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 March 31, 1997
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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 (IRS Employer Identification No.)
of incorporation or
organization)
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 May 2, 1997, there were 43,747,628 shares of Common Stock,
$.01 par value, outstanding.
<PAGE>
FORM 10-Q/A
AMENDMENT NO. 1
The undersigned registrant hereby amends the following items,
financial statements, exhibits or other portions of its Form 10-Q
for the quarterly period ended March 31, 1997 as set forth in
the pages attached hereto:
(list all such items, financial statements, exhibits or other
portions amended)
1. Item 1 Financial Statements - Amended to reflect a change
in accounting for the May 1996 issuance of the convertible
preferred stock and debentures. (See Note 1 in NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED))
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FORM 10-Q/A
ADVANCED NMR SYSTEMS, INC. AND SUBSIDIARIES
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INDEX
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PART I. FINANCIAL INFORMATION Page No.
--------------------- --------
Item 1. Financial Statements
Consolidated Balance Sheets:
March 31, 1997 and September 30, 1996 . . . . 4
Consolidated Statements of Operations:
Quarters and Six Months Ended
March 31, 1997 and March 31, 1996 . . . . . . 5
Consolidated Statement of Stockholders' Equity . 6
Consolidated Statements of Cash Flows:
Six Months Ended March 31, 1997
and March 31, 1996 . . . . . . . . . . . . . 7
Notes to Consolidated Financial Statements . 8 - 11
Signature . . . . . . . . . . . . . . . . . . . . . . . 12
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FORM 10-Q/A
ADVANCED NMR SYSTEMS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS March September
31, 30,
1997 1996
------- -----------
Current assets:
Cash and cash equivalents $ 6,956,164 $3,287,880
Cash, restricted 1,705,859 -0-
Accounts receivable, net of
reserve for bad debts of
$666,063 At March 31, 1997
and $2,459,000 at
September 30, 1996 2,786,434 8,015,083
Inventories 481,879 526,597
Other current assets 150,848 1,002,846
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Total current assets 12,081,184 12,832,406
----------- -----------
Equipment, building, furniture
and leasehold improvements, net 928,656 9,581,564
Goodwill, net 2,454,244 26,205,525
Investment in and advances to
unconsolidated subsidiary 1,470,183 1,440,191
Other 140,096 664,844
----------- -----------
TOTAL $17,074,363 $50,724,530
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 573,931 $ 1,870,274
Accrued expenses 1,364,285 3,143,158
Other current liabilities 33,667 59,326
Current portion of long-term debt
and capital lease obligations 674,814 14,495,637
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Total current liabilities 2,646,697 19,568,395
========== ===========
Long-term debt and capital lease 680,994 5,682,719
obligations, less current portion
Minority interest in net assets of -0- 1,654,993
consolidated entities
Stockholders' equity:
Preferred stock, $.01 par value;
authorized 1,000,000 shares; issued,
-0- shares at March 31, 1997 and 2,194
shares at September 30, 1996 -0- 22
Common stock, $.01 par value;
authorized 50,000,000 shares;
issued 43,747,628 at March 31,
1997 and 34,180,777 at
September 30, 1996 437,476 341,808
Additional paid-in capital 55,776,542 55,392,656
Accumulated deficit (42,465,096) (31,913,813)
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13,748,922 23,820,673
Less: treasury stock, at cost 225,000 2,250 2,250
common shares ----------- -----------
Total stockholders' equity 13,746,672 23,818,423
----------- -----------
TOTAL $17,074,363 $50,724,530
=========== ===========
The accompanying notes to financial statements are an integral
part hereof.
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FORM 10-Q/A
ADVANCED NMR SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Six Months Ended
March 31, March 31,
1997 1996 1997
---- ---- 1996
---- ----
Revenues:
Net patient service 4,296,284 6,266,083 10,687,505 12,279,493
revenue
Management fees and 79,382 243,663 287,316 385,631
other --------- --------- ---------- ----------
Total revenues 4,375,666 6,509,746 10,974,821 12,665,124
--------- --------- ---------- ----------
Operating expenses:
Cost of service 3,013,309 3,974,914 7,416,198 7,754,628
operations
Selling, general and 1,060,595 2,680,925 2,369,053 5,120,355
administrative
Provision for bad debt 285,669 499,375 848,032 973,364
and collection costs ---------- ---------- ---------- ----------
Total operating 4,359,573 7,155,214 10,633,283 13,848,347
expenses ---------- ---------- ---------- ----------
Operating income 16,093 (645,468) 341,538 (1,183,223)
(loss)from continuing
operations
Other income 10,210 126,263 233,070 126,263
Loss on sale of imaging (9,232,361) -0- (9,232,361) -0-
business
Interest income 21,276 50,392 35,826 142,539
Interest expense (413,859) (498,723) (915,399) (989,503)
---------- ---------- ---------- ----------
Loss from continuing
operations before
minority interest, equity (9,598,641) (967,536) (9,537,326) (1,903,924)
in loss of subsidiary and
provision for taxes
Minority interests in net
income (loss) of (26,243) 76,042 (202,234) 59,656
consolidated entities
Equity in net loss of (483,438) -0- (958,068) -0-
unconsolidated subsidiary ---------- ---------- ---------- ----------
Loss from continuing (10,108,322) (891,494) (10,697,628) (1,844,268)
operations before income
taxes
Provision for income 10,000 (17,983) 103,445 (17,983)
taxes ---------- ---------- --------- ----------
Loss from continuing (10,098,322) (904,477) (10,594,183) (1,862,251)
operations
Income (loss) from 687 159,469 42,900 (457,439)
operations of ---------- ---------- ---------- ----------
discontinued division
Net loss $(10,097,635) $(750,008)$(10,551,283) $(2,319,690)
============ ========== ============ ===========
Income (loss) per common
share:
Income (loss) from $(.24) $(.03) $(.27) $(.06)
continuing operations
Income (loss) from .00 .01 .00 (.02)
operations of ------------------------ ------------ ------------
discontinued division
Net loss per share $(.24) $(.02) $(.27) $(.08)
======================== ============ ============
Weighted average number 42,283,039 30,207,173 38,770,484 30,186,913
of shares outstanding ======================= ============ ============
The accompanying notes to financial statements are an integral part hereof.
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<PAGE>
FORM 10-Q/A
ADVANCED NMR SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
(Unaudited)
Common Stock Preferred Stock Addit-
ional
Paid-In
Shares Amount Shares Amount Capital
------ ----- ------ ------ ---------
Balance as previously
reported - September 30,
1996 34,180,777 $341,808 2,194 $22 $53,616,726
Net adjustment related
to beneficial conversion
feature of convertible
preferred stock and
convertible debentures -- -- -- -- 1,233,230
Conversion of preferred
stock 9,566,851 95,668 (2,194) (22) (95,646)
Increase in
proportionate share of
subsidiary's equity
related to sale of -- -- -- -- 871,466
subsidiary's stock
Cumulative effect of
forfeiture of escrow
share -- -- -- -- (391,934)
Increase in proportionate
share of subsidiaries'
capital -- -- -- -- 542,700
Net loss for the six
months ended March
31, 1997 -- -- -- -- --
--------- ------- ---- --- -----------
Balance --
March 31, 1997 43,747,628 $437,476 -0- -0- $55,776,542
========== ======== ==== ==== ===========
Treasury Stock
Accumulated
Deficit Shares Amount
------- ------ ------ Total
Balance as previously
reported - September
30, 1996 $(30,137,883) 225,000 $(2,250) $23,818,423
Net adjustment related
to beneficial conversion
feature of convertible
preferred stock and
convertible debentures (1,775,930) -- -- (542,700)
Conversion of
preferred stock -- -- --
Increase in
proportionate
share of subsidiary's
equity related to sale -- -- -- 871,466
of subsidiary's stock
Cumulative effect of
forfeiture of escrow
share -- -- -- (391,934)
Increase in proportionate
share of subsidiaries'
capital -- -- -- 542,700
Net loss for the six
months ended March (10,551,283) -- -- (10,551,283)
31, 1997 ------------ ------- ------- ----------
Balance --
March 31, 1997 $(42,465,096) 225,000 $(2,250) $13,746,672
============ ======= ======= ===========
The accompanying notes to financial statements are an integral part hereof.
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<PAGE>
FORM 10-Q/A
ADVANCED NMR SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Six Months
Ended Ended March
March 31, 31, 1996
1997
Cash flows from operating activities:
Net loss (10,551,283) (2,319,960)
Adjustments to reconcile net loss to net cash
Used in operating activities:
Loss on sale of imaging business 9,232,361 -0-
Minority interest in net income (loss) of 202,234 (59,656)
consolidated entities
Equity in loss of unconsolidated subsidiary 958,068 -0-
Depreciation and amortization 749,756 1,673,937
Changes in assets and liabilities:
Accounts receivable, net 51,567 (678,678)
Inventories 44,718 (1,979,318)
Other current assets 493,886 216,771
Accounts payable and accrued expenses (1,409,241) 2,004,653
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Net cash used in operating activities (227,934) (1,141,981)
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Cash flows from investing activities:
Purchase of imaging and rehabilitation -0- (1,650,000)
business
Proceeds from sale of imaging business 8,083,839 -0-
Patent costs -0- (30,802)
Advances to unconsolidated subsidiaries (508,528) -0-
Purchase of minority interest in (1,497,842) -0-
Rehabilitation business
Purchase of equipment, furniture and (1,890,750) (357,993)
leaseholds improvements
Other assets 250,838 (45,116)
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Net cash used in investing activities 4,437,557 (2,083,911)
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Cash flows from financing activities:
Exercise of stock options -0- 130,667
Proceeds from issuance of long-term debt 1,842,707 680,000
Financing of purchase of minority interest 1,300,000 -0-
in Rehabilitation business
Repayment of long-term debt and capital lease (1,507,526) (1,226,286)
obligations
Distributions to minority interests (470,661) (558,000)
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Net cash provided in financing activities 1,164,520 (973,619)
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NET INCREASE (DECREASE) IN CASH AND CASH 5,374,143 (4,199,511)
EQUIVALENTS
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,287,880 7,541,508
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CASH AND CASH EQUIVALENTS, END OF PERIOD $8,662,023 $3,342,997
========== ===========
Supplement disclosures of cash flow information:
Interest paid during the period $ 544,565 $1,044,406
========== ===========
Supplemental disclosures of Non-cash and
Investing and Financing Activities:
Additional to capital leases $1,870,874
===========
See statement of stockholders' equity for amounts of non-cash charges
related to beneficial conversion features.
The accompanying notes to financial statements are an integral part hereof.
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<PAGE>
FORM 10-Q/A
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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Note 1 Basis of Presentation
----------------------------
The accompanying financial statements of Advanced NMR Systems,
Inc. ("ANMR" or the "Company") have been restated to include
adjustments to the September 30, 1996 balances of additional paid
in capital and accumulated deficit to reflect a change in accounting
for the May 1996 issuance of certain convertible securities by ANMR
and Advanced Mammography Systems, Inc. ("AMS") whereby the
beneficial conversion feature of the securities has been recorded
as a dividend in the case of convertible preferred stock and as
additional interest expense in the case of convertible debentures.
This amended Form 10-Q should be read in conjunction with all
subsequent filings with the Securities and Exchange Commission
which disclose significant developments including a proposed merger
of ANMR and AMS.
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 year ended September 30, 1996.
Note 2 The Company
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In August 1996, the Company announced a new strategic
direction, whereby the Company would focus on the development of
breast imaging centers and on its Imaging and Rehabilitation
Services business. The Company would also continue to provide
very high field MRI systems for clinical applications and
advanced research through its agreement with GE Medical Systems
( GEMS ) (see Note 3). From its inception through November 1992,
the Company engaged exclusively in research and development
activities for its Instascan ultrafast magnetic resonance
imaging system. In 1992, the Company received FDA clearance and
commenced commercial marketing activities up until August 1996,
when the Company discontinued the manufacture of its InstaScan (TM)
product.
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FORM 10-Q/A
On February 27, 1997, Medical Diagnostics, Inc., a wholly
owned subsidiary of the Company merged with MDI Acquisition
Corporation, a newly formed wholly-owned subsidiary of US
Diagnostic Inc. ( USD ) and became a wholly-owned subsidiary of
USD. The Merger was effected pursuant to an Agreement and Plan of
Merger, dated January 20, 1997 (the Merger Agreement ). See
Note 6.
On March 21, 1997, the Company acquired the remaining 25%
minority interest in the Rehabilitation Business for $1.5 million
which included a seller note of $1.3 million, maturing October
1998, payable quarterly with a balloon payment of $200,000.
Note 3 The GEMS Agreement
-------------------------
In July 1994, the Company concluded an agreement with GEMS
for the sale of 3T and 4T research MR systems to GEMS through
June 1999. These systems, which were not submitted to the FDA
for clearance for commercial use, were sold to research
institutions throughout the world. Very high field systems have
been installed at the University of Florida at Gainesville, the
University of California at Los Angeles, Massachusetts General
Hospital in Boston and two universities in Japan. 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 Company's InstaScan product. In June 1995, 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. At December 31, 1996, there
are twenty-four (24) Instascan systems and seven (7) 3T/4T systems
in the field. The Company will continue its exclusive contract
with GEMS to provide engineering integration of very high field
3T and 4T MRI systems through June 1999.
Note 4 AMS
----------
In connection with the AMS January 1993 public offering, the
Company, which was the sole stockholder of AMS, placed in escrow
an aggregate of 2,750,000 (the "Escrow Shares") of the 4,000,000
shares of Common Stock it owned. On May 1, 1997, all shares
subject to the escrow were forfeited as a result of AMS' failure
to achieve certain financial milestones, which if achieved would
have resulted in the release of the escrow shares to the Company.
Upon the forfeiture of the escrowed shares, the Company's
interest in AMS was reduced to approximately 16%.
In May 1996, AMS closed a private placement (the "AMS
Placement") of $3 million principal 4% convertible debentures.
Net proceeds from the AMS Placement were approximately $2,752,000
after payment of fees and related expenses. As of January 31,
1997, an additional 1,748,364 shares of common stock had been
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FORM 10-Q/A
issued in connection with the conversion of these debentures at
which time the Company's percentage ownership of AMS was reduced
to approximately 48%. Accordingly, as of September 30, 1996, the
Company changed from consolidation of AMS to the equity method of
accounting for its investment in AMS.
Note 5 Private Placement of ANMR Convertible Preferred Stock and
----------------------------------------------------------------
Private Placement of AMS Convertible Debentures
-----------------------------------------------
In May 1996, ANMR closed a private placement (the
"Placement") of $3.7 million principal amount of newly issued
Series A Convertible Preferred Stock, $.01 par value, (the
"Preferred Stock"). Preferred Stock shareholders are entitled to
receive dividends at a rate of $40.00 per share per annum, when
and as declared by the Board of Directors of the Company. At
January 31, 1997, all 3,700 shares had been converted into
13,488,320 shares of Common Stock. The net proceeds from the
Placement of approximately $3,320,000, after payment of fees and
related expenses, was being used for working capital.
Note 6 MDI Merger with USD and Related Pro Forma Financial
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Information
------------
On February 27, 1997, MDI, a wholly-owned subsidiary the
Company, merged with MDI Acquisition Corporation, a newly-formed
wholly-owned subsidiary of USD and became a wholly-owned
subsidiary of USD. The Merger was effected pursuant to an
Agreement and Plan of Merger, dated January 20, 1997.
At the effective time of the Merger, upon conversion of the
MDI shares, USD paid the Company $22,000,000 (the "Merger
Consideration") as follows: (I) to Chase Manhattan Bank N.A.
(the "Bank"), on behalf of obligations of MDI which were
guaranteed by the Company, an amount sufficient to fully satisfy
all of MDI's obligations to the Bank (approximately $12,000,000)
and (ii) the remainder of the Merger Consideration (approximately
$10,000,000) to the Company. As a result of the Merger, USD
assumed approximately $9,000,000 in payment obligations under
MDI s capital leases. The Company paid a financial advisor fee
to Leeds Group Inc. and other expenses related to the Merger.
In addition, the Company maintained letters of credit in the
aggregate amount of $700,000 securing certain of the capital
leases assumed by USD, for which the Company received a $700,000
note from USD repayable on December 31, 1997 in the event the
letters of credit are not replaced or removed. USD agreed to use
to its best efforts to replace those letters of credit or to
remove the requirement for them. There are also mutual
indemnifications between the Company and USD whereby the Company
has indemnified USD from any claims arising from the termination
of the Key Employment Agreement of John A. Lynch, MDI s former
Chief Executive Officer and from any losses arising from the
lawsuits between MDI and Raytel Medical Corporation, et al,
("Raytel"). In connection with the Raytel litigation $1,000,000
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FORM 10-Q/A
of the sales price and all of the Company s unescrowed shares in
AMS have been placed in a blocked account as security until the
litigation is settled or decided by a trial court.
The following unaudited pro forma financial information sets
forth the results of the Company as if the Merger of MDI with USD
had occurred prior to October 1, 1996. The pro forma financial
information does not purport to be indicative of what would have
occurred had the acquisition been made as of October 1, 1996 or
results that may occur in the future.
Six months ended
March 31, 1997
--------------
Net revenues $ 2,632,000
Net Loss $(1,104,000)
Loss per share $(0.03)
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FORM 10-Q/A
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.
--------------------------
(Registrant)
Date: August 4, 1997
/s/ Steven J James
--------------------------
Steven J James
Chief Financial Officer
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