Registration No. 33-62657
Rule 424(b)(3)
PROSPECTUS
ADVANCED NMR SYSTEMS, INC.
2,331,722 Shares
Common Stock, $.01 Par Value
Issuable Upon Exercise of 2,331,722 Common Stock Purchase Warrants
This Prospectus relates to the offering by Advanced NMR Systems,
Inc., a Delaware corporation (the "Company"), of up to 2,331,722
shares of Common Stock, $.01 par value per share (the "Common Stock"),
issuable upon exercise of up to 2,331,722 Advanced NMR Common Stock
Purchase Warrants (the "Warrants"). On August 31, 1995 (the
"Effective Date"), the Company issued the Warrants to the holders of
shares of common stock, $.01 par value per share of Medical
Diagnostics, Inc., ("MDI"), upon the merger (the "Merger") of MDI into
ANMR Acquisition Corp., a wholly-owned subsidiary of the Company
("Acquisition Corp."), pursuant to an Agreement and Plan of Merger,
dated as of May 2, 1995 (the "Merger Agreement"), by and among the
Company, MDI and Acquisition Corp.
The Warrants were issued under a Warrant Agreement, dated as of
August 31, 1995 (the "Warrant Agreement"), between the Company and
American Stock Transfer & Trust Company, as Warrant Agent (the
"Warrant Agent"). The Warrants entitle the holders thereof to
purchase shares of Common Stock at a price per share of $3.75, subject
to customary anti-dilution adjustments. Each Warrant may be exercised
until 5:00 p.m., New York City time, on the earlier of August 30,
2000, the fifth anniversary of the Effective Date, or the date fixed
for redemption of the Warrants.
The Warrants are subject to redemption at the option of the
Company, in whole but not in part, at a redemption price of $.05 per
Warrant, in the event that the average market price of Common Stock
has been at least $4.50 per share (subject to adjustment for stock
splits and combinations) for any twenty consecutive trading days after
the Effective Date. Any Warrants not exercised prior to the date
fixed for redemption thereafter will represent only the right to
receive, upon surrender, the redemption price therefor.
The Warrants are listed on the NASDAQ National Market System
("NMS") under the symbol "ANMRW." The Warrants are inactively traded.
The shares of the Company's Common Stock are listed on the NASDAQ
NMS under the symbol "ANMR." On October 5, 1995, the closing sales
price for a share of Common Stock as quoted on the NASDAQ NMS was
$2.1875.
The Company will receive proceeds from the exercise of the
Warrants, but not from the sale of the underlying Common Stock. See
"Use of Proceeds."
All expenses of the registration of the shares of the Company's
Common Stock issuable upon exercise of the Warrants covered by this
Prospectus, estimated to be $30,000, are to be borne by the Company.
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH
DEGREE OF RISK. SEE "RISK FACTORS" ON PAGE 7 HEREIN.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is October 5, 1995
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the
"Commission"). These reports, proxy statements and other information
can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024 of the Commission's office
at 450 Fifth Street N.W., Washington, D.C. 20549, and at its regional
offices located at New York Regional Office, 7 World Trade Center,
13th Floor, New York, New York 10048; and 500 West Madison Street,
14th Floor, Chicago, Illinois 60661. Copies of such material can be
obtained from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates.
This Prospectus does not contain all the information set forth in
the Registration Statement filed by the Company with the Commission
(the "Registration Statement") with respect to the securities to which
this Prospectus relates, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. For
further information with respect to the Company and the securities
offered hereby, reference is made to the Registration Statement,
including the exhibits thereto. Each summary in this Prospectus of
information included in the Registration Statement or any exhibit
thereto is qualified in its entirety by reference to such information
or exhibit.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
Except to the extent modified or superseded by information
contained herein, the Company's Annual Report on Form 10-K for the
year ended December 31, 1994, the Company's Quarterly Reports on Form
10-Q for the quarters ended March 31, 1995, and June 30, 1995,
respectively, the Company's Reports on Form 8-K filed on May 5, 1995
and September 8, 1995, respectively, and the Joint Proxy Statement of
the Company and MDI, dated August 3, 1995, for the Company's 1995
Annual Meeting of Stockholders, as filed with the Commission, are
hereby incorporated by reference in this Prospectus. Any statement
contained in a document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained
herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
All documents filed pursuant to Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act after the date of this Prospectus and prior to the
termination of this offering shall be deemed incorporated by reference
in this Prospectus and to be a part hereof from the date of filing of
such documents.
The Company undertakes to provide without charge to each person,
including any beneficial owner, to whom a copy of this Prospectus has
been delivered, upon the written or oral request of any such person, a
copy of any of the documents or information incorporated by reference
herein, other than exhibits to such documents unless such exhibits are
specifically incorporated by reference into such documents. Requests
should be directed to Jack Nelson, Chairman, Advanced NMR Systems,
Inc., 46 Jonspin Road, Wilmington, Massachusetts 01887; telephone
number (508) 657-8876.
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SUMMARY
THE COMPANY
General
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Advanced NMR Systems, Inc. ("ANMR" as a separate company and ANMR
and its subsidiaries collectively sometimes the "Company") develops,
manufactures and markets a family of technically advanced products
related to ultra-fast magnetic resonance imaging ("MRI") systems.
ANMR manufactures the InstaScan system, a sophisticated high-speed
retrofit package for enhancing conventional MRI systems. ANMR is also
the exclusive integrator of very high field (3T and 4T) MRI systems
using some of General Electric Medical Systems ("GEMS") Signa MR
components, third party components and an ANMR component. ANMR has a
61% ownership interest in Advanced Mammography Systems, Inc. ("AMS").
AMS has developed a dedicated MRI breast imaging system and is
negotiating with certain medical facilities for its installation. On
August 31, 1995, Medical Diagnostics, Inc. ("MDI") became a wholly-
owned subsidiary of ANMR through consummation of the Merger. MDI
provides advanced radiology services such as MRI and Single Photon
Emission Computed Tomography ("SPECT") to patients in Massachusetts,
New York, Virginia, West Virginia and Tennessee through a network of
mobile and fixed equipment at hospital, clinic and freestanding
facilities, and also rehabilitation services for motor vehicle
accident victims.
ANMR is a Delaware corporation. Its executive office is located at
46 Jonspin Road, Wilmington, Massachusetts 01887, and its telephone
number is (508) 657-8876.
ANMR
----
From its inception in 1983 until November 1992, ANMR was
exclusively an R&D operation. In 1992, ANMR's transition to a
manufacturing operation was initiated with the first commercial sale
of its 1.5T InstaScan system and receipt of clearance from the U.S.
Food and Drug Administration ("FDA") to market such system to clinical
institutions. Calendar year 1993 marked the modification of ANMR's
agreement with GEMS (the "GEMS Agreement") and the initial
implementation of its sales and marketing program to sell the
InstaScan system. The GEMS Agreement was further modified as of June
30, 1994 in which revenues from the sale of high field 3T and 4T
systems would contribute to satisfying the GEMS obligation under the
1993 GEMS Agreement.
MRI systems provide medical images for the diagnosis and detection
of disease. The systems use large magnets, digital computers and
controlled radio waves to derive cross-sectional (two dimensional) and
volume (three-dimensional) pictures of human and animal anatomy and to
provide information, which can be displayed either on film or a video
monitor, about the concentration and the physical and chemical
environment of atomic nuclei without the need for invasive surgery.
This is in contrast to other currently available diagnostic techniques
such as Positron Emission Tomography ("PET"), Computerized Axial
Tomography ("CAT") and conventional X-ray equipment that subject
living tissue to potentially harmful ionizing radiation. MRI systems
present no known risk to most patients; however, the long imaging
times associated with commercially available systems may result in
degraded image quality due to patient movement and motion of the
internal organs (especially of the heart and of the abdominal organs)
during the scanning period.
ANMR has developed the Instascan system which is significantly
faster than other commercially available systems and has demonstrated
that the adverse effects of any motion, patient or organ, can be
substantially eliminated. In addition, natural physiological motions
can actually be visualized by acquiring multiple InstaScan images and
showing them in a movie sequence. Following ANMR's lead,
manufacturers of MRI systems are now including Echo Planar Imaging
("EPI") in their systems.
The following significant events have occurred at ANMR since
January 1, 1994: ANMR was awarded an imaging patent for its new
technology referred to as Catch and Hold and received clearance from
the FDA for commercial sale of the Catch and Hold technology;
installed its second InstaScan system at Massachusetts General
Hospital (MGH) to be used specifically for clinical application;
installed its first 3T Instascan retrofit at the University of
Pittsburgh; installed an EPI upgrade for the National Institutes of
Health (NIH) for the development
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of an EPI upgrade of its 4T MRI system; received two purchase orders
for integrating and installing 3T MRI systems and announced the
receipt of an additional nine purchase orders for its InstaScan
systems from various research and clinical sites; appointed a Vice
President of Sales and Marketing who was a former head of sales for
GEMS; hired a GEMS senior scientist as an Engineering Program Manager;
concluded an agreement to expand its strategic alliance with GEMS
through June 30, 1997 as the exclusive system integrator of the high
field 3T and 4T MRI system; entered into an alliance with the
University of Texas and Elscint, Ltd. to develop, manufacture and
distribute a highly sophisticated, fully integrated functional
neuroimaging system; and received regulatory clearance in Japan for
the commercial sales of its InstaScan system.
In March 1993, the GEMS Agreement was modified providing, in part,
for the minimum purchase by GEMS of 100 InstaScan systems by the end
of calendar year 1994 with installation by the end of calendar year
1995. If by December 31, 1995, GEMS has not paid ANMR for the 100
units, it was to pay ANMR $100,000 for each unit of the first 75 units
not purchased and $50,000 for each of units 76-100 not purchased. The
GEMS purchase obligation was modified as of June 30, 1994 in an
agreement with GEMS pursuant to which revenues from the sale of 3T and
4T systems will contribute to satisfying the GEMS obligation under the
1993 GEMS Agreement. The 1994 modification covers a three year period
through June 30, 1997. The GEMS purchase obligation is subject to
usual conditions of sale, including changes in health care regulations
covering MRI products. The GEMS period of exclusivity for the
InstaScan system terminated on December 31, 1994. At December 31,
1994, seventeen InstaScan sales and two 3T sales were credited to this
arrangement with GEMS. As of January 1, 1995, sales of the InstaScan
system are no longer limited under the 1993 GEMS Agreement. All
future sales of the InstaScan system will be sold directly to customer
sites or through GEMS and will be negotiated on mutually acceptable
terms with each customer. Purchase orders of the InstaScan systems
obtained after December 31, 1994 will generally not be credited
towards the dollar value of GEMS's obligation under the 1993 GEMS
Agreement.
In July 1994, ANMR concluded an agreement with GEMS for the sale of
3T and 4T research MR systems to GEMS through June 1997. These
systems, while not yet submitted to the FDA for clearance for clinical
use, will be sold to premier research institutions throughout the
world. The first such system was installed at the University of
Pittsburgh in April 1994. This first system was developed in
collaboration with the MRI group at the corporate research and
development center of GEMS. All future systems will be integrated by
ANMR at its plant.
In June 1992, ANMR licensed (the "ANMR License Agreement") to AMS
the right to use ANMR's InstaScan technology in the development of a
dedicated breast imaging system (the "Field of Use"). As
consideration for the ANMR License Agreement, AMS paid to ANMR
$1,680,000 and issued 4,000,000 shares of AMS Common Stock, of which
2,750,000 shares are subject to an escrow arrangement for release
based upon AMS achieving certain future minimum pre-tax income, or the
market price of the AMS common stock reaching certain levels.
ANMR believes other dedicated use (or partial body) MRI scanners
might be developed for fields of use in addition to mammography. AMS
has not been granted the right to use any technology now or hereafter
obtained by ANMR in connection with any other dedicated use MRI
scanners. However, AMS has been granted a 50% interest in any net
profits, as defined in the ANMR License Agreement (after allocation of
development expenses), derived by ANMR from the sale or license of
dedicated use MRI scanners utilizing or based upon the Licensed
Technology outside of the Field of Use. The ANMR License Agreement
provides that (i) any inventions outside the Field of Use developed
solely by ANMR or an ANMR entity shall be owned by ANMR or such ANMR
entity and automatically licensed to AMS on an exclusive, worldwide
basis, within the Field of Use, (ii) any inventions developed solely
by AMS shall be automatically licensed to ANMR on an exclusive,
worldwide basis for use solely outside the Field of Use, and (iii) any
inventions outside the Field of Use jointly developed by ANMR and AMS
or an ANMR entity shall be jointly owned in equal shares by ANMR, on
the one hand, and AMS or an ANMR entity, on the other hand, and AMS or
an ANMR entity shall automatically license its interest to ANMR on an
exclusive, worldwide basis. Accordingly, ANMR would obtain the right
to future technology developed by AMS for use in connection with
mammography, and AMS shall obtain the right to further technology
developed by ANMR for use outside the Field of Use.
AMS is continuing its mission to develop a dedicated MR breast
imaging system. Over the past year, AMS has developed an imaging
technique to suppress fat in breast images. This technology is
particularly useful in
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imaging dense breasts which present a problem in interpreting
conventional X-ray images. This new technique was developed as a
collaboration between ANMR and AMS. AMS has completed a prototype of
its dedicated MR breast imaging system and is currently negotiating
with certain medical facilities for its installation.
To optimize ANMR's and AMS's operating efficiency, ANMR and AMS
entered into a Shared Services Agreement as of January 25, 1993
whereby the companies share common expenses and functions, for
example, executive officers, marketing, field service, accounting,
regulatory approvals, and manufacturing operations. This agreement
has been extended to January 24, 1996. From an engineering and
manufacturing perspective, this Shared Services Agreement has greatly
facilitated development of the prototype mammography scanner and has
also benefitted ANMR's development of enhancements to its InstaScan
products.
In January 1995, AMS called for redemption of all of its remaining
outstanding redeemable warrants to purchase shares of its common
stock. Warrants for 226,000 shares had previously been exercised
prior to the call. All of the outstanding warrants were exercised
prior to the redemption date for approximately 774,000 shares of AMS
common stock at the exercise price of $3.00 per share. Consequently,
no warrants were actually redeemed. AMS is using the $2.3 million
proceeds from the exercise of the warrants for continuing research and
development and for general working capital purposes.
MDI
---
MDI was founded in 1984 to operate mobile radiology services as a
full-service medical provider under its own clinic licenses where such
operation is allowed under state regulation. It used the proceeds
from a 1992 public offering in part to acquire minority interests in
current MDI operations from certain partners, to acquire imaging
businesses operating in New York, Virginia, West Virginia and
Tennessee and to enter into the rehabilitation business in
Massachusetts.
Effective November 5, 1993, MDI acquired certain assets from, and
entered into contractual arrangements to provide MRI services to, a
privately held professional medical corporation which provides MRI
services to a regional network of hospitals and clinics located in the
Finger Lakes region of New York State.
In May 1994, MDI completed its acquisition of Meritus Health
Systems and affiliates ("Meritus") headquartered in Roanoke, Virginia.
Meritus provides MRI and SPECT imaging services in Virginia, West
Virginia and Tennessee.
MDI often acts as a full-service medical provider in its radiology
services business, particularly MRI services, providing MRI and SPECT
equipment and technologists and typically providing or arranging for
the necessary physician and support personnel, scheduling and
screening of patients, maintaining medical and administrative records,
establishing charges and billing and collecting revenues from patients
and third-party payers. In these instances, host hospitals generally
function as a landlord for an MDI subsidiary or affiliate operating
the MRI or SPECT services. By operating in this manner, MDI is able
to control the hours of operation for its units and manage patient
scheduling, permitting MDI to more fully utilize its equipment. MDI
is also able to expand demand for its services by marketing directly
to referring physicians and third-party payers, the primary sources of
MRI patient business, including physicians who are not affiliated with
the host hospitals. MDI believes that controlling all or most of the
radiology services, including holding the required clinic licenses
when possible, enhances its ability to negotiate renewals or
extensions of its arrangements with the hospitals.
A majority of MDI's MRI services are provided under the "full-
service" model. SPECT services are provided under both vendor and
provider models. In circumstances where MDI does not operate as a
provider, it endeavors to improve utilization and operating
performance by applying the marketing and other skills it has
developed as a provider to these operations.
On January 31, 1995, MDI entered the rehabilitation market through
its acquisition of 75% of the net assets of the MVA Center for
Rehabilitation, Inc. in Springfield, MA, and entered into a
partnership to provide physician care, physical therapy and case
management to motor vehicle accident victims. MDI is evaluating this
business and,
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although no assurances can be given, MDI anticipates opening
additional MVA centers and may seek to develop other opportunities in
niche rehabilitation markets.
The MDI Merger
--------------
Upon the Merger, ANMR issued 6,670,157 shares of ANMR Common Stock
and 2,331,722 Warrants and also paid an aggregate of $11,196,102
(exclusive of any payments in lieu of the issuance of fractional
shares) to the holders of common stock, $.01 par value per share, of
MDI (the "MDI Common Stock"). The outstanding options and warrants
for the purchase of an aggregate of 560,894 shares of MDI Common Stock
became exercisable for ANMR Common Stock, ANMR Warrants and/or cash.
Pursuant to the Merger Agreement, each share of MDI Common Stock
was exchangeable for (i) $8.00 in cash (the "Cash Consideration"), or
(ii) 2.861 shares of ANMR Common Stock plus one Warrant (collectively,
the "Share Consideration"), or (iii) a combination of the Cash
Consideration and the Share Consideration, provided that not more than
37.5% of the MDI Common Stock could be exchanged for the Cash
Consideration. Based upon elections made by MDI Stockholders, the
Cash Consideration was pro rated so each stockholder who had elected
the Cash Consideration received $4.02 in cash, 1.423 shares of ANMR
Common Stock and .4975 of a Warrant for each MDI share exchanged.
The Cash Consideration was financed in part by a $9 million five-
year term loan facility and a $6 million revolving credit facility to
MDI from Chemical Bank, and guaranteed by ANMR and certain of MDI's
subsidiaries. The loan facilities are secured by a first lien on
specified assets of MDI, ANMR and certain designated subsidiaries, and
a pledge of ANMR's unescrowed shares of AMS Common Stock. The balance
of the loan proceeds was used to repay MDI's prior bank facility and
for general working capital.
Upon the Merger, the ANMR Board of Directors was increased from
seven to ten persons and John A. Lynch, Edward J. Connors and Milton
L. Glass, designees of the prior MDI Board, were added as directors to
the ANMR Board and Mr. Lynch was elected Senior Vice President of
ANMR. The ANMR Board also approved a change in the Company's fiscal
year to September 30, from December 31, to conform to the MDI fiscal
year.
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RISK FACTORS
The shares of the Company's Common Stock issuable upon exercise of
the Warrants are speculative in nature and involve a high degree of
risk. In addition to the other information in this Prospectus, the
following information should be considered carefully by potential
purchasers in evaluating the Company and its business before making an
investment in the shares of Common Stock offered hereby:
Significant Indebtedness and Debt Service After Merger. The
financing related to the Merger has resulted in a high level of
indebtedness for the Company. At March 31, 1995, on a pro forma and
consolidated basis assuming that the Merger closed as of March 31,
1995, the Company would have had indebtedness for borrowed money of
approximately $21 million, including the current portion of long-term
debt of approximately $8 million, representing approximately 71% of
stockholders' equity. The Company's high level of indebtedness has
several important consequences, including, but not limited to: (i)
significant interest expense and principal repayment obligations
resulting in substantial annual fixed charges; (ii) significant
limitations on its ability to obtain financings, make capital
expenditures and acquisitions and take advantage of other significant
business opportunities that may arise; and (iii) increased
vulnerability to adverse general economic and industry conditions. In
addition, under the credit agreements with the bank, the Company will
be required to comply with significant affirmative and negative
covenants and financial ratios, including interest coverage, debt
service coverage and debt to tangible net worth. Non-compliance could
result in the acceleration of such indebtedness.
History of Net Losses. From its inception in 1983 until November
1992, ANMR was engaged exclusively in research and development
activities. In 1992, ANMR's transition to a manufacturing operation
was initiated with the first commercial sale of its 1.5T InstaScan
system and receipt of clearance from the FDA to market such system to
clinical institutions. From its inception through June 30, 1995, ANMR
had aggregate gross revenues of $11,861,000 from sales of the
InstaScan system and related products. ANMR's cash requirements have
been exceeding its resources due primarily to expenditures related to
research and development. ANMR, including consolidated results of
AMS, has incurred net losses of $3,547,000, $6,167,000 and $5,493,000
for each of the fiscal years ended December 31, 1994, 1993 and 1992,
respectively. ANMR believes that, based on MDI's earnings history,
the additional cash flow to be provided by MDI after consummation of
the Merger could provide ANMR with net operating income commencing in
fiscal year 1996, assuming certain expected savings and efficiencies
are achieved.
Adverse Accounting and Tax Consequences of Goodwill. The Merger
was accounted for by the purchase method of accounting. Under this
accounting method, the majority of the purchase price for MDI --
approximately $29 million -- was allocated to the intangible asset
goodwill which represents approximately 47% of the total assets and
approximately 87% of the stockholders equity of the Company post-
Merger. The Company will incur an annual non-cash charge to
operations for the amortization of goodwill of approximately $1
million over the next 30 years, which will not be deductible for
income tax purposes.
No Assurance of Future Sources of Capital to Support and Grow
Business. The Company will require capital to finance its continued
investment in research and development, and to support and grow its
existing businesses, particularly its MRI technologies. Inasmuch as
ANMR expects to incur additional operating losses with respect to its
MRI technologies following the Merger and the bank facilities restrict
the ability of MDI to upstream funds to ANMR, there can be no
assurance that ANMR will have adequate working capital to fund these
activities.
Volatility of Common Stock Price. The market price of the
Company's Common Stock historically has been volatile. Factors such
as quarter-to-quarter variations in revenues and announcements of
technological innovations or new products by ANMR or its competitors,
customers or suppliers could cause the market price of the Common
Stock to fluctuate significantly, even with the addition of the MDI
business. In addition, in recent years the stock markets in general,
and the market prices for diagnostic imaging service companies in
particular, have experienced
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significant volatility, which often may be unrelated to the operating
performance of the affected companies. Such volatility could
adversely affect the market price of the Company's Common Stock.
Lack of Dividends; Restrictions on Payment of Dividends. Neither
ANMR nor MDI has ever paid a dividend to its stockholders. The
Company intends to retain all available earnings, if any, generated by
its operations for the development and growth of its business and does
not anticipate paying any cash dividends on its Common Stock in the
foreseeable future. In addition, the payment of cash dividends is
restricted under the bank credit agreement.
Unpredictable Results of Healthcare Reform Initiatives. Many
competing proposals have been introduced in Congress and various state
legislatures to reform the present health care systems. The Company
cannot predict the health care reforms that may be enacted or the
effect that any such reforms may have on their respective businesses.
The ability of many of MDI's patients or health care providers to pay
for MDI's services depends upon governmental and private insurer
reimbursement policies. A significant change in these policies could
adversely affect MDI's businesses.
Reliance on Arrangement with GEMS. One of the products
manufactured by ANMR is the InstaScan System. The InstaScan retrofit
has been configured to only GEMS Signa Systems as ANMR had an
exclusive marketing arrangement with GEMS through December 31, 1994.
Reconfiguring its units to make InstaScan compatible with other
manufacturers' MRI systems would require substantial time and involve
substantial costs. There can be no assurance that any effort by ANMR
to make InstaScan compatible with other manufacturer's systems would
ultimately be successful.
Technological Development Limited By Third Party Patents. ANMR's
business is dependent upon the ability to offer systems which
incorporate the most current technology. This requires substantial
expenditures for research and development. In addition, some of this
technology is protected by patents and patent applications of others
to which ANMR has no rights. Such patents, if valid, may limit the
proposed business of ANMR to new technologies and new magnetic
resonance diagnostic methods outside the scope of such patents. In
the event that one or more patent holders were to assert a claim of
infringement with respect to any product or technology which ANMR may
develop, no assurance can be given that such claim would not be
successful, and if successful, that its impact on ANMR would not be
materially adverse.
Potential Adverse Impact of Competing Services and Equipment. The
health services and equipment industry is highly competitive. Since
ANMR develops imaging products that ultimately function as one
component part of a larger system, it is dependent in large part upon
manufacturers of such complete MRI systems to accept and endorse
ANMR's products. Most of these systems' manufacturers have the
capability to develop and manufacture imaging components, such as echo
planar imaging, similar to those developed by ANMR. There can be no
assurance that these manufacturers will continue to accept and endorse
ANMR's products. Some entities have, and others may develop,
competing products or services which may be superior to those proposed
by ANMR and/or AMS. Many of these other entities have greater
resources and more substantial marketing capabilities than ANMR and
AMS. Furthermore, in some cases, other imaging equipment such as PET
scanners, conventional x-rays, CAT scanners, nuclear medicine systems
and ultrasound systems may be used instead of MRI systems for certain
diagnostic procedures, and there are several other methods presently
in practice for the detection of breast cancer. These other equipment
systems may be less expensive to purchase, install and maintain and
involve lower patient charges for their use. MDI competes with
hospitals, private clinics, physicians and therapist rehabilitation
practices and other independent providers of rehabilitation services,
many of which possess greater financial resources or are better known
than MDI.
Potential Adverse Impact of Government Regulation. The
manufacture, marketing and use of magnetic resonance systems and MRI
services are subject to various federal and state regulations,
including premarket clearance by the FDA for the MRI Systems. Such
clearance may take considerable time to obtain and in some cases may
not be granted. Until required FDA or state approvals are obtained,
neither governmental agencies nor private
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insurers will reimburse AMS for the cost of magnetic resonance systems
and diagnostic procedures. Furthermore, reimbursement may not be
authorized even after approvals are granted or it may be delayed for
substantial periods after such approvals. The market for the
Company's products and services, particularly the MDI services, is
also adversely affected by state certificate of need ("CON") laws,
which in some states limit the establishment of new facilities and
services as well as the purchase of major medical equipment. There
can be no assurance that CONs can be obtained if needed and without a
costly and time consuming administrative process. In addition,
federal and state health care and related regulations are subject to
constant change. The Company cannot predict what changes may be
enacted which may affect its business or the manner in which its
business would be affected by such changes. In addition,
manufacturers of medical devices are subject to FDA regulations,
including compliance with good manufacturing practice regulations.
There can be no assurance that these laws and regulations will not
have an adverse impact on the Company in the future.
Potential Adverse Impact of Reliance on Governmental and Private
Reimbursement of Health Care Costs. ANMR products are used in both
clinical and research environments. Clinical customers will depend
upon governmental and private insurer reimbursement policies. In
addition, in most cases, the ability of patients or health care
providers to pay for the services which MDI provides depends upon
governmental and private insurer reimbursement policies.
Consequently, such policies have a direct effect on the ability of
patients and providers to use and pay for services rendered by ANMR
customers to these parties and the ability of patients and health care
providers to use and pay for MDI's services. As a result, any
significant adverse change in such reimbursement policies would likely
adversely affect ANMR's and MDI's business.
Under federal cost-containment legislation currently in effect,
hospital inpatients covered by Medicare are classified into diagnostic
related groups ("DRGs") in accordance with the patients' diagnoses,
and reimbursement to hospitals for these patients is limited to
predetermined amounts assigned to particular DRGs. Similarly, some
states limit reimbursement of health care costs by select payers
according to predetermined amounts. These predetermined amounts do
not necessarily cover all of the cost of the medical services actually
provided. Currently, the DRG program is not applicable to outpatient
services such as those generally provided MDI and, consequently, many
health care providers have an incentive to refer patients to
diagnostic imaging services on an outpatient basis. If in the future
DRG program is expanded to include outpatient services, MDI's business
may be materially and adversely affected.
Most health care insurers compensate a service provider, such as
MDI, for a percentage of its charge for MRI scans based upon the
"reasonable and customary" fee for such service for that geographical
area. The determination of what is "reasonable and customary" is in
the insurer's sole discretion. As a result, MDI must seek the payment
balance, if any, directly from the patient, which, given the costs of
debt collection, may be impractical. In addition, certain states,
including Massachusetts, prohibit this so-called "balance billing" of
patients under certain circumstances, and in other states, MDI has
agreed with one or more insurers not to balance bill their patients.
MDI also contracts with managed care payers for a negotiated fee-per-
scan which is usually substantially below MDI's charge for such scans.
If the percentage of patients insured by managed care payers
substantially increases, or if managed care payers substantially
reduce the fee-per-scan they are willing to pay, MDI could be
materially and adversely affected. Additionally, if a substantial
number of private insurers were to adopt diagnostic related group-type
reimbursement schedules and if these schedules did not permit MDI to
profitably provide MRI services, MDI would be materially and adversely
affected.
Dependence on, and Need for, Key Personnel. Because of the
specialized nature of its business, the Company is dependent upon the
efforts of its current officers and employees, and upon its ability to
attract and retain technically qualified personnel. The loss of the
services of Jack Nelson, Chairman of the Board and Treasurer of ANMR
or John A. Lynch, President of MDI and Senior Vice President of ANMR,
could materially adversely affect the Company. There is intense
competition for qualified personnel in the MRI industry, including
competition from companies with substantially greater resources than
the Company. There can be no assurance that the Company
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<PAGE>
will be successful in recruiting or retaining personnel of the
requisite scientific caliber or in the requisite numbers to enable the
Company to conduct its business as planned.
USE OF PROCEEDS
Assuming all the Warrants are exercised, the Company will receive
net proceeds of approximately $8,700,000, after payment of certain
expenses. The Company estimates that the expenses will be
approximately $30,000. The proceeds to be received by the Company
upon the exercise of the Warrants will be utilized for research and
development by ANMR, marketing and working capital purposes.
DESCRIPTION OF SECURITIES
The Company's authorized capital stock currently consists of
50,000,000 shares of Common Stock and 1,000,000 shares of, $.01 par
value per share Preferred Stock ("Preferred Stock"). As of September
5, 1995, 30,238,571 shares of Common Stock were issued and outstanding
and no shares of Preferred Stock were issued and outstanding.
Common Stock
Holders of the Company's Common Stock are entitled to one vote per
share on all matters submitted to a vote of stockholders of the
Company and to receive dividends when, as and if declared by the
Company's Board from funds legally available therefor. Upon
liquidation of the Company, holders of Common Stock are entitled to
share ratably in any assets available for distribution to stockholders
after payment of all obligations of ANMR and priority payments to any
senior class of capital stock. Holders of the Common Stock do not
have cumulative voting rights or preemptive, subscription or
conversion rights.
Preferred Stock
The Board of Directors of the Company is authorized (without action
of stockholders) from time to time, to establish and designate one or
more series of Preferred Stock, to fix the number of shares
constituting each series, and to fix the designations, powers,
preferences and relative participating, conversion, redemption,
optional or other special rights, and qualification, limitations or
restrictions thereof, of each series and the variations and the
relative rights, preferences and limitations as between series and to
increase or decrease the number of shares constituting each series.
Under certain circumstances, the Company could issue this Preferred
Stock as a method of discouraging, delaying or preventing a change of
control of the Company.
Warrants
General. The Warrants were issued under the Warrant Agreement.
The description of the Warrant Agreement set forth below does not
purport to be complete and is qualified in its entirety by reference
to the Warrant Agreement.
Each Warrant initially entitles the holder thereof to purchase one
share of Common Stock at an exercise price of $3.75 (the "Exercise
Price"). The Exercise Price and the number of shares of Common Stock
issuable upon the exercise of each Warrant are subject to adjustment
in certain events described below. Each Warrant may be exercised on
or after the issuance thereof and until 5:00 p.m., New York City time,
on the earlier of August 30, 2000 or the date fixed for redemption of
the Warrants (as described below) in accordance with the terms of the
Warrants and the Warrant Agreement. To the extent that any Warrant
remains outstanding after such time, such unexercised Warrant will
automatically terminate.
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<PAGE>
Exercise. Warrants may be exercised by surrendering to the Warrant
Agent, American Stock Transfer & Trust Company (the "Warrant Agent") a
signed Warrant certificate indicating the warrantholder's election to
exercise all or a portion of the Warrants evidenced by such
certificate. Surrendered certificates must be accompanied by payment
of the aggregate Exercise Price in respect of the Warrants to be
exercised, which payment may be made in cash or by certified or
official bank check payable to the order of the Company. No
adjustments as to cash dividends with respect to the Common Stock will
be made upon any exercise of Warrants.
If fewer than all the Warrants evidenced by any certificate are
exercised, the Warrant Agent will deliver to the exercising
warrantholder a new Warrant certificate representing the unexercised
Warrants. The Company will not be required to issue fractional shares
of its Common Stock upon exercise of any Warrant, and in lieu thereof
will pay an amount equal to the same fraction of the current market
value per share of Common Stock, determined as provided in the Warrant
Agreement.
Antidilution and Exercise Price Adjustments. The number of shares
of Common Stock purchasable upon the exercise of each Warrant and the
Exercise Price are subject to adjustment in connection with (a) the
issuance of a stock dividend to holders of Common Stock, or a
combination or subdivision of Common Stock, and (b) certain
distributions by the Company to the holders of Common Stock of
evidences of indebtedness or of its assets (excluding cash dividends
or distributions out of earnings or out of surplus legally available
for dividends) or of convertible securities, all as set forth in the
Warrant Agreement. Notwithstanding the foregoing, no adjustment in
the Exercise Price will be made until cumulative adjustments require
an adjustment of at least $.05.
In case of any reclassification, capital reorganization or other
change to the Common Stock, or any consolidation or merger of the
Company with or into another corporation, or any sale or conveyance of
the property of the Company as an entirety or substantially as an
entirety, the Warrant Agreement will require that effective provisions
will be made so that each holder of an outstanding Warrant will have
the right thereafter to exercise his or her Warrant for the kind and
amount of securities and property receivable in connection with such
reclassification, capital reorganization, consolidation, merger or
sale by a holder of the number of shares of Common Stock for which
such Warrants were exercisable immediately prior thereto. Furthermore,
if the Company grants to the holders of Common Stock rights or
warrants or options to purchase the Company's Common Stock or
securities convertible into or exchangeable or exercisable for Common
Stock, the Company shall concurrently grant to each warrantholder the
rights, warrants or options to which such warrantholder would have
been entitled if such warrantholder were the holder of the number of
shares of Common Stock then issuable upon exercise of his or her
Warrants.
Redemption. All, but not less than all, of the Warrants then
outstanding may be redeemed at the option of the Company, at a
redemption price of $.05 per Warrant, in the event that the Market
Price (as hereinafter defined) of the Common Stock has been at least
$4.50 per share (the "Target Price"). For this purpose, "Market
Price" means the average closing price reported for ANMR Common Stock
on the NASDAQ National Market System (or other principal market) for
any twenty consecutive trading days. If the Common Stock is
subdivided or combined into a greater or smaller number of shares, the
Target Price will be proportionately adjusted.
The Company must give irrevocable notice of its election to redeem
the Warrants no more than ten trading days following the end of the
twenty consecutive day period referred to in the preceding paragraph.
Notice of redemption will be mailed to warrantholders not more than 30
days nor less than 20 days before the date fixed for redemption, and
in any event not more than five trading days following delivery of the
notice to the Warrant Agent referred to in the preceding sentence.
Any Warrant so called for redemption may be exercised until 5:00 p.m.,
New York City time, on the business day immediately preceding the date
fixed for redemption, and immediately thereafter any such Warrant, to
the extent not exercised, will represent only the right to receive,
upon surrender, the redemption price therefor.
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<PAGE>
Reports
The Company furnishes to its stockholders and will furnish to its
warrantholders, after the close of each fiscal year, an annual report
containing audited financial statements. In addition, the Company may
furnish to its stockholders and warrantholders such other reports as
may be authorized, from time to time, by its Board of Directors.
Transfer Agent, Registrar and Warrant Agent
American Stock Transfer & Trust Company, 40 Wall Street, 46th
Floor, New York, New York 10005, is the transfer agent, registrar and
Warrant Agent for the securities of the Company.
PLAN OF DISTRIBUTION
No underwriter is being utilized in connection with this offering
or with the exercise of the Warrants. The 2,331,722 shares of ANMR
Common Stock are issuable upon exercise of the Warrants.
The Company is registering the shares of Common Stock issuable upon
exercise of the Warrants and not the resale thereof by the holders of
the shares of Common Stock after such exercise.
EXPERTS
The audited consolidated financial statements of ANMR as of
December 31, 1994 and 1993, and for the three years ended December 31,
1994, which have been incorporated by reference in this Prospectus,
have been audited by Richard A. Eisner & Company, LLP, independent
public accountants, as indicated in their reports with respect thereto
which are incorporated by reference in this Prospectus in reliance
upon the authority of said firm as experts in accounting and auditing.
The financial statements of MDI and its subsidiaries as of
September 30, 1994 and 1993 and for the three years ended September
30, 1994, which have been incorporated by reference in this
Prospectus, have been audited by Arthur Andersen LLP, independent
public accountants, as indicated in their reports with respect thereto
which appears elsewhere herein, are incorporated by reference in this
Prospectus in reliance upon the authority of said firm as experts in
accounting and auditing.
LEGAL MATTERS
Legal matters relating to the Common Stock will be passed upon for
the Company by Reid & Priest LLP, 40 West 57th Street, New York, New
York 10019.
ADDITIONAL INFORMATION
The Company has filed with the Securities and Exchange Commission,
Washington, D.C., a Registration Statement on Form S-3 under the
Securities Act of 1933, as amended, covering the securities offered
hereby. For further information with respect to the Company and the
securities offered hereby, reference is made to the Registration
Statement and to the exhibits filed as part thereof. Such information
is available for inspection at the Public Reference Section maintained
by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549.
Copies of the materials contained in the Registration Statement may be
obtained from the Commission upon payment of the fees prescribed by
its rules and regulations. Statements contained in this Prospectus as
to the contents of any contract or other document referred to are not
necessarily complete. In each instance, reference is made to the copy
of such contract or other document filed as an exhibit to the
Registration Statement, each such statement being qualified in all
respects by such reference.
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TABLE OF CONTENTS
Page
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Available Information . . . . . . . . . . . . . . . . . . . . 2
Incorporation of Certain Information
by Reference. . . . . . . . . . . . . . . . . . . . . . . . 2
The Company . . . . . . . . . . . . . . . . . . . . . . . . . 3
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . 7
Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . 10
Description of Securities. . . . . . . . . . . . . . . . . . 10
Plan of Distribution. . . . . . . . . . . . . . . . . . . . . 12
Experts . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . 12
Additional Information. . . . . . . . . . . . . . . . . . . . 12
-----------------
No dealer, salesman, or any other person has been authorized to
give any information or to make any representations or projections of
future performance other than those contained in this Prospectus, and
any such other information, projections, or representations if given
or made must not be relied upon as having been so authorized. The
delivery of this Prospectus or any sale hereunder at any time does not
imply that the information herein is correct as of any time subsequent
to its date. This Prospectus does not constitute an offer to sell or
a solicitation of any offer to buy any of the securities offered
hereby in any jurisdiction to any person to whom it is unlawful to
make such offer or solicitation.
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ADVANCED NMR
SYSTEMS, INC.
2,331,722 shares of Common Stock
Issuable Upon Exercise of
2,331,722 Common Stock Purchase
Warrants
---------------
PROSPECTUS
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October 5, 1995
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