<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 Report (Date of earliest event reported): November 4, 1997
HEALTHCARE IMAGING SERVICES, INC.
---------------------------------
(Exact name of registrant as specified in its charter)
Delaware 000-19636 22-3119929
-------- --------- ----------
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
200 Schulz Drive, Red Bank, New Jersey 07701
-------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (732) 224-9292
NOT APPLICABLE
--------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
This Form 8-K/A is filed as an amendment to the Current Report on Form 8-K
filed by HealthCare Imaging Services, Inc. (the "Company") on November 19, 1997
in connection with the Company's acquisition of substantially all of the assets
of M.R Radiology Imaging of Lower Manhattan, P.C., a New York professional
corporation ("MRI").
a) Financial statements of businesses acquired
The following Audited Financial Statements of MRI are filed on the pages
listed below:
Report of Independent Auditors.........................................F-1
Balance Sheet as of December 31, 1996..................................F-2
Statement of Income for the year ended December 31, 1996...............F-3
Statement of Shareholder's Equity for the year ended
December 31, 1996....................................................F-4
Statement of Cash Flows for the year ended December 31, 1996...........F-5
Notes to Financial Statements..........................................F-6
The following Unaudited Financial Statements of MRI are filed on the pages
listed below:
Balance Sheet as of September 30, 1997................................F-10
Statement of Income for the period ended September 30, 1997...........F-11
Statement of Shareholder's Equity for the period ended
September 30, 1997..................................................F-12
Statement of Cash Flows for the period ended September 30, 1997.......F-13
b) Pro Forma financial information
The following required pro forma financial information of the Company
and MRI is filed on the pages listed below:
Pro Forma Consolidated Condensed Balance Sheets as of
September 30, 1997..................................................F-14
Pro Forma Consolidated Statements of Operations for the nine
months ended September 30, 1997.....................................F-16
Pro Forma Consolidated Statements of Operations for the year
ended December 31, 1996.............................................F-17
Notes to Pro Forma Consolidated Financial Statements..................F-17
c) Exhibits
23.1 Consent of David Fischer & Co., P.A.
2
<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.
HEALTHCARE IMAGING SERVICES, INC.
(Registrant)
Dated: January 16, 1998 By: /s/ Elliott H. Vernon
---------------------------
Elliott H. Vernon
Chairman of the Board, President
and Chief Executive Officer
3
<PAGE>
INDEX TO EXHIBITS
Exhibit No.
23.1 Consent of David Fischer & Co., P.A.
4
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
To the Shareholder of
M.R. Radiology Imaging of Lower Manhattan, P.C.
New York, New York
We have audited the accompanying balance sheet of M.R. Radiology Imaging of
Lower Manhattan, P.C. as of December 31, 1996 and the related statements of
income, shareholder's equity, 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
presentation. We believe that our audit provides 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 M.R. Radiology Imaging of
Lower Manhattan, P.C. as of December 31, 1996, and the results of its
operations and its cash flows for the year then ended in conformity with
generally accepted accounting principles.
/s/ David Fischer & Co., P.A.
-----------------------------------
DAVID FISCHER & CO., P.A.
Morristown, New Jersey
January 7, 1998
F-1
<PAGE>
M.R. RADIOLOGY IMAGING OF LOWER MANHATTAN, P.C.
BALANCE SHEET
DECEMBER 31, 1996
- -------------------------------------------------------------------------------
ASSETS 1996
CURRENT ASSETS:
Accounts receivable - Net of allowance for doubtful accounts
of $151,000 $ 456,335
Prepaid expenses and other 18,464
Deferred income taxes 60,000
----------
Total current assets 534,799
----------
EQUIPMENT - NET 470,286
----------
DEPOSIT 1,855
----------
TOTAL ASSETS $1,006,940
==========
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Bank overdraft $ 594
Accounts payable and accrued expenses 40,956
Current portion of capital lease obligation 145,849
Income taxes payable 36,530
----------
Total current liabilities 223,929
----------
NONCURRENT LIABILITIES:
Capital lease obligation, less current portion 271,609
Deferred income taxes 64,000
----------
Total noncurrent liabilities 335,609
----------
SHAREHOLDER'S EQUITY:
Common stock, $1.00 par value: 10,000 shares
authorized and outstanding 10,000
Retained earnings 437,402
----------
Total shareholder's equity 447,402
----------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $1,006,940
==========
The accompanying notes are an integral part of the financial statements.
F-2
<PAGE>
M.R. RADIOLOGY IMAGING OF LOWER MANHATTAN, P.C.
STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
- -------------------------------------------------------------------------------
1996
REVENUES, NET $1,783,548
----------
OPERATING EXPENSES:
Salaries - Officer 523,539
Salaries - Other 391,586
Occupancy and other operating expenses 283,680
Films and supplies 44,893
Equipment maintenance and repairs 122,546
Consulting and marketing fees 18,200
Professional fees 58,567
Depreciation and amortization 96,421
Interest 41,913
----------
1,581,345
----------
INCOME BEFORE PROVISION FOR INCOME TAXES 202,203
PROVISION FOR INCOME TAXES 83,000
----------
NET INCOME $ 119,203
==========
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
M.R. RADIOLOGY IMAGING OF LOWER MANHATTAN, P.C.
STATEMENT OF SHAREHOLDER'S EQUITY
YEAR ENDED DECEMBER 31, 1996
- -------------------------------------------------------------------------------
Common Stock Total
Retained Shareholder's
Shares Amount Earnings Equity
-------- -------- ---------- -------------
BALANCE, DECEMBER 31, 1995 10,000 $10,000 $305,392 $315,392
Capital contribution 12,807 12,807
Net income 119,203 119,203
------ ------- -------- --------
BALANCE, DECEMBER 31, 1996 10,000 $10,000 $437,402 $447,402
====== ======= ======== ========
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
M.R. RADIOLOGY IMAGING OF LOWER MANHATTAN, P.C.
STATEMENT OF CASH FLOW
YEAR ENDED DECEMBER 31, 1996
- -------------------------------------------------------------------------------
1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 119,203
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization 96,421
Deferred income taxes 40,000
Changes in assets and liabilities:
Accounts receivable (195,093)
Prepaid expenses and other 3,626
Accounts payable and accrued expenses 20,619
Income taxes payable 36,530
---------
Net cash provided by operating activities 121,306
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contribution 12,807
Payments on capital lease obligation (134,256)
---------
Net cash used in financing activities (121,449)
---------
DECREASE IN CASH (143)
BANK OVERDRAFT:
Beginning of the year (451)
---------
End of the year $ (594)
=========
SUPPLEMENTAL CASH FLOW DATA:
Interest paid $ 40,824
=========
Income taxes paid $ 6,470
=========
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
M.R. RADIOLOGY IMAGING OF LOWER MANHATTAN, P.C.
NOTES TO FINANCIAL STATEMENTS
YEAR ENDED DECEMBER 31, 1996
- -------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BUSINESS ACTIVITY - M.R. Radiology Imaging of Lower Manhattan, P.C., a New
York professional corporation (the "Company") is in the business of
operating a fixed-site MRI and ultrasound facility (the "Facility"),
located at 45 Beekman Street in New York City.
REVENUES - The Company provides MRI and ultrasound services to patients.
Revenues are recognized at the time services are rendered.
EQUIPMENT - Equipment, stated at cost, is depreciated on a straight-line
basis over the estimated useful lives of the assets. Leasehold improvements
are amortized over the shorter of the life of the lease or the useful life.
The estimated useful lives are as follows:
Office equipment 5 years
Medical equipment 7 years
Leasehold improvements 6-8 years
INCOME TAXES - The Company accounts for income taxes in accordance with the
provisions of Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS 109"). SFAS 109 requires the
recognition of deferred tax assets and liabilities for the expected future
tax consequences of events that have been included in the financial
statements or tax returns. Under this method, deferred tax assets and
liabilities are determined based on the difference between the financial
statement and tax basis of assets and liabilities using enacted tax rates
in effect for the year in which the differences are expected to reverse.
Valuation allowances are established when necessary to reduce deferred tax
assets to the amount expected to be realized.
FAIR VALUE OF FINANCIAL INSTRUMENTS - For financial instruments including
cash, accounts receivable and payable and accruals, it was assumed that the
carrying amount approximated fair value because of their short maturity.
The fair value of the Company's capital lease obligation was estimated
using discounted cash flow analysis, based on the Company's current
incremental borrowing rates for similar types of borrowing arrangements.
The carrying amount and fair value for the Company's capital lease
obligation was $453,377 at December 31, 1996.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
CONCENTRATION OF CREDIT RISK
Cash
The Company places its cash with one financial institution located in New
York. On several occasions during 1996, the Company's cash balances
exceeded the Federal Deposit Insurance Corporation insurance limit of
F-6
<PAGE>
$100,000 per financial institution. The Company has not experienced any
losses in such accounts, and it believes it is not exposed to any
significant credit risk on cash.
Accounts Receivable
The Company extends credit without collateral to its patients, most of whom
are local residents and are insured under third-party payor agreements.
Accounts receivable from patients and third-party payors, included in the
Company's accounts receivable, as of December 31, 1996 were as follows:
1996
----
No fault insurance 49%
Commercial 20%
HMO 15%
Workers compensation 10%
Self pay and other third-party payors 6%
----
100%
The Company's accounts receivable are shown net of an allowance for
doubtful accounts which consists of the Company's estimate of amounts that
will not be collected from patients and other third party payors.
LONG-LIVED ASSETS - In March 1995, the Financial Accounting Standards Board
(the "FASB") issued Statement of Financial Accounting Standards No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed of." The Company adopted this standard in 1996
without any significant impact on the Company's financial position or
results of operations.
2. EQUIPMENT
Equipment consisted of the following:
DECEMBER 31, 1996
Medical equipment under capital lease $585,903
Office equipment 53,213
Leasehold improvements 12,989
------
652,105
Less accumulated depreciation and amortization 181,819
--------
$470,286
========
F-7
<PAGE>
3. CAPITAL LEASE OBLIGATION
Future minimum lease payments under a noncancellable operating lease and
the present value of future minimum capital lease payments as of
December 31, 1996 consisted of the following:
YEAR ENDING CAPITAL LEASE OPERATING
DECEMBER 31, OBLIGATION LEASE
1997 $175,078 $43,000
1998 175,078 43,000
1999 116,719 7,167
-------- -------
Total minimum lease payments 466,875 $93,167
=======
Less amounts representing interest 49,417
--------
Present value of minimum capital lease payments 417,458
Less current portion of obligation 145,849
--------
$271,609
========
Rent expense was $45,062 for 1996.
4. INCOME TAXES
Although the Company is organized as a sub-chapter S Corporation under
Federal and State laws, the accompanying financial statements include a
provision for income taxes as if the Company was a C Corporation.
The provision for income taxes consisted of the following:
STATE AND
FEDERAL LOCAL TOTAL
December 31, 1996:
Current $18,000 $25,000 $43,000
Deferred 31,000 9,000 40,000
------ ------- -------
$49,000 $34,000 $83,000
======= ======= =======
F-8
<PAGE>
The difference between the actual income tax expense and the tax expense
computed by applying the statutory Federal income tax rate to the net
income before taxes is attributable to the following:
Year Ended December 31,
-----------------------
1996
----------
Dollars Percentage
Statutory Federal income tax rate $68,749 34.0
State and local income taxes 16,500 8.1
Deferred state taxes 5,940 2.9
Other (8,189) (4.0)
------- ----
Actual income tax expense $83,000 41.0
======= ====
Deferred income taxes reflect the tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes. The tax
effects of significant items comprising the Company's net deferred income
taxes as of December 31, 1996 are as follows:
1996
----
Deferred tax asset:
Allowance for doubtful accounts $ 60,000
Deferred tax liability:
Book over tax depreciation (64,000)
--------
Net deferred income taxes $ (4,000)
========
Current tax asset $ 60,000
Non-current tax liability (64,000)
--------
Net deferred income taxes $ (4,000)
========
5. SUBSEQUENT EVENT
On November 4, 1997, the Company entered into an agreement with HealthCare
Imaging Services, Inc. ("HIS") to sell substantially all of its assets,
except for cash. In exchange, HIS agreed to pay the Company approximately
$2,200,000 consisting of $900,000 due at closing, $300,000 in a short term
note due December 31, 1997 and 1,000,000 shares of HIS common stock. In
addition, HIS agreed to assume certain liabilities due under continuing
contracts and operating and capital leases.
HIS also entered into a three year consulting agreement, which is renewable
for successive one year terms, which provides the Company the right to use
the equipment acquired by HIS on an exclusive basis. As part of the
consulting agreement, the Company engaged HIS to provide management
services at a cost of 90% of gross cash receipts. The consulting agreement
includes certain restrictive covenants under which the Company can operate
and may be terminated for cause as defined in the consulting agreement.
F-9
<PAGE>
M.R. RADIOLOGY IMAGING OF LOWER MANHATTAN, P.C.
BALANCE SHEET
SEPTEMBER 30, 1997
- -------------------------------------------------------------------------------
SEPTEMBER 30, 1997
ASSETS (UNAUDITED)
CURRENT ASSETS:
Cash and cash equivalents $ 23,528
Accounts receivable - Net 447,746
Deferred income taxes 72,000
--------
Total current assets 543,274
--------
EQUIPMENT - NET 407,966
--------
DEPOSIT 1,855
--------
TOTAL ASSETS $953,095
========
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 10,871
Current portion of capital lease obligation 156,274
Income taxes payable 64,530
--------
Total current liabilities 231,675
--------
NONCURRENT LIABILITIES:
Capital lease obligation, less current portion 140,490
Deferred income taxes 73,000
--------
Total noncurrent liabilities 213,490
--------
SHAREHOLDER'S EQUITY:
Common stock, $1.00 par value: 10,000 shares
authorized and outstanding 10,000
Retained earnings 497,930
--------
Total shareholder's equity 507,930
--------
TOTAL LIABILITIES AND SHAREHOLDER'S EQUITY $953,095
========
F-10
<PAGE>
M.R. RADIOLOGY IMAGING OF LOWER MANHATTAN, P.C.
STATEMENT OF INCOME
PERIOD ENDED SEPTEMBER 30, 1997
- -------------------------------------------------------------------------------
SEPTEMBER 30, 1997
(UNAUDITED)
REVENUES, NET $876,974
--------
OPERATING EXPENSES:
Salaries 471,900
Occupancy and other operating expenses 127,620
Films and supplies 14,123
Equipment maintenance and repairs 80,604
Professional fees 9,091
Depreciation and amortization 62,321
Interest 25,787
--------
791,446
--------
INCOME BEFORE PROVISION FOR INCOME TAXES 85,528
PROVISION FOR INCOME TAXES 25,000
--------
NET INCOME $ 60,528
========
F-11
<PAGE>
M.R. RADIOLOGY IMAGING OF LOWER MANHATTAN, P.C.
STATEMENT OF SHAREHOLDER'S EQUITY
PERIOD ENDED SEPTEMBER 30, 1997
- -------------------------------------------------------------------------------
Total
Common Stock Retained Shareholder's
Shares Amount Earnings Equity
------ ------ -------- ------
BALANCE, DECEMBER 31, 1996 10,000 $ 10,000 $437,402 $447,402
Net income 60,528 60,528
-------- -------- -------- --------
BALANCE, SEPTEMBER 30, 1997 10,000 $ 10,000 $497,930 $507,930
======== ======== ======== ========
F-12
<PAGE>
M.R. RADIOLOGY IMAGING OF LOWER MANHATTAN, P.C.
STATEMENT OF CASH FLOW
PERIOD ENDED SEPTEMBER 30, 1997
- -------------------------------------------------------------------------------
SEPTEMBER 30, 1997
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 60,528
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation and amortization 62,321
Deferred income taxes (3,000)
Changes in assets and liabilities:
Accounts receivable 8,589
Prepaid expenses and other 18,464
Accounts payable and accrued expenses (30,085)
Income taxes payable 28,000
---------
Net cash provided by operating activities 144,817
---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on capital lease obligation (120,695)
---------
Net cash used in financing activities (120,695)
---------
INCREASE IN CASH 24,122
CASH:
Beginning of the period (594)
---------
End of the period $ 23,528
=========
SUPPLEMENTAL CASH FLOW DATA:
Interest paid $ 25,204
=========
Income taxes paid $ --
=========
F-13
<PAGE>
Unaudited Pro Forma Consolidated Condensed Financial Statements
The following unaudited pro forma condensed consolidated balance sheet as
of September 30, 1997 and unaudited pro forma condensed consolidated statement
of operations for the nine months ended September 30, 1997 and the year ended
December 31, 1996 (collectively, the "Pro Forma Statements") are based on the
historical Consolidated Financial Statements of the Company, included in the
Company's Quarterly Report on Form 10-Q and the historical Financial Statements
of M.R. Radiology Imaging of Lower Manhattan, P.C. included elsewhere in this
report on Form 8-K/A, as adjusted to give effect to the acquisition of
substantially all of the assets of M.R. Radiology Imaging of Lower Manhattan,
P.C. (the "MRI Acquisition") and the related issuance of cash, common stock and
a short-term promissory note (collectively, the "Transactions") using the
purchase method of accounting and the assumptions and adjustments in the
accompanying Notes to the Pro Forma Statements. The pro forma condensed
consolidated balance sheet gives effect to the transactions as if they occurred
on September 30, 1997 and the pro forma condensed consolidated statement of
operations gives effect to the transactions as if they occurred on the first
day of the respective periods.
The pro forma adjustments are based upon available information and certain
assumptions that the Company believes are reasonable. The Pro Forma Statements
do not purport to represent what the Company's financial position and result of
operations would actually have been had the Transactions in fact occurred on
such dates or to project the Company's financial position or results of
operations for any future period.
The Pro Forma Statements and the Notes thereto should be read in
conjunction with the historical Consolidated Financial Statements of the
Company and Notes thereto included in the Company's Annual Report on Form 10-K
for the year ended December 31, 1996, as amended, the Company's Quarterly
report on Form 10-Q and the historical Financial Statements of M.R. Radiology
Imaging of Lower Manhattan, P.C. and Notes thereto for the year ended December
31, 1996 included elsewhere in this report on Form 8-K/A.
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEETS (A):
<TABLE>
<CAPTION>
M.R. RADIOLOGY
IMAGING OF
LOWER
COMPANY MANHATTAN, P.C.
HISTORICAL HISTORICAL
SEPTEMBER 30, SEPTEMBER 30, PRO FORMA PRO FORMA
1997 1997 ADJUSTMENTS CONSOLIDATED
---- ---- ----------- ------------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 369,738 $ 23,528 $ (23,528)(B) $ 369,738
Accounts receivable - net 4,821,101 447,746 - 5,268,847
Prepaid expenses and other 146,026 - - 146,026
Deferred income taxes - 72,000 (72,000)(B) -
----------- -------- ---------- -----------
Total current assets 5,336,865 543,274 (95,528) 5,784,611
----------- -------- ---------- -----------
PROPERTY, PLANT AND EQUIPMENT - Net 5,007,181 407,966 - 5,415,147
----------- -------- ---------- -----------
OTHER ASSETS:
Advances to licensee 220,998 - - 220,998
Goodwill - net 124,925 - 1,585,039 (D) 1,709,964
Due from officer 252,364 - - 252,364
Other assets 341,169 1,855 - 343,024
----------- -------- ---------- -----------
Total other assets 939,456 1,855 1,585,039 2,526,350
----------- -------- ---------- -----------
TOTAL ASSETS $11,283,502 $953,095 $1,489,511 $13,726,108
=========== ======= ========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving credit facility $ 400,000 $ - $1,203,721 (E) $ 1,603,721
Accounts payable and accrued expenses 1,008,819 10,871 100,000 (F) 1,119,690
Current portion of long-term debt and capita
lease obligations 1,666,862 156,274 - 1,823,136
Income taxes payable 6,794 64,530 (64,530)(B) 6,794
----------- -------- ---------- -----------
Total current liabilities 3,082,475 231,675 1,239,191 4,553,341
----------- -------- ---------- -----------
</TABLE>
F-14
<PAGE>
<TABLE>
<CAPTION>
M.R. RADIOLOGY
IMAGING OF
LOWER
COMPANY MANHATTAN, P.C.
HISTORICAL HISTORICAL
SEPTEMBER 30, SEPTEMBER 30, PRO FORMA PRO FORMA
1997 1997 ADJUSTMENTS CONSOLIDATED
---- ---- ----------- ------------
<S> <C> <C> <C> <C>
NONCURRENT LIABILITIES:
Long-term debt and capital lease obligations 2,282,910 140,490 -- 2,423,400
Reserve for restructuring costs 364,501 -- -- 364,501
Deferred income taxes -- 73,000 (73,000)(B) --
------------ ------------ ------------ ------------
Total noncurrent liabilities 2,647,411 213,490 (73,000) 2,787,901
------------ ------------ ------------ ------------
MINORITY INTEREST 514,768 -- -- 514,768
------------ ------------ ------------ ------------
STOCKHOLDERS' EQUITY:
Preferred stock 33,050 -- -- 33,050
Common stock 72,685 10,000 (10,000)(G)
10,000 (H) 82,685
Additional paid-in capital 11,886,563 -- 821,250 (H) 12,707,813
Accumulated deficit (6,925,180) 497,930 (497,930)(G) (6,925,180)
Unearned compensation (28,270) -- -- (28,270)
------------ ------------ ------------ ------------
Total stockholders' equity 5,038,848 507,930 323,320 5,870,098
------------ ------------ ------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 11,283,502 $ 953,095 $ 1,489,511 $ 13,726,108
============ ============ ============ ============
</TABLE>
See notes to Pro Forma Consolidated Condensed Financial Statements
F-15
<PAGE>
PRO FORMA CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (A):
<TABLE>
<CAPTION>
M.R.
RADIOLOGY
IMAGING OF
LOWER
MANHATTAN,
COMPANY P.C.
HISTORICAL HISTORICAL
SEPTEMBER 30, SEPTEMBER 30, PRO FORMA PRO FORMA
1997 1997 ADJUSTMENTS CONSOLIDATED
---- ---- ------------ ------------
<S> <C> <C> <C> <C>
REVENUES $7,672,300 $876,974 $ (72,700)(I) $8,461,577
(14,997)(J)
---------- -------- --------- ----------
OPERATING EXPENSES
Salaries 2,045,402 471,900 (72,700)(I) 2,371,902
(72,700)(K)
Other operating expenses 2,351,991 127,620 - 2,479,611
Films and supplies 376,923 14,123 - 391,046
Equipment maintenance and repairs 463,931 80,604 - 544,535
Consulting and marketing fees 286,866 - - 286,866
Professional fees 381,335 9,091 (9,091)(L) 381,335
Depreciation and amortization 1,085,798 62,321 79,252 (M) 1,227,371
Interest 387,277 25,787 99,307 (N) 512,371
Gain on sale of property, plant and equipment (105,000) - - (105,000)
Non-cash compensation charge 370,376 - - 370,376
---------- -------- --------- ----------
Total operating expenses 7,644,899 791,446 24,068 8,460,413
---------- -------- --------- ----------
INCOME (LOSS) BEFORE MINORITY
INTERESTS IN JOINT VENTURES AND
INCOME TAXES 27,401 85,528 (111,765) 1,164
MINORITY INTERESTS IN JOINT
VENTURES (331,140) - - (331,140)
---------- -------- --------- ----------
(LOSS) INCOME BEFORE INCOME
TAXES (303,739) 85,528 (111,765) (329,976)
INCOME TAX PROVISION 32,596 25,000 (10,000)(C) 47,596
---------- -------- --------- ----------
NET (LOSS) INCOME $ (336,335) $ 60,528 $(101,765) $ (377,572)
========== ======== ========= ==========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING 5,532,769 6,532,769
========= =========
NET LOSS PER COMMON SHARE $(0.06) $(0.06)
======= =======
</TABLE>
See notes to Pro Forma Consolidated Condensed Financial Statements
F-16
<PAGE>
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (A):
<TABLE>
<CAPTION>
M.R. RADIOLOGY
IMAGING OF
LOWER
COMPANY MANHATTAN, P.C.
HISTORICAL HISTORICAL
DECEMBER 31, DECEMBER 31, PRO FORMA PRO FORMA
1996 1996 ADJUSTMENTS CONSOLIDATED
---- ---- ------------ ------------
<S> <C> <C> <C> <C>
REVENUES $ 9,787,591 $1,783,548 $(347,451)(I) $11,392,784
169,096 (J)
------------ ---------- --------- -----------
OPERATING EXPENSES:
Salaries 2,838,739 915,125 (347,451)(I) 3,230,325
(176,088)(K)
Other operating expenses 2,645,275 283,680 - 2,928,955
Provision/(recovery) of bad debts (392,286) - - (392,286)
Films and supplies 552,067 44,893 - 596,960
Equipment maintenance and repairs 645,231 122,546 - 767,777
Consulting and marketing fees 72,344 18,200 - 90,544
Professional fees 457,797 58,567 (58,567)(L) 457,797
Depreciation and amortization 1,450,074 96,421 109,763 (M) 1,656,258
Interest 469,133 41,913 132,409 (N) 643,455
Non-cash compensation charge 1,445,473 - - 1,445,473
------------ ---------- --------- -----------
Total operating expenses 10,183,847 1,581,345 (339,934) 11,425,258
------------ ---------- --------- -----------
(LOSS) INCOME BEFORE MINORITY
INTERESTS IN JOINT VENTURES
AND INCOME TAXES (396,256) 202,203 161,579 (32,474)
MINORITY INTERESTS IN JOINT
VENTURES (416,192) - - (416,192)
------------ ---------- --------- -----------
(LOSS) INCOME BEFORE INCOME TAXES (812,448) 202,203 161,579 (448,666)
INCOME TAX PROVISION 49,348 83,000 (58,000)(C) 74,348
------------ ---------- --------- -----------
NET (LOSS) INCOME $ (861,796) $ 119,203 $ 219,579 $ (523,014)
============ =========== ============ ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 4,711,974 5,711,974
========= =========
NET LOSS PER COMMON SHARE $(0.18) $(0.09)
====== ======
</TABLE>
See notes to Pro Forma Consolidated Condensed Financial Statements
NOTES TO PRO FORMA CONSOLIDATED CONDENSED FINANCIAL STATEMENTS:
(A) The following pro forma adjustments reflect the MRI Acquisition using the
purchase method of accounting. The total purchase price for the MRI Acquisition
has been preliminarily allocated to tangible and identifiable intangible assets
and liabilities based upon management's estimate of their respective fair
market values with the excess of cost over fair value of net assets acquired
allocated to goodwill. The allocation of purchase price is subject to revision
when additional information concerning asset and liability valuations is
obtained.
(B) Pro forma adjustment to represent excluded assets and liabilities not
assumed pursuant to the asset purchase agreement of the MRI Acquisition.
(C) Pro forma adjustment to give effect to the pro forma provisions for income
taxes.
(D) Pro forma adjustment to preliminary allocation of excess of purchase price
over the estimated fair market value of the tangible and identifiable
intangible assets and liabilities assumed.
(E) Pro forma adjustment to reflect cash and notes issued as part of the
purchase price for the acquisition (cash required was borrowed under the
Company's revolving credit facility):
Cash paid to sole shareholder $ 900,000
F-17
<PAGE>
Cash paid to sole shareholder-promissory note 303,721
----------
Borrowings against revolving credit facility $1,203,721
==========
(F) Pro forma adjustment to record estimated transaction costs.
(G) Pro forma adjustment to eliminate M.R. Radiology Imaging of Lower
Manhattan, P.C.'s historical shareholder's equity.
(H) Pro forma adjustment to reflect the issuance of one million shares of
common stock, $.01 par value per share, of the Company as part of the purchase
price combination for the MRI Acquisition:
Common stock $ 10,000
Additional paid in capital 821,250
---------
$ 831,250
=========
(I) Pro forma adjustment to reclassify salaries to revenues to conform M.R.
Radiology Imaging of Lower Manhattan, P.C.'s historical accounting and
reporting policies with that of the Company.
(J) Pro forma adjustment to reflect the consulting services agreement entered
into pursuant to the MRI Acquisition.
(K) Pro forma adjustment to represent the elimination of certain compensation
that will no longer be made to the shareholder of M.R. Radiology Imaging of
Lower Manhattan, P.C.
(L) Pro forma adjustment to eliminate professional fees that are not continued.
(M) Pro forma adjustment to represent the estimated increase in amortization
expense over 15 years on a straight-line basis relating to the intangible
assets acquired in the MRI Acquisition based upon the preliminary purchase
price allocation.
(N) Pro forma adjustment to represent the pro forma adjustment to interest
expense due to the cost of borrowing cash used by the Company to fund the MRI
Acquisition at an average interest rate of 11%.
F-18
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our report on the Financial Statements of M.R. Radiology Imaging of Lower
Manhattan, P.C. for the year ended December 31, 1996, included in this Form
8-K/A, into the Company's previously filed Registration Statements No. 33-42091,
No. 33-72876 and No. 33-86214 on Form S-3 and Registration Statements No.
33-86872 and No. 333-8699 on Form S-8.
/s/ DAVID FISCHER & COMPANY, P.A.
- ---------------------------------
DAVID FISCHER & COMPANY, P.A.
Morristown, New Jersey
January 16, 1998
