and the  private  sector will
continue  to review and assess  alternative  health  care  delivery  and payment
systems.  Potential  approaches that have been considered include mandated basic
health care benefits,  controls on health care spending  through  limitations on
the growth of private  health  insurance  premiums  and  Medicare  and  Medicaid
spending,  the creation of large insurance purchasing groups, price controls and
other fundamental changes to the health care delivery system. Legislative debate
is expected to continue in the future,  and market forces are expected to demand
reduced  costs.  The Company  cannot  predict  what  impact the  adoption of any
federal or state health care reform  measures,  future  private sector reform or
market forces may have on its business.

PRODUCT LIABILITY RISKS

As a manufacturer and marketer of medical diagnostic  equipment,  the Company is
subject to potential  product  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 $6.0 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


================================================================================
                                       13
<PAGE>

FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


dividends will be paid.  Rather,  the Company  expects that any future  earnings
will be applied toward the further development of the Company's business.

ITEM 2 - PROPERTIES

The Company  leases  approximately  131,865 square feet of industrial and office
spaces  in South  San  Francisco  and  Hayward,  California.  The  research  and
development,  marketing,  administrative,  and certain manufacturing  operations
occupy approximately 75,688 square feet of space located in South San Francisco,
California,  under leases expiring in February 2004.  Customer service and other
manufacturing  operations occupy 37,500 square feet of space located in Hayward,
California  under a lease  expiring in  December  2002.  The Company  sub-leases
18,677 square feet to certain tenants with leases expiring in February 2004.

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, 2000.


================================================================================
                                       14
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


                                     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.

                               2000                           1999
                     --------------------------    ---------------------------
Quarter              High           Low            High           Low
----------------     -----------    -----------    -----------    ------------
First                $      4.75    $      2.47    $      2.28    $      1.03
Second                      3.63           2.03           1.44           0.84
Third                       2.72           2.03           1.84           1.06
Fourth                      2.53           1.28           3.81           1.03

As of March 20, 2001,  there were  approximately  5,839 holders of record of the
Company's  common stock.  On March 20, 2001,  the closing price of the Company's
common stock on Nasdaq was $1.56.

                              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.

ITEM 6 -  SELECTED FINANCIAL DATA
<TABLE>
                                  IMATRON INC.
                         SELECTED FINANCIAL INFORMATION
                    (in thousands, except per share amounts)
<CAPTION>
OPERATING INFORMATION

           Year Ended December 31             2000        1999        1998        1997        1996
                                            --------    --------    --------    --------    --------
<S>                                         <C>         <C>         <C>         <C>         <C>
Total revenues from continuing
   operations                               $ 62,420    $ 37,549    $ 30,660    $ 37,317    $ 24,823

Operating income (loss) from continuing
   operations                               $  4,460    $ (5,835)   $ (9,535)   $ (3,915)   $ (8,065)
Income (loss) from continuing operations
                                            $  6,272    $ (5,646)   $ (9,400)   $ (3,250)   $ (5,892)
Income (loss)  from discontinued
   operations                               $    207    $   (940)   $ (4,507)   $ (6,428)   $ (4,573)
Net income (loss)                           $  6,283    $ (6,586)   $(14,781)   $ 11,422)   $(13,737)
Basic and diluted income (loss) per share
   from continuing operations               $   0.06    $  (0.06)   $  (0.11)   $  (0.04)   $  (0.08)


Number of shares used in per share calculations:

  Basic                                      102,983      94,680      83,941      78,461      74,406
  Diluted                                    106,931      94,680      83,941      78,461      74,406
</TABLE>

================================================================================
                                       15
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


BALANCE SHEET INFORMATION

At December 31                 2000      1999      1998      1997      1996
                             -------   -------   -------   -------   -------

Working capital              $31,982   $22,217   $12,813   $26,003   $33,042
Total assets                  51,488    40,643    31,982    43,165    47,488
Long term obligations
   including capital lease
   obligations                    82       125        39       121       182
Total liabilities             14,796    13,818    12,991    11,840     9,962
Minority interest               --          93       331    14,255    12,323
Shareholders' equity          36,692    26,732    18,660    17,070    25,203


The Company did not pay any cash dividends on its common stock during any of the
periods presented above.

ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
             CONDITION AND RESULTS OF OPERATIONS

                         LIQUIDITY AND CAPITAL RESOURCES

At December 31, 2000,  working  capital  increased  to  $31,982,000  compared to
December  31,  1999  working  capital of  $22,217,000  primarily  as a result of
increased  revenues.  The current ratio  increased to 3.2:1 at December 31, 2000
from 2.7:1 at December 31, 1999.

The Company's  total assets  increased to  $51,488,000  compared to December 31,
1999  total  assets of  $40,643,000.  Cash  used in  continuing  operations  was
$8,825,000  for twelve  months ended  December 31, 2000  compared to  $1,267,000
during  the  same  period  in  1999.  The  increase  in cash  used in  operating
activities  was  primarily  due  to  increases  in  receivables   and  inventory
purchases,  partially offset by an increase in accrued expenses. The increase in
receivables was due to increased  scanner shipments to 33 in 2000 from 19 during
the same  period in 1999.  Growth in trade  receivables  was mainly due to the 9
scanner  shipments in the fourth  quarter of 2000 that were  outstanding at year
end. The increase in inventory  was due to increased  production  levels to meet
anticipated shipments in the next fiscal year.

Cash provided by  discontinued  operations  was $1,495,000 for the twelve months
ended December 31, 2000 compared to cash used amounting to $3,555,000 during the
same  period  in  1999  due to the  $1,240,000  cash  balance  transferred  from
HeartScan  to  Imatron  in 2000  and the  $2,079,000  cash  settlement  of lease
obligations  on scanners sold in 1999. Net income from  discontinued  operations
for the twelve month period ended  December 31, 2000 was $207,000 as compared to
a net loss of $940,000 (net of gain on sale of assets of discontinued  business)
for the same period in 1999. The increase in net income was primarily due to the
net gain realized from the sale of all HeartScan centers which were consistently
operating at a loss since inception.

The Company's investing activities for the year ended December 31, 2000 included
purchases of capital equipment and marketable securities amounting to $1,679,000
and $2,523,000,  respectively,  offset by maturities of marketable securities of
$4,061,000  and  proceeds  from  the  disposal  of  discontinued  operations  of
$107,000.   Capital  expenditures  included  approximately  $1,334,000  of  test
equipment  for  use  in  research  and  development.   The  Company's  investing
activities  for the year ended  December 31, 1999 included  acquisition of Caral
amounting  to  $273,000  (net of cash  acquired)  and  purchases  of  marketable
securities and equipment  amounting to $4,062,000 and $1,148,000,  respectively,
offset by maturities of  marketable  securities of $2,063,000  and proceeds from
disposal of discontinued operations of $4,325,000. Capital expenditures included
approximately  $437,000 for the purchase and  installation  of the MK Enterprise
Resource Planning System.


================================================================================
                                       16
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


Cash provided by financing  activities was $2,884,000 for the year ended 2000 as
compared with $11,670,000 for the same period in 1999. Key financing  activities
for the year included proceeds of $3,002,000 and $11,409,000 from sale of common
stock and exercise of stock options and warrants  during the year ended December
31, 2000 and 1999, respectively.

The  Company's  liquidity  is affected  by many  factors,  including  the normal
ongoing   operations  of  the  business  and  other   factors   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  existing at December 31, 2000 together with the
estimated  proceeds  from  ongoing  sales of products and services and the funds
available  under a line of credit with  Silicon  Valley  Bank,  will provide the
Company with sufficient cash for operating  activities and capital  requirements
through December 31, 2001.

The Company  expects to devote  substantial  capital  resources  to research and
development,  to support a direct sales force and  marketing  operations  and to
continue to support its  manufacturing  capacity and facilities.  To satisfy the
Company's capital and operating requirements beyond 2001, 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 CONTINUING OPERATIONS

2000 vs. 1999

Overall  revenues for the year ended December 31, 2000 of $62,420,000  increased
$24,871,000  or 66% compared to revenues of  $37,549,000  for the same period in
1999. Net product revenues  increased to $53,318,000 in 2000 from $29,891,000 in
1999 due to 33  scanners  having been sold in 2000  compared  to 19 in 1999.  In
2000, the increase in average scanner selling price was also attributable to the
increase  in  scanner  revenues.  The  increase  in revenue  was  reduced by the
adoption of Staff Accounting  Bulletin No. 101 (SAB 101), Revenue Recognition in
Financial  Statements  (SAB 101) in the 4th  quarter of 2000 which  resulted  in
deferring  a portion of scanner  sales  related to the  installation  until such
installation services have been performed. The Company deferred $368,000 for the
year  ended  2000 as a result  of this  change  in  accounting  policy.  Service
revenues  increased  19% to  $8,248,000  in 2000 from  $6,938,000 in 1999 due to
increases in scanners  under  service  contracts  and spare parts  revenue.  The
increase in spare  parts  revenue  was due to the  payment of  receivables  from
Imatron Japan amounting to $1,242,000 which had previously been deferred because
payment was not reasonably assured.  Since 1998, revenues on spare parts shipped
to Imatron  Japan,  a major  customer,  were  deferred  and  related  costs were
recognized  due to the  customer's  difficulty  in  paying  as a  result  of the
economic and currency  uncertainties  in Japan.  Other product  sales  represent
revenues from Caral's  machining and fabrication  services.  Other


================================================================================
                                       17
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


product  sales  increased  to $854,000  in 2000 from  $720,000 in 1999 due to an
increase in sales to a greater number of third-party customers.

Total  cost of  revenues  as a percent of  revenues  for the year ended 2000 was
lower at 59% as compared with 72% in 1999. Product cost of revenues as a percent
of product revenues decreased to 56% in 2000 from 68% in 1999 due to shipment of
33  scanners  with  higher  gross  margins  compared  to 19  shipments  in 1999.
Although, the cost of product sales decreased in 2000 due to the adoption of SAB
101, it did not affect the cost of product  revenue as percent of  revenues.  In
1999,  the high cost of product  sales was due to the decrease in  production of
new scanners,  resulting in a significant  portion of the fixed  overhead of the
manufacturing  facility  being  expensed  to cost of  revenue.  Service  cost of
revenues as a percent of service  revenue  decreased  to 78% in 2000 from 89% in
1999 due to the  recognition of spare parts revenue from Imatron Japan which was
deferred since 1998 pending payment of its  receivables.  The related costs were
expensed during the prior period resulting in a decrease in cost as a percent to
revenues for the year ended 2000. Other product cost of revenues as a percent of
other product revenues slightly decreased to 97% in 2000 from 98% in 1999 due to
increased sales to external customers.

Operating  expenses for the year ended 2000  increased to  $20,845,000 or 33% of
revenues,  compared to  $16,332,000,  or 43% of revenues in 1999.  Research  and
development expenses of $8,944,000 in 2000 increased from $7,045,000 in 1999 due
to an increase in materials for new product  development  programs and increased
compensation  expenses.  Marketing and sales expenses increased to $8,562,000 in
2000 from  $6,244,000  in 1999 due primarily to increases in headcount and sales
commissions  resulting from increased  scanner  sales.  Administrative  expenses
increased to  $3,196,000  in 2000 from  $2,622,000  in 1999 due  primarily to an
increase in headcount resulting from increased business activities. The increase
was partially  offset by $1,537,000  received on the  settlement of  receivables
reserved in 1998 and 1999.  Goodwill  amortization  amounting  to  $141,000  and
$139,000 in 2000 and 1999,  respectively,  represent  the  amortized  portion of
goodwill related to the acquisition of Caral.  Restructuring charges of $282,000
relates to severance and related  benefits paid by the Company  during the first
quarter of 1999 as part of it's reorganization plan.

Gain on sale of  service  business  totaled  $1,525,000  and  relates to sale of
service  business in Japan.  Interest income  increased to $548,000 in 2000 from
$242,000 in 1999.  The  increase was due to higher  average cash and  investment
balances during 2000 compared to 1999 resulting from cash generated from scanner
sales in 2000.  Interest expense  represents  interest incurred on capital lease
obligations on certain office  equipment.  The cumulative  effect of a change in
accounting principle amounting to $29,000 was due to the adoption of SAB 101.

1999 vs. 1998

Overall  revenues for the year ended December 31, 1999 of $37,549,000  increased
$6,889,000  or 22%  compared to revenues of  $30,660,000  for the same period in
1998. Net product revenues  increased to $29,891,000 in 1999 from $22,547,000 in
1998 due to 19  scanners  having been sold in 1999  compared  to 15 in 1998.  In
addition,  upgrade  revenues  increased to  $1,490,000  in 1999 from $272,000 in
1998.  Service  revenues  slightly  increased  1% to  $6,938,000  in  1999  from
$6,863,000 in 1998 due to an increase in scanners under service  contract offset
by a decrease in spare parts shipped. Development contract revenue of $1,250,000
recorded in 1998 represented a  non-refundable  payment 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.  There were no  payments  received  from  Siemens for 1999 as the
Memorandum of Understanding expired on April 1, 1998.

Total  cost of  revenues  as a percent of  revenues  for the year ended 1999 was
lower at 72% as compared with 76% in 1998. Product cost of revenues as a percent
of product revenues decreased to 68% in 1999 from 75% in 1998. The gross margins
in 1998  were  adversely  affected  by a mix in the sales  prices  of  scanners.
Although the cost of a scanner remains  constant for all new scanner sales,  the
price varied  depending on the  customer.  In  particular,  sales to Siemens and
Imatron  Japan,  Inc.  had a lower  sales  price and  consequently  lower  gross
margins,  than sales to other parties.  The decrease in the cost of revenue as a
percentage  of revenue for scanners was due to the decrease in scanner  sales to
these  distributors to two in fiscal year 1999 from four in fiscal year 1998 and
a sale of a refurbished  scanner with higher gross margins in 1999. Service cost
of revenues as a percent of service revenue decreased to 89% in 1999 from 93% in
1998 due to improved  scanner  performance  reducing  the costs to maintain  the
scanners and higher gross margins on spare parts shipped.  In 1998,  revenues on
spare parts  shipped to Imatron  Japan,  a major  customer,  were  deferred  and
related costs were  recognized due to the  customer's  difficulty in paying as a
result of the economic and currency uncertainties in Japan. As a major customer,
the Company  extended  credit  beyond the normal  terms to ensure the  continued
service for its 29 installed scanners purchased from the Company.

Operating  expenses for the year ended 1999  decreased to  $16,332,000 or 43% of
revenues,  compared to  $16,901,000,  or 55% of revenues in 1998.  Research  and
development expenses of $7,045,000 in 1999 decreased from $7,869,000 in 1998 due
to a reduction in headcount and  completion  of certain R&D projects.  Marketing
and sales  expenses  increased to  $6,244,000  in 1999 from  $4,456,000  in 1998
primarily due to increases in promotional  activities and headcount to establish
a larger  sales and  marketing  organization  to better


================================================================================
                                       18
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


serve the growing EBT market. Administrative expenses decreased to $2,622,000 in
1999  from  $4,576,000  in 1998  due  primarily  to a  decrease  in the bad debt
provision relating to certain distributors.  Goodwill amortization  amounting to
$139,000 in 1999  represents  the amortized  portion of goodwill  related to the
acquisition of Caral. Restructuring charges of $282,000 relates to severance and
related benefits paid by the Company during the first quarter of 1999 as part of
it's reorganization plan.

Interest  income  increased to $242,000 in 1999 from $155,000 in the  comparable
period of 1998.  The  increase  was due to higher  average  cash and  investment
balances during 1999 compared to 1998 resulting from cash generated from scanner
sales, private offering of the Company's common stock, and exercises of warrants
and stock options in 1999.  Interest  expense  represents  interest  incurred on
capital lease obligations on certain office equipment.

The  Company  incurred a non-cash  charge to income of  $874,000  recorded  as a
return to minority  interest expense for the year ended 1998, in connection with
amortization  of beneficial  conversion  features  granted to the holders of the
HeartScan convertible Series A Preferred Stock.

Discontinued operation:

On July 13, 1998,  the Company  announced  its intention to divest its HeartScan
subsidiary.  Accordingly,  the Company  restated  its  financial  statements  to
reflect the  classification  of HeartScan as a  discontinued  operation  for all
periods presented (See Note 17).

During the twelve  months of 1999 and 1998,  the  Company  reported  losses from
discontinued operations of $940,000 and $4,507,000,  respectively,  which relate
to the  discontinued  operations  of the HeartScan  subsidiary.  The decrease in
operating  loss was  primarily  due to the closure of the centers which had been
consistently  operating at a loss and the net gain realized from the sale of the
centers. In 2000, income from discontinued  operations of $207,000 was primarily
due to the net gain realized  from the sale of a scanner,  offset by an increase
in accrual for expected losses.

At the  measurement  date,  the Company  estimated that although a gain would be
realized upon the ultimate sale,  HeartScan  would  continue to incur  operating
losses  through the disposal  date. In the fourth  quarter of 1998,  the Company
changed its strategy from selling HeartScan to a single buyer to that of selling
the  individual  centers to buyers  located in the cities where the centers were
located. As such, the Company reassessed its estimate of the gain on disposal to
reflect the Company's change in strategy.

In 1999, the Company sold all its domestic centers for a net gain of $1,049,000.
At December 31, 2000,  the sale of HeartScan  subsidiary  was completed with the
sale of the scanner in Cascais, Portugal for a net gain of $427,000.

NEW ACCOUNTING STANDARDS

In June 1998, the FASB issued Statement of Financial  Accounting Standard (SFAS)
No. 133, Accounting for Derivative Instruments and Hedging Activities.  SFAS No.
133, as amended by SFAS Nos. 137 and 138,  establishes  accounting and reporting
standards for derivative financial instruments and hedging activities related to
those instruments, as well as other hedging activities. Because the Company does
not currently  hold any  derivative  instruments  and does not engage in hedging
activities,  the Company  expects that the adoption of SFAS No. 133, as amended,
will not have a material impact on its consolidated financial position,  results
of operations, or cash flows. The Company will be required to adopt SFAS No. 133
in fiscal 2001.

In March 2000,  the FASB issued  Interpretation  No. 44,  Accounting for Certain
Transactions involving Stock Compensation,  an interpretation of APB Opinion No.
25. This  Interpretation  clarifies  the  application  of Opinion 25 for certain
issues:  (a) the definition of employee for purposes of applying Opinion 25, (b)
the criteria for determining whether a plan qualifies as a noncompensatory plan,
(c) the  accounting  consequence  of  various  modifications  to the  terms of a
previously  fixed stock option or award,  and (d) the accounting for an exchange
of stock compensation awards in a business combination.  Effective July 1, 2000,
the Company adopted


================================================================================
                                       19
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


Interpretation  No. 44. The  adoption  of this  interpretation  did not have any
material effect on the Company's  consolidated  financial position or results of
operations.

ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company has held investments consisting of interest bearing investment grade
instruments  consistent with the Company's  investment  policy.  The Company has
also entered into leasing  arrangements.  At December 31, 2000,  the Company had
money market mutual funds,  certificates of deposit and commercial paper,  which
mature in less than twelve months.  Additionally,  the Company maintained leases
for certain office equipment that have been accounted for as capital leases with
a total  obligation  of $117,000 as of December 31,  2000.  The Company does not
believe that it is subject to any material  exposure to interest  rate,  foreign
currency or other market risks.

ITEM 8 - CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

See  Consolidated  Financial  Statements and  Consolidated  Financial  Statement
Schedule listed in Item 14 (a) 1 and 2.

ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
         AND FINANCIAL DISCLOSURE

                                 Not applicable.

                                    PART III

ITEM 10 - EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
The executive officers of the Company and their ages and positions are set forth
below. Unless otherwise indicated, officers are full-time employees and serve at
the discretion of the Board of Directors.
<CAPTION>
              Name                     Age         Position
              -------------------      -------     ---------------------------------------------------
<S>                                    <C>         <C>
              Dr. Douglas P. Boyd      59          Chairman of the Board,
                                                   Chief Technology Officer

              S. Lewis Meyer           56          Chief Executive Officer

              Terry Ross               53          President (retired January 1, 2001)

              Frank Cahill             54          Vice President, Finance and Administration, Chief
                                                   Financial Officer, Secretary
</TABLE>

o    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.


================================================================================
                                       20
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


     Recognized  internationally  for his pioneering  work in the development of
     fan-beam CT scanners,  Xenon  detector  arrays,  and EBT, 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.

o    S.  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

     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.

o    Terry  Ross  served as  President  of Imatron  from  January  1999  through
     December 2000.  From 1989 to 1998, Mr. Ross was President,  Chief Executive
     Officer and Director of Cemax-Icon,  Inc., a medical imaging  manufacturer.
     Prior thereto, he was Vice President of Sales and Marketing of the Company.
     Mr. Ross also held executive sales positions at Picker International,  Inc.
     and ADAC Laboratories, Inc., all of which are medical imaging companies.

o    Frank Cahill was appointed  Vice  President of Finance and  Administration,
     Chief Financial Officer, and Secretary of Imatron on January 2, 2000. Prior
     to joining the  Company,  Mr.  Cahill has held  management  positions  from
     "Fortune 500"  companies in New York to smaller  start-up  companies  since
     relocating  to  California  a few  years  ago.  Most  recently  he was Vice
     President - Finance and  Administration  at Berkeley  Heart Lab,  Inc., the
     developer  of a unique  test to measure  lipid  particle  density and Chief
     Financial  Officer  at  MED-COR  Health  Information   Solutions,   Inc.  a
     healthcare consulting and service firm.

     Mr.  Cahill  while at Ernst & Young in New York became a  Certified  Public
     Accountant. He has received an M.B.A. from Rutgers University and a B.S. in
     Physics from St. Peters College both in New Jersey.

ITEM 11 - EXECUTIVE COMPENSATION

The  information  required  on  items  11,  12 and 13  will be  included  in the
Company's  definitive proxy statement or as an amendment to the Form 10-K, under
cover of Form 8. The  information  required  in Part III will be filed  with the
Securities  Exchange  Commission  no later  than 120 days  after  the end of the
fiscal year.

                                     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:


================================================================================
                                       21
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


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 as 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: None


================================================================================
                                       22
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


                                   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: March 23, 2001                 IMATRON INC.
                                      -----------------------------------


                               By:    FRANK CAHILL
                                      -----------------------------------
                                      Chief Financial Officer, Vice President,
                                      Finance and  Administration, Secretary
<TABLE>
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.
<CAPTION>
SIGNATURE                                  TITLE                                       DATE
--------------------------------------     ------------------------------------        ----------------------
<S>                                        <C>                                         <C>
                                           Director,
--------------------------------------     Chairman of the Board                       March 23, 2001
Douglas P. Boyd


--------------------------------------     Director
William J. McDaniel                                                                    March 23, 2001



--------------------------------------     Director
John L. Couch                                                                          March 23, 2001



--------------------------------------     Director
Allen Chozen                                                                           March 23, 2001



--------------------------------------     Director
Richard Myler                                                                          March 23, 2001


--------------------------------------     Director,
S. Lewis Meyer                             President/Chief Executive Officer           March 23, 2001
                                           (Principal Executive Officer)

                                                                                       March 23, 2001
--------------------------------------     Director
Terry Ross



--------------------------------------     Director
Aldo J. Test                                                                           March 23, 2001


--------------------------------------     Chief Financial Officer, Vice President,
Frank Cahill                               Finance and Administration, Secretary       March 23, 2001
                                           (Principal Financial Officer and
                                           Principal Accounting Officer)


=====================================================================================================
                                                 23
</TABLE>
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================

                                  IMATRON INC.

                   Index to Consolidated Financial Statements

  STATEMENT                                                                 PAGE
  -----------------------------------------------------------------------   ----

  Independent Auditors' Report                                                25

  Consolidated Balance Sheets as of December 31, 2000 and 1999                26

  Consolidated Statements of Operations for the years ended
  December 31, 2000, 1999, and 1998                                           27

  Consolidated Statements of Shareholders' Equity for the years ended
  December 31, 2000, 1999, and 1998                                           29

  Consolidated Statements of Cash Flows for the years ended December 31,
  2000, 1999, and 1998                                                        30

  Notes to Consolidated Financial Statements                                  32


================================================================================
                                       24
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


                          Independent Auditors' Report

The Board of Directors and Shareholders
Imatron Inc.:

We have audited the consolidated balance sheets of Imatron Inc. and subsidiaries
as of December 31, 2000 and 1999,  and the related  consolidated  statements  of
operations,  shareholders'  equity,  and cash flows for each of the years in the
three-year  period ended December 31, 2000. In connection with our audits of the
consolidated financial statements,  we have also audited the financial statement
schedule  listed  in the  index at Item  14(a)2.  These  consolidated  financial
statements  and  financial  statement  schedule  are the  responsibility  of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
consolidated  financial statements and financial statement schedule based on our
audits.

We conducted our audits in accordance with auditing standards generally accepted
in the  United  States of  America.  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
subsidiaries  as of  December  31,  2000  and  1999,  and the  results  of their
operations and their cash flows for each of the years in the  three-year  period
ended  December 31, 2000, in conformity  with  accounting  principles  generally
accepted in the United  States of America.  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.

                                                    /S/ KPMG LLP

San Francisco, California
January 30, 2001


================================================================================
                                       25
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================

<TABLE>
                                  IMATRON INC.
                           Consolidated Balance Sheets
                                 (In thousands)
<CAPTION>
                                                                                           December 31,  December 31,
ASSETS                                                                                          2000         1999
                                                                                             ---------    ---------
<S>                                                                                          <C>          <C>
Current assets
    Cash and cash equivalents                                                                $   4,718    $   9,198
    Short term investments                                                                         461        1,999
    Accounts receivable (net of allowance for doubtful accounts of $870 and
    $2,876 at December 31, 2000 and 1999, respectively):
           Trade accounts receivable                                                            19,300        8,570
           Accounts receivable from joint venture                                                 --            582
           Other receivables                                                                     2,184         --
    Inventories                                                                                 18,835       12,965
    Prepaid expenses                                                                               905        1,030
    Net current assets of discontinued operations                                                 --          1,019
                                                                                             ---------    ---------
Total current assets                                                                            46,403       35,363

Property and equipment, net                                                                      3,567        2,900
Goodwill, net                                                                                    1,101        1,242
Other assets                                                                                       417          669
Long-term net assets of discontinued operations                                                   --            469
                                                                                             ---------    ---------
Total assets                                                                                 $  51,488    $  40,643
                                                                                             =========    =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
    Accounts payable                                                                         $   3,037    $   2,998
    Deferred revenue                                                                             1,901        2,017
    Other accrued liabilities                                                                    9,448        8,101
    Capital lease obligations - due within one year                                                 35           30
                                                                                             ---------    ---------
Total current liabilities                                                                       14,421       13,146

Deferred income on sale leaseback transactions                                                    --            367
Deferred revenue                                                                                   293          180
Capital lease obligations                                                                           82          125
                                                                                             ---------    ---------
Total liabilities                                                                               14,796       13,818
                                                                                             ---------    ---------
Minority interest                                                                                 --             93
                                                                                             ---------    ---------
Shareholders' equity
    Common stock, no par value;  150,000 shares authorized;  104,599 and 100,042
    shares issued and outstanding December 31, 2000 and 1999, respectively                     128,108      121,566
    Additional paid-in capital                                                                   9,614        9,399
    Notes receivable from shareholders                                                          (3,230)        (150)
    Accumulated deficit                                                                        (97,800)    (104,083)
                                                                                             ---------    ---------
Total shareholders' equity                                                                      36,692       26,732
                                                                                             ---------    ---------
Total liabilities and shareholders' equity                                                   $  51,488    $  40,643
                                                                                             =========    =========
<FN>
                 The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>

================================================================================
                                       26
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================

<TABLE>
                                              IMATRON INC.
                                Consolidated Statements of Operations
                               (In thousands, except per share amounts)
<CAPTION>
                                                                 Years ended December 31,
                                                            --------------------------------
                                                                2000        1999        1998
                                                            --------    --------    --------
<S>                                                         <C>         <C>         <C>
Revenues
   Product sales                                            $ 53,318    $ 29,891    $ 22,547
   Service                                                     8,248       6,938       6,863
   Other products sales                                          854         720        --
   Development contracts                                        --          --         1,250
                                                            --------    --------    --------
        Total revenue                                         62,420      37,549      30,660
                                                            --------    --------    --------
Cost of revenues
   Product sales                                              29,849      20,188      16,931
   Service                                                     6,436       6,162       6,363
   Other products sales                                          830         702        --
                                                            --------    --------    --------
        Total cost of revenues                                37,115      27,052      23,294
                                                            --------    --------    --------
Gross profit                                                  25,305      10,497       7,366
                                                            --------    --------    --------
Operating expenses
   Research and development                                    8,944       7,045       7,869
   Marketing and sales                                         8,562       6,244       4,456
   General and administrative                                  3,196       2,622       4,576
   Goodwill amortization                                         143         139        --
   Restructuring charges                                        --           282        --
                                                            --------    --------    --------
        Total operating expenses                              20,845      16,332      16,901
                                                            --------    --------    --------
Operating income (loss)                                        4,460      (5,835)     (9,535)

Gain on sale of service business                               1,525        --          --
Interest income                                                  548         242         155
Interest expense                                                 (23)        (68)        (20)
Other income (loss)                                             (238)         15        --
                                                            --------    --------    --------
Income (loss) from continuing operations before provision
   for income taxes                                            6,272      (5,646)     (9,400)
Provision for income taxes                                      (167)       --          --
                                                            --------    --------    --------
Income (loss) from continuing operations                       6,105      (5,646)     (9,400)
Income (loss) from discontinued operations                       207        (940)     (4,507)
Non cash return to minority interest                            --          --          (874)
                                                            --------    --------    --------
Income (loss) before cumulative effect of change in
   accounting principle                                        6,312      (6,586)    (14,781)
Cumulative effect on prior years (to December 31, 1999)
   of changing to a different revenue recognition method         (29)       --          --
                                                            --------    --------    --------
Net income (loss)                                           $  6,283    $ (6,586)   $(14,781)
                                                            ========    ========    ========


================================================================================
                                       27
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


Net income (loss) per share:
    Income (loss) from continuing operations
       - basic and diluted                                  $  0.06     $(0.06)    $   (0.11)
                                                            =======     ======     =========
    Net income (loss) - basic and diluted                   $  0.06     $(0.07)    $   (0.18)
                                                            =======     ======     =========
Number of shares used in basic per share calculations       102,983     94,680        83,941
                                                            =======     ======     =========
Number of shares used in diluted per share calculations     106,931     94,680        83,941
                                                            =======     ======     =========
Proforma amounts assuming the new revenue recognition
    method is applied retroactively:
    Net income (loss)                                       $ 6,312    $(6,615)    $ (14,781)
                                                            =======     ======     =========
    Net income (loss) - basic                               $  0.06     $(0.07)    $   (0.18)
                                                            =======     ======     =========
    Net income (loss) - diluted                             $  0.06     $(0.07)    $   (0.18)
                                                            =======     ======     =========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>


================================================================================
                                       28
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


<TABLE>
                                                                    IMATRON INC.
                                                 Consolidated Statements of Shareholders' Equity
                                                                    (In thousands)
<CAPTION>
                                                    Common Stock       Additional   Deferred                Accum-
                                                 --------------------   Paid-in      Compen-     Notes      ulated
                                                  Shares      Amount     Capital     Sation    Receivable   Deficit       Total
                                                 --------    --------    --------   --------    --------    --------    --------
<S>                                                <C>         <C>          <C>         <C>                  <C>          <C>
Balances at December 31, 1997                      78,815      90,728       9,290       (232)       --       (82,716)     17,070
Common stock issued for employee
   stock purchase plans, stock
   bonus and the exercise of
   warrants and employee stock                      1,984       1,949        --         --          --          --         1,949
   options
Conversion of subsidiary's
   convertible series A preferred
   stock to company's common stock                  7,496      14,798        --         --          --          --        14,798
Amortization of deferred
   compensation                                      --          --          --           62        --          --            62
Warrants issued for services                         --          --            50       --          --          --            50
Notes receivable from officers
   for exercise of stock options                     --          --          --         --          (488)       --          (488)
Net loss                                             --          --          --         --          --       (14,781)    (14,781)
                                                 --------    --------    --------   --------    --------    --------    --------
Balances at December 31, 1998                      88,295    $107,475    $  9,340    $  (170)    $  (488)  $ (97,497)   $ 18,660
Common stock issued for employee
   stock purchase plans, stock
   bonus and the exercise of
   warrants and employee stock                      3,118       4,016        --         --          --          --         4,016
   options
Common stock and warrants sold in
   private placements, net of
   offering costs                                   7,673       8,621        --         --          --          --         8,621
Common stock issued for
   acquisition of subsidiary                          956       1,454        --         --          --          --         1,454
Reversal of deferred compensation
   due to cancellation of stock
   options of discontinued                           --          --          --          170        --          --           170
   operations
Warrants issued per employment
   contract                                          --          --            10       --          --          --            10
Non-cash expense related to
   options issued to
    Non-employee directors                           --          --            49       --          --          --            49
Repayments of notes receivable                       --          --          --         --           338        --           338
Net loss                                             --          --          --         --          --        (6,586)     (6,586)
                                                 --------    --------    --------   --------    --------    --------    --------
Balances at December 31, 1999                     100,042    $121,566    $  9,399   $   --      $   (150)  $(104,083)   $ 26,732
Common stock sold in a private
   placement, net of offering                         281       1,151        --         --          --          --         1,151
   costs
Common stock issued for employee
   stock purchase plans, stock
   bonus and the exercise of
   warrants and employee stock
   options                                          1,285       2,391        --         --          --          --         2,391
Exercise of warrants for notes
   receivable from officers                         2,991       3,000        --         --        (3,000)       --          --
Interest on notes receivable from
   officers                                                                                         (117)                   (117)
Non-cash expense related to
   warrants and options issued to
   non-employees and directors                       --          --           215       --          --          --           215
Repayments of notes receivable                       --          --          --         --            37        --            37
Net income                                           --          --          --         --          --         6,283       6,283
                                                 --------    --------    --------   --------    --------    --------    --------
Balances at December 31, 2000                     104,599    $128,108    $  9,614   $   --      $ (3,230)   $(97,800)   $ 36,692
                                                 ========    ========    ========   ========    ========    ========    ========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>


================================================================================
                                       29
<PAGE>
<TABLE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================

                                  IMATRON INC.
                      Consolidated Statements of Cash Flows
                                 (In thousands)
<CAPTION>
                                                                       Years Ended December 31
                                                                  --------------------------------
                                                                      2000        1999        1998
                                                                  --------    --------    --------
<S>                                                                  <C>      <C>          <C>
Cash flows from operating activities:
Net income (loss)                                                    6,283    $ (6,586)    (14,781)
Adjustments to reconcile net loss to net cash used in operating
    activities:
Depreciation and amortization                                          766         757         780
Net income from discontinued operations                               (207)        940       4,507
Goodwill amortization                                                  141         139        --
Amortization of deferred compensation                                 --          --            62
Non-cash return to minority interest                                  --          --           874
Provision for (recovery of) doubtful accounts                       (1,252)        240       1,155
Options and warrants issued for services                               215          49          50
Common stock issued for good and services                              540       1,228         503
Loss on disposal of assets                                             246          22          20
Changes in operating assets and liabilities:
Accounts receivable                                                (11,080)     (1,209)        340
Inventories                                                         (5,870)      1,730      (1,507)
Prepaid expenses                                                       125        (202)       (428)
Other assets                                                           252         950        (417)
Accounts payable                                                        39        (671)        553
Other accrued liabilities                                            1,347       1,974       1,017
Deferred revenue                                                      (370)       (628)       (621)
                                                                  --------    --------    --------
Net cash used in operating activities:                              (8,825)     (1,267)     (7,893)
Net cash used in (provided by) discontinued operations               1,495      (3,555)        499
                                                                  --------    --------    --------
                                                                    (7,330)     (4,822)     (7,394)
                                                                  --------    --------    --------
Cash flows from investing activities:
Capital expenditures                                                (1,679)     (1,148)       (642)
Purchases of short-term investments                                 (2,523)     (4,062)       (885)
Maturities of short-term investments                                 4,061       2,063       1,065
Proceeds from sale of discontinued operations                          107       4,325
Acquisition of subsidiary, net of cash acquired                       --          (273)       --
                                                                  --------    --------    --------
Net cash used in (provided by) by investing activities:                (34)        905        (462)
                                                                  --------    --------    --------
Cash flows from financing activities:
Payments of obligations under capital leases                           (38)        (87)        (57)
Proceeds from issuance of warrant                                     --            10        --
Proceeds from issuance of common stock                               3,002      11,409       1,446
Loans to stockholders                                                 (117)       --          (488)
Repayment of loans to stockholders                                      37         338        --
                                                                  --------    --------    --------
Net cash provided by financing activities                            2,884      11,670         901
Net (decrease) increase in cash and cash equivalents                (4,480)      7,753      (6,955)
Cash and cash equivalents, at beginning of year                      9,198       1,445       8,400
                                                                  --------    --------    --------
Cash and cash equivalents, at end of year                            4,718    $  9,198       1,445
                                                                  ========    ========    ========
</TABLE>

                                    Continued

================================================================================
                                       30
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================

<TABLE>
                                  IMATRON INC.
                Consolidated Statements of Cash Flows, continued
                                 (In thousands)
<CAPTION>
<S>                                                                      <C>      <C>      <C>
Supplemental Disclosure of Noncash Investing and Financing Activities:
   HeartScan's conversion of preferred stock to Imatron
       common stock                                                       --     $  --     14,798
                                                                         =====   =======   ======
   Equipment acquired under capital leases:
       Continuing operations                                              --     $   139       39
                                                                         =====   =======   ======
   Notes issued for stock options and warrants exercised
       Continuing operations                                             3,000   $  --        488
                                                                         =====   =======   ======
   Cash paid for interest on capital lease obligations:
       Continuing operations                                                23   $    68       20
                                                                         =====   =======   ======
       Discontinued operations                                            --     $   247      390
                                                                         =====   =======   ======
<FN>
    The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>


================================================================================
                                       31
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


                                  IMATRON INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 Electron Beam Tomography ("EBT")
scanner.  The scanner is used in large and mid-sized hospitals and free standing
imaging  clinics.  Imatron Inc.  provides  service,  parts,  and  maintenance to
hospitals  and clinics that operate its scanners,  as well as medical  equipment
manufactured by other companies.

BASIS OF CONSOLIDATION

The  accompanying   consolidated  financial  statements  include  the  financial
statements of the Company and its wholly owned  subsidiaries,  HeartScan Imaging
Inc.   ("HeartScan")  and  Caral   Manufacturing   ("Caral").   All  significant
intercompany balances and transactions have been eliminated in consolidation.

On July 13,  1998,  the  Company  adopted  a formal  plan to sell its  HeartScan
subsidiary  in order for the Company to focus more  comprehensively  on the core
business of manufacturing  and servicing  quality EBT scanners.  For all periods
presented, the financial statements reflect the Company's HeartScan segment as a
discontinued operation.

On January 6, 1999,  Imatron acquired a 100% interest in Caral in an acquisition
accounted  for under the purchase  method of  accounting.  Beginning  January 6,
1999, the financial  position and operating  results of Caral were  consolidated
with those of the Company.

USE OF ESTIMATES

The preparation of financial  statements in conformity  with generally  accepted
accounting  principle 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.

NEW ACCOUNTING PRONOUNCEMENTS

In June 1998, the FASB issued Statement of Financial  Accounting Standard (SFAS)
No. 133, Accounting for Derivative Instruments and Hedging Activities.  SFAS No.
133, as amended by SFAS Nos. 137 and 138,  establishes  accounting and reporting
standards for derivative financial instruments and hedging activities related to
those instruments, as well as other hedging activities. Because the Company does
not currently  hold any  derivative  instruments  and does not engage in hedging
activities,  the Company  expects that the adoption of SFAS No. 133, as amended,
will not have a material impact on its consolidated financial position,  results
of operations, or cash flows. The Company will be required to adopt SFAS No. 133
in fiscal 2001.

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 EBT scanner and
the Company's business.  The Company's operations are also subject to regulation
by other federal,  state, and local  governmental  entities empowered to enforce
pertinent  statutes and regulations,  such as those enforced by the Occupational
Safety and Health Agency and the Environmental Protection Agency.

The Company sells its products worldwide through a direct  employee-based  sales
organization and independent  distributors.  In addition,  the Company maintains
geographically based sales and marketing  organizations that are


================================================================================
                                       32
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


responsible for marketing,  sales and distribution of the Company's  products in
the United States,  Europe,  Africa, the Middle East, Canada,  Latin America and
the  Asia-Pacific  region.  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.

The  Company's  revenues  are  principally  derived  from  the  sales of the EBT
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 other critical parts.

COMPREHENSIVE INCOME (LOSS)

The Company has no  components of other  comprehensive  income (loss) other than
its  net  income  (loss)  and,  accordingly,   comprehensive  income  (loss)  is
equivalent to net income (loss) for all periods presented.

CASH EQUIVALENTS

The Company considers all highly liquid  investments  purchased with an original
maturity  of  three  months  or less to be cash  equivalents.  Cash  equivalents
consist principally of cash on deposit with banks and money market accounts that
are stated at costs, which approximates fair value.

FINANCIAL INSTRUMENTS

In accordance with SFAS No. 115, "Accounting for Certain Investments in Debt and
Equity   Securities,"   the   Company  has   classified   all   investments   as
available-for-sale.  Available-for-sale  securities  are  carried at fair value,
with  unrealized  gains and losses  reported  as a separate  component  of other
comprehensive  income (loss), if material.  Fair values of investments are based
on quoted market  prices.  Short-term  investments at December 31, 2000 and 1999
consist of commercial  paper and government  securities,  respectively,  and are
classified as available for sale.

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.

INVENTORIES

Inventories are stated at the lower of standard cost (which  approximates actual
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
that are no longer used in production,  upgrades and repairs. 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.

PROPERTY AND EQUIPMENT

Property  and  equipment  are  stated  at cost  and are  depreciated  using  the
straight-line method over their estimated useful lives.  Equipment under capital
leases, except for scanner equipment and leasehold  improvements,  are


================================================================================
                                       33
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


amortized  using the  straight-line  method  over the lesser of their  estimated
useful lives or the remaining term of the related leases.

Estimated useful lives are as follows:

                  Machinery and equipment            3 - 5 years
                  Furniture and fixtures             3 - 5 years
                  Leasehold improvements                 5 years

GOODWILL AND LONG-LIVED ASSETS

Goodwill  represents  the  excess  of cost  over net  assets  of  Caral,  and is
amortized on a straight-line method over 10 years.  Accumulated  amortization of
goodwill   was  $280,000  and  $139,000  as  of  December  31,  2000  and  1999,
respectively.  The Company  accounts for goodwill  and other  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 goodwill and
long-lived  assets 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.  Based on these  evaluations,  there were no  adjustments  to the carrying
value of goodwill and other long-lived assets in the fiscal periods reported.



================================================================================
                                       34
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


REVENUE RECOGNITION AND CHANGE IN ACCOUNTING PRINCIPLE

In December  1999, the  Securities  and Exchange  Commission  (SEC) issued Staff
Accounting  Bulletin  No.  101  (SAB  101),  Revenue  Recognition  in  Financial
Statements,  as amended by SAB 101A and SAB 101B, which provides guidance on the
recognition,  presentation,  and  disclosure of revenue in financial  statements
filed with the SEC.  SAB 101  outlines  the basic  criteria  that must be met to
recognize  revenue and  provides  guidance  for  disclosures  related to revenue
recognition policies.

The  Company  adopted  SAB 101 in the fourth  quarter of fiscal year 2000 and in
accordance  with APB Opinion No. 20 Accounting  Changes and SFAS No. 3 Reporting
Accounting  Changes in Interim Financial  Statements,  results of operations for
the first,  second and third  quarter of fiscal year 2000 have been  restated to
reflect the new revenue  recognition  policy.  The effect of the adoption of SAB
101 on retained  earnings as of January 1, 2000 has been reflected as cumulative
effect of change in  accounting  principle  in the net income for the year ended
December 31,  2000.  The  cumulative  effect  includes  reversal of $442,000 and
$413,000  related to revenues and costs of sales,  respectively,  recognized  in
prior periods.

Prior to  September  30,  2000,  the Company  recognized  product  revenue  upon
shipment to the customers or customer-designated locations.

Upon adoption of SAB 101, the Company changed its revenue  recognition policy to
reflect  the  multi-  element  nature  of its  sales  contracts.  The  Company's
arrangement with its customers typically includes an installation service, which
is performed at some time  subsequent  to the shipment of the scanner.  Based on
the criteria  included in SAB 101, the Company  concluded  that the  undelivered
installation is not essential to the  functionality of the delivered  equipment.
The Company used the following indicators in its evaluation:

         o    The   equipment   is  a  standard   product  and  no   significant
              customization is required upon installation;

         o    Installation  is primarily  related to assembly and does not alter
              the equipment capabilities;

         o    The installation service is available from other vendors.

Thus, the Company as changed its revenue recognition policy to the following:

Revenue associated with the sale of scanners is recognized when:

         o    Persuasive evidence of an arrangement exists;

         o    Delivery has occurred;

         o    The  Company's  price to the  customer is fixed and  determinable;
              and,

         o    Collectibility is reasonably assured.

At the time of shipment, the Company defers revenue associated with installation
services  based on the  fair  value of those  services  until  the  installation
service is performed and completed.  The fair value of the installation services
was established  based on historical  charge rates for similar services provided
by the Company to the customers of its service business. The Company accrues for
estimated scanner warranty cost upon scanner shipment.  Revenue from the sale of
parts is recognized upon shipment. Revenue earned under maintenance contracts is
recognized ratably over the service period.


================================================================================
                                       35
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================

<TABLE>
The Company's  interim  results of operations  have been restated as follows (in
thousand, except per share amounts):
<CAPTION>
                                                                                    Three Months Ended
                                                                        September 30,     June 30,       March 31,
                                                                             2000            2000           2000
                                                                          -------         -------        -------
<S>                                                                        <C>             <C>            <C>
Revenue as originally reported                                             17,805          15,517         11,348
Effect of change in revenue recognition                                      (110)             37           (110)
                                                                          -------         -------        -------
Revenue as restated                                                        17,695          15,554         11,238
                                                                          =======         =======        =======
Net income as originally reported                                           1,577           1,044            248
Effect of change in revenue recognition                                        (7)              3             (7)
                                                                          -------         -------        -------
Income before cumulative effect of change in accounting principle
                                                                            1,570           1,047            241
Cumulative effect on prior years (to December 31, 1999) of
   changing to a different revenue recognition method                                                        (29)
                                                                          -------         -------        -------
Net income as restated                                                      1,570           1,047            212
                                                                          =======         =======        =======
</TABLE>

The  adoption  of SAB 101 did not have any  effect  on the  originally  reported
earnings per share amounts.

SALE LEASEBACK ARRANGEMENT

In 1998 and 1997,  the Company sold scanners to third-party  leasing  companies.
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  included  monthly rental  payments over a 5-year
term with a guarantee of the payments by Imatron.  HeartScan accounted for these
leases as capital leases.  Imatron  recognized revenue equal to its scanner cost
and  deferred  the profit on its sales to the  leasing  companies.  The  Company
amortized its deferred  profit to product  sales over the five-year  term of the
HeartScan leases. Imatron recognized $70,000, $356,000, and $501,000 of deferred
profit for these leases for the years ended  December 31, 2000,  1999, and 1998,
respectively.  The  unamortized  portion of the  deferred  revenue  amounting to
$412,000 was recorded to net income in the fourth  quarter of 2000 upon the sale
of the final HeartScan center.

RESEARCH AND DEVELOPMENT

Research and development expenditures are charged to operations as incurred.

ADVERTISING COSTS

Advertising and promotion costs are expensed as incurred.

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.

NET INCOME (LOSS) PER SHARE

The Company computes and discloses its net income (loss) per share in accordance
with SFAS No. 128, "Earnings per Share." SFAS No. 128 establishes  standards for
computing and  presenting  earnings per share.  Basic income (loss) per share is
computed based on the weighted average number of common shares outstanding,  and


================================================================================
                                       36
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


diluted income (loss) per share is computed based on the weighted average number
of common shares and dilutive  potential  common shares  outstanding  during the
period.  The  calculation  takes into account the shares that may be issued upon
exercise  of stock  options  and  warrants,  reduced by the  shares  that may be
repurchased  with the funds  received  from the  exercise,  based on the average
price during the period.  Stock  options and  warrants  were  excluded  from the
diluted calculation for 1999 and 1998, as their effects were anti-dilutive.

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  Principle  Board Opinion
("APB")  No.  25,  "Accounting  for Stock  Issued  to  Employees,"  and  related
interpretations.  Under APB No. 25 compensation expense on fixed stock awards is
based on the  difference,  if any,  on the date of the grant,  between  the fair
value of the Company's  stock and the exercise  price of the award.  The Company
accounts for equity  instruments  issued to non-employees in accordance with the
provisions  of SFAS No.  123 and  Emerging  Issues  Task Force  ("EITF")  96-18,
"Accounting for Equity  Instruments  That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling Goods or Services".

In March 2000,  the FASB issued  Interpretation  No. 44,  Accounting for Certain
Transactions involving Stock Compensation,  an interpretation of APB Opinion No.
25. This  Interpretation  clarifies  the  application  of Opinion 25 for certain
issues:  (a) the definition of employee for purposes of applying Opinion 25, (b)
the criteria for determining whether a plan qualifies as a noncompensatory plan,
(c) the  accounting  consequence  of  various  modifications  to the  terms of a
previously  fixed stock option or award,  and (d) the accounting for an exchange
of stock compensation awards in a business combination.  Effective July 1, 2000,
the Company adopted  Interpretation No. 44. The adoption of this  interpretation
did not  have  any  material  effect  on the  Company's  consolidated  financial
position or results of operations.

FOREIGN CURRENCY TRANSLATION

The Company's foreign operations use the U.S. dollar as the functional  currency
and,  accordingly,  their monetary  assets and liabilities are remeasured at the
year-end  exchange rates and non-monetary  assets and liabilities are remeasured
at historical  exchange  rates.  Statements of operations  are remeasured at the
average  exchange rates for the period.  Foreign  currency  transaction gain and
losses are recognized in current operations and have not been significant to the
Company's results in any period.  The effect of foreign currency rate changes on
cash and cash equivalents has not been significant in any period presented.

Note 2 - FINANCIAL INSTRUMENTS

Investments were as follows:
                                                            December 31,
                                                      -------------------------
                                                        2000            1999
                                                      --------         --------
                                                            (In thousands)
Money market mutual funds                             $  4,321         $  4,600
Certificate of deposit                                     573             --
Commercial paper                                           285            6,597
                                                      --------         --------
Total investments                                        5,179           11,197
Less amounts classified as cash and cash equivalents    (4,718)          (9,198)
                                                      --------         --------
Short-term investments                                $    461         $  1,999
                                                      ========         ========

Cost approximated fair value of all investments at December 31, 2000 and 1999.


================================================================================
                                       37
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


Note 3 - inventories

Inventories were as follows:
                                                             December 31,
                                                      -------------------------
                                                          2000             1999
                                                      --------         --------
                                                            (In thousands)
Purchased parts and sub-assemblies                    $ 7,377           $ 4,272
Service parts                                           2,588             1,747
Work-in-progress                                        6,209             4,718
Finished products                                       2,661             2,228
                                                      --------         --------

                                                      $18,835           $12,965
                                                      ========         ========

Note 4 - PROPERTY AND EQUIPMENT, Net

Property and equipment, at cost, were as follows:

                                                             December 31,
                                                      -------------------------
                                                          2000             1999
                                                      --------         --------
                                                            (In thousands)

Machinery and equipment                               $  7,036         $  6,644
Furniture and fixtures                                   1,763            1,527
Leasehold improvements                                   2,718            2,386
                                                      --------         --------
                                                        11,517           10,557

Less accumulated depreciation and amortization          (7,950)          (7,657)
                                                      --------         --------

                                                      $  3,567         $  2,900
                                                      ========         ========


================================================================================
                                       38
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


Note 5 - OTHER ACCRUED LIABILITIES

Other accrued liabilities were as follows:

                                                             December 31,
                                                      -------------------------
                                                          2000             1999
                                                      --------         --------
                                                            (In thousands)

Warranty and product upgrades                         $  3,677         $  3,436
Deferred income on sale leaseback transactions            --                114
Customer deposits                                        1,378            1,362
Employee compensation                                    2,654            1,372
Other                                                    1,739            1,817
                                                      --------         --------

                                                      $  9,448         $  8,101
                                                      ========         ========


Note 6 - ACQUISITIONS

CARAL MANUFACTURING

On January 6, 1999  (closing  date)  Imatron  acquired a 100%  interest in Caral
Manufacturing  ("Caral").  Caral was a major vendor of Imatron and  manufactures
custom-made parts for scanners.

The purchase price of the acquisition was comprised of $275,000 in cash, 624,113
shares of common  stock  issued at closing  plus an issuance of shares of common
stock  based on the market  price of the  Company's  common  stock as of July 6,
1999. The shares issued at closing were valued at $825,000 or $1.3219 per share,
which was the  average  stock  price for the  period  from  December  7, 1998 to
December 18, 1998, the period  surrounding the date the terms of the acquisition
were agreed. The security price of the Company's common stock as of July 6, 1999
was below $2.90 per share,  and as part of the  agreement,  the  Company  issued
332,279  additional  shares.  In accordance with EITF 97-15, the contingency was
valued at $629,000.

The acquisition  was accounted for using the purchase method of accounting,  and
accordingly,  the operating results of Caral have been included in the Company's
consolidated  financial  statements  from January 6, 1999 forward.  The purchase
price was  allocated to the  acquired  assets and assumed  liabilities  based on
their  respective  estimated  fair values at the date of  acquisition.  The fair
value of assets acquired was $660,461 and liabilities assumed was $320,000.  The
excess of the aggregate  purchase price over the fair market value of net assets
acquired  amounting to $1,389,000 is classified as goodwill,  and amortized on a
straight line method over 10 years.

POSITRON CORPORATION

On January 25, 1999, the Company  acquired  9,000,000  shares of common stock of
Positron  Corporation  ("Positron")  representing  a 55% interest  for $100.  On
August 18, 1999,  the ownership  interest of the Company in Positron was diluted
to 16% as a result of the completion of a private equity financing of Positron's
common  stock.  As  such,  Imatron's  control  in  Positron  was  temporary  and
accordingly, the Company accounts for its investment in Positron at cost.

In conjunction  with the execution of a letter of intent and the consummation of
the  purchase  business  combination  with  Positron,  the Company  made working
capital  advances to Positron  under a $600,000  credit  facility at an interest
rate 1/2% over the prime  interest  rate.  On August 9, 1999,  Positron paid its
obligation of $600,000 including $56,000 of interest to the Company. The Company
did not engage in any transactions  with Positron during the year ended December
31, 2000.


================================================================================
                                       39
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


Note 7 -RESTRUCTURING AND REORGANIZATION CHARGES

On February 8, 1999,  the Company  implemented  a  restructuring  plan to reduce
costs and improve  operating  efficiencies.  The plan  included  elimination  of
approximately  20% of the  Company's  workforce in various  departments  and its
HeartScan  subsidiary  including disposal of its HeartScan  operations (see Note
17). The cost associated with this reduction in staff,  consisting  primarily of
severance and related  benefits,  was $282,000 and was paid in the first quarter
of 1999.

Note 8 - RELATED PARTY TRANSACTIONS

JOINT VENTURE COMPANY

In 1994,  the  Company  formed a joint  venture,  Imatron  Japan,  Inc.  ("Joint
Venture")  with two unrelated  parties.  Imatron had a 24% interest in the Joint
Venture, which was carried at no value in the accompanying  consolidated balance
sheet  as of  December  31,  1999.  The  Company  had been  accounting  for this
investment under the equity method of accounting.

The Company  recognized  revenues of $0,  $2,800,000 and $2,800,000 from scanner
sales to Imatron Japan,  Inc. in fiscal 2000, 1999 and 1998,  respectively.  All
scanner  sales were either  fully paid in advance or payable  under  irrevocable
letter of credit without a right to return.

In October 2000, in connection  with the Marubeni  transaction  (see Note 9) the
Company  acquired a service  business owned by the Joint Venture in exchange for
forgiveness of account  receivable  from the Joint Venture of $2,779,000.  As of
the transaction date, the Company  recognized  $1,242,000 of service revenue and
reversed an allowance for doubtful  accounts in the amount of $1,537,000,  which
had been established in 1998 and 1999. The service revenue related to prior year
sales of spare  parts to  Imatron  Japan,  Inc  which had been  deferred  due to
uncertainty  of payments.  In November  2000,  the service  business was sold to
Marubeni Corporation.

NOTES RECEIVABLE FROM OFFICERS

At December 31, 1999, the Company held 2 notes receivable  amounting to $113,000
and $37,000  from the  Company's  Chief  Executive  Officer and the former Chief
Financial  Officer,  respectively.  These notes arose from transactions in 1998,
whereby the Company  provided loans for the purchase of 700,000 shares of common
stock under the Company's  stock option plan.  During 2000, the balance on notes
receivable  increased  to  $3,230,000  due to the  exercises  of warrants by the
Company's  former  President to purchase  2,991,027 shares of common stock for a
full recourse note in the amount of $3,000,000 and accrued interest thereof,  in
the amount of $117,000.  These  warrants were issued in 1999 in connection  with
the private placement of shares (see Note 11). The note, which bears an interest
rate of 7.25% per annum, is payable in full on June 15, 2001. All notes are full
recourse and are collateralized by the shares of common stock. The receivable is
shown on the balance sheet as a reduction in equity.


================================================================================
                                       40
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


Note 9 - COLLABORATION AGREEMENTS

SIEMENS CORPORATION

For the period  from March 31, 1995 to March 31,  1998,  the Company and Siemens
Corporation  ("Siemens")  operated  under  a 1995  Memorandum  of  Understanding
whereby Siemens  provided  $15,000,000 to the Company's C-150 Evolution  scanner
research and development program paid to the Company in quarterly non-refundable
payments.  The results of the  collaborative  research were jointly owned by the
parties and cross licensed. For the period from March 31, 1995 to March 31, 1998
Siemens retained exclusive  distribution rights in certain  geographical regions
for sales of the C-150 Evolution scanner.

On  April  1,  1998,  Imatron's  obligations  and  Siemens'  funding  under  the
Memorandum of Understanding  terminated.  In addition,  Siemens  surrendered its
exclusive distribution rights and Imatron assumed worldwide distribution for its
C-150 scanners. Imatron continues to provide scanner service support to Seimens'
customers under an April 1997 service support agreement signed with Siemens. For
an agreed upon amount,  Imatron  provides all  pre-installation  site  planning,
installation  and  application  support,  as well as,  warranty and  maintenance
services,  as a subcontractor  to Siemens.  Revenues for services are recognized
ratably  over  the  life of the  contracts  while  other  service  revenues  are
recognized upon completion of work.

MARUBENI CORPORATION

In  November  2000,  the  Company   entered  into  an  agreement  with  Marubeni
Corporation and their wholly owned subsidiary Meditec corporation  (collectively
"Marubeni").  Pursuant to the  agreement the Company  appointed  Marubeni as its
exclusive  importer,  distributor and customer service provider for EBT scanners
in Japan through 2003. The Company also transferred all assets and rights to the
service business  previously acquired from its related party Imatron Japan, Inc.
to Marubeni (see Note 8). In  consideration  for the rights and assets acquired,
Marubeni  paid  the  Company  a  total  of 500  million  yen,  or  approximately
$4,654,000. The total transaction fee was allocated to different elements of the
arrangement based on their relative fair values. The Company deferred revenue in
the  amount  of  $350,000  which  represents  the  estimated  fair  value of the
distributorship rights for a three-year period based on a third party valuation.
The  deferred  revenue  will be  amortized  to net  income  over the life of the
distributor agreement.  The remaining arrangement fee totaled $4,304,000 and was
recognized as proceeds from sale of the service  business  offset by the cost of
the service business of $2,779,000 and was recorded as other income.

Note 10 - COMMITMENTS and CONTINGENCIES

OPERATING LEASES

The  Company  leases its  present  facilities  under  various  operating  leases
expiring  between July 2002 and February 2004.  Future  minimum rental  payments
under the leases as of December 31, 2000, are as follows (in thousands):

                         2001                     $ 1,328
                         2002                       1,375
                         2003                       1,118
                         2004                         115
                                            ----------------
                         Total                    $ 3,936
                                            ================

Rent expense for operating leases totaled $1,153,000,  $1,022,000,  and $972,000
in 2000, 1999, and 1998, respectively.


================================================================================
                                       41
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


CAPITAL LEASE OBLIGATIONS

The Company leases certain equipment under non-cancelable  lease agreements.  As
of December  31,  2000,  equipment  under the  capital  lease  arrangements  and
included in property and equipment aggregated $117,000. Accumulated amortization
related to this equipment totaled $31,000 as of December 31, 2000.

Future minimum lease  payments  under capital lease  obligations at December 31,
2000, are as follows (in thousands):

                 2001                                        $ 50
                 2002                                          50
                 2003                                          48
                                                           ---------
                 Total minimum payments                       148
                 Less amounts representing interest           (31)
                                                           ---------
                 Total principal                              117
                 Less portion due within one year             (35)
                                                           ---------
                 Long-term portion                           $ 82
                                                           =========

Interest paid on capital lease obligations was $23,000,  $68,000, and $20,000 in
2000, 1999, and 1998, 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 Imatron Associates (the predecessor to the
Company).  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 certain  components
of the C-150 EBT scanner. On October 8, 1997, UC canceled the license to Emersub
and  granted  the  Company a license  for the  remaining  life of the  patent on
substantially the same terms as the Emersub license agreement. Imatron agreed to
pay UC  royalties  in the amount of $9,185 for each scanner sold from January 1,
1997 through September 28, 1999, the patent expiry date.  Royalties for 1999 and
1998 were $77,790 and $137,775,  respectively. There was no royalty payment made
in 2000 as the license agreement has expired.

Pursuant to the 1995  Memorandum  of  Understanding  with  Siemens,  the Company
transferred  five  patents  to  Siemens,  two of  which  cover  features  of the
Company's  C-150  scanner.  Siemens has 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.  For the year ended
December 31,  2000,  Imatron  produced 26 scanners  and has accrued  $120,000 of
royalty expenses for the 6 scanners produced in excess of 20.


================================================================================
                                       42
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


Note 11- CAPITAL STOCK

COMMON STOCK

The Company has authorized 150 million shares of common stock.

During 1999,  the Company sold a total of 904,600 shares of Imatron common stock
to an investor,  netting  proceeds of $2,596,000.  These shares were sold at the
prevailing  market  price at the time of sale,  ranging  from $1.66 to $3.99 per
share, or an average price of $2.87 per share. During the first quarter of 1999,
the  Company  also  issued  314,659  shares of Imatron  common  stock to certain
vendors as payment for accounts payable invoices amounting to $413,000, or $1.31
per  share.  There  were  no  other  securities  issued  in  relation  to  these
transactions.  These shares were  registered  with the  Securities  and Exchange
Commission in 1996.

On June 15,  1999,  the  Company  closed a  private  placement  offering  of the
Company's common stock with the Company's President whereby the Company sold for
$3,025,000:

 - 3,767,713 shares of common stock;

 - A warrant to  purchase  up to an  additional  $3  million of common  stock in
   increments  of $500,000  at a price  equal to 125% of the  closing  price (or
   $1.003 per share); and

 - A warrant to purchase  360,000  shares of common stock with an exercise price
   of 130% of the closing  price (or $1.044 per share)  with a one year  vesting
   period and an expiration date of June 15, 2004.

On July 23,  1999,  the  Company  closed a  private  placement  offering  of the
Company's common stock whereby 3,000,000 shares of common stock and a warrant to
purchase  1,000,000  shares  of common  stock at $1.25  per share  were sold for
$3,000,000.

In 2000, the Company  raised an aggregate of $3,002,000  from exercises of stock
options,  warrants,  and sale of its common stock,  at an average price of $2.26
per share. The Company issued a total of 1,325,989 shares of its common stock in
relation to these transactions.

In addition,  the Company  issued  warrants to purchase  shares of the Company's
common stock to  non-employees  for marketing  services at an exercise  price of
$2.00 per share.  The fair value of these  securities  estimated  on the date of
grant using the Black Scholes option-pricing model was approximately $1.74, with
the following  assumptions:  expected stock price  volatility of 80%;  risk-free
interest rate of 6.25%; and an contractual 10 year life. The fair value of these
instruments was recorded as an increase in additional paid in capital  amounting
to $174,000.  The fully vested options were recorded as prepaid  expense and are
being amortized over two years, the term of the agreement.

During the second  quarter of 2000,  the President of the Company  exercised his
warrants to purchase  2,991,027  shares of the Company's  common stock (see Note
8). These warrants were issued under the 1999 private placement  offering of the
Company's common stock.

MINORITY INTEREST

HeartScan has authorized  1,000,000  shares of .001 par value  preferred  stock.
There are 200,000 issued and  outstanding  shares at December 31, 2000 and 1999,
of which,  100,000 shares have been  designated  "Series A Preferred  Stock" and
100,000 have been designated "Series B Preferred Stock."

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 HeartScan
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 to the Series A and B Preferred  Stock  holders.  To
date, no dividend has been distributed to the holders of preferred stock.

Each share of Series A and B Preferred  Stock is  entitled  to ten votes.  These
shares had certain  conversion  rights,  which expired  unexercised  on June 26,
2000.


================================================================================
                                       43
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


The Series A Preferred  Stock was sold on June 26,  1996 in a private  placement
offering  at $160 per share  which  realized  net  proceeds  to the  Company  of
$14,798,000.  The  investment  by the Series A Preferred  Stock holders has been
accounted for as a minority interest holding in HeartScan with $5,890,000 of the
proceeds  being  allocated to  paid-in-capital  for the  intrinsic  value of the
Imatron  beneficial  conversion  feature.  A  non-cash  return  to the  minority
interest  expense  of  $874,000  was  recognized  for  the  amortization  of the
beneficial  conversion  feature for 1998. The beneficial  conversion feature was
fully amortized in 1998.

Imatron was the holder of the Series B Preferred  Stock at December 31, 2000 and
1999.

WARRANTS
<TABLE>
A summary of the Company's  outstanding  warrants as of December 31, 2000, 1999,
and 1998 and  changes  during  the  years  then  ended is  presented  below  (in
thousands, except per share amounts):
<CAPTION>
                                 Warrants to Purchase   Weighted Average        Range of
                                    Common Shares       Exercise Price       Expiration Dates
                                    -------------       --------------     ------------------
<S>                                   <C>               <C>                 <C>

Outstanding at December 31, 1997       6,164                3.85            2000 - 2001
                                    -------------       --------------     ------------------

Issued                                 1,130                4.22                   2002
Exercised                               (213)               1.82            2000 - 2002
Canceled                                --                                         --
                                    -------------       --------------     ------------------

Outstanding at December 31, 1998       7,081                3.97            2000 - 2002
                                    -------------       --------------     ------------------

Issued                                 4,567                1.08            2000 - 2004
Exercised                             (1,150)               1.28            2000 - 2002
Canceled                                --                                         --
                                    -------------       --------------     ------------------

Outstanding at December 31, 1999      10,498            $   3.00            2000 - 2004
                                    -------------       --------------     ------------------

Issued                                  --               --                        --
Exercised                             (3,338)               1.14            2000 - 2002
Canceled                                (112)               2.42                   2000
                                    -------------       --------------     ------------------

Outstanding at December 31, 2000       7,048            $   3.89            2001 - 2004
                                    =============       ==============     ==================
</TABLE>

COMMON STOCK RESERVED

At December 31, 2000, the Company has reserved shares of common stock for future
issuances as follows (in thousands):

                          Stock option plans             9,230
                          Stock purchase plan              372
                          Stock warrants                 7,048
                          Stock bonus plans                503
                                                     ------------
                          Total                         17,153
                                                     ============

================================================================================
                                       44
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


Note 12 - STOCK-BASED COMPENSATION

PROFORMA STOCK COMPENSATION

At  December  31,  2000,  Imatron has two stock  option  plans,  Employee  Stock
Purchase  Plan,  and stock bonus plan,  which are described  below.  The Company
applies APB No. 25 and related interpretations in accounting for its plans.

Proforma  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 and employee  stock  purchase plan under the fair value method of
that  Statement.  The fair  value of awards was  estimated  at the date of grant
using an option pricing model with the following weighted-average assumptions.

                                        2000           1999             1998
                                     -----------    ------------    ------------

  Expected stock price volatility      80.00%         80.00%         80.20%
  Risk-free interest rate               5.75%          6.91%          5.50%
  Expected life - years                 9.35           8.00           7.53
  Expected dividend yield               0.00%          0.00%          0.00%

<TABLE>
For purposes of pro forma disclosures, the estimated fair value of the awards is
amortized to expense over the awards vesting period.  Had the Company elected to
recognize  compensation expense based on the fair value of the awards granted at
grant dates as  prescribed  by SFAS 123, net income (loss) and basic and diluted
income  (loss) per share  would  have been  increased  to the pro forma  amounts
indicated in the table below (in thousands except per share amounts):
<CAPTION>
                                                               2000            1999              1998
                                                          -------------   --------------    --------------
<S>                                                            <C>             <C>             <C>
  Net income (loss) - as reported                              $6,283         ($6,586)         ($14,781)
  Net income (loss) - pro forma                                   406         ($8,579)         ($15,763)
  Basic and diluted - net loss per share - as reported          $0.06          ($0.07)           ($0.18)
  Basic and diluted - net loss per share - pro forma            $0.00          ($0.09)           ($0.19)
</TABLE>

The weighted  average fair value of options granted in 2000, 1999, and 1998 were
$2.31, $1.21, and $1.92 per share, respectively.  The weighted average remaining
contractual life of all options at December 31, 2000, is 8.3 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 vesting  options  become
exercisable.

DIRECTOR STOCK OPTION PLAN

The Company's  Directors'  Stock Option Plan is  authorized  to issue  1,500,000
shares  under the plan.  Each  eligible  director is entitled to receive  40,000
options upon election and 40,000 options annually, thereafter.

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  immediately  with an option for the Company to  repurchase  the
shares and expire ten years from the grant date. Compensation expense related to
options granted to the Company's  directors computed on an intrinsic value basis
totaled $41,000, $49,000, and $0 in 2000, 1999, and 1998, respectively.


================================================================================
                                       45
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


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-employees,  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.  On June 18,  1999,  at the annual
meeting, the shareholders approved an amendment to the 1993 Plan to increase the
shares authorized thereunder to 11,500,000 common shares.

On February 24, 1998, the Company  offered  employees  holding options under the
1993 Stock Option Plan,  the  opportunity  to exchange  such options for options
with an exercise  price equal to $2.56 per share,  the fair market  value of the
Company's  stock on that date.  Outstanding  options to purchase  760,597 shares
were repriced.

On October 23, 1998,  the Company  made an offer to its  employees to cancel and
re-grant at October 23,  1998,  all  outstanding  options with  exercise  prices
greater than $1.50. Outstanding options to purchase 1,158,992 shares at exercise
prices ranging from $1.78 to $2.56 were  re-granted  and repriced at $1.50,  the
closing price at October 23, 1998.

With respect to the October 23, 1998 option  repricing,  employees  were given 4
weeks to execute an agreement to obtain the lower  priced  options.  The Company
considered this offering  period and concluded that it had an immaterial  effect
on  compensation  expense  required to be recorded.  There was no such repricing
"window" for the February 24, 1998 option exchange.

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
prior to 1998 under the plan generally vest evenly over four years following the
grant date and expire  five years from the grant date.  Options  granted in 1998
and  thereafter  generally  vest  evenly  over four  years  and  expire 10 years
subsequent to the date of grant.


================================================================================
                                       46
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


<TABLE>
A summary of the activity under the Imatron stock option plans is as follows (in
thousands, except per share amounts):

                                                                                Outstanding Options
                                                                -------------------------------------------------------
                                                Shares                                Exercise           Aggregate
                                               Available          Number of           price per            exercise
                                               for Grant            shares              share               price
                                             ---------------    ---------------    -----------------    ---------------
<S>                                               <C>                <C>             <C>                      <C>
Balances at December 31, 1997                       1,104              3,688         $0.43 - $5.00             5,584
Shares reserved for issuance                          450                 --              --                      --
Options granted                                    (1,254)             1,254         $1.28 - $2.56             2,774
Options exercised                                      --             (1,280)        $0.37 - $2.63              (724)
Options canceled                                      178               (178)        $0.61 - $3.31              (411)
Options repricing:
         Options canceled                              --             (1,920)        $1.78 - $2.56            (4,988)
         Options re-granted                            --              1,920         $1.50 - $2.56             3,685
                                             ---------------    ---------------    -----------------    ---------------
Balances at December 31, 1998                         478              3,484         $0.61 - $5.00             5,920

Shares reserved for issuance                        6,500                 --              --                      --
Options granted                                    (3,367)             3,367         $1.00 - $2.19             4,998
Options exercised                                      --               (762)        $0.37 - $2.56            (1,019)
Options canceled                                      891               (891)         $1.00- $3.99            (1,479)
                                             ---------------    ---------------    -----------------    ---------------
Balances at December 31, 1999                       4,502              5,198         $0.71 - $5.00             8,420
Options granted                                    (3,171)             3,171         $1.41 - $3.56             7,313
Options exercised                                      --               (470)        $0.71 - $2.56              (671)
Options canceled                                      376               (376)         $1.00- $3.56              (705)
                                             ---------------    ---------------    -----------------    ---------------
Balances at December 31, 2000                       1,707              7,523         $1.00 - $4.99            14,357
                                             ===============    ===============    =================    ===============
</TABLE>
<TABLE>
The following table summarizes  information concerning Imatron's outstanding and
exercisable  options as of  December  31, 2000 (in  thousands,  except per share
amounts):
<CAPTION>
                                                         Options Outstanding                 Options Exercisable
                                                  -------------------------------------  -----------------------------
                                                    Weighted                                Weighted
                                                     Average             Weighted           Average
                                                    Remaining            Average             Number
      Range of                 Number of           Contractual           Exercise              of           Exercise
   Exercise Prices              Shares                Life                Price              Shares           Price
------------------------     ----------------     ----------------    -----------------  --------------    -----------
<S>                                  <C>              <C>                 <C>                  <C>         <C>
    $1.00 - $2.00                    2,880            8.20                $1.29                1,299       $1.26
    $2.01 - $3.00                    4,530            8.40                $2.28                1,554       $2.28
    $3.01 - $4.00                       63            9.20                $3.56                   12       $3.56
    $4.01 - $5.00                       50            0.5                 $4.99                   50       $4.99
                             ----------------     ----------------    -----------------  --------------    -----------
                                     7,523            8.30                $1.93                2,915       $1.88
                             ================     ================    =================  ==============    ===========
</TABLE>

Options for 2,915,067,  1,287,311,  and 1,448,685 shares of the Company's common
stock were  exercisable  under the plans at December 31, 2000, 1999, and 1998 at
an  aggregate  exercise  price  of  $5,476,000,   $2,140,000,   and  $2,435,000,
respectively.


================================================================================
                                       47
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


In October 1995, HeartScan approved the adoption of the HeartScan Imaging,  Inc.
1995 Stock  Option  Plan ("HSI  Stock  Option  Plan"),  which  provided  for the
granting of incentive stock options to employees and nonstatutory  stock options
to employees,  nonemployee directors, and certain consultants. On July 13, 1998,
all outstanding  options to purchase  HeartScan  common stock were canceled as a
result of the Company's decision to sell the HeartScan subsidiary.

STOCK BONUS PLAN

On June 18, 1999, at the annual meeting, the shareholders  approved an amendment
to the 1987 Stock Bonus Plan to increase the  authorized  shares from  1,200,000
common shares to 2,200,000  common shares.  In addition,  the Company's Board of
Directors  approved the increase in the number of shares  awarded in 1999 fiscal
period from 400,000 shares to 650,000 shares.

The Company granted 240,515, 644,173, and 285,250 shares under the plan in 2000,
1999, and 1998,  respectively.  Accordingly,  the Company recorded  compensation
expense  equal to the fair  value of the stock  issued  amounting  to  $540,000,
$810,000, and $460,000 in 2000, 1999, and 1998, respectively.

EMPLOYEE STOCK PURCHASE PLAN

Under the Company's employee stock purchase 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  beginning  of the
initial offering period or end of each three-month interim offering period.

On June 18, 1999, at the annual meeting, the shareholders  approved an amendment
to the plan to increase the number of shares  authorized  from 1,800,000  common
shares to 2,300,000 common shares.

A total of 228,245,  244,902, and 188,863 shares were issued at weighted average
purchase  price of $1.56,  $1.05,  and $1.76 per share in 2000,  1999, and 1998,
respectively.

Note 13 - 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  $333,000,  $247,000,  and  $281,000  in  2000,  1999,  and  1998,
respectively.


================================================================================
                                       48
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


Note 14- 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):

                                                           2000          1999
                                                        --------      --------
Deferred tax assets:
 Net operating loss carryforwards                       $ 28,188      $ 30,829
 Federal credit carryforwards                              1,868         2,134
 Expenses not currently deductible for tax purposes        3,312         5,448
 Deferred revenue previously taxed                             0           233
 Other                                                     1,513         1,103
                                                        --------      --------
 Deferred tax assets                                      34,881        39,747

Valuation allowance                                      (34,669)      (37,890)
                                                        --------      --------

Net deferred tax assets                                      212         1,857
                                                        --------      --------

Deferred tax liabilities:
 State income taxes                                         --           1,149
 Other                                                       212           708
                                                        --------      --------
Deferred tax liabilities                                     212         1,857
                                                        --------      --------

 Net deferred taxes                                     $   --        $   --
                                                        ========      ========

The net  change in the  valuation  allowance  was  $(3,221,000),  $537,000,  and
$5,272,000 for 2000, 1999, and 1998,  respectively,  principally  resulting from
net operating loss carryforwards.

The   reconciliation  of  income  tax  attributable  to  continuing   operations
calculated at the U.S.  federal  statutory  rate to the effective tax rate is as
follows:

                                2000      1999      1998
                              ------    ------    ------
Federal statutory rate         34.0%    (34%)     (34%)
Effective state rate            1.0%     (6%)      (6%)
Goodwill amortization           1.0%     (1%)       --
Valuation allowance           (33.5%)    41%       40%
                              ------    ------    ------
Effective tax rate              2.5%      0%        0%
                              ======    ======    =======

At December 31,  2000,  the Company has net  operating  loss  carryforwards  for
federal  and  state  income  tax  purposes  of  approximately   $64,368,000  and
$6,494,000, respectively. Additionally, the Company has research and development
and alternative minimum tax credit carryforwards of approximately  $1,868,000 at
December 31, 2000. The net operating loss and the research and  development  tax
credit carryforwards expire in various years from 2001 through 2020.

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.


================================================================================
                                       49
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


Note 15 - NET INCOME (LOSS) PER SHARE
<TABLE>
The  computation  of basic and diluted  loss per share for both  continuing  and
discontinued  operations for the years ended  December 31, 2000,  1999, and 1998
are as follows:
<CAPTION>
                                                                  2000               1999              1998
                                                             ---------------    ----------------   --------------
                                                                   (In thousands, except per share amounts)
<S>                                                               <C>             <C>                   <C>
Income (loss) from continuing operations                     $      6,105       $     (5,646)      $      (9,400)
                                                             ===============    ================   ==============
Income (loss) from discontinued operations                   $        207       $       (940)      $      (4,507)
                                                             ===============    ================   ==============
Net Income (loss)                                            $      6,283       $     (6,586)      $     (14,781)
                                                             ===============    ================   ==============
Weighted average common shares - basic                            102,983             94,680              83,941

Weighted average common shares - diluted                          106,931             94,680              83,941

Basic and diluted loss per share:
     Income (loss) from continuing operations                $       0.06         $    (0.06)        $     (0.11)
                                                             ===============    ================   ==============
     Income (loss) from discontinued operations              $       0.00         $    (0.01)        $     (0.05)
                                                             ===============    ================   ==============
     Net income (loss)                                       $       0.06         $    (0.07)        $     (0.18)
                                                             ===============    ================   ==============
Anti-dilutive options and warrants not included
   in calculation                                                  10,347             15,696              10,565
                                                             ===============    ================   ==============
</TABLE>

The  cumulative  effect of change in  accounting  principle  resulting  from the
adoption  of SAB  101,  did  not  have  an  impact  on the  earnings  per  share
calculations.

Note 16 - ENTERPRISE WIDE SEGMENT DISCLOSURES

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  Caral  engages  in  the  business  of  machining  and
fabrication of metal and plastic components.  The Company's discontinued segment
operated centers that perform the coronary artery scan  procedures.  The Company
sold all its assets in HeartScan in 2000 (see Note 17).


================================================================================
                                       50
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


The accounting  policies of the segments are the same as those  described in the
summary  of   significant   accounting   policies   included  in  the  Company's
consolidated  financial statements and notes thereto for the year ended December
31,  2000.  The  Company  evaluates  performance  based on  profit  or loss from
operations before income taxes not including non-recurring gains and losses.

The Company  accounts for  intersegment  sales and  transfers as if the sales or
transfers were to third parties, that is, at current market prices.
<TABLE>
The following  table  summarizes the results of operations for the Company's two
major continuing  business segments for the twelve-month  periods ended December
31, (in thousands):
<CAPTION>
                                          Imatron        Caral      Eliminations  Consolidated
                                          --------      --------      --------      --------
<S>                                       <C>           <C>           <C>           <C>
2000:

Revenues from external customers          $ 61,566      $    854      $   --        $ 62,420
Intersegment revenues                         --           2,103        (2,103)         --
Total revenue                               61,566         2,957        (2,103)       62,420
Operating income                             4,260           200          --           4,460
Total assets as of December 31, 2000        52,092           140          (744)       51,488


1999:

Revenues from external customers          $ 36,829      $    720      $   --        $ 37,549
Intersegment revenues                         --             805          (805)         --
Total revenue                               36,829         1,525          (805)       37,549
Operating loss                              (5,681)         (127)          (27)       (5,835)
Total assets as of December 31, 1999        39,041           415          (301)       39,155
</TABLE>

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):

                                             2000        1999        1998
                                          -------     -------     -------

United States ( a )                       $49,377     $22,374     $12,931
Europe ( b )                                1,468       2,871       2,326
Japan ( c )                                  --         2,800       2,800
Asia Pacific ( d )                          1,350        --          --
Saudi Arabia                                 --          --         1,837
Brazil                                       --          --         1,880
                                          -------     -------     -------

     Total scanner sales (e)               52,195      28,045      21,774

     Sale leaseback profit recognized          70         356         501
     Upgrade sales                          1,053       1,490         272
                                          -------     -------     -------

     Total product sales                  $53,318     $29,891     $22,547
                                          =======     =======     =======

(a)      Sales to Siemens amounted to $800,000 in 1998.


================================================================================
                                       51
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


(b)      Sales to a customer in Turkey amounted to $1,350,000 in 2000.  Sales to
         Turkey and Germany  amounted to  $2,871,000  in 1999.  Sales to Siemens
         amounted to $926,000 in 1998.

(c)      Sales to an affiliated  customer,  Imatron  Japan,  Inc. (d) Sales to a
         customer in Hong Kong.

(e)      All  sales  are  denominated  in US  currency;  therefore,  there is no
         foreign currency risk.


Note 17 - DISCONTINUED OPERATION -- SALE OF HEARTSCAN SUBSIDIARY

On July 13, 1998 (the  measurement  date),  the Company adopted a formal plan to
sell  its  HeartScan   subsidiary  in  order  for  the  Company  to  focus  more
comprehensively  on the core business of  manufacturing  and serving quality EBT
scanners.  Accordingly,  the operating  results of the HeartScan  operations are
reflected as discontinued  operations for all periods presented in the Company's
statements  of  operations  and  as net  assets  (liabilities)  of  discontinued
operations in the December 31, 1999 balance sheets.

At the  measurement  date,  the Company  estimated that although a gain would be
realized upon the ultimate sale,  HeartScan  would  continue to incur  operating
losses  through the disposal  date. In the fourth  quarter of 1998,  the Company
changed its strategy from selling HeartScan to a single buyer to that of selling
the  individual  centers to buyers  located in the cities where the centers were
located. As such, the Company reassessed its estimate of the gain on disposal to
reflect the Company's change in strategy.

In 1999, the Company sold all its domestic centers for a net gain of $1,049,000.
At  December  31,  2000,  the final  remaining  foreign  center  was  sold.  The
additional  expenses  in 2000  were  primarily  from  scanner  depreciation  and
interest  expense on the scanner lease  obligation  and do not  represent  other
operating expenses.

Actual HeartScan results of operations are as follows (in thousands):

                                                      2000       1999      1998
                                                   -------    -------   -------

Revenues                                           $  --      $ 1,920   $ 3,996
Costs and expenses                                    (220)    (3,909)   (8,503)
                                                   -------    -------   -------
Loss before income taxes                              (220)    (1,989)   (4,507)
Gain on sale of assets of discontinued operations      427      1,049      --
Provision for income taxes                            --         --        --
                                                   -------    -------   -------
Income (loss) from discontinued operations         $   207    $  (940)  $(4,507)
                                                   =======    =======   =======

HeartScan  statements of operations  include costs of sales of $0,  $300,000 and
$602,000 in 2000,  1999 and 1998,  respectively,  related to  transactions  with
Imatron.

There were no remaining assets of the discontinued operations as of December 31,
2000.

In February  1999,  the Company sold its  HeartScan - San  Francisco  center and
related C-150 scanner and other  equipment.  Proceeds from sale were  $1,500,000
resulting in a net gain of approximately $1,396,000.

In June 1999,  the Company sold its  HeartScan -  Pittsburgh  center and related
C-150  scanner  and other  equipment  for  $650,000  resulting  in a net loss of
approximately $237,000.

In July 1999,  the Company sold the C-150  scanner  formerly used by HeartScan -
Seattle for $625,000. The sale resulted in a net loss of approximately $617,000.


================================================================================
                                       52
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


In November  1999,  the Company sold its  HeartScan - Houston and  Washington DC
centers and the related C-150 scanners and other equipment for  $2,200,000.  The
sale resulted in a net gain of approximately $507,000.

In October 2000, the Company sold its remaining center in Cascais,  Portugal for
a net gain of $427,000

<TABLE>
Note 18 - QUARTERLY SELECTED FINANCIAL DATA (unaudited), in thousands:
<CAPTION>
                        Description                          1st           2nd          3rd           4th
                                                           quarter       quarter       quarter       quarter
----------------------------------------------------       -------       ------        ------        -------
<S>                                                        <C>           <C>           <C>           <C>
Balances for the year ended December 31, 1999:
Net sales                                                   5,230         8,280        11,100         12,939
                                                           ======        ======        ======        =======
Gross margin                                                  268         2,494         3,082          4,653
                                                           ======        ======        ======        =======
Income (loss) before cumulative effect of change in
  accounting principle                                     (3,043)       (1,927)       (1,661)            45
                                                           ======        ======        ======        =======
Net income (loss)                                          (3,043)       (1,927)       (1,661)            45
                                                           ======        ======        ======        =======
Net income (loss) per share                                 (0.03)        (0.02)        (0.02)          0.00
                                                           ======        ======        ======        =======
Balances for the year ended December 31, 2000:
Net sales                                                  11,238        15,554        17,695         17,933
                                                           ======        ======        ======        =======
Gross margin                                                5,117         6,306         7,188          6,694
                                                           ======        ======        ======        =======
Income (loss) before cumulative effect of change in
  accounting principle                                        241         1,047         1,570          3,454
                                                           ======        ======        ======        =======
Net income (loss)                                             212         1,047         1,570          3,454
Net income (loss) per share                                  0.00          0.01          0.02           0.03
                                                           ======        ======        ======        =======
</TABLE>

Certain  accounts  from first  quarter  through  third quarter of 2000 have been
restated to reflect the adoption of SAB 101.

Note 19 - SUBSEQUENT EVENT

On February 21, 2001,  the Company was granted a  $7,000,000  revolving  line of
credit by Silicon  Valley  Bank.  Interest  under the line of credit is computed
based on the outstanding principal balance at a per annum rate of 1% over prime.
The line of credit has a maturity  date of  February  21, 2002 and is secured by
domestic receivables.  Under the terms of the agreement, the Company is required
to satisfy certain financial and operating  covenants,  which include a ratio of
quick assets to current  liabilities,  net of deferred  service  revenue,  of at
least 1.00:1.00 and a


================================================================================
                                       53
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================


 ratio of total  liabilities,  net of subordinated debt and
deferred service  revenue,  to tangible net worth plus  subordinated  debt of no
more than 1.00:1.00.


================================================================================
                                       54
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================




                                   SCHEDULE II
<TABLE>
                                  IMATRON INC.
                 Valuation and Qualifying Accounts and Reserves
                                 (In thousands)
<CAPTION>
                                                     Balance at
                                                        the
                                                     beginning      Charged to                  Balance at
                                                       of the       costs and                   end of the
                       Description                     period       expenses     Deductions       period
-----------------------------------------------      ------------  ----------   -------------  -------------
<S>                                                    <C>           <C>           <C>             <C>
Balances for the year ended December 31, 1998:

Allowance for doubtful accounts receivable             2,490         1,155           (373)         3,272
Inventory reserves                                     3,359           520           (175)         3,704
Reserve for warranty                                   1,790         1,575         (1,373)         1,992

Balances for the year ended December 31, 1999:
Allowance for doubtful accounts receivable             3,272           240           (636)         2,876
Inventory reserves                                     3,704           550         (1,582)         2,672
Reserve for warranty                                   1,992         2,448         (1,210)         3,230

Balances for the year ended December 31, 2000:
Allowance for doubtful accounts receivable             2,876        (1,252)          (754)           870
Inventory reserves                                     2,672           471           (883)         2,260
Reserve for warranty                                   3,230         2,942         (2,601)         3,571

</TABLE>


================================================================================
                                       55
<PAGE>
FY 2000                             IMATRON INC.                       FORM 10-K
================================================================================

<TABLE>
<CAPTION>
IMATRON INC. INDEX TO EXHIBITS FOR 10-K, FILED MARCH 2001
<S>           <C>
3.1  (1)      Certificate of Incorporation of the Company, as amended, as of March 31, 1983.

3.2  (2)      Certificate of Amendment of Certificate of Incorporation filed with the New Jersey Secretary of
              State on June 17, 1988.

3.3  (2)      Certificate of Amendment of Certificate of Incorporation filed with the New Jersey Secretary of
              State on  July 26, 1988.

3.4  (3)      Certificate of Correction of Certificate of Amendment of Certificate of Incorporation filed
              with the New Jersey Secretary of State on February 7, 1989.

3.5  (4)      Certificate of Amendment of Certificate of Incorporation filed with the New Jersey Secretary of
              State on March 29, 1990.

3.6  (5)      Certificate of Amendment of Certificate of Incorporation filed with the New Jersey Secretary of
              State on December 7, 1990.

3.7  (6)      Certificate of Amendment of Certificate of Incorporation filed with the New Jersey Secretary of
              State on July 7, 1997.

3.8  (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 Private Offering concluded June 24, 1996.

4.5  (21)     Form of Warrant issued to TeraRecon Inc. on October 15, 1997.

4.6  (21)     Form of Warrant issued to TeraRecon Inc. on October 21, 1997.

4.7  (21)     Form of Warrant issued to investors in connection with a Private Offering which concluded
              January 28, 1997.

4.8  (22)     Form of Warrant issued to TeraRecon Inc. on April 24, 1998.

4.9  (25)     Form of Warrant issued to Terry Ross on June 15, 1999.

4.10 (25)     Form of  Warrant issued to Terry Ross on June 15, 1999.

4.11 (25)     Form of Warrant issued to Jose Maria Salema Garcao on July 30, 1999.

10.1 (18)     1997 Stock Bonus Incentive Plan, as amended through June 19, 1999.

10.2 (15)     1998 Amended and Restated Non-Employee Director's Stock Option Plan, as amended through June
              19, 1999.


============================================================================================================
                                                  56
<PAGE>
FY 2000                                       IMATRON INC.                                         FORM 10-K
============================================================================================================


10.3 (12)     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.

10.4 (12)     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.

10.5 (13)*    Patent License Agreement dated as of March 12, 1993 between Imatron Inc. and Severson & Werson, A
              Professional Corporation.

10.6 (13)     Escrow Holder Agreement dated as of March 12, 1993 by and among Imatron Inc., Siemens
              Corporation and Severson & Werson, A Professional Corporation.

10.7 (13)     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.

10.8 (14)     1993 Stock Option Plan, as amended through June 19, 1999.

10.9 (11)     1994 Employee Stock Purchase Plan, as amended through June 19, 1999.

10.10(16)     Executive Employment Agreement dated as of June 11, 1993 between the Company and S. Lewis Meyer.

10.11(16)     Agreement and Joint Company Agreement between the Company, Tobu Land System Company and Kino
              Corporation dated January 7, 1994.

10.12(16)     Distributorship Agreement between the Company and Imatron Japan K. K. dated February 3, 1994.

10.13(16)     First Amendment to Distributorship Agreement between the Company and Imatron Japan K. K. dated
              February 8, 1994.

10.14(16)     Memorandum of Understanding dated February 2, 1994 between the Company and Siemens AG, Medical
              Engineering Group.

10.15(16)     Memorandum  of  Understanding  dated  February  2,  1994
              between  Company  and Siemens AG,  Medical  Engineering  Group
              (Evolution Upgrade project and distribution agreement).

10.16(17)*    Memorandum of Understanding dated March 31, 1995 between the Company and Siemens Corporation.

10.17(19)     Development Agreement dated July 22, 1997 between the Company and TeraRecon Inc.

10.18(20)     Stock  Purchase  Agreement  between the Company,  HeartScan Imaging, Inc., and investors in a
              Private Offering which concluded June 24, 1996.

10.19(10)     Form of Warrant Purchase Agreement between the Company and investors in the Private Offering
              which concluded June 24, 1996.

10.20(10)     Stock Purchase Agreement between the Company and Gary Post, dated March 8, 1996.

10.21(21)     Agreement for Service Support dated February, 1997 between the Company and Siemens Medical
              Systems, Inc.


============================================================================================================
                                                  57
<PAGE>
FY 2000                                        IMATRON INC.                                        FORM 10-K
============================================================================================================


10.22(21)     Warrant Purchase Agreement between the Company and TeraRecon Inc. dated October 15, 1997.

10.23(21)     Warrant Purchase Agreement between the Company and TeraRecon Inc. dated October 21, 1997.

10.24(22)     Warrant Purchase Agreement between the Company and TeraRecon Inc. dated April 24, 1998.

10.25(23)     Loan Agreement between the Company and Positron Corporation dated May 1, 1998, with schedules
              and exhibits.

10.26(23)     Stock Purchase Agreement, dated May 1, 1998 between the Company and Positron Corporation.

10.27(24)     Sales Representative Agreement dated July 1, 1998.

10.28(  )     Employment Agreement dated January 4, 1999 between the Company and Terry Ross.

10.29(26)     Stock Purchase Agreement, dated June 16, 1999, between Imatron Inc. and
              Terry Ross.

10.30(26)     Lock-Up Agreement, dated September 14, 1999, between Imatron Inc. and Terry Ross.

10.31(27)     Loan and Security Agreement, dated June 15, 2000, between Imatron Inc. and Terry Ross, with
              Promissory Note

10.32(27)     Transition Agreement, dated October 5, 2000, between Imatron Inc. and Imatron Japan Inc.

10.33(27)     Distributorship Agreement, dated November 10, 2000, among Imatron Inc., Meditec Corporation,
              and Marubeni Corporation

10.34(27)     Consulting Agreement, dated January 1, 2001, between Imatron Inc. and Terry Ross

10.35(27)     Loan and Security Agreement, dated February 21, 2001, between Imatron Inc. and Silicon Valley
               Bank

     o        Consent of Independent Auditors, KPMG LLP

     o        Confidential Treatment Request granted by the Securities and Exchange Commission.


Footnotes
----------
(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.

==================================================================================================================
                                                      58
<PAGE>
FY 2000                                           IMATRON INC.                                           FORM 10-K
==================================================================================================================
(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-8 filed on January 7, 2000
         (Registration No. 333-94239) and incorporated herein by reference.

(12)     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.

(13)     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.

(14)     Filed as an Exhibit to the Company's Registration Statement on Form S-8 filed on January 7, 2000
         (Registration No. 333-94245).

(15)     Filed as an Exhibit to the Company's Registration Statement on Form S-8 filed on January 7, 2000
         (Registration No. 333-94237).

(16)     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.

(17)     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.

(18)     Filed as an Exhibit to the Company's Registration Statement on Form S-8 POS filed on August 18, 1999
         (Registration No. 333-15081) and incorporated herein by reference.

(19)     Filed as an Exhibit to the Company's Current Report on Form 8-K filed on August 5, 1997 and incorporated
         herein by reference.

(20)     Filed as an Exhibit to the Company's Current Report on Form 8-K filed on July 1, 1996 and incorporated
         herein by reference.

(21)     Filed on an Exhibit to the Company's  Annual  Report on Form 10-K for the fiscal year ended  December
         31, 1997 and incorporated herein by reference.

(22)     Filed as  an Exhibit to the Company's Registration Statement on Form S-3 (Reg. No. 333-51963) filed on
         May 6, 1998 and incorporated herein by reference.


================================================================================================================
                                                    59
<PAGE>
FY 2000                                        IMATRON INC.                                            FORM 10-K
================================================================================================================
(23)     Filed as an Exhibit to the Company's Current Report on Form 8-K filed on June 16, 1998 and incorporated
         herein by reference.

(24)     Filed as an Exhibit to the  Company's Current Report on Form 8-K filed July 20, 1998 and incorporated
         herein by reference.

(25)     Filed as an  Exhibit  to the  Company's  Current  Report  on Form 8-K  filed  August  10,  1999,  and
         incorporated herein by reference.

(26)     Filed as  an Exhibit to the Company's Registration Statement on Form S-3 (Reg. No. 333-87195) filed on
         September 16, 1999, and incorporated herein by reference.

(27)     Filed on an Exhibit to the Company's  Annual  Report on Form 10-K for the fiscal year ended  December
         31, 2000 and incorporated herein by reference.


================================================================================================================
                                                       60
</TABLE>

<PAGE>
FY 2000                           IMATRON INC.                         FORM 10-K
================================================================================


                           LOAN AND SECURITY AGREEMENT

         THIS LOAN AND SECURITY AGREEMENT (this "Agreement"), entered into as of
June 15, 2000 by and between Imatron, Inc., a New Jersey corporation ("Lender"),
and Terry Ross ("Borrower").

                                    RECITALS:

         WHEREAS,  Lender  desires to lend to Borrower and  Borrower  desires to
borrow from Lender the sum of Three Million Dollars ($3,000,000.00) (the "Loan")
on the terms and conditions provided for herein; and

         WHEREAS, Borrower intends hereby to pledge 2,991,027 shares of Lender's
common stock (the "Common  Stock") and other  proceeds and  interests as defined
herein,  as secured  collateral  for payment of the Loan and  performance of all
Borrower's obligations under this Agreement.

         NOW,  THEREFORE,  in  consideration of the mutual promises made herein,
and for other good and valuable  consideration,  the receipt and  sufficiency of
which are hereby acknowledged, the parties, intending to be legally bound, agree
as follows:

         SECTION  1.  Loan.  Lender  agrees  to  lend  to  Borrower  the  sum of
$3,000,000 to be evidenced by an interest  bearing  Promissory Note of even date
herewith in the form of Exhibit A hereto (the "Note").  As provided in the Note,
the Note may be repaid at any time without premium or penalty.

         SECTION 2. Pledge of Security  Interest;  Collateral.  Borrower  hereby
pledges and grants to the Lender a first priority lien on and security  interest
in  the  Collateral,   as  hereinafter   defined.  The  term  Collateral  means,
collectively: (i) the Common Stock; and (ii) all products, proceeds and revenues
of and from the Common  Stock,  together  with all  substitutions  therefore and
additions  thereto  including  without   limitation  stock  rights,   rights  to
subscribe, liquidating dividends, stock dividends, cash dividends, interest, new
securities  and other  property  to which  Borrower is or may  hereafter  become
entitled to receive on account of such Common Stock.

         SECTION 3. Security for Obligations. This Agreement secures the payment
and/or  performance  of  all  obligations  of  Borrower  to the  Lender,  now or
hereafter  existing  under the Note,  whether  for  principal,  interest,  fees,
expenses or otherwise, and all obligations of Borrower now or hereafter existing
under this Agreement (all such obligations of Borrower to the Lender hereinafter
referred to as the "Obligations").

         SECTION 4. Delivery of  Collateral.  All  certificates  or  instruments
representing  the Collateral  shall be delivered to and held by Lender and shall
be in suitable form for transfer by delivery,  or shall be  accompanied  by duly
executed  instruments  of  transfer  or  assignment  in  blank,  all in form and
substance  satisfactory  to the Lender.  The Lender shall have the right, in the
event of a default under the Note or this Agreement,  in its sole discretion and
without notice of the Collateral.  In addition,  the Lender shall have the right
at any time to exchange  certificates or instruments  representing or evidencing
the   Collateral   for   certificates   or  instruments  of  smaller  or  larger
denominations.

         SECTION 5.  Representations and  Warranties.  Borrower  represents  and
                     warrants as follows:

(a)      Borrower is the legal and beneficial  owner of the Collateral  free and
         clear of any  lien,  security  interest,  option  or other  charges  or
         encumbrance  except for the security interest created by this Agreement
         between Borrower and Lender of even date herewith; and

(b)      The pledge of the Collateral pursuant to this Agreement creates a valid
         and  perfected  first  priority  security  interest in the  Collateral,
         securing the payment and/or performance of the Obligations.


================================================================================
                                       61
<PAGE>

FY 2000                           IMATRON INC.                         FORM 10-K
================================================================================


         SECTION 6. Further  Assurances.  Borrower  agrees that at any time, and
from time to time,  Borrower  will  promptly  execute  and  deliver  all further
instruments and documents, and take all further action, that may be necessary or
desirable,  or that the Lender may reasonably  request,  in order to perfect and
protect any security  interest  granted or purported to be granted  hereby or to
enable the Lender to exercise and enforce its rights and remedies hereunder with
respect to any Collateral.

     SECTION 7.  Voting Rights; Dividends; Etc.

         (a) So long as no Event of Default  (as  hereinafter  defined) or event
         which,  with the giving of notice or the lapse of time, or both,  would
         become an Event of Default, shall have occurred and be continuing:

                  (i)  Borrower  shall have the right to exercise all voting and
                  other corporate rights with respect to the Collateral; and

                  (ii) Borrower  shall be entitled to receive and retain any and
                  all  dividends  paid in respect of the  Collateral;  provided,
                  however, that any and all

                           (A)  dividends  paid or payable other than in cash in
                           respect  of,  and   instruments  and  other  property
                           received,  receivable  or  otherwise  distributed  in
                           respect of, or in exchange for, any Collateral,

                           (B) dividends and other distributions paid or payable
                           in cash in respect of any  Collateral  in  connection
                           with a partial or total liquidation or dissolution of
                           Lender or in connection  with a reduction of capital,
                           capital surplus or paid-in-surplus of Lender, and

                           (C) cash paid,  payable or otherwise  distributed  in
                           respect of principal of, or in  redemption  of, or in
                           exchange for, any Collateral,


shall  forthwith  be delivered  to the Lender to hold as  Collateral,  or as may
otherwise be agreed between  Borrower and the Lender,  and shall, if received by
Borrower, be received in trust for the benefit of the Lender, be segregated from
the other  property or funds of  Borrower,  and be  forthwith  delivered  to the
Lender  as  Collateral  in the same  form as so  received  (with  any  necessary
endorsement).

         (b) Upon the  occurrence  and  during  the  continuance  of an Event of
Default under the Note or hereunder:

                  (i) All rights of Borrower  to  exercise  the voting and other
                  consensual  rights  which  the  Borrower  would  otherwise  be
                  entitled  to  exercise  pursuant  to  Section  7(a)(i) of this
                  Agreement  and to  receive  the  dividend  payments  which the
                  Borrower  would  otherwise be authorized to receive and retain
                  pursuant to Section  7(a)(ii) of this  Agreement  shall cease,
                  and Lender  shall  thereupon  have the sole right to  exercise
                  such  voting and other  consensual  rights and to receive  and
                  hold as Collateral such dividend payments.

                  (ii) All  dividend  payments  which are  received  by Borrower
                  contrary  to  the  provisions  of  Section  7(b)(i)  shall  be
                  received  in trust for the  benefit  of the  Lender,  shall be
                  segregated from other funds of Borrower and shall be forthwith
                  paid over to the Lender as  Collateral  in the same form as so
                  received (with necessary endorsement).

       (c) The term "Event of Default" shall mean (1) failure of Borrower to pay
the unpaid  principal due under the Note within fifteen (15) days after the date
when due; or (2) the insolvency,  bankruptcy (which is not stayed within 60 days
after its commencement), or dissolution of Borrower, or (3) any material default
by Borrower in the  performance  of any covenant or  agreement  pursuant to this
Agreement  which  default is not cured  within ten (10) days  following  written
notice by Lender.

================================================================================
                                       62
<PAGE>
FY 2000                           IMATRON INC.                         FORM 10-K
================================================================================


         SECTION 8.  Transfers  and Other  Liens;  Additional  Shares.  Borrower
agrees  that it will not (i) sell or  otherwise  dispose of, or grant any option
with  respect to, any of the  Collateral,  or (ii) create or permit to exist any
lien, security interest,  or other charge or encumbrance upon or with respect to
any of the Collateral, except for the security interest under this Agreement and
under the Asset Purchase  Agreement of even date herewith  between  Borrower and
Lender.

         SECTION 9.  Lender  May  Perform.  If  Borrower  fails to  perform  any
agreement  contained  herein,  the  Lender  may  itself  perform,  or cause  the
performance of, such agreement, and the expenses the Lender incurs in connection
therewith shall be payable by Borrower under Section 12.

         SECTION  10.  Reasonable  Care.  The  Lender  shall be  deemed  to have
exercised  reasonable care in the custody and  preservation of the Collateral in
its possession if the Collateral is accorded  treatment  substantially  equal to
that which the Lender  accords its own property,  it being  understood  that the
Lender shall not have  responsibility for (a) ascertaining or taking action with
respect to calls, conversions,  exchanges,  maturities, tenders or other matters
relative to any  Collateral,  whether or not the Lender has or is deemed to have
knowledge of such matters,  or (b) taking any necessary steps to preserve rights
against any parties with respect to any Collateral.

         SECTION 11.  Remedies upon Default.  If any Event of Default shall have
occurred  and  continues  uncured for five (5)  consecutive  days,  upon written
notice to  Borrower,  the Lender may exercise in respect of the  Collateral,  in
addition to other rights and remedies provided for herein or otherwise available
to them,  all the rights and  remedies of a secured  party on default  under the
Uniform  Commercial  code (the "Code") in effect in the State of  California  at
that time.

         SECTION 12. Expenses.  Borrower will, upon demand,  pay, to the Lender,
the amount of any and all reasonable expenses, including the reasonable fees and
expenses of Lender's counsel and of any experts and agents, which the Lender may
reasonably  incur in connection  with the exercise of  enforcement of any of the
rights of the Lender hereunder, or the failure by Borrower to perform or observe
any of the provisions hereof.

         SECTION 13. Security  Interest  Absolute.  All rights of the Lender and
security interests hereunder,  and all obligations of Borrower hereunder,  shall
be absolute and unconditional irrespective of:

         (a) any lack of  validity  or  enforceability  of the Note or any other
         agreement or instrument relating thereto;

         (b) any change in the time,  manner or place of  payment  of, or in any
         other term of, all or any of the Obligations, or any other amendment or
         waiver of or any consent to any departure from the Note;

         (c) any exchange, release or non-perfection of any other collateral, or
         any release or amendment or waiver of or consent to departure  from any
         guaranty, for all or any of the Obligations; or

         (d) any other circumstance  which might otherwise  constitute a defense
         available to, or a discharge of, Borrower in respect of the Obligations
         or  Borrower  in respect of this  Agreement,  other than the payment in
         full of the Obligations.

         SECTION 14. Amendments, Etc. No amendment or waiver of any provision of
this  Agreement nor consent to any departure by Borrower  herefrom  shall in any
event be effective unless the same shall be in writing and signed by the Lender,
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.

         SECTION 15. Notices. All notices, requests,  demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other  communication  hereunder  shall be deemed  duly given if (and then two
business days after) it is sent by registered or certified mail,  return receipt
requested, postage prepaid, and addressed to the intended recipient as set forth
below:


================================================================================
                                       63
<PAGE>
FY 2000                           IMATRON INC.                         FORM 10-K
================================================================================


                           If to Borrower:
                           --------------

                           Terry Ross
                           c/o Imatron Inc.
                           389 Oyster Point Boulevard

                           So. San Francisco, California   94080


================================================================================
                                       64
<PAGE>
FY 2000                           IMATRON INC.                         FORM 10-K
================================================================================


                                 PROMISSORY NOTE

$3,000,000                                                     September 8, 2000
                                                 South San Francisco, California

FOR VALUE RECEIVED,  the undersigned,  Terry Ross, hereby promises to pay to the
order of Imatron  Inc. at such place as the holder of this note (the "Note") may
direct in writing,  the principal sum of Three Million Dollars  ($3,000,000.00).
This Note shall bear  interest,  at a rate of interest equal to 7.25% per annum.
Principal and accrued  interest shall be paid in full in one installment on June
15, 2001.

This Note may be prepaid at any time without premium or penalty. This Note shall
be deemed to be a contract  entered  into and made  pursuant  to the laws of the
State of  California  and shall in all  respects  be  governed,  construed,  and
enforced in accordance with the laws of said State.

The undersigned  agrees,  if this Note is placed in the hands of an attorney for
collection, to pay reasonable legal costs as permitted by law.

The undersigned waives demand, presentment for payment, notice of non-payment or
dishonor,  notice of protest,  and protest of this Note. No delay on the part of
the holder in  exercising  any right,  power or privilege  pursuant to this Note
shall operate as a waiver of the same, and no single or partial  exercise of any
right,  power or privilege  shall  constitute  an exhaustion or waiver of any of
them, all of which shall continue for the benefit of holder.

This Note amends that certain Promissory Note dated June 15, 2000 and is secured
pursuant to a Loan and Security Agreement dated June 15, 2000.

Dated: September 8, 2000





Signed by
------------------------------------
        TERRY ROSS


================================================================================
                                       65
<PAGE>
FY 2000                           IMATRON INC.                         FORM 10-K
================================================================================


                              TRANSITION AGREEMENT

         THIS AGREEMENT  ("Agreement") is made and entered into as of October 5,
2000 by and between IMATRON, INC., a corporation organized under the laws of the
State of New Jersey,  United  States of America  ("Imatron")  and IMATRON  JAPAN
INC., a corporation organized under the laws of Japan ("IJ").

WITNESSETH:

         WHEREAS,  Imatron previously  entered into a Distributorship  Agreement
dated  February 3, 1994 (the  "Distributorship  Agreement")  with IJ pursuant to
which IJ was  appointed  the  exclusive  distributor  of  certain  of  Imatron's
products in Japan; and

         WHEREAS, the Distributorship  Agreement was terminated on May 16, 2000;
and

         WHEREAS,  Imatron and IJ desire to avoid  disrupting  the marketing and
service of Imatron  products in Japan and to provide for an orderly,  supportive
and  mutually   agreed  method  to  permit   Imatron  to  initiate   alternative
distribution in Japan.

     NOW,  THEREFORE,  in consideration of the mutual covenants  hereinafter set
forth, the parties hereto hereby agree as follows:

         1.  Transfer of Assets. On the Closing Date, as hereinafter defined, IJ
             shall sell, assign and transfer to Imatron or its assignee pursuant
             to an Assignment and Assumption  Agreement in the form of Exhibit A
             hereto (the  "Assignment and Assumption  Agreement") the following:
             (i) all Imatron EBT Scanner system  replacement and component parts
             and service tools set forth on Exhibit A-1 hereto; (ii) all service
             contracts  for the repair and  maintenance  of Imatron  EBT Scanner
             systems   in  Japan  set  forth  on  Exhibit   A-2  (the   "Service
             Contracts");  (iii) the rights, licensing and registration, if any,
             of  IJ  to  enter  into  service   contracts  for  the  repair  and
             maintenance  of Imatron  EBT  Scanner  systems  in Japan;  (iv) all
             documents,  including  quotations  and other  marketing  materials,
             service files relating to past, present,  and potential Imatron EBT
             Scanner  system  purchase  and  service  customers;   and  (v)  the
             regulatory  approvals  for the  importation  or sale of Imatron EBT
             Scanner  systems,  and the  replacement and component parts thereof
             into Japan,  commonly referred to as the "homologation".  The parts
             and components referred to in this paragraph will be transferred to
             Imatron on an AS-IS WHERE-IS  basis and IJ makes no  representation
             as  to  Imatron  as to  the  status  or  value  of  the  parts  and
             components.

         2.  Retained  Assets.  The  assets to be  transferred  by IJ to Imatron
             shall include only those assets specified in Paragraph 1 above, and
             specifically, shall not include Imatron EBT Scanner systems Nos. 26
             and 160.

         3.  Imatron Payment and Assumption of Liabilities. In consideration for
             the  transfer and  assignment  as provided in Paragraph 1 above and
             subject to the terms and  conditions  set forth  herein,  as of the
             Closing Date:

         a. Imatron will assume all obligations under the Service Contracts from
            and after the Closing Date. All losses,  claims and damages  arising
            under the Service  Contracts  prior to the Closing Date shall be the
            responsibility  of IJ and all  losses,  claims and  damages  arising
            under the Service Contracts from and after the Closing Date shall be
            the responsibility of Imatron.

         b. Imatron will forgive the approximate $3.6 million of indebtedness of
            IJ to Imatron including approximately $2.4 of the principal and $1.2
            million of accrued and unpaid interest.

         c. Imatron will provide  without cost to IJ all  necessary  replacement
            parts  for  Scanner  Nos.  26 and 160  which IJ  presently  holds in
            inventory, but not to exceed $356,000 in value.


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         4.  Certain  Continuing  Warranty  Obligations.  The parties understand
             that  following the Closing  Date, IJ will have certain  continuing
             warranty  obligations in connection  with the sale by IJ of Scanner
             Nos.  26,  160,  167,  169,  175,  and  177.  IJ  will  assume  the
             responsibility  to provide the post-sale  warranty  service for the
             purchasers  and for the time periods set forth in Exhibit B hereto.
             Replacement parts will continue to be provided by Imatron for these
             six (6)  scanners  at no  charge  during  the  respective  warranty
             periods.

         5.  Imatron Name:  Post-Closing  Assistance.  Imatron  grants to IJ the
             right  to  continue  to use the  name  "Imatron"  for so long as is
             necessary to complete  the  regulatory  approvals  for the products
             other than Imatron EBT Scanners and for which IJ has applied  prior
             to the Closing Date. From the Closing Date, IJ agrees to change its
             legal name to a name not  containing the word "Imatron" or any word
             similar  thereto.  IJ agrees to assist  Imatron in the importing of
             spare  and  component  parts  until  such  time  as all  regulatory
             (homologation) approvals have been transferred in order for Imatron
             or its assignee to import such parts.

         6.  Closing Date. The transactions  provided for in the Agreement shall
             close at a date  mutually  agreed upon by the parties (the "Closing
             Date"). If this Agreement does not close before October 6, 2000, it
             shall be of no further force or effect.

         7.  Agreement  in  Principle.  The  parties  agree that this  Agreement
             supercedes the Agreement in Principle  entered into as of August 4,
             2000 which, upon execution and closing of this Agreement,  shall be
             without further force or effect.

         8.  Public  Announcements.  IJ and Imatron will jointly announce to the
             public  and  to  customers   the  transfer  of  sales  and  service
             responsibilities to Imatron and/or its assignee.

         9.  Assignment.   IJ  understands  and  agrees  that  it  is  Imatron's
             intention  to appoint a new sales and service  provider for its EBT
             Scanner systems in Japan.  Upon any such  appointment,  Imatron may
             assign and transfer all of its rights and  obligations  pursuant to
             this  Agreement  and,  except  for  the  obligations   pursuant  to
             Paragraph  3b, 3c and the last  sentence of  Paragraph  4,  Imatron
             shall  be  released  from and  shall  have no  further  obligations
             pursuant to this Agreement.

         10. Release.  As  additional  consideration  for the promises set forth
             herein and except for the covenants  and  agreements of the parties
             as set forth  herein,  each of the parties  releases the other from
             any  and  all  claims,  know  and  unknown,   arising  out  of  the
             Distributorship Agreement and the business of the parties with each
             other pursuant thereto. The parties understand that this release is
             intended to expressly  agree that they waive the  provisions of and
             relinquishes all rights and benefits it may have under Section 1542
             of the Civil Code of the State of California. Section 1542 provides
             as follows:

A GENERAL  RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF  EXECUTING  THE  RELEASE,  WHICH IF
KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

         11. Indemnification. Each of the parties hereby agrees to hold harmless
             and indemnify the other,  and its successors  and assigns,  against
             any claim,  action, loss,  liability,  damage, or cost and expense,
             including  without  limitation  reasonable  attorneys' and experts'
             fees and expenses (hereafter  collectively  "Losses" and separately
             as  "Loss"),  resulting  from  or  arising  out  of any  breach  or
             inaccuracy of any representation or warranty, nonperformance of any
             agreement,  covenant,  promise,  or  obligation  on the part of the
             indemnifying party contained in this Agreement.

         12. Notices. All notices,  certificates,  requests,  demands, and other
             communications  hereunder shall be in writing and may be personally
             served or sent by telex or facsimile or by certified or  registered
             airmail or  commercial  courier.  All such  notices,  certificates,
             requests,  demands,  and other communications shall be delivered to
             the party to receive the same at the address indicated below (or at
             such other address as a party may specify in a written notice):


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FY 2000                           IMATRON INC.                         FORM 10-K
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If to IJ:
         Imatron Japan Inc.

         3-5-7 Hatchobori
         Chuo-ku, 104-00032, Tokyo, Japan
         Attention: Ms. Sachiko Kimoshita, President

         Fax: (03)-3206-1912



         If to Imatron:

         Imatron Inc.
         389 Oyster Point Blvd.
         South San Francisco, CA  94080
         Attn: Mr. S. Lewis Meyer, Chief Executive Officer
         Fax: (415) 871-0418

         If personally delivered,  a notice shall be effective upon delivery. If
delivered in accordance with this section, a notice shall be effective as of the
date or receipt.  If given by telex or  facsimile,  a notice  shall be effective
when  sent,  answerback  received  or,  in the case of  facsimile,  confirmation
received.  A party may  change its  address  indicated  above by giving  written
notice of such change to the other in the manner specified in this section,

         13. Arbitration. Any controversy or claim arising out of or relating to
             this  Agreement,  or  the  breach  thereof,  shall  be  settled  by
             arbitration in accordance with the commercial  Arbitration Rules of
             the American Arbitration Association ("AAA") and judgments upon the
             award  rendered  by the  arbitrators  may be  entered  in any court
             having  jurisdiction  thereof.  The arbitration shall take place in
             San Francisco,  California and be governed by the laws of the State
             of California, United States. The arbitration shall be conducted by
             three (3)  arbitrators.  Each party  shall  select  one  arbitrator
             within  thirty  (30)  days  after  the  filing  of  a  request  for
             arbitration.  Should a party fail to select and  arbitrator  within
             such  thirty-day  period,  the other  party  shall also select that
             arbitrator.  The two  selected  arbitrators  shall  select  a third
             arbitrator.  The  official  language  of the  arbitration  shall be
             English and all  proceedings  and rulings shall be in English.  The
             arbitration  shall be conducted as  expeditiously as possible,  and
             all parties  shall exert best efforts to finalize  the  arbitration
             hearings  after  the  close of the  arbitration  hearings.  Before,
             during or after  arbitration,  each  party  shall have the right to
             seek from any appropriate court all provisional  remedies permitted
             under   California   law.  If  any  party  hereto  must   institute
             arbitration to collect any payments due hereunder, the party liable
             therefore shall reimburse the other party for reasonable attorneys'
             fees and other costs incurred in connection with such arbitration.

         14. Miscellaneous

                  a.  Governing Law: Arbitration. This Agreement shall be deemed
                      to have  been  entered  into and  shall be  construed  and
                      enforced  in  accordance  with  the  laws of the  State of
                      California without regard to that body of law known as the
                      conflict of laws. Any  controversy or claim arising out of
                      or  relating  to this  Agreement,  or the breach  thereof,
                      shall be settled by  arbitration  as provided in Paragraph
                      10 of the Transition  Agreement.  This Agreement  shall be
                      deemed to have been  entered  into and shall be  construed
                      and enforced in  accordance  with the laws of the State of
                      California without regard to that body of law known as the
                      conflict of laws.

                  b.  Governing  Language.  The official text of this  Agreement
                      shall be in English  language,  and any  interpretation or
                      construction  of this  Agreement  shall be based solely on
                      the English-language text.


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FY 2000                           IMATRON INC.                         FORM 10-K
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                  c.  Authority.  Each  individual  executing  this Agreement on
                      behalf of any party represents and warrants that he or she
                      is  authorized  to enter into this  Agreement on behalf of
                      that party and that this Agreement binds that party.

                  d.  Waivers.  No  failure  or delay  by any  party  hereto  in
                      exercising any right,  power or privilege  hereunder shall
                      operate  as a waiver  thereof,  nor  shall  any  single or
                      partial  waiver  thereof  include  any  other  or  further
                      exercise  thereof  or the  exercise  of any  other  right,
                      power, or privilege.

                  e.  Binding on  successors,  Assigns.  This  Agreement and the
                      covenants  herein shall be binding on the  successors  and
                      assigns of each party.

                  f.  Amendments.   Unless  otherwise   provided  herein,   this
                      Agreement  may  not be  changed,  waived,  discharged,  or
                      terminated  orally,  but only by a written document signed
                      by duly authorized officers of the parties hereto.

                  g.  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.

                  h.  Entire  Agreement.  This Agreement is the entire agreement
                      between   the  parties   and   supersedes   and  shall  be
                      substituted  for  each  and  every  prior  agreement  with
                      respect  to  distribution  of  Imatron  products,  whether
                      written,  oral  or  otherwise  in  effect  between  IJ and
                      Imatron.  Imatron and IJ each represents and warrants that
                      there are no other outstanding  obligations or agreements,
                      either  written,  oral or implied  inconsistent  with this
                      Agreement.

                          IN WITNESS WHEREOF,  the parties hereto have executed
                     this Agreement as of the date and year first above written.

                     IMATRON INC.           IMATRON JAPAN INC.

                     TERRY ROSS             SACHIKO KINOSHITA
                     President                       President
                     10/5/00                         10/5/00


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