UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1997
-------------
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
------------------------------------------------------
(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 August 12, 1997, there were 43,747,628 shares of Common Stock,
$.01 par value, outstanding.
<PAGE>
FORM 10-Q
ADVANCED NMR SYSTEMS, INC. AND SUBSIDIARIES
-------------------------------------------
INDEX
-----
PART I. FINANCIAL INFORMATION Page No.
--------------------- --------
Item 1. Financial Statements
Consolidated Balance Sheets:
June 30, 1997 and September 30, 1996 3
Consolidated Statements of Operations:
Quarters and Nine Months Ended
June 30, 1997 and June 30, 1996 4
Consolidated Statement of Stockholders'
Equity 5
Consolidated Statements of Cash Flows:
Nine Months Ended June 30, 1997
and June 30, 1996 6
Notes to Consolidated Financial Statements 7 - 10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11 - 13
PART II. OTHER INFORMATION
-----------------
Item 1. Legal proceedings 14
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
2
<PAGE>
FORM 10-Q
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ADVANCED NMR SYSTEMS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED) September 30,
ASSETS June 30,1997 1996
------------ ------------
Current assets:
Cash and cash equivalents $ 5,913,106 $ 3,287,880
Cash, restricted 1,722,151 --
Accounts receivable, net of reserve for bad
debts of $607,000 at June 30, 1997 and
$2,459,000 at September 30, 1996 2,779,730 8,015,083
Inventories 481,797 526,597
Other current assets 217,511 1,002,846
------------ ------------
Total current assets 11,114,295 12,832,406
------------ ------------
Equipment, building, furniture and leasehold
improvements, net 955,524 9,581,564
Goodwill, net 2,417,844 26,205,525
Investment in and advances to unconsolidated
subsidiary 1,332,132 1,440,191
Other 165,022 664,844
------------ ------------
TOTAL $ 15,984,817 $ 50,724,530
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 663,663 $ 1,870,274
Accrued expenses 1,271,534 3,143,158
Other current liabilities 40,750 59,326
Current portion of long-term debt and capital
lease obligations 675,897 14,495,637
------------ ------------
Total current liabilities 2,651,844 19,568,395
------------ ------------
Long-term debt and capital lease obligations,
less current portion 512,610 5,682,719
Minority interest in net assets of
consolidated entities -- 1,654,993
Stockholders' equity:
Preferred stock, $.01 par value;
authorized 1,000,000 shares;
issued, -0- shares at June 30, 1997
and 2,194 shares at September 30, 1996 -- 22
Common stock, $.01 par value; authorized
50,000,000 shares; issued 43,747,628
at June 30, 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 (43,391,405) (31,913,813)
------------ ------------
12,822,613 23,820,673
Less: treasury stock, at cost
225,000 common shares 2,250 2,250
------------ ------------
Total stockholders' equity 12,820,363 23,818,423
------------ ------------
TOTAL $ 15,984,817 $ 50,724,530
============ ============
The accompanying notes to financial statements are an integral part hereof.
3
<PAGE>
FORM 10-Q
ADVANCED NMR SYSTEMS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Net patient service revenue 920,563 6,773,129 11,608,067 19,052,622
Management fees and other -- 146,254 287,316 531,885
------------ ------------ ------------ ------------
Total revenues 920,563 6,919,383 11,895,383 19,584,507
------------ ------------ ------------ ------------
Operating expenses:
Cost of service operations 770,836 4,216,004 8,269,199 11,970,632
Research and development -- 253,162 -- 750,957
Selling, general and
administrative 758,548 1,686,980 3,045,433 4,798,040
Provision for bad debt and
collection costs 1,810 603,510 849,842 1,576,874
------------ ------------ ------------ ------------
Total operating expenses 1,531,194 6,759,656 12,164,474 19,096,503
------------ ------------ ------------ ------------
Operating income (loss) from
continuing operations (610,631) 159,727 (269,091) 488,004
Other income 6,541 -- 239,611 126,263
Loss on sale of imaging business (144,922) -- (9,377,283) --
Interest income 113,848 78,839 149,674 221,378
Interest expense (34,656) (1,407,686) (950,056) (2,397,189)
------------ ------------ ------------ ------------
Loss from continuing operations
before minority interest, equity
in loss of subsidiary and
provision for taxes (669,820) (1,169,120) (10,207,145) (1,561,544)
Minority interests in net income
(loss) of consolidated entities -- 300,831 (202,234) 360,487
Equity in net loss of
unconsolidated subsidiary (232,041) -- (1,190,108) --
------------ ------------ ------------ ------------
Loss from continuing operations
before income taxes (901,861) (868,289) (11,599,487) (1,201,057)
Provision for income taxes (40,000) (10,000) 63,445 (27,983)
------------ ------------ ------------ ------------
Loss from continuing operations (941,861) (878,289) (11,536,042) (1,229,040)
Income (loss) from operations of
discontinued division 15,549 (1,358,129) 58,450 (3,327,068)
------------ ------------ ------------ ------------
Net loss $ (926,312) $ (2,236,418) $(11,477,592) $ (4,556,108)
============ ============ ============ ============
Income (loss) per common share:
Income (loss) from continuing
operations $ (.02) $ (.03) $ (.28) $ (.04)
Income (loss) from operations
of discontinued division (--) (.04) (--) (.11)
------------ ------------ ------------ ------------
Net loss per share $ (.02) $ (.07) $ (.28) $ (.15)
============ ============ ============ ============
Weighted average number of
shares outstanding 43,747,628 30,207,173 40,429,532 30,186,913
============ ============ ============ ============
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
4
<PAGE>
FORM 10-Q
ADVANCED NMR SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
ADDITIONAL
COMMON STOCK PREFERRED STOCK PAID-IN
SHARES AMOUNT SHARES AMOUNT CAPITAL
------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Balance -
As Restated - 34,180,77 $ 341,808 2,194 $ 22 $ 55,392,656
September 30, 1996
Conversion of
preferred stock 9,566,851 95,668 (2,194) (22) (95,646)
Increase in
proportionate
share of
subsidiary's
equity
Cumulative effect
of forfeiture of
escrow shares -- -- -- -- (391,934)
Net loss for the
nine months ended
June 30, 1997 -- -- -- -- --
------------ ------------ ------------ ---------- ------------
Balance -
June 30, 1997 43,747,628 $ 437,476 -0- -0- $ 55,776,542
============ ============ ============ ========== ============
</TABLE>
<TABLE>
<CAPTION>
ACCUMULATED TREASURY STOCK
DEFICIT SHARES AMOUNT TOTAL
------- ------ ------ -----
<S> <C> <C> <C> <C>
Balance -
As Restated - $(31,913,813) 225,000 $ (2,250) $ 23,818,423
September 30, 1996
Conversion of
preferred stock -- -- --
Increase in
proportionate
share of
subsidiary's
equity
Cumulative effect
of forfeiture of
escrow shares -- -- -- (391,934)
Net loss for the
nine months ended
June 30, 1997 (11,477,592) -- -- 11,477,592)
------------ ------------ ------------ ------------
Balance -
June 30, 1997 $(43,391,405) 225,000 $ (2,250) $ 12,820,363
============ ============ ============ ============
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
5
<PAGE>
FORM 10-Q
ADVANCED NMR SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
June 30, June 30,
1997 1996
------------ ------------
Cash flows from operating activities:
Net loss $(11,477,592) $ (4,556,108)
Adjustments to reconcile net loss
to net cash
Used in operating activities:
Loss on sale of imaging business 9,377,283 --
Minority interest in net income (loss) 202,234 (360,487)
of consolidated entities
Equity in loss of unconsolidated
subsidiary 1,190,108 --
Amortization of beneficial conversion
feature -- 883,333
Depreciation and amortization 871,047 2,527,343
Changes in assets and liabilities:
Accounts receivable, net 58,271 687,068
Inventories 44,800 (2,479,731)
Other current assets 427,223 674,463
Accounts payable and accrued expenses (1,405,177) 1,431,747
------------ ------------
Net cash (used) in operating activities (711,803) (1,192,372)
------------ ------------
Cash flows from investing activities:
Purchase of imaging and rehabilitation
business -- (1,650,000)
Proceeds from sale of imaging business 7,938,917 --
Patent costs -- (36,203)
Advances to unconsolidated subsidiaries (602,516) --
Purchase of minority interest in
Rehabilitation business (1,500,000) --
Purchase of equipment, furniture and (2,000,352) (527,184)
leaseholds improvements
Other assets 225,912 (211,310)
------------ ------------
Net cash provided (used) in investing
activities 4,061,961 (2,424,697)
------------ ------------
Cash flows from financing activities:
Exercise of stock options -- 130,667
Proceeds from issuance of convertible
debentures and warrants -- 2,751,950
Proceeds from issuance of preferred stock -- 3,316,645
Proceeds from issuance of long-term debt 1,842,707 680,000
Financing of purchase of minority
interest in Rehabilitation business 1,300,000 --
Repayment of long-term debt and capital
lease obligations (1,674,827) (3,452,246)
Distributions to minority interests (470,661) (759,500)
------------ ------------
Net cash provided in financing activities 997,219 2,667,516
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 4,347,377 (949,553)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 3,287,880 7,542,508
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 7,635,257 $ 6,592,955
============ ============
Supplement disclosures of cash flow information:
Interest paid during the period $ 924,117 $ 619,744
============ ============
Supplemental disclosures of Non-cash Investing
and Financing Activities:
Additions 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.
6
<PAGE>
FORM 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- ------------------------------------------------------
Note 1 Basis of Presentation
- ----------------------------
The accompanying financial statements for September 30, 1996 have
been restated to include adjustments to 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.
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 and on Form 10-K
and 10-K A for the year ended September 30, 1996.
Note 2 The Company
- ------------------
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(TM) 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.
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.
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.
7
<PAGE>
FORM 10-Q
Note 3 The Proposed Merger
- --------------------------
On June 23, 1997, the Company entered into an Agreement and Plan
of Merger ("Merger Agreement") with AMS, whereby AMS will merge (the
"AMS Merger") into AMS Merger Corp. ("Merger Corp."), a wholly owned
subsidiary of ANMR, and become a wholly owned subsidiary of ANMR. As a
condition of the AMS Merger, ANMR will amend its Certificate of
Incorporation to effect a one-for-ten Reverse Stock Split. In
consideration for the Merger, AMS shareholders will receive .4 of a
share of ANMR, on a post-Reverse Stock Split basis, in exchange for
each share of AMS stock, and outstanding AMS options and warrants
would be exchanged on a similar basis. The Company expects to complete
the AMS Merger in September, after approval by stockholders of AMS and
ANMR and other customary closing conditions
Note 4 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 through September 1996. A 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 June
30, 1997, there are twenty-four (24) Instascan systems and seven (7)
3T/4T systems in the field. The Company's exclusive contract with GEMS
to provide engineering integration of very high field 3T and 4T MRI
systems runs through June 1999. The Company is currently negotiating
with GEMS on a broad range of issues to resolve certain disputes
arising out of their agreements.
Note 5 AMS
- ----------
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 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.
8
<PAGE>
FORM 10-Q
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 the Escrow Shares were
forfeited as a result of AMS' failure to achieve certain financial and
market price milestones, which if achieved would have resulted in the
release of the Escrow Shares to the Company. Upon the forfeiture of
the Escrow Shares, the Company's interest in AMS was reduced to
approximately 16% of the outstanding AMS Common Stock.
Note 6 Private Placement of ANMR Convertible Preferred Stock
- ------------------------------------------------------------
In May 1996, ANMR closed a private placement (the "Placement") of
$3.7 million face 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 of
Preferred Stock 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 used for
working capital.
Note 7 MDI Merger with USD and Related Pro Forma Financial 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
"MDI Merger"). The MDI Merger was effected pursuant to an Agreement
and Plan of Merger, dated January 20, 1997.
At the effective time of the MDI Merger, 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 MDI
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 MDI 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 indemnification's 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,
9
<PAGE>
FORM 10-Q
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 of the
Merger Consideration 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 MDI Merger 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.
Nine months ended
June 30, 1997
-------------
Net revenues $ 3,225,000
Net Loss $(1,847,000)
Loss per share $(0.05)
10
<PAGE>
FORM 10-Q
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- -----------------------------------------------------------
AND RESULTS OF OPERATIONS
- -------------------------
The results of operations for the three and nine months ended
June 30, 1997 are not necessarily indicative of the results for
future periods. The following discussion should be read in
conjunction with the attached notes thereto, and with the
audited financial statements and notes thereto for the year
ended September 30, 1996.
Results of Operations
- ---------------------
Net patient service revenue totaled $921,000 and $11,608,000 for
the three and nine months ended June 30, 1997 versus $6,773,000 and
$19,053,000 for the three and nine months ended June 30, 1996. Cost of
service operations totaled $771,000 and $8,269,000 for the three and
nine months ended June 30, 1997 versus $4,216,000 and $11,970,000 for
the three and nine months ended June 30, 1996. These decreases were
largely the result of the MDI Merger in February 1997 partially offset
by increased rehabilitation service revenues and expenses associated
with the new MVA centers established in the second and third quarters
of fiscal 1996.
Management fees and other revenues for the three and nine months
ended June 30, 1997, include a $70,000 settlement with an equipment
manufacturer associated with the delay in delivery of imaging
equipment.
Selling, general and administrative expenses totaled $759,000 and
$3,045,000 for the three and nine months ended June 30, 1997 versus
$1,687,000 and $4,798,000 for the three and nine months ended June 30,
1996. This decrease is due to the change in the accounting treatment
of the Company's investment in AMS from consolidation to equity
accounting and due to the MDI Merger.
Other income includes a gain of $223,000 from the sale of certain
equipment.
Minority interests in net income of consolidated entities
consists of earnings allocated to MDI's joint venture partners. Prior
to September 1996, the allocated earnings were offset by losses
allocated to the AMS minority shareholders. The equity in net loss of
unconsolidated subsidiary reflects the Company's equity share of the
AMS loss subsequent to September 1996. Due to the MDI Merger in
February 1997, most of the categories included in the statements of
operations will decrease substantially compared to prior year periods.
11
<PAGE>
FORM 10-Q
Liquidity and Capital Resources
- -------------------------------
The Company has available cash and cash equivalents of $7,635,000
at June 30, 1997 (including $1,722,000 of restricted cash). Assuming
completion of the Merger with AMS, Advanced NMR intends to utilize the
funds for the continuing development of the AMS dedicated breast
imaging system, for the clinical research study being conducted on the
role of MRI in breast care and for the opening of breast imaging
centers.
If the AMS Merger is were not completed, Advanced NMR intends to
explore other strategic alternatives in order to enhance stockholder
value. Included among those options is the future expansion of its
Rehabilitation Services business and/or other service activities.
However, there can be no assurance that any transactions contemplated
would be consummated and, assuming consummation, Advanced NMR may
require additional capital, and there is no assurance that such
capital would be obtainable or on satisfactory terms.
The significant cash flows from investing activities for the
three and nine months ended June 30, 1997 include approximately
$7,939,000 in proceeds from the MDI Merger, $2,000,000 used for
medical imaging equipment additions and $1,500,000 used for the
acquisition of the minority interest in the Company's rehabilitation
business. Cash flows from financing activities include $1,843,000 of
proceeds from financing of medical equipment and $1,300,000 for the
purchase of the minority interest in the rehabilitation business
offset by principal payments on equipment debt.
Inflation
- ---------
To date, inflation has not had a material effect on the Company's
business. The Company believes that the effects of future inflation
may be minimized by controlling costs and increasing efficiency
through an increase in the volume of MRI examinations performed.
The Company is including the following cautionary statement in
its Report on Form 10-Q to make applicable and take advantage of the
safe harbor provisions of the Private Securities Litigation Reform Act
of 1995 for any forward-looking statements made by, or on behalf of
the Company. Forward-looking statements include statements concerning
plans, objectives, goals, strategies, future events or performance and
underlying assumptions and other statements, which are other than
statements of historical facts. Certain statements contained herein
are forward looking statements and accordingly involve risks and
uncertainties, which could cause actual results, or outcomes to differ
materially from those expressed in the forward-looking statements. The
Company's expectations, beliefs and projects are expressed in good
faith and are believed by the Company to have a reasonable basis,
including without limitations, management's examination of historical
operating trends, data contained in the Company's records and other
12
<PAGE>
FORM 10-Q
data available from third parties, but there can be no assurance that
management's expectations, beliefs or projections will result or be
achieved or accomplished. In addition to other factors and matters
discussed elsewhere herein, the following are important factors that,
in the view of the Company, could cause actual results to differ
materially from those discussed in the forward-looking statements:
technological advances by the Company's competitors, changes in health
care reform, including reimbursement programs, capital needs to fund
any delays or extensions of research programs, delays in product
development, lack of market acceptance of technology and the
availability of capital on terms satisfactory to the Company. The
Company disclaims any obligation to update any forward-looking
statements to reflect events or circumstances after the date hereof.
13
<PAGE>
FORM 10-Q
PART II OTHER INFORMATION
Item 1 Legal proceedings
During 1996, the Company became engaged in litigation with one of
its customers regarding the performance of five Instascan systems
sold to the customer. The suit, entitled International Magnetic
Systems, Inc. vs. Advanced NMR Systems, Inc. (Case No.
96-014750(03)), was filed in the Circuit Court of the 17th
Judicial Circuit in and for Broward County, Florida. Effective
August 4, 1997, the parties entered into a Settlement Agreement
and General Release whereby all claims and damages between the
parties were dismissed. As a result of the settlement, the
Company received a payment of $15,940 and took back title to two
Instascan systems that were held in storage during the dispute.
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Form 8-K
On February 27, 1997, the Company filed a Form 8-K announcing the
closing of the MDI Merger.
On April 16, 1997, the Company filed a Form 8-K/A, amending the
February 27, 1997 Form 8-K to include required Pro Forma
financial information as if the MDI Merger had occurred as of
October 1, 1995 and October 1, 1996.
On July 30, 1997, the Company filed a Form 8-K/A, further
amending the February 27, 1997 Form 8-K to reflect a change in
accounting for the May 1996 issuance of the convertible preferred
stock and debentures.
14
<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.
-------------------------
(Registrant)
Date: August 12, 1997 /s/ Jack Nelson
------------------ --------------------------------
Jack Nelson
Chief Executive Officer
Date: August 12, 1997 /s/ Steven J. James
------------------- --------------------------------
Steven J James
Chief Financial Officer
15
<PAGE>
EXHIBIT INDEX
Exhibit Description
------- -----------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM ADVANCED NMR SYSTEMS, INC. FORM 10-Q FOR
THE PERIOD ENDED JUNE 30, 1996, AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 9-MOS
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0
0
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</TABLE>
