<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Amendment August 27, 1997
MEDICAL RESOURCES, INC.
-----------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
Delaware 0-20440 13-3584552
-------- ------- ----------
(State or Other (Commission (I.R.S. Employer
Jurisdiction) File Number) Identification No.)
155 State Street, Hackensack, N.J. 07013
- --------------------------------------- -----
(Address of Principal Executive Office) (Zip Code)
Registrant's telephone number, including area code (201) 488-6230
--------------
</TABLE>
____________________________________________________________
AMENDMENT NO 3
The undersigned registrant hereby amends its
Current Report on Form 8-K, filed on January 9, 1996
to add Item 7 as set forth herein.
<PAGE>
Item 7. FINANCIAL STATEMENTS AND EXHIBITS.
----------------------------------
(a) Financial statement of business acquired
----------------------------------------
On January 9, 1996, Medical Resources, Inc. (the "Company") consummated the
acquisition of the business assets of MRI-CT, Inc. ("MRICT"). The following
financial statements of MRICT and the reports thereon of independent
accountants, all appearing after the signature page to this Form 8-K/A, are
included herein.
MRI-CT, INC.
Independent Auditor's Report
Balance Sheet as of December 31, 1995
Statement of Income and Retained Earnings for the Year Ended December
31, 1995
Statement of Cash Flows for the Year Ended December 31, 1995
Notes to Financial Statements
Independent Auditor's Report on Additional Information for the Year
Ended December 31, 1995
Operating Expenses for the Year Ended December 31, 1995
Independent Auditor's Report
Balance Sheets as of December 31, 1994, 1993 and 1992
Statements of Income for the Years Ended December 31, 1994, 1993 and
1992
Statements of Retained Earnings for the Years Ended December 31, 1994,
1993 and 1992
Statements of Cash Flows for the Year Ended December 31, 1994, 1993
and 1992
Notes to Financial Statements
(b) Pro Forma Financial Information
-------------------------------
On January 9, 1996, Medical Resources, Inc. (the "Company") consummated the
acquisition (the "Acquisition") of the business assets of MRICT, a New York
Corporation based in New York, New York (the "Seller") comprised primarily of
four diagnostic imaging centers located at (i) 197 Third Avenue, New York, New
York, (ii) 6511 Ft. Hamilton Parkway, Brooklyn, New York, (iii) 1401 Ocean
Avenue, Brooklyn, New York and (iv) 1612 St. Peters Avenue, Bronx, New York.
The Acquisition was consummated pursuant to an Asset Purchase Agreement (the
"Agreement") dated as of December 21, 1995 by and among the Company and the
Seller. Pursuant to the Agreement, a wholly owned subsidiary of the Company
acquired substantially all of the business assets of the Seller for a
combination of $553,000 cash, 194,113 shares of common stock and a $88,000 note
payable at prime due January 9, 2001.
The Pro Forma Consolidated Statements of Operations ("Financial
Statements") combines the individual Financial Statements of the Company and
MRICT for the year ended December 31, 1995 after giving effect to the pro forma
adjustments described in the Notes to Pro Forma Financial Statements.
The following consolidated pro forma data reflects the Acquisition of MRICT
as if it occurred on January 1, 1995. The following unaudited pro forma
information does not purport to be indicative of the results which would
actually have been obtained had the Acquisitions been completed during the
periods presented or which may be obtained in the future.
<PAGE>
TABLE OF CONTENTS
-----------------
MRI-CT:
Independent Auditor's Report
Balance Sheet as of December 31, 1995
Statement of Income and Retained Earnings for the year ended
December 31, 1995
Statement of Cash Flows for the year ended December 31, 1995
Notes to the Financial Statements
Independent Auditor's Report on Additional Information
Operating Expenses for the Year Ended December 31, 1995
Independent Auditor's Report
Balance Sheets as of December 31, 1994, 1993 and 1992
Statements of Income for the years ended December 31, 1994,
1993 and 1992
Statements of Retained Earnings for the years ended
December 31, 1994, 1993 and 1992
Statements of Cash Flows for the years ended December 31,
1994, 1993 and 1992
Notes to the Financial Statements
Pro Forma Information
<PAGE>
BARD & GLASSMAN
CERTIFIED PUBLIC ACCOUNTANTS
342 MADISON AVENUE - NEW YORK, NY 10173
---------
(212) 599-2880
FAX: (212) 599-3517
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and
Stockholders of MRI-CT, Inc.:
We have audited the accompanying balance sheet of MRI-CT, INC. as of
December 31, 1995, and the related statements of income, retained earnings, and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
we believe that our audit provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of MRI-CT, Inc. as of
December 31, 1995, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
/s/ Bard & Glassman
New York, New York
February 2, 1996
<PAGE>
MRI-CT, INC.
BALANCE SHEET
DECEMBER 31, 1995
ASSETS
Current assets;
Cash ................................................... $ 25,823
Accounts receivable .................................... 1,419,266
Tax refund receivable .................................. 1,006
Prepaid taxes .......................................... 5,085
Prepaid expenses ....................................... 12,584
Other current assets ................................... 1,000
----------
Total current assets ............................ 1,464,764
Property and equipment (less accumulated
depreciation of $6,101,349) ................................ 3,258,101
Security deposits .............................................. 71,905
Deferred lease acquisition costs ............................... 16,188
----------
$4,810,958
==========
LIABILITIES
Current liabilities;
Note payable to Trust u/w/o Elias Rand ..................... $1,100,000
Accounts payable and accrued expenses ...................... 690,146
Current portion of note payable - Du Pont .................. 43,830
Current Portion of capital lease obligations ............... 668,456
----------
Total current liabilities ....................... 2,502,432
Note payable - Du Pont (less current portion above) ............ 56,556
Capital lease obligations (less current portion above) ........ 1,158,383
----------
3,717,371
----------
STOCKHOLDER'S EQUITY
Capital stock - 175 shares authorized,
issued and outstanding, no par value ....................... 5,831
Retained earnings .............................................. 1,087,756
----------
1,093,587
----------
$4,810,958
==========
<PAGE>
MRI-CT, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1995
Revenues ........................................................ $ 5,104,532
-----------
Expenses:
Operating expenses .......................................... 5,177,805
Depreciation and amortization ............................... 971,105
-----------
6,148,910
-----------
Net loss from operations ........................................ (1,044,378)
Interest income ................................................. 71,240
-----------
Net loss before tax provision ................................... (973,138)
Income tax provision ............................................ (4,282)
-----------
Net loss ........................................................ (977,420)
Retained earnings - January 1, 1995 ............................. 2,065,176
-----------
Retained earnings - December 31, 1995 ........................... $ 1,087,756
===========
<PAGE>
MRI-CT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES:
- ----------------------
Property and equipment - Property and equipment are recorded at cost.
Depreciation is computed using the straight-line and accelerated methods over
the expected useful lives of the assets. Leasehold improvements incurred to
accommodate leased medical equipment are amortized over the remaining term of
the applicable leases or their useful lives, whichever is shorter. Expenditures
for maintenance and repairs are charged to expense, while those for renewals and
betterments are capitalized. When fixed assets are retired or otherwise disposed
of, the cost and related accumulated depreciation are removed from the accounts
with any resulting gain or loss reflected in earnings. For tax purposes property
and equipment are depreciated using accelerated methods. Deferred taxes are
provided on the difference between the depreciation for tax and report purposes.
Income Taxes - the shareholder of the Company consented to the election by
the corporation to be treated as an "S" corporation under the Internal Revenue
Code. Accordingly, there is no provision for Federal tax included in the
financial statements.
PROPERTY AND EQUIPMENT:
- -----------------------
Property and equipment as of December 31, 1995 is summarized as follows:
Cost and Estimated
Book Value Useful Lives
------------- ------------
Capitalized leases .......................... $4,071,090 5-7 years
Medical equipment ........................... 4,547,010 5-7 years
Office equipment ............................ 173,141 5 years
Automobiles ................................. 24,345 5 years
Leasehold improvements ...................... 543,864 5-7 years
---------
9,359,450
---------
Less accumulated depreciation:
Capitalized leases ...................... 1,982,200
Other assets ............................ 4,119,149
---------
6,101,349
---------
Net fixed assets ............................ $3,258,101
=========
(Continued)
<PAGE>
MRI-CT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
SECURITY DEPOSITS:
- ------------------
The Company has various security deposits outstanding on leased equipment.
GOODWILL AND OTHER
DEFERRED CHARGES:
- ------------------
The company purchased a medical facilities area at Westchester Square
Hospital in 1991. In connection with this purchase, the Company entered into a
restrictive covenant agreement for which it paid $250,000. This amount was
amortized over the three years from 1991 to 1993. The Company also assumed a
capital lease on equipment and a rental lease at a cost of $190,812. The costs
incurred with respect to these leases were deferred and were amortized over the
respective lease terms. In addition, the Company recorded goodwill of $31,375 in
connection with this acquisition which was amortized over four years.
NOTE PAYABLE TO
TRUST U/W/O ELIAS RAND:
- -----------------------
At December 31, 1995, MRI-CT had a demand loan outstanding payable to its
shareholder, the Trust u/w/o Elias Rand amounting to $1,100,00. The loan carries
interest at the prime rate. At December 31, 1995, the interest rate was 8.75%.
NOTE PAYABLE DU PONT:
- ---------------------
The Company finances several pieces of imaging equipment from E.I. du Pont
de Nemours & Company (Du Pont). The Company is required to purchase all of its
film from Du Pont and a portion of the Company's film purchases is credited by
Du Pont to the loan. The loan carries interest at approximately 8% per annum.
The note is payable as follows:
For the year ended December 31,
1996....................................... $ 48,000
1997....................................... 48,000
1998....................................... 16,960
--------------
112,960
Less amount representing interest.......... 12,574
--------------
$ 100,386
==============
(Continued)
<PAGE>
MRI-CT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
LEASES:
- -------
MRI-CT capitalizes leases in accordance with Statement of Financial
Accounting Standards No. 13, Accounting for Leases. the Company leases various
types of medical equipment with lease terms of five years.
Future minimum lease payments under capital leases consisted of the
following at December 31, 1995.
For the year ending December 31,
1996............................... $ 805,133
1997............................... 773,548
1998............................... 419,886
1999............................... 69,240
--------------
Total minimum lease payments........... 2,067,807
Less amount representing interest...... 240,968
--------------
Present value of net minimum lease payments $ 1,826,839
==============
COMMITMENTS AND CONTINGENCIES:
- ------------------------------
MRI-CT, Inc. leases space at two locations under leases that expire November
30,1998 and August 31, 2000. The current base annual rent is $330,120 plus
escalation.
At December 31, 1995, the required minimum lease payments regarding the
above for the next five years are as follows:
For the year ending:
1996............................... $ 341,808
1997............................... 340,118
1998............................... 335,762
1999............................... 162,996
2000............................... 108,664
--------------
$ 1,289,348
==============
The Company occupies two other locations on a month to month basis.
Reference is made to the note "Related Party Transactions".
MRI-CT's employment agreement with the chief executive officer ends December
31, 1997. Under the terms of the agreement, the officer receives a base salary
plus a percentage of gross receipts. On January 9, 1996 the employment agreement
was terminated and $200,00 was paid to the officer.
The Company is a party to various services contracts covering its equipment.
(Continued)
<PAGE>
MRI-CT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
RELATED PARTY TRANSACTIONS:
- ---------------------------
MRI-CT rents space at two locations from the Trust u/w/o Elias Rand at a
total of $6,500 per month plus real estate taxes. In addition, the Company rents
space from Sonja Rand at $4,500 per month plus maintenance. These leases are on
a month to month basis.
In 1995, the Company billed its affiliate MRI-CT Scanning, P.C. $322,848 for
administrative , technical, diagnostic imaging equipment and related services.
Accounts receivable at December 31, 1995 includes $112,295 from MRI-CT Scanning,
P.C.
LITIGATION:
- -----------
The Company is a defendant in a defendant in a lawsuit brought by a former
employee. The financial statements include a provision of $35,000 for settlement
of the lawsuit, which in the opinion of management is adequate.
MAJOR CUSTOMERS AND
CREDIT RISK CONCENTRATION:
- --------------------------
The Company's revenue and accounts receivable is derived from providing
administrative and technical services, diagnostic imaging equipment and related
services to various radiology practices.
The Company maintains cash balances at several financial institutions.
Account balances are insured by the Federal Deposit Insurance Corporation for up
to $100,000 per bank account.
SUBSEQUENT EVENT:
- -----------------
On January 9, 1996, the Company sold substantially all of its assets and
liabilities.
<PAGE>
BARD & GLASSMAN
CERTIFIED PUBLIC ACCOUNTANTS
342 MADISON AVENUE - NEW YORK, NY 10173
---------
(212) 599-2880
FAX: (212) 599-3517
INDEPENDENT AUDITOR'S REPORT
ON ADDITIONAL INFORMATION
To the Board of Directors and
Stockholders of MRI-CT, Inc.:
Our report on our audit of the basic financial statements of MRI-CT,
Inc. for 1995 appears in the preceding section. The audit were made for the
purpose of forming an opinion on the basic financial statements taken as a
whole. the schedule of operating expenses presented for purposes of additional
analysis and is not a required part of the basic financial statements. Such
information has been subjected to the audition procedures applied in the audit
of the basic financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
/s/ Bard & Glassman
New York, New York
February 2, 1996
<PAGE>
MRI-CT, INC.
OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1995
Salaries and wages .......................................... $2,098,407
Service and supplies ........................................ 360,820
Repairs and maintenance - medical equipment ................. 822,881
Interest .................................................... 297,615
Professional fees ........................................... 247,910
Rent and maintenance ........................................ 532,235
Utilities ................................................... 109,196
Insurance ................................................... 163,671
Payroll taxes ............................................... 156,090
Telephone ................................................... 96,717
Office expenses and supplies ................................ 134,850
Auto expenses ............................................... 18,689
Travel and entertainment .................................... 1,675
Delivery and postage ........................................ 34,441
Outside service ............................................. 61,042
Security .................................................... 13,256
Miscellaneous expenses ...................................... 28,310
----------
$5,177,805
==========
<PAGE>
BARD & GLASSMAN
CERTIFIED PUBLIC ACCOUNTANTS
342 MADISON AVENUE - NEW YORK, NY 10173
---------
(212) 599-2880
FAX: (212) 599-3517
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and
Stockholders of MRI-CT, Inc.:
We have audited the accompanying balance sheets of MRI-CT, Inc. as of
December 31, 1994, 1993, and 1992, and the related statements of income,
retained earnings, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of MRI-CT, Inc. as of December
31, 1994, 1993, and 1992, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
/s/ Bard & Glassman
New York, New York
October 6, 1995
<PAGE>
MRI-CT, INC.
BALANCE SHEET
DECEMBER 31,
ASSETS
1994 1993 1992
Current assets: ---------- ---------- ----------
Cash ............................. $ 274,002 $ 365,905 $ 409,977
Accounts receivable .............. 1,478,334 1,229,614 586,753
Tax refunds receivable ........... 885 85,925 --
Prepaid taxes .................... 8,269 9,896 107,299
Prepaid expenses ................. 57,102 70,794 --
Other current assets ............. 21,700 31,998 46,998
Receivable from stockholder ...... -- -- 300,000
----------- ----------- ---------
Total current assets ...... 1,840,292 1,794,132 1,451,027
Property and equipment (less
accumulated depreciation ......... 4,116,079 3,649,136 4,514,488
Security deposits .................... 71,205 107,135 37,285
Deferred lease acquisition costs ..... 25,438 34,688 43,938
Goodwill ............................. 5,882 13,726 21,570
Construction in progress ............. -- 332,000 --
Collateral receivable ................ -- 209,000 209,000
Investments .......................... -- -- 12,600
Restrictive covenant agreement ....... -- -- 93,750
----------- ----------- ---------
$6,058,896 $6,139,817 $6,383,658
(Continued)
<PAGE>
MRI-CT, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Cash flows from operating activities;
<S> <C> <C>
Cash receipts:
Cash received from customers .............. $ 5,163,600
Interest received ......................... 71,240
-----------
Total cash received .................... 5,234,840
Cash payments:
Cash paid for cost of revenues and
general and administrative expenses .... $ 4,486,484
Cash paid for taxes ....................... 1,098
Cash paid for interest .................... 297,615
-----------
Total cash paid ........................ 4,785,197
-----------
Net cash flows provided by operating activities ... 449,643
Cash flows from investing activities:
Purchase of property and equipment ............ (97,994)
Cash flows from financing activities:
Proceeds from equipment financing ............. 74,193
Repayment of note payable - Du Pont ........... (60,469)
Payments on capital lease obligations ......... (613,552)
-----------
Net cash flows used in financing activities (599,828)
-----------
Net decrease in cash .............................. (248,179)
Cash - January 1, 1995 ............................ 274,002
-----------
Cash - December 31, 1995 .......................... $ 25,823
===========
</TABLE>
<PAGE>
MRI-CT, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Reconciliation of net loss to net cash flow from operating activities:
<S> <C> <C>
Net loss .......................................................... $ (977,420)
Non-cash expenses, revenues, losses and gains included in net loss:
Depreciation and amortization ............................. $ 971,105 --
Decrease in accounts receivable ........................... 59,068 --
Decrease in prepaid corporate taxes ....................... 3,184 --
Decrease in prepaid expenses .............................. 44,518 --
Decrease in other current assets .......................... 19,879 --
Increase in accounts payable
and accrued expenses ................................. 329,309 1,427,063
--------- ---------
Net cash flow provided by operating activities .................... $ 449,643
=========
</TABLE>
<PAGE>
MRI-CT, INC.
BALANCE SHEET
DECEMBER 31,
LIABILITIES
1994 1993 1992
------------ ----------- ----------
Current liabilities:
Loan payable ........................ $1,100,000 $1,100,000 $1,150,000
Accounts payable
and accrued expenses ............ 360,837 224,690 73,380
Current portion of
note payable - Du Pont .......... 70,000 60,000 66,300
Current portion of
capital lease obligations ....... 613,550 361,890 515,010
---------- ---------- ----------
Total current liabilities .... 2,144,387 1,746,580 1,804,690
Note payable - Du Pont
(less current portion above) ........ 16,662 92,860 146,554
Capital lease obligations
(less current portion above) ........ 1,826,840 972,988 1,311,351
Deferred income taxes payable ........... -- 1,000 10,000
Construction loan ....................... -- 332,000 --
3,987,889 3,145,428 3,272,595
---------- ---------- ----------
STOCKHOLDER'S EQUITY
Capital stock - 175 shares
authorized, issued and
outstanding, nor par value ............ 5,831 5,831 5,831
Retained earnings ....................... 2,065,176 2,988,558 3,105,232
---------- ---------- ----------
2,0717,007 2,994,389 3,111,063
---------- ---------- ----------
$6,058,896 $6,139,817 $6,383,658
========== ========== ==========
See accompanying notes to financial statements.
<PAGE>
MRI-CT, INC.
STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31,
1994 1993 1992
----------- ----------- ----------
Revenues ............................ $ 5,892,163 $ 6,713,119 $5,921,597
Expenses:
Operating expenses .............. 5,290,223 5,571,539 4,134,949
depreciation and amortization ... 1,173,489 1,268,578 1,300,160
----------- ----------- ----------
6,463,712 6,840,117 5,435,109
----------- ----------- ----------
Net income (loss) from operations ... (571,549) (126,998) 486,488
Rental income ....................... -- -- 4,500
Interest income ..................... 51,548 29,416 22,757
Gain (loss) on sale of property ..... (102,345) (16,308) 30,305
Loss on liquidation of collateral ... (209,000) -- --
Settlement of prior year's tax audit (61,210) -- --
Estimated litigation settlement cost (30,000) -- --
----------- ----------- ----------
Net income (loss)
before tax provision ............ (922,556) (113,890) 544,050
Income tax provision ................ 826 2,784 67,866
----------- ----------- ----------
Net income (loss) ................... $ (923,382) $ (116,674) $ 476,184
=========== =========== ==========
See accompanying notes to financial statements.
<PAGE>
MRI-CT, INC.
STATEMENT OF RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31,
1994 1993 1992
----------- ----------- ----------
Retained earnings-
beginning of year ............... $ 2,988,558 $ 3,105,232 $3,142,548
Net income (loss) ................... (923,382) (116,674) 476,184
----------- ----------- ----------
2,065,176 2,988,558 3,618,732
Distributions ....................... -- -- 513,500
----------- ----------- ----------
Retained earnings - end of year ..... $ 2,065,176 $ 2,988,558 $3,105,232
=========== =========== ==========
See accompanying notes to financial statements.
<PAGE>
MRI-CT, INC.
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash receipts:
Cash received from customers ......... $ 5,643,444 $ 6,070,258 $ 6,597,313
Interest received .................... 51,548 29,416 22,757
Tax refunds received ................. 94,936 -- 36,259
Rent income received ................. -- -- 4,500
----------- ----------- -----------
Total cash received .............. 5,789,928 6,099,674 6,660,829
----------- ----------- -----------
Cash payments :
Cash paid for cost of revenues and
general and administrative expenses 4,884,075 5,234,229 4,322,688
Cash paid for taxes ................... 10,096 306 100,778
Cash paid for interest ................ 337,221 241,794 228,380
----------- ----------- -----------
Total cash paid .................. 5,231,392 5,476,329 4,651,846
----------- ----------- -----------
Net cash provided by
operating activities ........ 558,536 623,345 2,008,983
----------- ----------- -----------
Cash flows from investing activities:
Proceeds from sale of property & equipment .. 109,000 3,500 500
Purchase of property & equipment ............ (1,834,683) (312,190) (1,776,079)
Repayment of note receivable from stockholder -- 300,000 50,000
Liquidation of investments .................. -- 12,600 12,600
Return of (increase in)
security deposit on capital lease ......... 35,930 (69,850) 89,237
----------- ----------- -----------
Net cash used in investing activities . (1,689,753) (65,940) (1,623,742)
----------- ----------- -----------
</TABLE>
(Continued)
<PAGE>
MRI-CT, INC.
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1994 1993 1992
----------- ---------- -----------
<S> <C> <C> <C>
Cash flows form financing activities:
Proceeds form capital lease loan .... $ 1,660,000 $ 53,355 $ 1,403,480
Payments on capital lease obligations (554,488) (544,838) (1,143,877)
Repayment of note payable - Du Pont . (66,198) (59,994) (60,695)
Repayment of loan ................... -- (50,000) --
Repayment of payable to stockholder . -- -- (250,000)
Distributions to stockholder ........ -- -- (513,500)
----------- ---------- -----------
Net cash provided by
(used in) financing activities 1,039,314 (601,477) (564,592)
----------- ---------- -----------
Net decrease in cash .................... (91,903) (44,072) (179,351)
Cash - January 1, ....................... 365,905 409,977 589,328
----------- ---------- -----------
Cash - December 31, ..................... $ 274,002 $ 365,905 $ 409,977
=========== ========= ===========
</TABLE>
(Continued)
<PAGE>
MRI-CT, INC.
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Reconciliation of net income (loss) to net
cash provided by operating activities;
Net income (loss) ............................................... $ (923,382) $ (116,674) $ 476,184
Non-cash expenses, revenues, losses and gains included in income:
Depreciation and amortization ............................ 1,173,489 1,268,578 1,300,160
(Gain) loss on sale of property .......................... 102,345 16,308 (30,305)
Loss on liquidation of collateral ........................ 209,000 -- --
(Increase) decrease in accounts receivable ............... (248,720) (642,861) 675,716
(Increase) decrease in prepaid corporate taxes ........... 86,667 11,478 12,147
(Increase) decrease in prepaid expenses .................. 13,692 (70,794) 20,435
(Increase) decrease in other current assets .............. 10,298 15,000 84,416
Increase (decrease) in accounts
payable and accrued expenses .......................... 136,147 151,310 (520,970)
Increase (decrease) in deferred taxes payable ............ (1,000) (9,000) (8,800)
----------- ----------- -----------
Net cash provided by
operating activities ........................... $ 558,536 $ 623,345 $ 2,008,983
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
MRI-CT, INC.
NOTES TO FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES:
- ----------------------
Property and Equipment - Property and equipment are recorded at cost.
Depreciation is computed using the straight-line and accelerated methods over
the expected useful lives of the assets. Leasehold improvements incurred to
accommodate leased medical equipment are amortized over the remaining term of
the applicable leases or their useful lives, whichever is shorter. Expenditures
for maintenance and repairs are charges to expense, while those for renewals and
betterments are capitalized. When fixed assets are retired or otherwise disposed
of, the cost and related accumulated depreciation are removed from the accounts
with any resulting gain or loss reflected in earnings. For tax purposes property
and equipment are depreciated using accelerated methods. Deferred taxes are
provided on the difference between the depreciation for tax and report purposes.
Income Taxes - The shareholder of the Company consented to the election by
the corporation to be treated as an "S" corporation under the Internal Revenue
Code. Accordingly, there is no provision for Federal tax included in the
financial statements.
RECEIVABLE FROM STOCKHOLDER:
- ----------------------------
The receivable from stockholder represented the unpaid balance of the
proceeds due on the sale of property and equipment to the shareholder for
$350,000. The unpaid balance carried interest at 8% per annum. $50,000 was
repaid in March, 1993 and the balance of $250,000 was repaid in July, 1993.
(Continued)
<PAGE>
MRI-CT, INC.
NOTES TO FINANCIAL STATEMENTS
PROPERTY AND EQUIPMENT:
- -----------------------
Property and equipment is summarized as follows:
1994 1993 1992
----------- ----------- -----------
Capitalized leases ........... $ 3,299,691 $ 7,295,218 $10,949,590
Medical equipment ............ 5,242,776 2,381,188 2,195,166
Office equipment ............. 173,141 168,307 100,423
Automobiles .................. 24,346 24,346 55,495
Leasehold improvements ....... 521,501 1,138,835 1,087,395
----------- ----------- ----------
9,261,455 11,007,894 14,388,069
----------- ----------- ----------
Less accumulated depreciation:
Capitalized leases ....... $ 713,426 $ 5,071,887 $ 7,992,204
Other assets.............. 4,431,950 2,286,871 1,881,377
----------- ------------ -----------
5,145,376 7,358,758 9,873,581
----------- ------------ -----------
Net fixed assets.............. $ 4,116,079 $ 3,649,136 $ 4,514,488
=========== ============ ===========
INVESTMENTS:
- ------------
At December 31, 1992, the investment account consisted of $12,600 principal
amount of the Westchester Square Hospital's 12-1/2% debentures, due October 1,
1993. The debenture were repaid in semi-annual installments of $6,300 each on
April 1, and October 1, 1993.
CONSTRUCTIONS IN PROGRESS
CONSTRUCTION LOAN:
- -------------------------
The Company installed a new MRI in the New York office in 1994 at a total
cost of $1,660,000. As of December 31, 1993 the finance company had advanced
$332,000 to the vender doing the installation. The interest rate on the loan was
8%.
SECURITY DEPOSITS:
- ------------------
The Company has various security deposits outstanding on leased equipment.
(Continued)
<PAGE>
MRI-CT, INC.
NOTES TO FINANCIAL STATEMENTS
COLLATERAL RECEIVABLE:
- ----------------------
On October 17, 1989 the Company was advised UMB Bank and Trust company (UMB)
liquidated collateral with a face value of $209,000 deposited by the sole
stockholder as security on leases entered into by the Company and UMB. The
Company reimbursed the stockholder for the collateral and demanded the return of
the collateral from UMB. Management felt that the Company has fulfilled all of
its under the leases, that the liquidation of the collateral was improper, and
expected full recovery. In 1994 the Company determined that the collateral was
uncollectible and a provision was made in the financial statements to reflect
the loss.
GOODWILL AND OTHER DEFERRED CHARGES:
- ------------------------------------
The Company purchased a medical facilities area at Westchester Square
Hospital in 1990. In connection with this purchase, the Company entered into a
restrictive covenant agreement for which it paid $250,000. This amount was
amortized over the three years from 1991 to 1993. The Company also assumed a
capital lease on equipment and a rental lease at a cost of $190,812. The costs
incurred with respect to these leases were deferred and are being amortized over
the respective lease terms.
In addition, the Company recorded goodwill of $31,375 in connection with
this acquisition which is being amortized over four years.
LOAN PAYABLE:
- -------------
The Company had two demand loans payable to the Bank of New York totaling
$1,150,000. The loans were secured by marketable securities owned by the sole
stockholder and carried interest at the prime rate. In 1993, the Company repaid
$50,000 of the loan. In September, 1994 the bank called the loan and liquidated
the collateral securities owned by the estate of the late stockholder in payment
thereof. The Company then executed a note payable to the estate for the same
amount, terms and conditions as the loan from the bank. The estate then assigned
the note to the trust established by the late stockholder. At December 31, 1994
the interest rate on the loan was 8.75% per annum.
<PAGE>
MRI-CT, INC.
NOTES TO FINANCIAL STATEMENTS
LEASES:
- -------
MRI-CT capitalizes leases in accordance with Statement of Financial
Accounting Standards No. 13, Accounting for Leases. The Company leases various
types of medical equipment with lease terms of five years.
Future minimum lease payments under capital leases consisted of the
following :
Fiscal year ending December 31, 1994 1993 1992
---------- ---------- ----------
1993.................................. $ -- $ -- $ 658,676
1994.................................. -- 422,680 412,009
1995.................................. 805,128 392,440 381,769
1996.................................. 805,128 389,691 379,020
1997.................................. 773,550 358,115 347,447
1998.................................. 419,895 -- --
1999.................................. 69,240 -- --
---------- ---------- ----------
Total minimum lease payments.......... $2,872,941 $1,568,262 $2,178,921
Less amount
representing interest............... 432,551 233,384 352,560
---------- ---------- ----------
Present value of net
minimum lease payments.............. $2,440,390 $1,334,878 $1,826,361
========== ========== ==========
NOTE PAYABLE - DU PONT:
- -----------------------
The Company finances several pieces of imaging equipment from E.I. Du Pont
De Nemours & Company. A portion of the Company's film purchases is credited by
Du Pont to the loan. The loan carries interest at approximately 8% per annum.
INCOME TAXES:
- -------------
The income tax provision in the statement of income is summarized as
follows:
1994 1993 1992
-------- -------- ---------
Current expense -
state and local ................ $ 1,826 $ 11,784 $ 76,666
Deferred tax credit ................ (1,000) (9,000) (8,800)
------- -------- --------
Total charged to operations ........ $ 826 $ 2,784 $ 67,866
======= ======== ========
(Continued)
<PAGE>
MRI-CT, INC.
NOTES TO FINANCIAL STATEMENTS
COMMITMENTS AND CONTINGENCIES:
- ------------------------------
MRI-CT, Inc. leases space at two location under leases that expire November
30, 1998 and August 31, 2000. The current base annual rent is $330,120 plus
escalation.
At December 31, 1994, the required minimum lease payments regarding the
above for the next five years are as follows:
1995................................................ $ 332,503
1996................................................ 341,808
1997................................................ 340,118
1998................................................ 335,762
1999................................................ 162,996
----------
$1,513,187
MRI-CT's employment agreement with the chief executive officer ends December
31, 1997. Under the terms of the agreement, the officer receives a base salary
plus a percentage of gross receipts.
RELATED PARTY TRANSACTIONS:
- ---------------------------
MRI-CT rents space at two locations from the Trust u/w/o Elias Rand at total
of $6,500 per month plus real estate taxes. In addition, the Company rents space
from Sonja Rand at $4,500 per month plus real estate taxes. These leases are on
a month to month basis.
MAJOR CUSTOMER AND
CREDIT RISK CONCENTRATION:
- --------------------------
The Company's revenue and accounts receivable is derived from providing
administrative and technical services, diagnostic imaging equipment and related
services to various radiology practices.
The Company maintains cash balances at several financial institutions.
Account balances are insured by the Federal Deposit Insurance Corporation for up
to $100,00 per bank account.
<PAGE>
MEDICAL RESOURCES, INC.
PRO FORMA CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
As of December 31, 1995
--------------------------------------------------------
Pro Forma
Medical -------------------------
ASSETS Resources, Inc. MRI-CT, Inc. Adjustments Total
------ --------------- ------------ ----------- -----
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 3,934,677 $ 25,823 ($553,245) (1) $ 3,497,370
($25,823) (2)
Short term investments - - - -
Accounts receivable, net 13,837,637 1,419,266 (375,018) (2) 14,881,885
Inventory - - - -
Other assets 477,062 7,091 28,909 (2) 513,062
Deferred tax asset 1,871,397 - - 1,871,397
Prepaid expenses 1,074,459 12,584 (1,869) (2) 1,085,174
----------- ---------- ----------- -----------
Total current assets 21,195,232 1,464,764 (836,931) 21,823,065
Property, plant and
equipment 11,530,159 3,258,101 (2,174,601) (2) 12,613,659
Other assets 2,287,769 88,093 177,907 (2) 2,553,769
Goodwill 9,122,663 - 1,555,310 (1) 10,572,762
(1,093,587) (3)
1,078,491 (2)
----------- ---------- ----------- -----------
Total assets $44,135,823 $4,810,958 ($1,383,526) $47,563,255
=========== ========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current portion of notes
payable $ 957,884 $1,143,830 $(1,143,830) (2) $ 957,884
Current portion of
obligations under
capital leases 3,244,652 668,456 (354,710) (2) 3,558,398
Accounts payable and
accrued expenses 4,602,926 690,146 263,092 (2) 5,556,164
Other current liabilities 1,405,875 - - -
Income taxes payable 245,899 - - 245,899
----------- ---------- ----------- -----------
Total current liabilities 10,457.236 2,502,432 (1,235,448) 11,724,220
Notes payable 4,448,974 56,556 88,315 (1) 4,537,289
(56,556) (2)
Obligations under capital
leases 6,707,650 1,158,383 - 7,866,033
Convertible debentures 4,350,000 - -
Other longterm liabilities 1,205,627 - - 1,205,627
----------- ---------- ----------- -----------
Total liabilities 27,169,487 3,717,371 (1,203,689) 29,683,169
----------- ---------- ----------- -----------
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par
value, 20,000,000 shares
authorized, 7,697,500 pro
forma number of shares issued
and outstanding at December
31, 1994 76,975 5,831 1,941 (1) 78,916
(5,831) (3)
Common stock to be issued 1,721,250 - - 1,721,250
Additional paid-in capital 20,834,922 - 911,809 (1) 21,746,731
Retained (deficit) (4,298,678) 1,087,756 (1,087,756) (3) (4,298,678)
Less 255,000 common shares
in treasury, at cost (1,368,133) - - (1,368,133)
----------- ---------- ----------- -----------
Total stockholders'
equity 16,966,336 1,093,587 (179,837) 17,880,086
----------- ---------- ----------- -----------
Total liabilities and
stockholders' equity $44,135,823 $4,810,958 ($1,383,526) $47,563,255
=========== ========== =========== ===========
</TABLE>
<PAGE>
MEDICAL RESOURCES, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the year ended December 31, 1995
----------------------------------------------------------------
Pro Forma
Medical -------------------------------
Resources, Inc. MRI-CT, Inc. Adjustments Total
--------------- ------------- ------------ -----------
<S> <C> <C> <C> <C>
Net service revenue $51,993,758 5,104,532 $ 0 $57,098,290
----------- ---------- --------- -----------
Operating expenses of services 31,563,796 5,177,805 - 36,741,601
Provisions for uncollectible accounts receivable 3,377.862 - - 3,377,862
Corporate general and administrative 4,978,045 - - 4,978,045
Depreciation and amortization 4,567,144 971,105 (289,205) (4) 5,249,044
----------- ---------- --------- -----------
Operating income (loss) 7,506,911 (1,044,378) 289,205 6,751,738
Interest (income)/expense 1,829,017 (71,240) - 1,757,777
----------- ---------- --------- -----------
Income (loss) before minority interest and
income taxes 5,677,894 (973,138) 289,205 4,993,961
Minority interest in losses of joint ventures
and limited partnerships 124,085 - - 124,085
----------- ---------- --------- -----------
Income before income taxes 5,801,979 (973,138) 289,205 5,118,046
Provision for income taxes 1,659,111 4,282 (271,016) (5) 1,392,377
----------- ---------- --------- -----------
Income from continuing operations $ 4,142,868 ($977,420) $ 560,221 $ 3,725,669
=========== ========== ========= ===========
</TABLE>
<PAGE>
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
- ----------------------------------------------------
(1) Adjustment reflects the value of the consideration given by the Company to
acquire the net business assets of MRI-CT as outlined in Item 7 (b) of this Form
8-K/A.
(2) Item reflects the carrying value of the assets and liabilities of MRICT as
stated in its December 31, 1995 financial statements adjusted to the agreed upon
purchase price of such assets acquired and liabilities assumed which were a part
of the Acquisition.
(3) The adjustment to stockholders' equity to record the elimination of the
common stock and retained earnings of MRICT.
(4) Adjustment to depreciation and amortization reflects the effect of the
increase in property, plant and equipment and of goodwill due to the acquisition
of the net assets of MRICT. Since the property, plant and equipment of MRICT
were acquired at a price less than its carrying value by MRICT, the depreciation
was reduced to reflect the depreciation at the purchase price. The property,
plant and equipment of $1,083,500 and of goodwill of $1,540,214 from the
Acquisition are being amortized over a five and twenty year basis, respectively.
(5) The adjustment to the provision for income taxes reflects the tax effect of
the operations of MRICT and the adjustments to depreciation and amortization
discussed above, calculated at the Company's statutory tax rate of 39%.
<PAGE>
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 hereunto duly authorized.
MEDICAL RESOURCES, INC.
By: /s/ William D. Farrell
-------------------------------------
William D. Farrell
President and Chief Operating Officer
Dated: August 27, 1997
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
MRI-CT:
Independent Auditor's Report 8
Balance Sheet as of December 31, 1995 9
Statement of Income and Retained Earnings for the year ended
December 31, 1995 10
Statement of Cash Flows for the year ended December 31, 1995 11
Notes to the Financial Statements 13
Independent Auditor's Report on Additional Information 17
Operating Expenses for the Year Ended December 31, 1995 18
Independent Auditor's Report 19
Balance Sheets as of December 31, 1994, 1993 and 1992 20
Statements of Income for the years ended December 31, 1994,
1993 and 1992 22
Statements of Retained Earnings for the years ended
December 31, 1994, 1993 and 1992 23
Statements of Cash Flows for the years ended December 31,
1994, 1993 and 1992 24
Notes to the Financial Statements 27
</TABLE>
<PAGE>
MEDICAL RESOURCES, INC.
PRO FORMA CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
As of December 31, 1995
--------------------------------------------------------
Pro Forma
Medical -------------------------
ASSETS Resources, Inc. MRI-CT, Inc. Adjustments Total
------ --------------- ------------ ----------- -----
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 3,934,677 $ 25,823 ($553,245) (1) $ 3,497,370
($25,823) (2)
Short term investments - - - -
Accounts receivable, net 13,837,637 1,419,266 (375,018) (2) 14,881,885
Inventory - - - -
Other assets 477,062 7,091 28,909 (2) 513,062
Deferred tax asset 1,871,397 - - 1,871,397
Prepaid expenses 1,074,459 12,584 (1,869) (2) 1,085,174
----------- ---------- ----------- -----------
Total current assets 21,195,232 1,464,764 (836,931) 21,823,065
Property, plant and
equipment 11,530,159 3,258,101 (2,174,601) (2) 12,613,659
Other assets 2,287,769 88,093 177,907 (2) 2,553,769
Goodwill 9,122,663 - 1,555,310 (1) 10,572,762
(1,093,587) (3)
1,078,491 (2)
----------- ---------- ----------- -----------
Total assets $44,135,823 $4,810,958 ($1,383,526) $47,563,255
=========== ========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current portion of notes
payable $ 957,884 $1,143,830 $(1,143,830) (2) $ 957,884
Current portion of
obligations under
capital leases 3,244,652 668,456 (354,710) (2) 3,558,398
Accounts payable and
accrued expenses 4,602,926 690,146 263,092 (2) 5,556,164
Other current liabilities 1,405,875 - - -
Income taxes payable 245,899 - - 245,899
----------- ---------- ----------- -----------
Total current liabilities 10,457.236 2,502,432 (1,235,448) 11,724,220
Notes payable 4,448,974 56,556 88,315 (1) 4,537,289
(56,556) (2)
Obligations under capital
leases 6,707,650 1,158,383 - 7,866,033
Convertible debentures 4,350,000 - -
Other longterm liabilities 1,205,627 - - 1,205,627
----------- ---------- ----------- -----------
Total liabilities 27,169,487 3,717,371 (1,203,689) 29,683,169
----------- ---------- ----------- -----------
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par
value, 20,000,000 shares
authorized, 7,697,500 pro
forma number of shares issued
and outstanding at December
31, 1994 76,975 5,831 1,941 (1) 78,916
(5,831) (3)
Common stock to be issued 1,721,250 - - 1,721,250
Additional paid-in capital 20,834,922 - 911,809 (1) 21,746,731
Retained (deficit) (4,298,678) 1,087,756 (1,087,756) (3) (4,298,678)
Less 255,000 common shares
in treasury, at cost (1,368,133) - - (1,368,133)
----------- ---------- ----------- -----------
Total stockholders'
equity 16,966,336 1,093,587 (179,837) 17,880,086
----------- ---------- ----------- -----------
Total liabilities and
stockholders' equity $44,135,823 $4,810,958 ($1,383,526) $47,563,255
=========== ========== =========== ===========
</TABLE>
<PAGE>
MEDICAL RESOURCES, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the year ended December 31, 1995
----------------------------------------------------------------
Pro Forma
Medical -------------------------------
Resources, Inc. MRI-CT, Inc. Adjustments Total
--------------- ------------- ------------ -----------
<S> <C> <C> <C> <C>
Net service revenue $51,993,758 5,104,532 $ 0 $57,098,290
----------- ---------- --------- -----------
Operating expenses of services 31,563,796 5,177,805 - 36,741,601
Provisions for uncollectible accounts receivable 3,377.862 - - 3,377,862
Corporate general and administrative 4,978,045 - - 4,978,045
Depreciation and amortization 4,567,144 971,105 (289,205) (4) 5,249,044
----------- ---------- --------- -----------
Operating income (loss) 7,506,911 (1,044,378) 289,205 6,751,738
Interest (income)/expense 1,829,017 (71,240) - 1,757,777
----------- ---------- --------- -----------
Income (loss) before minority interest and
income taxes 5,677,894 (973,138) 289,205 4,993,961
Minority interest in losses of joint ventures
and limited partnerships 124,085 - - 124,085
----------- ---------- --------- -----------
Income before income taxes 5,801,979 (973,138) 289,205 5,118,046
Provision for income taxes 1,659,111 4,282 (271,016) (5) 1,392,377
----------- ---------- --------- -----------
Income from continuing operations $ 4,142,868 ($977,420) $ 560,221 $ 3,725,669
=========== ========== ========= ===========
</TABLE>
<PAGE>
BARD & GLASSMAN
CERTIFIED PUBLIC ACCOUNTANTS
342 MADISON AVENUE - NEW YORK, NY 10173
---------
(212) 599-2880
FAX: (212) 599-3517
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and
Stockholders of MRI-CT, Inc.:
We have audited the accompanying balance sheet of MRI-CT, INC. as of
December 31, 1995, and the related statements of income, retained earnings, and
cash flows for the year then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
we believe that our audit provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of MRI-CT, Inc. as of
December 31, 1995, and the results of its operations and its cash flows for the
year then ended in conformity with generally accepted accounting principles.
/s/ Bard & Glassman
New York, New York
February 2, 1996
<PAGE>
MRI-CT, INC.
BALANCE SHEET
DECEMBER 31, 1995
ASSETS
Current assets;
Cash ................................................... $ 25,823
Accounts receivable .................................... 1,419,266
Tax refund receivable .................................. 1,006
Prepaid taxes .......................................... 5,085
Prepaid expenses ....................................... 12,584
Other current assets ................................... 1,000
----------
Total current assets ............................ 1,464,764
Property and equipment (less accumulated
depreciation of $6,101,349) ................................ 3,258,101
Security deposits .............................................. 71,905
Deferred lease acquisition costs ............................... 16,188
----------
$4,810,958
==========
LIABILITIES
Current liabilities;
Note payable to Trust u/w/o Elias Rand ..................... $1,100,000
Accounts payable and accrued expenses ...................... 690,146
Current portion of note payable - Du Pont .................. 43,830
Current Portion of capital lease obligations ............... 668,456
----------
Total current liabilities ....................... 2,502,432
Note payable - Du Pont (less current portion above) ............ 56,556
Capital lease obligations (less current portion above) ........ 1,158,383
----------
3,717,371
----------
STOCKHOLDER'S EQUITY
Capital stock - 175 shares authorized,
issued and outstanding, no par value ....................... 5,831
Retained earnings .............................................. 1,087,756
----------
1,093,587
----------
$4,810,958
==========
<PAGE>
MRI-CT, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 1995
Revenues ........................................................ $ 5,104,532
-----------
Expenses:
Operating expenses .......................................... 5,177,805
Depreciation and amortization ............................... 971,105
-----------
6,148,910
-----------
Net loss from operations ........................................ (1,044,378)
Interest income ................................................. 71,240
-----------
Net loss before tax provision ................................... (973,138)
Income tax provision ............................................ (4,282)
-----------
Net loss ........................................................ (977,420)
Retained earnings - January 1, 1995 ............................. 2,065,176
-----------
Retained earnings - December 31, 1995 ........................... $ 1,087,756
===========
<PAGE>
MRI-CT, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Cash flows from operating activities;
<S> <C> <C>
Cash receipts:
Cash received from customers .............. $ 5,163,600
Interest received ......................... 71,240
-----------
Total cash received .................... 5,234,840
Cash payments:
Cash paid for cost of revenues and
general and administrative expenses .... $ 4,486,484
Cash paid for taxes ....................... 1,098
Cash paid for interest .................... 297,615
-----------
Total cash paid ........................ 4,785,197
-----------
Net cash flows provided by operating activities ... 449,643
Cash flows from investing activities:
Purchase of property and equipment ............ (97,994)
Cash flows from financing activities:
Proceeds from equipment financing ............. 74,193
Repayment of note payable - Du Pont ........... (60,469)
Payments on capital lease obligations ......... (613,552)
-----------
Net cash flows used in financing activities (599,828)
-----------
Net decrease in cash .............................. (248,179)
Cash - January 1, 1995 ............................ 274,002
-----------
Cash - December 31, 1995 .......................... $ 25,823
===========
</TABLE>
<PAGE>
MRI-CT, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Reconciliation of net loss to net cash flow from operating activities:
<S> <C> <C>
Net loss .......................................................... $ (977,420)
Non-cash expenses, revenues, losses and gains included in net loss:
Depreciation and amortization ............................. $ 971,105 --
Decrease in accounts receivable ........................... 59,068 --
Decrease in prepaid corporate taxes ....................... 3,184 --
Decrease in prepaid expenses .............................. 44,518 --
Decrease in other current assets .......................... 19,879 --
Increase in accounts payable
and accrued expenses ................................. 329,309 1,427,063
--------- ---------
Net cash flow provided by operating activities .................... $ 449,643
=========
</TABLE>
<PAGE>
MRI-CT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES:
- ----------------------
Property and equipment - Property and equipment are recorded at cost.
Depreciation is computed using the straight-line and accelerated methods over
the expected useful lives of the assets. Leasehold improvements incurred to
accommodate leased medical equipment are amortized over the remaining term of
the applicable leases or their useful lives, whichever is shorter. Expenditures
for maintenance and repairs are charged to expense, while those for renewals and
betterments are capitalized. When fixed assets are retired or otherwise disposed
of, the cost and related accumulated depreciation are removed from the accounts
with any resulting gain or loss reflected in earnings. For tax purposes property
and equipment are depreciated using accelerated methods. Deferred taxes are
provided on the difference between the depreciation for tax and report purposes.
Income Taxes - the shareholder of the Company consented to the election by
the corporation to be treated as an "S" corporation under the Internal Revenue
Code. Accordingly, there is no provision for Federal tax included in the
financial statements.
PROPERTY AND EQUIPMENT:
- -----------------------
Property and equipment as of December 31, 1995 is summarized as follows:
Cost and Estimated
Book Value Useful Lives
------------- ------------
Capitalized leases .......................... $4,071,090 5-7 years
Medical equipment ........................... 4,547,010 5-7 years
Office equipment ............................ 173,141 5 years
Automobiles ................................. 24,345 5 years
Leasehold improvements ...................... 543,864 5-7 years
---------
9,359,450
---------
Less accumulated depreciation:
Capitalized leases ...................... 1,982,200
Other assets ............................ 4,119,149
---------
6,101,349
---------
Net fixed assets ............................ $3,258,101
=========
(Continued)
<PAGE>
MRI-CT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
SECURITY DEPOSITS:
- ------------------
The Company has various security deposits outstanding on leased equipment.
GOODWILL AND OTHER
DEFERRED CHARGES:
- ------------------
The company purchased a medical facilities area at Westchester Square
Hospital in 1991. In connection with this purchase, the Company entered into a
restrictive covenant agreement for which it paid $250,000. This amount was
amortized over the three years from 1991 to 1993. The Company also assumed a
capital lease on equipment and a rental lease at a cost of $190,812. The costs
incurred with respect to these leases were deferred and were amortized over the
respective lease terms. In addition, the Company recorded goodwill of $31,375 in
connection with this acquisition which was amortized over four years.
NOTE PAYABLE TO
TRUST U/W/O ELIAS RAND:
- -----------------------
At December 31, 1995, MRI-CT had a demand loan outstanding payable to its
shareholder, the Trust u/w/o Elias Rand amounting to $1,100,00. The loan carries
interest at the prime rate. At December 31, 1995, the interest rate was 8.75%.
NOTE PAYABLE DU PONT:
- ---------------------
The Company finances several pieces of imaging equipment from E.I. du Pont
de Nemours & Company (Du Pont). The Company is required to purchase all of its
film from Du Pont and a portion of the Company's film purchases is credited by
Du Pont to the loan. The loan carries interest at approximately 8% per annum.
The note is payable as follows:
For the year ended December 31,
1996....................................... $ 48,000
1997....................................... 48,000
1998....................................... 16,960
--------------
112,960
Less amount representing interest.......... 12,574
--------------
$ 100,386
==============
(Continued)
<PAGE>
MRI-CT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
LEASES:
- -------
MRI-CT capitalizes leases in accordance with Statement of Financial
Accounting Standards No. 13, Accounting for Leases. the Company leases various
types of medical equipment with lease terms of five years.
Future minimum lease payments under capital leases consisted of the
following at December 31, 1995.
For the year ending December 31,
1996............................... $ 805,133
1997............................... 773,548
1998............................... 419,886
1999............................... 69,240
--------------
Total minimum lease payments........... 2,067,807
Less amount representing interest...... 240,968
--------------
Present value of net minimum lease payments $ 1,826,839
==============
COMMITMENTS AND CONTINGENCIES:
- ------------------------------
MRI-CT, Inc. leases space at two locations under leases that expire November
30,1998 and August 31, 2000. The current base annual rent is $330,120 plus
escalation.
At December 31, 1995, the required minimum lease payments regarding the
above for the next five years are as follows:
For the year ending:
1996............................... $ 341,808
1997............................... 340,118
1998............................... 335,762
1999............................... 162,996
2000............................... 108,664
--------------
$ 1,289,348
==============
The Company occupies two other locations on a month to month basis.
Reference is made to the note "Related Party Transactions".
MRI-CT's employment agreement with the chief executive officer ends December
31, 1997. Under the terms of the agreement, the officer receives a base salary
plus a percentage of gross receipts. On January 9, 1996 the employment agreement
was terminated and $200,00 was paid to the officer.
The Company is a party to various services contracts covering its equipment.
(Continued)
<PAGE>
MRI-CT, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1995
RELATED PARTY TRANSACTIONS:
- ---------------------------
MRI-CT rents space at two locations from the Trust u/w/o Elias Rand at a
total of $6,500 per month plus real estate taxes. In addition, the Company rents
space from Sonja Rand at $4,500 per month plus maintenance. These leases are on
a month to month basis.
In 1995, the Company billed its affiliate MRI-CT Scanning, P.C. $322,848 for
administrative , technical, diagnostic imaging equipment and related services.
Accounts receivable at December 31, 1995 includes $112,295 from MRI-CT Scanning,
P.C.
LITIGATION:
- -----------
The Company is a defendant in a defendant in a lawsuit brought by a former
employee. The financial statements include a provision of $35,000 for settlement
of the lawsuit, which in the opinion of management is adequate.
MAJOR CUSTOMERS AND
CREDIT RISK CONCENTRATION:
- --------------------------
The Company's revenue and accounts receivable is derived from providing
administrative and technical services, diagnostic imaging equipment and related
services to various radiology practices.
The Company maintains cash balances at several financial institutions.
Account balances are insured by the Federal Deposit Insurance Corporation for up
to $100,000 per bank account.
SUBSEQUENT EVENT:
- -----------------
On January 9, 1996, the Company sold substantially all of its assets and
liabilities.
<PAGE>
BARD & GLASSMAN
CERTIFIED PUBLIC ACCOUNTANTS
342 MADISON AVENUE - NEW YORK, NY 10173
---------
(212) 599-2880
FAX: (212) 599-3517
INDEPENDENT AUDITOR'S REPORT
ON ADDITIONAL INFORMATION
To the Board of Directors and
Stockholders of MRI-CT, Inc.:
Our report on our audit of the basic financial statements of MRI-CT,
Inc. for 1995 appears in the preceding section. The audit were made for the
purpose of forming an opinion on the basic financial statements taken as a
whole. the schedule of operating expenses presented for purposes of additional
analysis and is not a required part of the basic financial statements. Such
information has been subjected to the audition procedures applied in the audit
of the basic financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a
whole.
/s/ Bard & Glassman
New York, New York
February 2, 1996
<PAGE>
MRI-CT, INC.
OPERATING EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 1995
Salaries and wages .......................................... $2,098,407
Service and supplies ........................................ 360,820
Repairs and maintenance - medical equipment ................. 822,881
Interest .................................................... 297,615
Professional fees ........................................... 247,910
Rent and maintenance ........................................ 532,235
Utilities ................................................... 109,196
Insurance ................................................... 163,671
Payroll taxes ............................................... 156,090
Telephone ................................................... 96,717
Office expenses and supplies ................................ 134,850
Auto expenses ............................................... 18,689
Travel and entertainment .................................... 1,675
Delivery and postage ........................................ 34,441
Outside service ............................................. 61,042
Security .................................................... 13,256
Miscellaneous expenses ...................................... 28,310
----------
$5,177,805
==========
<PAGE>
MRI-CT, INC.
BALANCE SHEET
DECEMBER 31,
LIABILITIES
1994 1993 1992
------------ ----------- ----------
Current liabilities:
Loan payable ........................ $1,100,000 $1,100,000 $1,150,000
Accounts payable
and accrued expenses ............ 360,837 224,690 73,380
Current portion of
note payable - Du Pont .......... 70,000 60,000 66,300
Current portion of
capital lease obligations ....... 613,550 361,890 515,010
---------- ---------- ----------
Total current liabilities .... 2,144,387 1,746,580 1,804,690
Note payable - Du Pont
(less current portion above) ........ 16,662 92,860 146,554
Capital lease obligations
(less current portion above) ........ 1,826,840 972,988 1,311,351
Deferred income taxes payable ........... -- 1,000 10,000
Construction loan ....................... -- 332,000 --
3,987,889 3,145,428 3,272,595
---------- ---------- ----------
STOCKHOLDER'S EQUITY
Capital stock - 175 shares
authorized, issued and
outstanding, nor par value ............ 5,831 5,831 5,831
Retained earnings ....................... 2,065,176 2,988,558 3,105,232
---------- ---------- ----------
2,0717,007 2,994,389 3,111,063
---------- ---------- ----------
$6,058,896 $6,139,817 $6,383,658
========== ========== ==========
See accompanying notes to financial statements.
<PAGE>
MRI-CT, INC.
STATEMENT OF INCOME
FOR THE YEARS ENDED DECEMBER 31,
1994 1993 1992
----------- ----------- ----------
Revenues ............................ $ 5,892,163 $ 6,713,119 $5,921,597
Expenses:
Operating expenses .............. 5,290,223 5,571,539 4,134,949
depreciation and amortization ... 1,173,489 1,268,578 1,300,160
----------- ----------- ----------
6,463,712 6,840,117 5,435,109
----------- ----------- ----------
Net income (loss) from operations ... (571,549) (126,998) 486,488
Rental income ....................... -- -- 4,500
Interest income ..................... 51,548 29,416 22,757
Gain (loss) on sale of property ..... (102,345) (16,308) 30,305
Loss on liquidation of collateral ... (209,000) -- --
Settlement of prior year's tax audit (61,210) -- --
Estimated litigation settlement cost (30,000) -- --
----------- ----------- ----------
Net income (loss)
before tax provision ............ (922,556) (113,890) 544,050
Income tax provision ................ 826 2,784 67,866
----------- ----------- ----------
Net income (loss) ................... $ (923,382) $ (116,674) $ 476,184
=========== =========== ==========
See accompanying notes to financial statements.
<PAGE>
BARD & GLASSMAN
CERTIFIED PUBLIC ACCOUNTANTS
342 MADISON AVENUE - NEW YORK, NY 10173
---------
(212) 599-2880
FAX: (212) 599-3517
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and
Stockholders of MRI-CT, Inc.:
We have audited the accompanying balance sheets of MRI-CT, Inc. as of
December 31, 1994, 1993, and 1992, and the related statements of income,
retained earnings, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of MRI-CT, Inc. as of December
31, 1994, 1993, and 1992, and the results of its operations and its cash flows
for the years then ended in conformity with generally accepted accounting
principles.
/s/ Bard & Glassman
New York, New York
October 6, 1995
<PAGE>
MRI-CT, INC.
BALANCE SHEET
DECEMBER 31,
ASSETS
1994 1993 1992
Current assets: ---------- ---------- ----------
Cash ............................. $ 274,002 $ 365,905 $ 409,977
Accounts receivable .............. 1,478,334 1,229,614 586,753
Tax refunds receivable ........... 885 85,925 --
Prepaid taxes .................... 8,269 9,896 107,299
Prepaid expenses ................. 57,102 70,794 --
Other current assets ............. 21,700 31,998 46,998
Receivable from stockholder ...... -- -- 300,000
----------- ----------- ---------
Total current assets ...... 1,840,292 1,794,132 1,451,027
Property and equipment (less
accumulated depreciation ......... 4,116,079 3,649,136 4,514,488
Security deposits .................... 71,205 107,135 37,285
Deferred lease acquisition costs ..... 25,438 34,688 43,938
Goodwill ............................. 5,882 13,726 21,570
Construction in progress ............. -- 332,000 --
Collateral receivable ................ -- 209,000 209,000
Investments .......................... -- -- 12,600
Restrictive covenant agreement ....... -- -- 93,750
----------- ----------- ---------
$6,058,896 $6,139,817 $6,383,658
(Continued)
<PAGE>
MRI-CT, INC.
STATEMENT OF RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31,
1994 1993 1992
----------- ----------- ----------
Retained earnings-
beginning of year ............... $ 2,988,558 $ 3,105,232 $3,142,548
Net income (loss) ................... (923,382) (116,674) 476,184
----------- ----------- ----------
2,065,176 2,988,558 3,618,732
Distributions ....................... -- -- 513,500
----------- ----------- ----------
Retained earnings - end of year ..... $ 2,065,176 $ 2,988,558 $3,105,232
=========== =========== ==========
See accompanying notes to financial statements.
<PAGE>
MRI-CT, INC.
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Cash receipts:
Cash received from customers ......... $ 5,643,444 $ 6,070,258 $ 6,597,313
Interest received .................... 51,548 29,416 22,757
Tax refunds received ................. 94,936 -- 36,259
Rent income received ................. -- -- 4,500
----------- ----------- -----------
Total cash received .............. 5,789,928 6,099,674 6,660,829
----------- ----------- -----------
Cash payments :
Cash paid for cost of revenues and
general and administrative expenses 4,884,075 5,234,229 4,322,688
Cash paid for taxes ................... 10,096 306 100,778
Cash paid for interest ................ 337,221 241,794 228,380
----------- ----------- -----------
Total cash paid .................. 5,231,392 5,476,329 4,651,846
----------- ----------- -----------
Net cash provided by
operating activities ........ 558,536 623,345 2,008,983
----------- ----------- -----------
Cash flows from investing activities:
Proceeds from sale of property & equipment .. 109,000 3,500 500
Purchase of property & equipment ............ (1,834,683) (312,190) (1,776,079)
Repayment of note receivable from stockholder -- 300,000 50,000
Liquidation of investments .................. -- 12,600 12,600
Return of (increase in)
security deposit on capital lease ......... 35,930 (69,850) 89,237
----------- ----------- -----------
Net cash used in investing activities . (1,689,753) (65,940) (1,623,742)
----------- ----------- -----------
</TABLE>
(Continued)
<PAGE>
MRI-CT, INC.
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1994 1993 1992
----------- ---------- -----------
<S> <C> <C> <C>
Cash flows form financing activities:
Proceeds form capital lease loan .... $ 1,660,000 $ 53,355 $ 1,403,480
Payments on capital lease obligations (554,488) (544,838) (1,143,877)
Repayment of note payable - Du Pont . (66,198) (59,994) (60,695)
Repayment of loan ................... -- (50,000) --
Repayment of payable to stockholder . -- -- (250,000)
Distributions to stockholder ........ -- -- (513,500)
----------- ---------- -----------
Net cash provided by
(used in) financing activities 1,039,314 (601,477) (564,592)
----------- ---------- -----------
Net decrease in cash .................... (91,903) (44,072) (179,351)
Cash - January 1, ....................... 365,905 409,977 589,328
----------- ---------- -----------
Cash - December 31, ..................... $ 274,002 $ 365,905 $ 409,977
=========== ========= ===========
</TABLE>
(Continued)
<PAGE>
MRI-CT, INC.
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
Reconciliation of net income (loss) to net
cash provided by operating activities;
Net income (loss) ............................................... $ (923,382) $ (116,674) $ 476,184
Non-cash expenses, revenues, losses and gains included in income:
Depreciation and amortization ............................ 1,173,489 1,268,578 1,300,160
(Gain) loss on sale of property .......................... 102,345 16,308 (30,305)
Loss on liquidation of collateral ........................ 209,000 -- --
(Increase) decrease in accounts receivable ............... (248,720) (642,861) 675,716
(Increase) decrease in prepaid corporate taxes ........... 86,667 11,478 12,147
(Increase) decrease in prepaid expenses .................. 13,692 (70,794) 20,435
(Increase) decrease in other current assets .............. 10,298 15,000 84,416
Increase (decrease) in accounts
payable and accrued expenses .......................... 136,147 151,310 (520,970)
Increase (decrease) in deferred taxes payable ............ (1,000) (9,000) (8,800)
----------- ----------- -----------
Net cash provided by
operating activities ........................... $ 558,536 $ 623,345 $ 2,008,983
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
<PAGE>
MRI-CT, INC.
NOTES TO FINANCIAL STATEMENTS
SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES:
- ----------------------
Property and Equipment - Property and equipment are recorded at cost.
Depreciation is computed using the straight-line and accelerated methods over
the expected useful lives of the assets. Leasehold improvements incurred to
accommodate leased medical equipment are amortized over the remaining term of
the applicable leases or their useful lives, whichever is shorter. Expenditures
for maintenance and repairs are charges to expense, while those for renewals and
betterments are capitalized. When fixed assets are retired or otherwise disposed
of, the cost and related accumulated depreciation are removed from the accounts
with any resulting gain or loss reflected in earnings. For tax purposes property
and equipment are depreciated using accelerated methods. Deferred taxes are
provided on the difference between the depreciation for tax and report purposes.
Income Taxes - The shareholder of the Company consented to the election by
the corporation to be treated as an "S" corporation under the Internal Revenue
Code. Accordingly, there is no provision for Federal tax included in the
financial statements.
RECEIVABLE FROM STOCKHOLDER:
- ----------------------------
The receivable from stockholder represented the unpaid balance of the
proceeds due on the sale of property and equipment to the shareholder for
$350,000. The unpaid balance carried interest at 8% per annum. $50,000 was
repaid in March, 1993 and the balance of $250,000 was repaid in July, 1993.
(Continued)
<PAGE>
MRI-CT, INC.
NOTES TO FINANCIAL STATEMENTS
PROPERTY AND EQUIPMENT:
- -----------------------
Property and equipment is summarized as follows:
1994 1993 1992
----------- ----------- -----------
Capitalized leases ........... $ 3,299,691 $ 7,295,218 $10,949,590
Medical equipment ............ 5,242,776 2,381,188 2,195,166
Office equipment ............. 173,141 168,307 100,423
Automobiles .................. 24,346 24,346 55,495
Leasehold improvements ....... 521,501 1,138,835 1,087,395
----------- ----------- ----------
9,261,455 11,007,894 14,388,069
----------- ----------- ----------
Less accumulated depreciation:
Capitalized leases ....... $ 713,426 $ 5,071,887 $ 7,992,204
Other assets.............. 4,431,950 2,286,871 1,881,377
----------- ------------ -----------
5,145,376 7,358,758 9,873,581
----------- ------------ -----------
Net fixed assets.............. $ 4,116,079 $ 3,649,136 $ 4,514,488
=========== ============ ===========
INVESTMENTS:
- ------------
At December 31, 1992, the investment account consisted of $12,600 principal
amount of the Westchester Square Hospital's 12-1/2% debentures, due October 1,
1993. The debenture were repaid in semi-annual installments of $6,300 each on
April 1, and October 1, 1993.
CONSTRUCTIONS IN PROGRESS
CONSTRUCTION LOAN:
- -------------------------
The Company installed a new MRI in the New York office in 1994 at a total
cost of $1,660,000. As of December 31, 1993 the finance company had advanced
$332,000 to the vender doing the installation. The interest rate on the loan was
8%.
SECURITY DEPOSITS:
- ------------------
The Company has various security deposits outstanding on leased equipment.
(Continued)
<PAGE>
MRI-CT, INC.
NOTES TO FINANCIAL STATEMENTS
COLLATERAL RECEIVABLE:
- ----------------------
On October 17, 1989 the Company was advised UMB Bank and Trust company (UMB)
liquidated collateral with a face value of $209,000 deposited by the sole
stockholder as security on leases entered into by the Company and UMB. The
Company reimbursed the stockholder for the collateral and demanded the return of
the collateral from UMB. Management felt that the Company has fulfilled all of
its under the leases, that the liquidation of the collateral was improper, and
expected full recovery. In 1994 the Company determined that the collateral was
uncollectible and a provision was made in the financial statements to reflect
the loss.
GOODWILL AND OTHER DEFERRED CHARGES:
- ------------------------------------
The Company purchased a medical facilities area at Westchester Square
Hospital in 1990. In connection with this purchase, the Company entered into a
restrictive covenant agreement for which it paid $250,000. This amount was
amortized over the three years from 1991 to 1993. The Company also assumed a
capital lease on equipment and a rental lease at a cost of $190,812. The costs
incurred with respect to these leases were deferred and are being amortized over
the respective lease terms.
In addition, the Company recorded goodwill of $31,375 in connection with
this acquisition which is being amortized over four years.
LOAN PAYABLE:
- -------------
The Company had two demand loans payable to the Bank of New York totaling
$1,150,000. The loans were secured by marketable securities owned by the sole
stockholder and carried interest at the prime rate. In 1993, the Company repaid
$50,000 of the loan. In September, 1994 the bank called the loan and liquidated
the collateral securities owned by the estate of the late stockholder in payment
thereof. The Company then executed a note payable to the estate for the same
amount, terms and conditions as the loan from the bank. The estate then assigned
the note to the trust established by the late stockholder. At December 31, 1994
the interest rate on the loan was 8.75% per annum.
<PAGE>
MRI-CT, INC.
NOTES TO FINANCIAL STATEMENTS
LEASES:
- -------
MRI-CT capitalizes leases in accordance with Statement of Financial
Accounting Standards No. 13, Accounting for Leases. The Company leases various
types of medical equipment with lease terms of five years.
Future minimum lease payments under capital leases consisted of the
following :
Fiscal year ending December 31, 1994 1993 1992
---------- ---------- ----------
1993.................................. $ -- $ -- $ 658,676
1994.................................. -- 422,680 412,009
1995.................................. 805,128 392,440 381,769
1996.................................. 805,128 389,691 379,020
1997.................................. 773,550 358,115 347,447
1998.................................. 419,895 -- --
1999.................................. 69,240 -- --
---------- ---------- ----------
Total minimum lease payments.......... $2,872,941 $1,568,262 $2,178,921
Less amount
representing interest............... 432,551 233,384 352,560
---------- ---------- ----------
Present value of net
minimum lease payments.............. $2,440,390 $1,334,878 $1,826,361
========== ========== ==========
NOTE PAYABLE - DU PONT:
- -----------------------
The Company finances several pieces of imaging equipment from E.I. Du Pont
De Nemours & Company. A portion of the Company's film purchases is credited by
Du Pont to the loan. The loan carries interest at approximately 8% per annum.
INCOME TAXES:
- -------------
The income tax provision in the statement of income is summarized as
follows:
1994 1993 1992
-------- -------- ---------
Current expense -
state and local ................ $ 1,826 $ 11,784 $ 76,666
Deferred tax credit ................ (1,000) (9,000) (8,800)
------- -------- --------
Total charged to operations ........ $ 826 $ 2,784 $ 67,866
======= ======== ========
(Continued)
<PAGE>
MRI-CT, INC.
NOTES TO FINANCIAL STATEMENTS
COMMITMENTS AND CONTINGENCIES:
- ------------------------------
MRI-CT, Inc. leases space at two location under leases that expire November
30, 1998 and August 31, 2000. The current base annual rent is $330,120 plus
escalation.
At December 31, 1994, the required minimum lease payments regarding the
above for the next five years are as follows:
1995................................................ $ 332,503
1996................................................ 341,808
1997................................................ 340,118
1998................................................ 335,762
1999................................................ 162,996
----------
$1,513,187
MRI-CT's employment agreement with the chief executive officer ends December
31, 1997. Under the terms of the agreement, the officer receives a base salary
plus a percentage of gross receipts.
RELATED PARTY TRANSACTIONS:
- ---------------------------
MRI-CT rents space at two locations from the Trust u/w/o Elias Rand at total
of $6,500 per month plus real estate taxes. In addition, the Company rents space
from Sonja Rand at $4,500 per month plus real estate taxes. These leases are on
a month to month basis.
MAJOR CUSTOMER AND
CREDIT RISK CONCENTRATION:
- --------------------------
The Company's revenue and accounts receivable is derived from providing
administrative and technical services, diagnostic imaging equipment and related
services to various radiology practices.
The Company maintains cash balances at several financial institutions.
Account balances are insured by the Federal Deposit Insurance Corporation for up
to $100,00 per bank account.
