UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________
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, 1996
-----------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________ to ______________
Commission File Number: 0-11914
-------
Advanced NMR Systems, Inc.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-2457487
------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
46 Jonspin Road, Wilmington, Massachusetts 01887
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(Address or principal executive offices) (Zip Code)
(508) 657-8876
----------------------------------------------------
(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
----- -----
As of January 31, 1997, there were 43,747,628 shares of Common Stock, $.01
par value, outstanding.
<PAGE>
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 December 31, 1996 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))
2
<PAGE>
ADVANCED NMR SYSTEMS, INC. AND SUBSIDIARIES
--------------------------------------------
INDEX
-----
PART I. FINANCIAL INFORMATION Page No.
--------------------- --------
Item 1. Financial Statements
Consolidated Balance Sheets:
December 31, 1996 and September 30, 1996 4
Consolidated Statements of Operations:
Three Months Ended December 31, 1996
and December 31, 1995 5
Consolidated Statement of Stockholders' Equity 6
Consolidated Statements of Cash Flows:
Three Months Ended December 31, 1996
and December 31, 1995 7
Notes to Consolidated Financial Statements 8 - 10
PART II. OTHER INFORMATION
-----------------
Signature 11
3
<PAGE>
FORM 10-Q/A
Part I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
ADVANCED NMR SYSTEMS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS December 31, September 30,
------ 1996 1996
----------- ------------
Current assets:
Cash and cash equivalents . . . . . . . . . $ 1,826,053 $ 3,287,880
Accounts receivable, net of reserve for bad
debts of $2,527,000 at December 31, 1996
and $2,459,000 at September 30, 1996 . . 7,931,349 8,015,083
Inventories . . . . . . . . . . . . . . . . 465,975 526,597
Other current assets . . . . . . . . . . . 805,374 1,002,846
----------- -----------
Total current assets . . . . . . . . . . 11,028,751 12,832,406
----------- -----------
Equipment, building, furniture and leasehold
improvements, net . . . . . . . . . . . . . 10,938,437 9,581,564
Goodwill, net . . . . . . . . . . . . . . . . 25,978,963 26,205,525
Investment in and advances to unconsolidated
subsidiary . . . . . . . . . . . . . . . . 1,377,045 1,440,191
Other . . . . . . . . . . . . . . . . . . . . 638,183 664,844
----------- -----------
TOTAL . . . . . . . . . . . . . . . . . . . . $49,961,379 $50,724,530
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
-------------------------------------
Current liabilities:
Accounts payable . . . . . . . . . . . . . $ 1,354,000 $ 1,870,274
Accrued expenses . . . . . . . . . . . . . 2,461,645 3,143,158
Other current liabilities . . . . . . . . . 55,167 59,326
Current portion of long-term debt and 14,459,650 14,495,637
capital lease obligations . . . . . . . . ----------- -----------
Total current liabilities . . . . . . . 18,330,462 19,568,395
----------- -----------
Long-term debt and capital lease obligations,
less current portion 6,546,409 5,682,719
Minority interest in net assets of
consolidated entities . . . . . . . . . . . 1,685,704 1,654,993
Stockholders' equity:
Preferred stock, $.01 par value; authorized
1,000,000 shares; issued, 1,153 shares at
December 31, 1996 and 2,194 shares at
September 30, 1996 . . . . . . . . . . . 12 12
Common stock, $.01 par value; authorized
50,000,000 shares; issued 38,341,688 at
December 31, 1996 and 34,180,777 share at
September 30, 1996 383,417 341,808
Additional paid-in capital . . . . . . . . . 55,351,057 55,392,656
Accumulated deficit . . . . . . . . . . . . . (32,333,432) (31,913,813)
----------- -----------
23,401,054 23,820,673
Less: treasury stock, at cost -225,000 common 2,250 2,250
shares . . . . . . . . . . . . . . . . . . ----------- -----------
Total stockholders' equity . . . . . . . 23,398,804 23,818,423
----------- -----------
TOTAL . . . . . . . . . . . . . . . . . . . . $49,961,379 $50,724,530
=========== ===========
The accompanying notes to financial statements are an integral part hereof.
4
<PAGE>
FORM 10-Q/A
ADVANCED NMR SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended
December 31,
-------------------------
1996 1995
--------- --------
Revenues:
Net patient service revenue . . . . . . . . . $6,413,921 $6,013,410
System sales . . . . . . . . . . . . . . . . 232,548 --
Management fees and other . . . . . . . . . . 208,121 141,968
---------- ----------
Total revenues . . . . . . . . . . . . . . . 6,854,590 6,155,378
---------- ----------
Operating expenses:
Cost of service operations . . . . . . . . . 4,330,768 3,779,714
Cost of system sales . . . . . . . . . . . . 190,336 --
Research and development . . . . . . . . . . -- 221,824
Selling, general and administrative . . . . . 1,257,299 1,434,113
Provision for bad debt and collection costs . 562,364 473,989
---------- ----------
Total operating expenses . . . . . . . . . 6,340,767 5,909,640
---------- ----------
Operating income from continuing operations . . 513,823 245,738
Other income . . . . . . . . . . . . . . . . . 222,860 --
Interest income . . . . . . . . . . . . . . . . 14,549 92,147
Interest expense . . . . . . . . . . . . . . . (501,540) (475,960)
---------- ----------
Income (loss) from continuing operations before
minority interest, equity in loss of
subsidiary and provision for taxes . . . . . 249,692 (138,075)
Minority interests in net income of
consolidated entities . . . . . . . . . . . . (174,139) (16,386)
Equity in net loss of subsidiary . . . . . . . (474,630) --
---------- ----------
Loss from continuing operations before income
taxes . . . . . . . . . . . . . . . . . . . . (399,077) (154,461)
Provision for income taxes . . . . . . . . . . (20,542) --
---------- ----------
Loss from continuing operations . . . . . . . . (419,619) (154,461)
Loss from operations of discontinued division . -- (1,415,221)
---------- ----------
Net loss . . . . . . . . . . . . . . . . . . . $(419,619) $(1,569,682)
======= ==========
Loss per common share:
Loss from continuing operations . . . . . . . . $(.01) $(.01)
Loss from operations of discontinued division . -- (.04)
--- ---
Net loss per share . . . . . . . . . . . . . . $(.01) $(.05)
=== ===
Weighted average number of shares outstanding . 35,334,290 30,167,696
========== ==========
The accompanying notes to financial statements are an integral part hereof.
5
<PAGE>
FORM 10-Q/A
ADVANCED NMR SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
Common Stock Preferred Stock
-------------------- ---------------
Shares Amount Shares Amount
------ ------ ------ ------
Balance as previously
reported - September
30, 1996 . . . . . . . . . . 34,180,777 $341,808 2,194 $ 22
Net adjustment related to
beneficial conversion
feature of convertible
preferred stock and
convertible debentures . . . -- -- -- --
Increase in proportionate
share of subsidiaries
capital . . . . . . . . . . . -- -- -- --
Conversion of preferred
stock . . . . . . . . . . . . 4,160,911 41,609 (1,041) (10)
-- -- -- --
Net loss for the period . . . . ---------- -------- ----- -----
38,341,688 $383,417 1,153 $ 12
Balance - December 31, 1996 . . . ========== ======== ===== =====
Additional
Paid-in Accumulated
Capital Deficit
----------- ---------------
Balance as previously
reported- September 30, 1996 . . . . $53,616,726 $(30,137,883)
Net adjustment related to
beneficial conversion
feature of convertible
preferred stock and
convertible debentures . . . . . . 1,233,230 (1,775,930)
Increase in proportionate
share of subsidiaries
capital . . . . . . . . . . . . . . 542,700 --
Conversion of preferred stock . . . . (41,599) --
-- ( 419,619)
Net loss for the period . . . . . . . ---------- ----------
$55,351,057 $(32,333,432)
Balance - December 31, 1996 . . . . . . ========== ==========
Treasury Stock
------------------
Shares Amount Total
------ ------ -----
Balance as previously
reported - September
30, 1996 . . . . . . . . . . . . 225,000 $(2,250) $23,818,423
Net adjustment related to
beneficial conversion
feature of convertible
preferred stock and
convertible debentures . . . . -- -- (542,700)
Increase in proportionate
share of subsidiaries
capital . . . . . . . . . . . . -- -- 542,700
Conversion of preferred stock . . -- -- --
-- -- ( 419,619)
Net loss for the period . . . . . ------- ----- ----------
225,000 $(2,250) $23,398,804
Balance - December 31, 1996 . . . . ======= ===== ==========
The accompanying notes to financial statements are an integral part hereof.
6
<PAGE>
FORM 10-Q/A
ADVANCED NMR SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Three Months Ended
December 31,
---------------------------
1996 1995
---- ----
Cash flows from operating activities:
Net loss . . . . . . . . . . . . . . . . . $(419,619) $(1,569,682)
Adjustments to reconcile net loss to net
cash used in operating activities:
Minority interest in net income of
consolidated entities . . . . . . . . . . 174,139 16,386
Depreciation and amortization . . . . . . . 776,742 836,376
Changes in assets and liabilities:
Accounts receivable, net . . . . . . . . 83,734 1,352,696
Inventories . . . . . . . . . . . . . . . 60,622 (2,123,601)
Other current assets . . . . . . . . . . 259,747 (315,674)
Accounts payable and accrued expenses . . (1,168,374) 183,828
--------- ---------
Net cash used in operating activities . . . (233,009) (1,619,671)
--------- ---------
Cash flows from investing activities:
Patent costs . . . . . . . . . . . . . . . -- (12,122)
Purchase of equipment, furniture and
leaseholds improvements . . . . . . . . . (1,878,912) (20,495)
(609) (45,116)
Other assets . . . . . . . . . . . . . . . --------- ---------
(1,879,521) (77,733)
Net cash used in investing activities . . . --------- ---------
Cash flows from financing activities:
Exercise of stock options . . . . . . . . . -- 20,815
Proceeds from issuance of long-term debt . 1,842,707 255,000
Repayment of long-term debt and capital
lease obligations . . . . . . . . . . . . (1,015,004) (530,433)
(177,000) (304,000)
Distributions to minority interests . . . . --------- ---------
650,703 558,618
Net cash provided in financing activities . --------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS . . (1,461,827) (2,256,022)
CASH AND CASH EQUIVALENTS, BEGINNING OF 3,287,880 7,542,508
PERIOD . . . . . . . . . . . . . . . . . . --------- ---------
$1,826,053 $5,286,486
CASH AND CASH EQUIVALENTS, END OF PERIOD . . ========= =========
Supplement disclosures of cash flow
information:
$544,565 $412,468
Interest paid during the period . . . . . . . ======= =======
See statement of stockholders
equity for amount of non-cash
charges related to beneficial
conversion features . . . . . . . . . . . . 1,233,230 --
========= =======
The accompanying notes to financial statements are an integral part hereof.
7
<PAGE>
FORM 10-Q/A
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
------------------------------------------------------
Note 1 Basis of Presentation
----------------------------
The accompanying financial statements 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 Advanced NMR Systems, Inc. ("ANMR" or the "Company")
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 the sale of an
ANMR subsidiary and 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
------------------
Through July 1996, the Company operated its business under
two segments consisting of Imaging Systems and Imaging and
Rehabilitation Services. In August 1996, the Company discontinued
the manufacture of its InstaScan[TM] product.
On January 20, 1997, ANMR and its wholly-owned subsidiary
Medical Diagnostics, Inc. ("MDI") signed a definitive agreement
to merge MDI's medical imaging services business into a
subsidiary of US Diagnostics, Inc. (NASDAQ: USDL) in exchange for
approximately $22 million in cash. The Company's physical
therapy services operations will be transferred to ANMR
concurrent with the closing. ANMR will retire the bank credit
facility totaling approximately $12 million. The transaction is
expected to close after receipt of certain government consents
including consent of the Federal Trade Commission under the Hart-
Scott-Rodino Antitrust Improvements Act.
Imaging Systems
---------------
ANMR was founded in 1983 to develop echo planar imaging
("EPI"), an ultrafast magnetic resonance imaging ("MRI")
technology. From its inception through November 1992, the
8
<PAGE>
FORM 10-Q/A
Company engaged exclusively in research and development
activities. In 1992, ANMR received U.S. Food and Drug
Administration ("FDA") clearance for its InstaScan[TM] system and
commenced commercial marketing activities to clinical
institutions. The Company, through its Imaging Systems business,
provides very high field MRI systems for clinical applications
and advanced research.
In July 1992, the Company formed Advanced Mammography
Systems, Inc. ("AMS") as a subsidiary for the purpose of
financing the development of its Aurora[TM] dedicated MR Breast
Imaging System. In early 1993, AMS completed its initial public
offering. Prior to August 1996, the Company held a 61% ownership
interest in AMS (including shares under an escrow arrangement
which will terminate in May 1997) which has since been reduced to
48% as the result of the conversion into AMS Common Stock of
certain AMS debentures which had been issued in a Regulation S
private placement. In February 1996, AMS was granted FDA
clearance for commercial use of its Aurora System. AMS is traded
on the NASDAQ stock market under the ticker symbol MAMO.
In August 1996, ANMR announced a new strategic direction
which it expects will leverage the Company's strength in
healthcare services and capitalize on the ongoing outsourcing
trend among healthcare providers seeking to increase operating
efficiencies while providing the highest quality patient care.
The Company intends to focus on its breast imaging centers and
fixed and mobile MRI services and to develop its rehabilitation
services business. As part of the Company's new mission, ANMR
will eliminate research, development and production of its
Instascan technology. In conjunction with this effort, ANMR had
reduced its work force to realign with the refocused research &
development effort. The Company expects to continue its contract
with General Electric Medical Systems ("GEMS") to serve as the
exclusive integrator of 3T and 4T MRI systems through June 1999.
Imaging and Rehabilitation Services
-----------------------------------
The Imaging and Rehabilitation Services segment consists of
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 ("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 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
9
<PAGE>
FORM 10-Q/A
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 (Subsidiary) Escrow Shares
-------------------------------------
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. The Company may vote the Escrow
shares, but cannot assign or transfer them while they remain
subject to the escrow. On May 1, 1997, all shares subject to the
escrow will be forfeited and contributed to the capital of AMS 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 will be reduced to
approximately 20%.
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, is being used for working capital.
In May 1996, AMS closed a private placement (the "AMS
Placement") of $3 million principal 4% convertible debentures.
Net proceeds from the AMS Placement was 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
issued in connection with the conversion of these debentures at
which time the Company's percentage ownership of AMS has been
reduced to approximately 48%. Accordingly, as of September 30,
1996, the Company has changed from consolidation of AMS to the
equity method of accounting for its investment in AMS.
10
<PAGE>
FORM 10-Q/A
SIGNATURE
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
11
