UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 1995
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or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number: 0-11914
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Advanced NMR Systems, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 22-2457487
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
46 Jonspin Road, Wilmington, Massachusetts 01887
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(Address or principal executive offices) (Zip Code)
(508) 657-8876
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(Registrant's telephone number, including area code)
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 period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes x No
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As of January 31, 1996, there were 30,183,546 shares of Common Stock, $.01
par value, outstanding.
AMENDMENT NO. 1
The undersigned registrant hereby amends the following items, financial
statements, exhibits or other portions of its Form 10-Q filed on
February 13, 1996 as set forth in the pages attached hereto:
1. Part I, Item 1, page 6,-Note 3 is amended to correct disclosure
regarding expected delivery of equipment.
<PAGE>
ADVANCED NMR SYSTEMS, INC. AND SUBSIDIARIES
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INDEX
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PART I. FINANCIAL INFORMATION Page No.
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Item 1. Financial Statements
Consolidated Balance Sheets:
December 31, 1995 and September 30, 1995 1
Consolidated Statements of Operations:
Quarters Ended December 31, 1995
and December 31, 1994 2
Consolidated Statement of Stockholders'
Equity 3
Consolidated Statements of Cash Flows:
Quarters Ended December 31, 1995
and December 31, 1995 4
Notes to Consolidated Financial Statements 5 - 8
PART II. OTHER INFORMATION
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Signatures 9
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
ADVANCED NMR SYSTEMS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
December 31, September 30,
ASSETS 1995 1995
------ ---- ----
Current assets:
Cash and cash equivalents $5,286,486 $7,542,508
Accounts receivable, net of reserve for bad
debts of $2,256,000 at December 31, 1995
and $2,103,000 at September 30, 1995 8,389,196 9,741,892
Inventories 5,436,192 3,312,591
Other current assets 2,272,245 1,972,871
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Total current assets 21,384,119 22,569,862
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Equipment, building, furniture and leasehold
improvements, net 7,658,232 8,207,687
Patent costs, net 201,755 205,754
Goodwill, net 26,678,903 26,858,226
Other 580,617 590,180
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TOTAL $56,503,626 $58,431,709
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LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Accounts payable $2,074,958 $1,001,130
Accrued expenses 3,081,438 3,024,216
Due to shareholders 46,102 1,696,102
Customer deposits 1,347,619 --
Accrued compensation 688,613 1,331,188
Other current liabilities 124,136 159,971
Current portion of long-term debt and
capital lease obligations 4,737,064 4,274,110
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Total current liabilities 12,099,930 11,486,717
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Long-term debt and capital lease
obligations, less current portion 15,540,965 16,279,352
Deferred revenues, net of current 33,570 33,567
Minority interest in net assets of
consolidated entities 2,360,064 2,614,107
Stockholders' equity:
Preferred stock, $.01 par value;
authorized, 1,000,000 shares;
issued, none -- --
Common stock, $.01 par value;
authorized, 50,000,000 shares;
issued 30,183,546 at December 31, 1995
and 30,151,821 shares at
September 30, 1995 301,835 301,518
Additional paid-in capital 58,267,185 58,246,689
Accumulated deficit (32,097,673) (30,527,991)
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26,471,347 28,017,966
Less: treasury stock, at cost -
225,000 common shares 2,250 2,250
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Total stockholders' equity 26,469,097 28,017,966
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TOTAL $56,503,626 $58,431,709
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The accompanying notes to financial statements are an integral part hereof.
<PAGE>
FORM 10-Q
ADVANCED NMR SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
December 31,
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1995 1994
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Revenues:
System sales $ 49,198 $ 63,390
Net patient service revenue 6,013,410 --
Management fees and other 141,968 --
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Total revenues 6,204,576 63,390
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Operating expenses:
Cost of goods sold 15,792 191,944
Cost of service operations 3,779,714 --
Research and development 650,314 767,218
Selling, general and administrative 2,454,250 1,507,376
Provision for bad debt and collection
costs 473,989 --
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Total operating expenses 7,374,059 2,466,538
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Loss from operations (1,169,483) (2,403,148)
Interest, net (383,813) (16,228)
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Loss before minority interests (1,553,296) (2,419,376)
Minority interests in net (income)
loss of consolidated entities (16,386) 214,166
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Net loss $(1,569,682) $(2,205,210)
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Net loss per share $(.05) $(.09)
=== ===
Weighted average number of shares
outstanding 30,167,696 23,603,251
========== ==========
The accompanying notes to financial statements are an integral part hereof.
<PAGE>
FORM 10-Q
ADVANCED NMR SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
Common Stock
---------------------- Paid-in Accumulated
Shares Amount Capital Deficit
------ ------ ------- -------
Balance -
September 30,
1995 30,151,821 $301,518 $58,246,689 $(30,527,991)
Exercise of
stock options 31,725 317 20,496 --
Net loss for
period -- -- -- (1,569,682)
---------- -------- ----------- ------------
Balance -
December 31,
1995 30,183,546 $301,835 $58,267,185 $(32,097,673)
========== ======== =========== =============
Treasury Stock
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Shares Amount Total
------ ------ -----
Balance -
September 30,
1995 225,000 $(2,250) $28,071,966
Exercise of
stock options -- -- 20,813
Net loss for
period -- -- (1,569,682)
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Balance -
December 31,
1995 225,000 $(2,250) $26,469,097
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The accompanying notes to financial statements are an integral part hereof.
<PAGE>
FORM 10-Q
ADVANCED NMR SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
December 31,
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1995 1994
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Cash flows from operating activities:
Net loss $(1,569,682) $(2,205,210)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Minority interest in net income (loss)
of consolidated entities 16,386 (214,166)
Depreciation and amortization 836,376 144,720
Common stock and warrant issued for
services -- 35,000
Changes in assets and liabilities:
Accounts receivable, net 1,352,696 2,152
Inventories (2,123,601) (770,550)
Other current assets (315,674) (60,937)
Accounts payable and accrued
expenses 183,828 1,552,912
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Net cash used in operating activities (1,619,671) (1,516,079)
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Cash flows from investing activities:
Patent costs (12,122) (46,115)
Purchase of equipment, furniture and
leaseholds improvements (20,495) (55,388)
Other assets (45,116) (13,430)
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Net cash used in investing activities (77,733) (114,933)
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Cash flows from financing activities:
Exercise of stock options 20,815 --
Proceeds from issuance of long-term debt 255,000 --
Proceeds from repayment of note receivable -- 110,000
Repayment of long-term debt and capital
lease obligations (530,433) (27,228)
Distributions to minority interests (304,000) --
Sale of warrant rights -- 200
Sale of subsidiary stock -- 240,054
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Net cash provided (used) in financing
activities (558,618) 323,026
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NET DECREASE IN CASH AND CASH EQUIVALENTS (2,256,022) (1,307,986)
CASH AND CASH EQUIVALENTS, BEGINNING
OF PERIOD 7,542,508 6,907,841
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CASH AND CASH EQUIVALENTS, END OF PERIOD $5,286,486 $5,599,855
========= =========
Supplemental disclosures of cash flow
information:
Interest paid during the period $412,468 $21,017
======= ======
The accompanying notes to financial statements are an integral part hereof.
<PAGE>
FORM 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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Note 1 - Basis of Presentation
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The results of operations for the interim periods shown in this report
are not necessarily indicative of results to be expected for the fiscal
year. In the opinion of management, the information contained herein
reflects all adjustments necessary to make the results of operations for
the interim periods a fair statement of such operations. All such
adjustments are of a normal recurring nature.
The accompanying financial statements do not contain all of the
disclosures required by generally accepted accounting principles and should
be read in conjunction with the financial statements and related notes
included in the Company's annual report on form 10-K for the nine month
period ended September 30, 1995.
Note 2 - The Company
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Advanced NMR Systems, Inc. ("ANMR"or the "Company") operates its
business under two segments consisting of Imaging Systems and Imaging and
Rehabilitation Services.
Imaging Systems
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ANMR was founded in 1983 to develop echo planar imaging ("EPI"), an
ultrafast MRI technology. From its inception through November 1992, the
Company engaged exclusively in research and development activities. The
Company, through its Imaging Systems business, develops, manufactures and
markets technically advanced magnetic resonance imaging ("MRI") systems for
clinical applications and advanced research. In 1992, ANMR received FDA
clearance for its InstaScan system and commenced commercial marketing
activities to clinical institutions. The Company is developing additional
MRI-based products, including very high field whole body systems and lower
cost, dedicated MRI systems for functional neuro-imaging and orthopedic
applications.
In 1992, the Company formed AMS as a subsidiary for the purpose of
financing the development of the MR Breast Imaging system. In early 1993,
AMS completed its initial public offering. ANMR has an approximately 61%
ownership interest in Advanced Mammography Systems, Inc. ("AMS"), a
publicly-traded company, which has developed a dedicated MR Breast Imaging
system that is pending U. S. Food and Drug Administration ("FDA") clearance
for commercial use. AMS is traded on the NASDAQ stock market under the
ticker symbol MAMO (see Note 7 regarding the definitive merger agreement
between the Company and AMS).
Imaging and Rehabilitation Services
-----------------------------------
The Imaging and Rehabilitation Services segment consists of Medical
Diagnostics, Inc. ("MDI"), which the Company acquired on August 31, 1995 as
the initial phase of the Company's strategy to penetrate and expand its
business into MRI and rehabilitation services. MDI is an operator and
manager of a network of mobile and fixed MRI units in Massachusetts, New
York, Virginia, West Virginia and Tennessee. MDI also provides Single
Photon Emission Computer Tomography
<PAGE>
("SPECT") nuclear medicine imaging services, Computerized Axial
Tomography ("CT") medical imaging services and physical therapy services.
MDI operates much of its business through various partnerships and
joint ventures in which MDI or a wholly-owned subsidiary of MDI serves
as a general partner.
Note 3 - The GEMS Agreement
---------------------------
In July 1994, the Company concluded an agreement with General Electric
Medical Systems ("GEMS") for the sale of 3T and 4T research MR systems to
GEMS through June 1997. These systems, which have not yet been submitted
to the FDA for clearance for commercial use, will be sold to research
institutions throughout the world. To date, very high field systems
utilizing "InstaScan" have been installed at University of Florida at
Gainsville and the University of California at Los Angeles ("UCLA"). Two
systems are expected to be shipped to universities in Japan during the
second and third quarters of fiscal 1996. In addition, a 3T system
installed at the University of Pittsburgh and a 4T system at the National
Institutes of Health were upgraded with the InstaScan product.
The Company had marketed InstaScan through joint marketing agreements
with GEMS. The 1993 Agreement had provided for GEMS to purchase 100
InstaScan units over a two year period which ended on December 31, 1994,
and if GEMS did not achieve the minimum purchases it was to have paid
certain amounts as a penalty. In July 1994, the 1993 Agreement was
modified to commit revenues realized from the sale of 3T and 4T systems
through December 31, 1995 towards GEMS' obligation under the 1993
Agreement. As of January 31, 1996, GEMS has purchased 17 InstaScan systems
and two 3T/4T systems and two additional units are expected to be delivered
to sites in Japan during the second and third quarters of fiscal 1996.
As of January 31, 1996, GEMS had not satisfied its minimum obligations
under the InstaScan contract. The minimum purchase obligation is subject
to usual conditions of sale, including changes in health care regulation
covering MRI products. In January 1996, the Company reached an agreement
with GEMS to extend the contract between the companies whereby the Company
is the exclusive system integrator for 3T and 4T MR imaging systems
through June 1999 and extended the period for the payment of the minimum
purchase obligation.
Note 4 - AMS (Subsidiary) Escrow Shares
---------------------------------------
In July 1992, the Company licensed (the "ANMR License Agreement") to
AMS to use the Company's technology in the development of a dedicated MR
Breast Imaging system. As consideration for the ANMR License Agreement,
AMS paid to the Company $1,680,000 and issued 4,000,000 shares of its
common stock, of which 2,750,000 shares are subject to an escrow agreement
for release based upon AMS achieving certain levels of pretax income or
share price in the future as follows: (a) 916,667 escrow shares are
released if AMS's minimum pretax income is at least $3.0 million during
fiscal year 1995 and (b) the remaining 1,833,333 escrow shares are released
or, if none of the escrow shares have been released under (a), then all
2,750,000 of the escrow shares are released, if (i) AMS's minimum pretax
income is at least $5.0 million during fiscal year 1995; or (ii) AMS's
minimum pretax income is at least $8.0 million during fiscal year 1996; or
(iii) AMS's Common Stock averages in excess of $20.00 per share for 30
consecutive days. On May 1, 1997, all escrow shares not released from
escrow will be forfeited and contributed to the capital of AMS. If and
when the shares are released from escrow, AMS will incur an expense
<PAGE>
based on the fair market value of AMS Common Stock at the time they are
released. For consolidation purposes, the Company treats the escrow
shares as if they were outstanding.
The accompanying consolidated financial statements reflect the
minority interest of the public stockholders. All significant intercompany
transactions between the Company and AMS have been eliminated in
consolidation.
Note 5 - Pro Forma Financial Information
----------------------------------------
Effective August 31, 1995, Medical Diagnostics, Inc. ("MDI") merged
(the "Merger") with a wholly-owned subsidiary of the Company. In
connection with the Merger, MDI entered into a loan and security agreement
with a bank to finance the cash portion of the merger. The acquisition has
been accounted for under the purchase method of accounting and the purchase
price of $29,806,000, exclusive of related costs, consisted of cash of
approximately $11,196,000 and stock valued at approximately $18,610,000.
In addition, approximately 2,332,000 warrants to purchase ANMR stock at
$3.75 per share were issued to MDI shareholders. The purchase price and
costs associated with the acquisition exceeded the fair value of the net
assets acquired by approximately $26,978,000 which has been assigned to
goodwill and is being amortized on a straight-line basis over thirty years.
The following unaudited pro forma financial information combines the
results of the Company and the acquired entity as if these acquisitions had
occurred on October 1, 1994, after giving effect to amortization of
goodwill and deferred financing fees, increased interest expense on the
borrowings, reversal of direct acquisition costs, reversal of tax benefit
recorded and decreases in interest income. The pro forma financial
information does not purport to be indicative of what would have occurred
had the acquisitions been made as of October 1, 1994 or results that may
occur in the future.
Three months ended
December 31,1994
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Net revenues $5,562,000
Net loss $(2,783,000)
Loss per share $(0.09)
Note 6 - Business Segment Information
-------------------------------------
The nature of the products and services classified in the business
segments presented herein are described in Note 2. Imaging Systems
includes revenues and expenses of the Company's manufacturing business and
Imaging and Rehabilitation Services includes the revenues and expenses of
the Company's Services business.
For the three months ended December 31, 1995:
Imaging and
Imaging Rehabilitation
Systems Services Consolidated
------ ------- ------------
Sales $49,000 $6,155,000 $6,205,000
Operating income (loss) (2,069,000) 900,000 (1,169,000)
Identifiable assets 39,926,000 16,577,000 56,503,000
Depreciation and amortization 363,000 473,000 836,000
Capital expenditures 20,000 13,000 33,000
<PAGE>
Note 7 - Definitive Merger Agreement
------------------------------------
On February 4, 1996, the Company entered into an Agreement and Plan of
Merger with AMS. Pursuant to that agreement, AMS shareholders (other than
ANMR) will receive, on a tax-free basis, shares of the Company's Common
Stock for each AMS share, with the actual number of shares of ANMR Common
Stock to be issued will be determined by dividing $2.625 by the average
closing price of ANMR Common Stock over a 30-day trading period ending five
days prior to the closing of the transaction, provided that ANMR will not
issue more than 1.297059 shares or fewer than 1.173529 shares for each
share of AMS Common Stock. Upon completion of the merger, AMS will operate
as a wholly-owned subsidiary of the Company. Completion of the merger is
subject, among other things, to AMS shareholder approval. The Company and
AMS will file shortly with the Securities and Exchange Commission a
registration statement including a proxy statement for AMS shareholders and
a prospectus for the shares of ANMR Common Stock to be issued in the
merger.
<PAGE>
FORM 10-Q
SIGNATURES
Pursuant to the requirements 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.
Advanced NMR Systems, Inc.
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(Registrant)
Date February 23, 1996 /s/ Jack Nelson
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Jack Nelson
Chief Executive Officer
Date February 23, 1996 /s/ Charles M. Moche
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Charles M. Moche
Chief Financial Officer
