Complaint Review: Austin Medical Imaging - Irvine California

AUSTIN MEDICAN IMAGING - HeartScan - BodyScaN

This is another medical scanning investment built around the Imatron Scanning machine. The latest fund raiser is for a clinic called Austin Medical Imaging. They informed me that they had centers opened in Newport Beach, Kansas City, Mo., Scottsdale, Las Vegas, Tampa, Sarasota and Orlando, San Antonio, West Las Vegas, Willow Grove, Pa (under construction) and now Austin.

In their literature, they brag profit projections, running from a low of 43.82% for the 1st year to 61.29% for years 6-10 on an investment of $4,000,000 per center. Then I read their written information. The first item I noticed was that the General Parter was taking a $400,000 fee off the top, and I quote These funds will be paid to the General Partner immediately upon receipt of funds from sales of Limited Partnership units.

In case you think he's working cheap, don't. His agreement with the center is non-exclusive, and the GP may be subject to various conflicts of interest in managing, contracting with or otherwise relating to the Partners, but all investorswaive objection to any conflicts of interest.

And if a group of LPs decide to engage in legal action against the General Partner he "...is authorized to use Limited Partnership funds to defend such (i.e. legal) actions whether initiated from a private, regulatory or investigative source. This means if the state determines something has been crooked, the GP can use your money to defend himself.

The next item is a $1,600,000 for syndication, marketing, organizational, professional, commissions, consultation and other front costs with the statement, The General Partner will have broad discretion in the use of these funds.

Thus the total fees and commissions comes to a realistic 50%, or more. Of the remaining $2 million, lumped together under the category Business Expenses, $1.325 goes for pre-opening costs, which includes office furniture and equipment, paper goods, and stationery, among other similar high cost items (Nice furniture I guess). On top of this, we have real estate costs (on rented property) of $300,000, tenant improvements of $90,000 and advertising and overhead costs of $152,000, which apparently are not considered a pre-opening cost.

It's not until you read the detailed projections that you come across the actual cost of the Imatron EBT unit. It's being leased for five years at a price of $234,535 per year. The office staff of four, working 40 hrs per week, has a total payroll of $589,900. I assume the bulk of this goes to the Medical Advisory Board & Consultants, all of whom are one person, Dr. Victor O. Bonilla, a 1970 graduate of the Medical School of the University of Honduras, who is currently the Chief of Internal Medicine at Chandler Regional Hospital in Arizona. It's not said if he'll be commuting to Austin or not.

According to their projections, revenues in Year 1 will be $4,113,000, which will throw off a net profit of $2,504,031 in order to bring you your 43.82% return, after the GP takes its cut of 30% (which increases to 50% after investors break even). However, as an artery scan is listed at $500, it will take 8226 scans during the first year, or 33 for each 8 hour day to reach these numbers, or better than one every 15 minutes.

In questioning one of their telephone sales people, I remarked that I lived in Tampa and would visit their local clinic to speak with people. It was then that I learned it had opened on February 29th of this year, over four months ago. I asked how many patients it was receiving and was told that the numbers currently were running at 5-6 per day.

When I pointed out this was considerably less than the 33 needed to meet their profit projections they replied, Those numbers are just projections. These are the real figures and we hope to show our investors a 15% return this year. That's not bad, is it? Look at what the market's doing.

I didn't bother to point out that at six tests a day, the clinic would only gross $750,000 in business for the year, which is less than the cost of only leasing the unit and paying the staff. As a business effort, and using their own projections and admitted customer flows, it doesn't seem possible that this is going to be a successful business effort for investors.

However, after taking half of our investment money up front, apparently THEY are going to do just fine.

Alvin B

Tampa Florida

Investor Data Exchange Member

Alvin

Lake Forest, California