UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1997
--------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to _____________
Commission File Number 0-20968
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Advanced Mammography Systems, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 04-3166438
--------------------------- -----------------------------
State or other jurisdiction (IRS Employer Identification
of incorporation or Number)
organization
46 Jonspin Road, Wilmington, Massachusetts 01887
--------------------------------------------------------------
(Address or principal executive offices) (Zip Code)
(508) 657-8876
-------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes x No
----- ------
As of May 2, 1997, there were 7,616,254 shares of Common Stock, $.01
par value, outstanding.
<PAGE>
FORM 10-Q/A
AMENDMENT NO. 1
The undersigned registrant hereby amends the following items,
financial statements, exhibits or other portions of its Form 10-Q
for the quarterly period ended March 31, 1997 as set forth in the
pages attached hereto:
(List all such items, financial statements, exhibits or other
portions amended)
1. Items 1 and 2 Financial Statements and Management's
Discussion and Analysis - Amended to reflect a change in
accounting for the May 1996 issuance of the convertible
debentures. (See Note 1 in NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS (UNAUDITED))
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<PAGE>
FORM 10-Q/A
ADVANCED MAMMOGRAPHY SYSTEMS, INC.
------------------------------------
INDEX
-----
PART I. FINANCIAL INFORMATION PAGE NO.
--------------------- --------
Item 1. Financial Statements
Balance Sheets:
March 31, 1997 and September 30, 1996 4
Statements of Operations: 5
Quarters and Six months ended March 31, 1997
and March 31, 1996 and for the period from
July 2, 1992 (inception) to March 31, 1997
Statements of Cash Flows: 6
Six months ended March 31, 1997 and March 31,
1996;
and for the period from July 2, 1992 (inception)
to March 31, 1997
Notes to Financial Statements 7-9
Item 2. Management's Discussion and Analysis 10-11
of Financial Condition and Results
of Operations
Signature 12
---------
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<PAGE>
FORM 10-Q/A
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
ADVANCED MAMMOGRAPHY SYSTEMS, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
BALANCE SHEETS
March 31, September
1997 30,
(Unaudited) 1996
---------- -----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,101,523 $ 1,997,076
Inventory 887,009 1,123,404
Other current assets 9,761 27,204
--------- -----------
TOTAL CURRENT ASSETS 2,998,293 3,147,684
Equipment - at cost, net of
accumulated depreciation
of $401,673 and $335,277
at March 31, 1997 and
September 30, 1996, 619,474 611,432
respectively
Patent - at cost, net of
amortization of $10,112
and $7,060 at March 31,
1997 and September 30,
1996, respectively 21,608 24,661
Debt issue cost 154,287 200,574
-------- --------
TOTAL ASSETS $ 3,793,662 $ 3,984,351
=========== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable & accrued expenses $ 216,156 $ 184,785
Compensation payable 116,829 52,259
Accounts payable to related party 1,180,078 671,551
--------- ---------
TOTAL CURRENT LIABILITIES 1,513,063 908,595
Notes Payable 512,744 1,471,751
------------ -----------
TOTAL LIABILITIES $ 2,025,807 $ 2,380,346
STOCKHOLDERS' EQUITY
Preferred stock, $.01
par value, 5,000,000
shares authorized none issued -- --
Common stock, $.01 par
value, authorized
25,000,000 shares; 103,663 83,467
issued 10,366,254
and 8,346,740
Additional paid in capital 16,659,429 14,368,543
Deficit accumulated
during the development
stage (14,995,237) (12,848,005)
------------- ----------
TOTAL STOCKHOLDERS' EQUITY 1,767,855 1,604,005
----------- ----------
TOTAL LIABILITIES &
STOCKHOLDERS' EQUITY $ 3,793,662 $ 3,984,351
========= ===========
See notes to financial statements
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<PAGE>
FORM 10-Q/A
ADVANCED MAMMOGRAPHY SYSTEMS, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENTS OF OPERATIONS
(UNAUDITED)
QUARTERS ENDED
--------------
MARCH 31,
--------
1997 1996
---- ----
REVENUES
System Revenues . . . . . . $ 400,000 $ --
----------- ---------
TOTAL REVENUES . . . . . . . . . 400,000 --
OPERATING EXPENSES
Acquired technology . . . . . . . -- --
Manufacturing . . . . . . . . . . 484,210 --
Research & development . . . . . 456,261 275,971
General & administrative . . . . 618,611 587,701
------- ---------
TOTAL OPERATING EXPENSES . . . . 1,559,082 863,672
--------- --------
(LOSS) FROM OPERATIONS . . . . . (1,159,082) (863,672)
----------
Amortization of debt issuance (23,143) --
cost . . . . . . . . . . . . . .
Interest expense . . . . . . . . -- --
Interest & other income . . . . . 25,455 16,503
------- -------
NET LOSS AND DEFICIT
ACCUMULATED DURING
DEVELOPMENT STAGE . . . $(1,156,770) $( 847,169)
=========== ===========
NET LOSS PER SHARE . . . . $ (.18) $ (.22)
========== ===========
Weighted average number of common
shares outstanding . . . . . . . 6,259,830 3,848,376
=========== ============
SIX MONTHS ENDED CUMULATIVE FROM
--------------- JULY 2, 1992
MARCH 31, (INCEPTION DATE)
---------- TO MARCH 31, 1997
-----------------
1997 1996
---- ----
REVENUES
System Revenues . . $ 400,000 $ -- $ 400,000
------------- ----------- --------------
TOTAL REVENUES . . . 400,000 -- 400,000
OPERATING EXPENSES
Acquired technology . -- -- 1,720,000
Manufacturing . . . . 548,526 -- 548,526
Research & development 847,711 497,795 4,574,573
General & administrative 1,150,673 1,019,810 6,920,969
--------- --------- -----------
TOTAL OPERATING
EXPENSES . . . 2,546,910 1,517,605 13,764,068
--------- ---------- -----------
(LOSS) FROM OPERATIONS (2,146,910) (1,517,605) (13,364,068)
Amortization of debt
issuance cost . . . . (46,286) -- (388,105)
Interest expense -- -- (1,599,999)
Interest & other
income . . . . 45,963 28,609 356,935
-------- ------- ---------
NET LOSS AND DEFICIT
ACCUMULATED DURING
DEVELOPMENT STAGE. . $(2,147,223) $(1,488,996) $(14,995,237)
=========== =========== ============
NET LOSS PER
SHARE . . $ (.36) $ (.39)
=========== ===========
Weighted average
number of common
shares outstanding 5,924,642 3,848,376
=========== ===========
See notes to financial statements.
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<PAGE>
FORM 10-Q/A
ADVANCED MAMMOGRAPHY SYSTEMS, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended March 31,
--------------------------
1997 1996
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) . . . . . . . . . $(2,147,223 $(1,488,996)
----------- -----------
Adjustments to reconcile net
loss to net cash flows from
operating activities:
Depreciation and amortization . . 90,276 59,844
Amortization of debt issuance cost 46,286 --
Amortization of discount related
to issuance of convertible
debentures . . . . . . . . . . . -- --
Common stock issued for
technology rights . . . . . . . . -- --
Changes in assets and liabilities:
Inventories . . . . . . . . . . . 236,395 (139,586)
Other current assets . . . . . . . 17,443 --
Accounts receivable . . . . . . . -- (54,147)
Accounts payable &
accrued expenses . . . . . . . . 31,371 130,940
Other current liabilities . . . . 573,097 (17,963)
------- -------
Total adjustments . . . . . . . . . 994,868 (20,912)
------- -------
NET CASH (USED) FOR OPERATING
ACTIVITIES: . . . . . . . . . . . . . . (1,152,365) (1,509,908)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Patent costs . . . . . . . . . . . . -- (2,187)
Net additions to furniture,
equipment, and leasehold
improvements . . . . . . . . . . . (74,438) (5,758)
---------- ----------
NET CASH (USED) FOR INVESTING (74,438) (7,945)
ACTIVITIES: . . . . . . . . . . . . . . ---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of notes payable . . . . . . -- --
Proceeds from notes payable & -- --
warrants . . . . . . . . . . . . .
Public offering of stock, net . . . -- --
Private placement . . . . . . . . . 1,500,000 --
Debt issuance cost . . . . . . . . . (168,750) --
Cost of public offering . . . . . . -- --
Sale of option to purchase units . . -- --
Exercise of stock & warrants . . . . -- --
-------- -------
NET CASH PROVIDED BY FINANCING 1,331,250 --
ACTIVITIES: . . . . . . . . . . . . . . --------- -------
CASH AND CASH EQUIVALENTS:
Net increase (decrease) . . . . . . 104,447 (1,517,853)
Balance, beginning of period . . . . 1,997,076 1,832,563
---------- ----------
Balance, end of period . . . . . . . $2,101,523 $314,710
========== =========
Cumulative From
July 2, 1992
(Inception Date)
To March 31, 1997
------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) . . . . . . . . . . . $(14,995,237)
-------------
Adjustments to reconcile net loss
to net cash flows from
operating activities:
Depreciation and amortization . . . . 1,190,366
Amortization of debt issuance cost . . 128,968
Amortization of discount related to
issuance of convertible
debentures . . . . . . . . . . . . 1,000,000
Common stock issued for 40,000
technology rights . . . . . . . . .
Changes in assets and liabilities:
Inventories . . . . . . . . . . . . . (887,009)
Other current assets . . . . . . . . . (9,761)
Accounts receivable . . . . . . . . . --
Accounts payable & accrued expenses . 216,156
Other current liabilities . . . . . . 1,296,907
----------
Total adjustments . . . . . . . . . . . 1,975,627
-----------
NET CASH (USED) FOR OPERATING ACTIVITIES: . (12,019,610)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Patent costs . . . . . . . . . . . . . . (31,720)
Net additions to furniture, equipment,
and leasehold improvements . . . . . . (1,021,148)
------------
NET CASH (USED) FOR INVESTING ACTIVITIES: . (1,052,868)
------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of notes payable . . . . . . . . (2,000,000)
Proceeds from notes payable & warrants . 5,000,000
Public offering of stock, net . . . . . 8,901,000
Private placement . . . . . . . . . . . 1,500,000
Debt issuance cost . . . . . . . . . . . (699,712)
Cost of public offering . . . . . . . . (1,436,617)
Sale of option to purchase units . . . . 129
Exercise of stock & warrants . . . . . . 3,909,201
------------
NET CASH PROVIDED BY FINANCING ACTIVITIES: 15,174,000
-------------
CASH AND CASH EQUIVALENTS:
Net increase (decrease) . . . . . . . . 2,101,523
Balance, beginning of period . . . . . . --
-------------
Balance, end of period . . . . . . . . . $2,101,523
=============
See notes to financial statements.
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<PAGE>
FORM 10-Q/A
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
------------------------------
The accompanying financial statements of Advanced Mammography
Systems, Inc. ("AMS" or the "Company") have been restated to
include adjustments to the September 30, 1996 balances of additional
paid in capital and deficit accumulated during the development stage
to reflect a change in accounting for the May 1996 issuance of
convertible debentures whereby the beneficial conversion feature of
the debentures was recorded as additional interest expense.
This amended Form 10-Q should be read in conjunction with all
subsequent filings with the Securities and Exchange Commission
which reflect significant developments including a proposed merger
of AMS and Advanced NMR Systems, Inc. ("ANMR").
The results of operations for the interim periods shown in this
report are not necessarily indicative of results to be expected for
the fiscal year. In the opinion of management, the information
contained herein reflects all adjustments necessary to make the
results of operations for the interim periods a fair statement of such
operations. All such adjustments are of a normal recurring nature.
The accompanying financial statements do not contain all of the
disclosures required by generally accepted accounting principles and
should be read in conjunction with the financial statements and
related notes included in the Company's annual report on Form 10-K for
the year ended September 30, 1996.
NOTE 2 - THE COMPANY
--------------------
The Company is a development stage company which was organized
in Delaware in July 1992 to acquire and develop proprietary technology
from ANMR in order to design, manufacture and commercialize a
dedicated (or partial body) magnetic resonance imaging ("MRI") system
for breast imaging which can be used to detect and characterize breast
tissue abnormalities.
In February 1996, the U.S. Food and Drug Administration (the
"FDA") cleared the commercial use of the Company s AuroraTM dedicated
MR Breast Imaging System. In order to fully commercialize the Aurora
System and to demonstrate diagnostic effectiveness as an accepted tool
for the diagnosis and management of breast disease and permit
reimbursement for dedicated breast MRI by third parties such as
Medicare, private insurance and managed care consortiums, the Company
must develop maximum clinical utility. The Company has launched a
clinical study which includes a scientific investigation of the
improved breast imaging device in a large patient population to
provide objective evidence of its clinical utility. The System has
been placed at the University of Texas Medical Branch at Galveston and
a second System will be installed at the Faulkner-Sagoff Centre for
Breast Health Care in Boston, MA during the third fiscal quarter. It
is anticipated that the breast imaging technology should gain clinical
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<PAGE>
FORM 10-Q/A
acceptance over the next two years and continue to evolve as further
information is obtained from the clinical studies concerning
additional applications.
The Company intends to market its MRI breast imaging products or
components thereof, either directly to hospitals and clinics or
through a marketing or joint venture arrangement with one or more
distributors.
NOTE 3 - THE ANMR ESCROW SHARES
-------------------------------
In connection with the Company's January 1993 public offering,
ANMR, which was the sole stockholder of the Company, placed in escrow
an aggregate of 2,750,000 (the "Escrow Shares") of the 4,000,000
shares of the Common Stock it owned. As of May 1, 1997, all Escrow
Shares have been forfeited and contributed to the capital of the
Company as a result of the Company s failure to achieve certain
financial milestones. Upon forfeiture of the Escrow Shares, ANMR s
interest in the Company is now reduced to approximately 16%.
NOTE 4 - THE SHARED SERVICES AGREEMENT
--------------------------------------
To optimize the Company s and ANMR s operating efficiency, the
Company and ANMR entered into a Shared Services Agreement as of
January 25, 1993, whereby the companies share common expenses and
functions, for example, executive officers, marketing, field service,
administration, regulatory approvals and outside services. On August
29, 1996, the original Agreement dated January 25, 1993, was
terminated and the Company and ANMR entered into a new agreement. On
August 6, 1996, ANMR announced that it has eliminated research,
development and production of its InstaScan technology. Restructuring
of ANMR could have an impact on the future availability of ANMR
scientific personnel under the Shared Services Agreement and its
related technology before the period under the ANMR License Agreement.
The Company believes that its transactions with ANMR described
above was on terms not less favorable to the Company than the terms
that would have been available from unaffiliated parties under similar
circumstances. Actual comparisons with other transactions are not
possible, however.
NOTE 5 - THE ANMR LICENSE AGREEMENT
-----------------------------------
In June 1992, the Company entered into the ANMR License Agreement
with ANMR pursuant to which the Company was granted a perpetual,
worldwide exclusive, royalty-free license to all proprietary
technology and related know-how, including patents owned and/or
licensed by ANMR and patent applications filed or to be filed by ANMR
(the "Licensed Technology"), to the extent, if any, useful in
connection with developing a dedicated MRI system for mammography (the
"Field of Use").
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<PAGE>
FORM 10-Q/A
NOTE 6 - PRIVATE PLACEMENT OF CONVERTIBLE DEBENTURES
----------------------------------------------------
In May 1996, the Company closed a Regulation S private placement
(the "Placement") of $3 million principal amount 4% Convertible
Debentures of the Company (the "Debentures") due December 1, 1998 (the
"Maturity Date"). The Debentures accrue interest at the rate of 4% per
annum from the date of issuance to the Maturity Date, or earlier
either upon conversion or prepayment. Upon conversion, the Company
has the option to pay the accrued interest on the Debentures being
converted in shares of its Common Stock at the then conversion rate.
At March 31, 1997, approximately $513,000 of Debentures was still
outstanding after certain conversions. The net proceeds of the
Placement of approximately $2,750,000, after payment of fees and
related expenses, is being used for completion of product development
of the Company s Aurora System, the commercialization and marketing of
the Aurora System and working capital.
In connection with the Placement, the Company issued to the
placement agents for the Debentures, warrants for the purchase of
197,500 shares of the Company's Common Stock at an exercise price of
$2.20 per share for a period or eighteen months and warrants for an
additional 197,500 shares of Common Stock at an exercise price of
$2.50 per share for a period of five years.
NOTE 7 - PRIVATE PLACEMENTS OF STOCK AND WARRANTS
-------------------------------------------------
In February 1997, the Company sold an aggregate of 1,219,514
shares of Common Stock and three year warrants (as adjusted) to
purchase 1,244,920 shares of Common Stock at an exercise price of
$1.93 per share for $1,500,000. These placements were in accordance
with Regulation S and Regulation D under the Securities Act of 1933.
In connection with the placements, the Company issued to the placement
agent three year warrants for the purchase of 243,902 shares of Common
Stock, one half exercisable immediately and the other half exercisable
proportionately with the exercise of the placement warrants, at an
exercise price of $1.68 per share and paid 11-1/4% in fees and
expenses.
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<PAGE>
FORM 10-Q/A
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS
----------------------
The following discussion should be read in conjunction with the
attached notes hereto, and with the audited financial statements and
notes thereto for the year ended September 30, 1996.
RESULTS OF OPERATIONS
---------------------
The Company was formed in July 1992 and is in the development
stage. In the second quarter of this fiscal year, the Company
received payment in full and recorded its first sale of the Aurora
system to the Beta site in Galveston, Texas. As a result of charging
operations with the cost of its technology license acquired from ANMR,
as well as salaries and consulting fees of persons engaged in research
and development activities, the Company had an accumulated deficit of
$14,995,237 at March 31, 1997.
Research and development expense was approximately $848,000 in
the six months of fiscal 1997, an increase of 70% compared with
approximately $498,000 in the same period in fiscal 1996. The
increase is due to the addition of technical personnel assigned from
ANMR to complete the R&D effort. The Company expects research and
development expense to stabilize at this level through fiscal 1997.
General & administrative expense for the six months of fiscal
1997 was $1,151,000, an increase of 13% compared with $1,019,000 for
the same period in fiscal 1996. The increase is due primarily to
additional personnel responsible for clinical applications, customer
support and regulatory and compliance management.
Total operating expenses for the six months of fiscal 1997 were
$2,547,000, an increase of 68% compared to approximately $1,518,000 in
the same period in fiscal 1996. The increase was mainly due to the
cost of sales of the first Aurora system, increased staffing of the
manufacturing process to prepare for future Aurora sales, and
increased expenditures for Research & Development.
LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
At March 31, 1997 the Company had working capital of
approximately $1,485,000 including available cash of approximately
$2,102,000. The Company expects to continue to incur substantial
expenditures for development, marketing, and clinical studies of the
breast imaging system.
The Company believes its existing cash reserves, including the
proceeds from the May 1996 Debentures and the February 1997 placements
(see Item 1 Notes 6 and 7) are adequate to fund its operating
activities for the next six months. The Company is seeking to obtain
additional funds through debt or additional equity placements,however,
there is no assurance that this will result in any financing or that
the terms would not be dilutive to stockholders. Should the Company
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<PAGE>
FORM 10-Q/A
be unable to obtain any such future financing arrangement, it would
examine alternative courses such as sale or disposition of assets or
alliances or mergers with strategic partners.
The Company is including the following cautionary statement in
its Report on Form 10-Q to make applicable and take advantage of the
safe harbor provisions of the Private Securities Litigation Reform Act
of 1995 for any forward-looking statements made by, or on behalf of
the Company. Forward-looking statements include statements concerning
plans, objectives, goals, strategies, future events or performance and
underlying assumptions and other statements which are other than
statements of historical facts. Certain statements contained herein
are forward looking statements and accordingly involve risks and
uncertainties which could cause actual results or outcomes to differ
materially from those expressed in the forward-looking statements.
The Company's expectations, beliefs and projects are expressed in good
faith and are believed by the Company to have a reasonable basis,
including without limitations, management's examination of historical
operating trends, data contained in the Company's records and other
data available from third parties, but there can be no assurance that
management's expectations, beliefs or projections will result or be
achieved or accomplished. In addition to other factors and matters
discussed elsewhere herein, the following are important factors that,
in the view of the Company, could cause actual results to differ
materially from those discussed in the forward-looking statements:
technological advances by the Company's competitors, changes in health
regulations and health care reform, including reimbursement programs,
capital needs to fund research programs, delays in product
development, lack of market acceptance of technology and the
availability of capital on terms satisfactory to the Company. The
Company disclaims any obligation to update any forward-looking
statements to reflect events or circumstances after the date hereof.
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<PAGE>
FORM 10-Q/A
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
Advanced Mammography Systems, Inc.
-----------------------------------
(Registrant)
Date: August 4, 1997 /s/ Steven J. James
--------------------
Steven J. James
Chief Financial Officer
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