=================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Mark One)
[check] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1996
------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NO. 0-20968
ADVANCED MAMMOGRAPHY SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-3166348
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
46 Jonspin Road
Wilmington, Massachusetts 01887
------------------------- -----
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE (508) 657-8876
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
None.
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
Common Stock, par value $0.01 per share
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 [check] No [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of the Registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the Registrant's Common Stock,
$.01 par value, held by non-affiliates computed by reference to
the average of the closing bid and asked prices as reported by
NASDAQ on December 31, 1996 (based upon the assumption that each
officer, director and person who is known by the Registrant to
own more than five percent of the outstanding Common Stock of the
Registrant is an affiliate of the Registrant for purposes of this
computation): $13,563,453.
Number of shares of the Registrant's Common Stock, $.01 par
value, outstanding as of December 31,1996: 8,346,740.
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<PAGE>
AMENDMENT NO. 1
The undersigned Registrant hereby amends the following
items, financial statements, exhibits or other portions of its
Form 10-K for the fiscal year ended September 30, 1996 as set
forth in the pages attached hereto:
(List all such items, financial statements, exhibits or
other portions amended.)
Part II
1. Item 6. Selected Financial Data.
2. Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations
3. Item 8. Financial Statements and Supplementary Data
Part IV
1. Exhibits and Financial Statements
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<PAGE>
INDEX
PART II . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Item 6. Selected Financial Data. . . . . . . . . . . . 4
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . 6
Item 8. Financial Statements and Supplementary Data . 8
PART IV . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 14. Exhibits and Financial Statements . . . . . . 9
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . . 11
-3-
<PAGE>
PART II
ITEM 6. SELECTED FINANCIAL DATA.
Statement of Operations Data:
The selected financial information for the twelve
months ended September 30, 1996 and September 30, 1995, the nine
months ended September 30, 1995 and September 30, 1994, and each
of the years ended December 31, 1994 and 1993, for the period
from July 2, 1992 (Inception) to December 31, 1992 and for the
period from July 2, 1992 (Inception) to September 30, 1996, is
derived from the financial statements of the Company.
This information should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the financial statements and notes
thereto included elsewhere in this Form 10-K/A.
-4-
<PAGE>
STATEMENT OF OPERATIONS DATA:
-----------------------------
TWELVE MONTHS TWELVE MONTHS NINE MONTHS
ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1996 1995 1995
---- ---- ----
COSTS & EXPENSES
Acquired
Technology Rights $ -- $ -- $ --
Research &
Development . . . 1,007,294 940,141 664,786
General & 2,209,736 1,571,007 1,107,326
Administrative . ------------ ------------ ------------
LOSS FROM
OPERATIONS (3,217,030) (2,511,148) (1,772,112)
Interest Income . 70,248 96,819 88,064
Interest Expense. 1,000,000 -- --
Amortization of
Debt Issuance (30,857) -- --
Costs . . . . . ------------ ------------ ------------
NET LOSS $(4,177,639) $(2,414,329) $(1,684,048)
============ ============ ============
NET LOSS PER $(1.03) $(.73) $(.44)
SHARE === === ===
Balance Sheet
Data:
Working Capital
(Deficit) . . . . $2,239,089 $2,605,522 $2,605,522
Total Assets . . 3,984,351 3,440,367 3,440,367
Total Liabilities 2,380,346 197,020 197,020
Stockholders'
Equity (Deficit) 1,604,005 3,243,347 3,243,347
NINE MONTHS
ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, DECEMBER 31, DECEMBER 31,
1994 1994 1993
---- ---- ----
COSTS & EXPENSES
Acquired
Technology
Rights . . . . $ -- $ -- $ --
Research &
Development . . 717,010 992,365 822,994
General & 1,119,138 1,582,820 870,414
Administrative ------------ ------------ ------------
LOSS FROM
OPERATIONS (1,836,148) (2,575,185) (1,693,408)
Interest Income 63,268 72,023 80,636
Interest
Expense . . . . -- -- (99,999)
Amortization of
Debt Issuance -- -- (51,825)
Costs . . . . ------------ ------------ ------------
NET LOSS $(1,772,880) $(2,503,162) $(1,764,596)
============ ============ ============
NET LOSS PER $(.64) $(.89) $(.68)
SHARE === === ===
Balance Sheet Data:
Working Capital
(Deficit) . . . $1,594,561 $1,097,761 $3,308,814
Total Assets . 2,677,964 2,146,632 3,647,055
Total
Liabilities . . 460,429 419,123 125,699
Stockholders'
Equity
(Deficit) . . . 2,217,535 1,727,509 3,521,356
CUMULATIVE
JULY 2, 1992 FROM JULY 2, 1992
(INCEPTION) TO (INCEPTION) TO
DECEMBER 31, SEPTEMBER 30,
1992 1996
---- ----
COSTS & EXPENSES
Acquired Technology
Rights . . . . . . . . $ 1,720,000 $ 1,720,000
Research & Development 239,423 3,726,862
General & -- 5,770,296
Administrative . . . . ------------ -------------
LOSS FROM OPERATIONS (1,959,423) (11,217,158)
Interest Income . . . . -- 310,971
Interest Expense . . . (500,000) (1,599,999)
Amortization of Debt
Issuance (259,137) 341,819
Costs . . . . . . . . ------------ -------------
NET LOSS $(2,718,560) $(12,848,005)
============ =============
NET LOSS PER SHARE $(1.17)
=====
Balance Sheet Data:
Working Capital
(Deficit) . . . . . . . $(2,347,861)
Total Assets . . . . . 211,339
Total Liabilities . . . 2,389,899
Stockholders' Equity
(Deficit) . . . . . . . (2,178,560)
-5-
<PAGE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Year Ended September 30, 1996 Compared to the Year Ended
September 30, 1995 (unaudited)
The Company's only source of revenue was interest
income of $70,000 in fiscal year 1996 as compared with $97,000 in
fiscal year 1995. The Company anticipates that sales revenues
resulting from the sale of its Aurora System at the University of
Texas will commence in the second quarter of fiscal 1997.
Research and development costs were $1,007,000 during
the twelve months ended September 30, 1996 and $940,000 in the
comparable 1995 period. The Company is focusing its research
activity in evolving the clinical platform to enhance future
system performance including an integrated biopsy capability.
General and administrative expenses in the year ended
September 30, 1996 of $2,210,000 increased from $1,571,000 in the
comparable fiscal 1995 period. The increase of approximately
$640,000 is primarily due to legal and investment banking fees
incurred in the aborted merger between the Company and ANMR,
public relations fees, certain costs associated with the private
placement of the convertible debentures and recruiting fees for
additional technical personnel.
Nine Month Period Ended September 30, 1995 Compared to the
Nine Month Period Ended September 30, 1994 (unaudited)
The Company's only source of revenue was interest
income of $88,000 in the nine months ended September 30, 1995 as
compared with $63,000 in the comparable 1994 period.
Research and development costs were $665,000 in the
nine months ended September 30, 1995 and $717,000 in the
comparable 1994 period.
General and administrative expenses in the nine months
ended September 30, 1995 of $1,107,000 decreased from $1,119,000
in the comparable 1994 period.
-6-
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, the Company had working capital
of $2,239,000. The Company's cash portfolio (cash and cash
equivalents) increased by $164,000 from $1,833,000 at September
30, 1995 to $1,997,000 at September 30, 1996. The increase was
due to proceeds received from the issuance of the Debentures in a
Regulation S private placement totaling approximately $2,750,000
and offset by costs incurred in the normal operations of the
business.
In May 1996, the Company closed the Placement of $3
million principal amount 4% Convertible Debentures of the Company
due December 1, 1998. The Debentures accrue interest at the rate
of 4% per annum from the date of issuance to the Maturity Date of
the Debentures, 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. The Company is using
the $2.75 million proceeds from the Placement for continuing
research and development and for general working capital
purposes.
The Company currently has no sources of recurring
revenues and has incurred operating losses since its inception
and has financed its operations with public and private offerings
of securities. Management believes that existing cash and cash
equivalents combined with additional cash inflows from investment
income, grants and advances will be sufficient to support
operations through the second quarter of 1997. Management
believes that additional funding will be required to fund
operations until, if ever, profitable operations can be achieved.
Therefore, the Company is continuing to actively pursue various
funding options, including additional equity offerings,
commercial and other borrowings, strategic corporate alliances
and business combination transactions, or a combination of these
methods for obtaining the additional financing that would be
required to continue the research and development necessary to
complete the development of its product and bring it to
commercial markets. However, there can be no assurance that such
funding initiatives will be successful.
The Company is including the following cautionary
statement in this Annual Report on Form 10-K 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
-7-
<PAGE>
be achieved or accomplished. In addition to other factors and
matters discussed elsewhere herein, the following are important
factors that, in the view of the Company, could cause actual
results to differ materially from those discussed in the forward-
looking statements: technological advances by the Company's
competitors, changes in health care reform, including
reimbursement programs, capital needs to fund any delays or
extensions of research programs, delays in product development,
lack of market acceptance of technology and the availability of
capital on terms satisfactory to the Company. The Company
disclaims any obligation to update any forward-looking statements
to reflect events or circumstances after the date hereof.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Item 14 and the Index therein for a listing of the
financial statements and supplementary data as a part of this
report.
-8-
<PAGE>
PART IV
ITEM 14. EXHIBITS AND FINANCIAL STATEMENTS
(a)(1) The following Financial Statements are filed
herewith:
Report of Independent Auditors
Balance Sheets
Statements of Operations
Statements of Changes in Stockholders' Equity
Statements of Cash Flows
Notes to Financial Statements
(a)(3) Exhibits
Exhibit Number
--------------
23* -- Consent of Richard A. Eisner & Company, LLP
independent public accountants for the
Company.
------------------
* Filed herewith
-9-
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in
Registration Statement No. 333-14403 of Advanced Mammography
Systems, Inc. (the "Company") on Form S-8 of our report dated
November 22, 1996 on the financial statements of the Company for
the year ended September 30, 1996, the nine-month period ended
September 30, 1995, the year ended December 31, 1994 and the period
July 2, 1994 (inception) to September 30, 1996 appearing in this
Annual Report on Form 10-K/A of the Company.
/s/ Richard A. Eisner & Company, LLP
-------------------------------------
Richard A. Eisner & Company, LLP
Cambridge, Massachussetts
August 1, 1997
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<PAGE>
SIGNATURE
Pursuant to the requirement of Section 13 or 15(d) 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.
Dated: August 4, 1997 By: /s/ Steven J. James
-------------------------------
Steven J. James, Chief Financial
Officer
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<PAGE>
ADVANCED MAMMOGRAPHY SYSTEMS, INC.
-I N D E X -
------------
PAGE
NUMBER
------
INDEPENDENT AUDITORS' REPORT . . . . . . . . . . . . . . . . F-2
BALANCE SHEETS AS AT
SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995 . . . . . . . . . . F-3
STATEMENTS OF OPERATIONS FOR THE
YEAR ENDED SEPTEMBER 30, 1996 AND
NINE MONTHS ENDED SEPTEMBER 30, 1995
AND SEPTEMBER 30, 1994 (UNAUDITED) AND THE
YEAR ENDED DECEMBER 31, 1994 AND FOR THE
PERIOD FROM JULY 2, 1992 (INCEPTION)
TO SEPTEMBER 30, 1996 . . . . . . . . . . . . . . . . . . . . F-4
STATEMENTS OF CHANGES IN STOCKHOLDERS'
EQUITY FOR THE YEAR ENDED SEPTEMBER 30,
1996, THE NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1995, THE YEAR ENDED
DECEMBER 31, 1994 AND FOR THE PERIOD
FROM JULY 2, 1992 (INCEPTION) TO
SEPTEMBER 30, 1996 . . . . . . .. . . . . . . . . . . . . . F-5
STATEMENTS OF CASH FLOWS FOR THE
YEAR ENDED SEPTEMBER 30, 1996 AND
NINE MONTHS ENDED SEPTEMBER 30, 1995
AND SEPTEMBER 30, 1994 (UNAUDITED) AND THE
YEAR ENDED DECEMBER 31, 1994 AND FOR THE
PERIOD FROM JULY 2, 1992 (INCEPTION)
TO SEPTEMBER 30, 1996 . . . . . . . . . . . . . . . . . . . . F-6
NOTES TO FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . F-7
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders of
Advanced Mammography Systems, Inc.
We have audited the accompanying balance sheets of
Advanced Mammography Systems, Inc. (a development stage company)
as at September 30, 1996 and September 30, 1995, and the related
statements of operations, stockholders' equity, and cash flows
for the year ended September 30, 1996, the nine months ended
September 30, 1995, the year ended December 31, 1994 and for the
period July 2, 1992 (Inception) to September 30, 1996. 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 enumerated
above present fairly, in all material respects, the financial
position of Advanced Mammography Systems, Inc. at September 30,
1996 and September 30, 1995, and the results of its operations
and its cash flows for the year ended September 30, 1996, the
nine months ended September 30, 1995, the year ended December 31,
1994 and the period from July 2, 1992 (Inception) to September
30, 1996, in conformity with generally accepted accounting
principles.
The accompanying financial statements have been
prepared assuming that the Company will continue as a going
concern. However, the Company has experienced recurring losses
and based on current estimates of cash flow, management does not
believe that it will have sufficient cash to satisfy its
obligations as they become due during fiscal 1997. This matter
raises substantial doubt about the Company's ability to continue
as a going concern. Management's plans in regard to these
matters are described in Note A to the financial statements. The
financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/ Richard A. Eisner & Company, LLP
--------------------------------------
Richard A. Eisner & Company, LLP
Cambridge, Massachusetts
November 22, 1996
March 13, 1997 as to Note A
F-2
<PAGE>
ADVANCED MAMMOGRAPHY SYSTEMS, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
BALANCE SHEETS
--------------
September 30, September 30,
ASSETS 1996 1995
------ ------------- -------------
CURRENT ASSETS:
Cash and cash equivalents . . . . . $ 1,997,076 $ 1,832,563
Inventory (Note B) . . . . . . . . 1,123,404 969,979
Other current assets . . . . . . . 27,204 0
------------ ------------
TOTAL CURRENT ASSETS . . . . . 3,147,684 2,802,542
Equipment at cost, net of 611,432 603,797
accumulated depreciation of
$335,277 and $190,942 at
September 30, 1996 and
September 30, 1995,
respectively (Note B)
Patent at cost, net of amortization 24,661 24,028
of $7,060 and $1,091 at
September 30, 1996 and
September 30, 1995,
respectively (Note B) . . .
Other . . . . . . . . . . . . . . . 0 10,000
Debt issue cost (Note C) . . . . . 200,574 0
------------ ------------
TOTAL ASSETS $ 3,984,351 $ 3,440,367
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable & accrued expenses $ 184,785 $ 25,083
Compensation payable . . . . . . . 52,259 38,509
Accounts payable to related party 671,551 133,428
(Note E) . . . . . . . . . . ------------ ------------
TOTAL CURRENT LIABILITIES . . . . . 908,595 197,020
------------
Notes Payable (Note C) . . . . . . 1,471,751 0
------------
TOTAL LIABILITIES . . . . . . 2,380,346 197,020
STOCKHOLDERS' EQUITY (Notes A and C)
Preferred stock, $.01 par value; -- --
5,000,000 shares authorized,
none issued . . . . . . . .
Common stock, $.01 par value; 83,468 65,984
25,000,000 shares authorized,
8,346,740 shares issued at
September 30, 1996, and
6,598,376 shares issued at
September 30, 1995 . . . . .
Additional paid-in capital . . . . 14,368,542 11,847,729
Deficit accumulated during the (12,848,005) (8,670,366)
development stage . . . . . ------------ ------------
TOTAL STOCKHOLDERS' EQUITY . . 1,604,005 3,243,347
------------ ------------
TOTAL LIABILITIES & STOCKHOLDERS' $ 3,984,351 $ 3,440,367
EQUITY . . . . . . . . . . . ============ ============
The accompanying notes to financial statements are an integral
part hereof.
F-3
<PAGE>
ADVANCED MAMMOGRAPHY SYSTEMS, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENTS OF OPERATIONS
Nine Months Nine Months
Year Ended Ended Ended
September 30, September 30, September 30,
1996 1995 1994
------------- ------------- -------------
(unaudited)
COSTS & EXPENSES:
Acquired Technology
Rights (Note D) $ -- $ -- $ --
Research & Development
(Note D) 1,007,294 664,786 717,010
General &
Administrative 2,209,736 1,107,326 1,119,138
(Note E) ------------ ------------ ------------
LOSS FROM OPERATIONS (3,217,030) (1,772,112) (1,836,148)
Amortization of Debt
Issuance Costs
(Note C) (30,857) -- --
Interest Expense
(Note C) (1,000,000) -- --
Interest and Other 70,248 88,064 63,268
Income ------------ ------------ ------------
NET LOSS AND DEFICIT
ACCUMULATED
DURING DEVELOPMENT $(4,177,639) $(1,684,048) $(1,772,880)
STAGE ============ ============ ============
NET LOSS PER SHARE $(1.03) $(.44) $(.64)
(Note B) === === ===
Weighted average
number of
Common Shares 4,046,160 3,830,092 2,765,975
Outstanding ============ ============ ============
Cumulative
from July 2, 1992
Year Ended (inception) to
December 31, 1994 September 30, 1996
----------------- ------------------
COSTS & EXPENSES:
Acquired Technology Rights
(Note D) $ -- $ 1,720,000
Research & Development
(Note D) 992,365 3,726,862
General & Administrative 1,582,820 5,770,296
(Note E) ------------ -------------
LOSS FROM OPERATIONS (2,575,185) (11,217,158)
Amortization of Debt Issuance
Costs (Note C) -- (341,819)
Interest Expense (Note C) -- (1,599,999)
Interest and Other Income 72,023 310,971
------------ -------------
NET LOSS AND DEFICIT
ACCUMULATED DURING $(2,503,162) $(12,848,005)
DEVELOPMENT STAGE ============ =============
NET LOSS PER SHARE (Note B) $(.89)
===
Weighted average number of 2,801,946
Common Shares Outstanding ============
The accompanying notes to financial statements are an integral
part hereof.
F-4
<PAGE>
ADVANCED MAMMOGRAPHY SYSTEMS, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Deficit
Accumulated
Common Stock Additional During the
--------------------- Paid-in Development
Shares Amount Capital Stage
------ ------ ------- -----------
Common stock
issued in
connection
with the
acquisition of
technology
rights
(Note D) 4,000,000 $40,000 $ -- $ --
Common stock
warrants issued
in connection
with notes
payable
(Note C[3]) -- -- 500,000 --
Net loss July 2,
1992
(inception)
to December 31, -- -- -- (2,718,560)
1992 --------- ------- ----------- -------------
Balance -
December 31,
1992 4,000,000 40,000 500,000 (2,718,560)
Initial public
offering of
stock, net of
offering costs 1,483,500 14,835 7,449,677 --
Net loss for the
year ended
December 31, -- -- -- (1,764,596)
1993 --------- ------- ----------- -------------
Balance -
December 31,
1993 5,483,500 54,835 7,949,677 (4,483,156)
Warrants
exercised 223,105 2,231 667,084 --
Stock options
exercised 5,000 50 39,950 --
Net loss for the
year ended
December 31, -- -- -- (2,503,162)
1994 --------- ------- ----------- -------------
Balance -
December 31,
1994 5,711,605 57,116 8,656,711 (6,986,318)
Stock options
exercised 114,286 1,143 881,288 --
Warrants
exercised 772,485 7,725 2,309,730 --
Net loss for the
nine months
ended
September 30, -- -- -- (1,684,048)
1995 --------- ------- ----------- -------------
Balance -
September 30,
1995 6,598,376 $65,984 $11,847,729 $(8,670,366)
Common stock
warrants issued
in connection
with notes
payable
(Note C[3]) -- -- 200,000 --
Beneficial conversion
feature of convertible
debentures (Note C) -- -- 1,000,000 (1,000,000)
Cost of warrants
issuance -- -- (16,619) --
Conversion of
Notes Payable
into Common
Stock
(Note C[3]) 1,748,364 17,484 1,337,432 --
Net loss for the
year ended
September 30, -- -- -- (3,177,639)
1996 --------- ------- ----------- -------------
Balance -
September 30, 8,346,740 $83,468 $14,368,542 $(12,848,005)
1996 ========= ======= =========== =============
The accompanying notes to financial statements are an integral part
hereof.
F-5
<PAGE>
ADVANCED MAMMOGRAPHY SYSTEMS, INC.
(A COMPANY IN THE DEVELOPMENT STAGE)
STATEMENTS OF CASH FLOWS
------------------------
Nine Months Nine Months
Year Ended Ended Ended
September 30, September 30, September 30,
1996 1995 1994
------------- ------------- -------------
(unaudited)
Cash flows from
operating
activities:
Net Loss $(4,177,639) $(1,684,048) $(1,772,880)
------------ ------------ ------------
Adjustments to
reconcile net loss to
net cash flows from
operating activities:
Depreciation and
amortization 148,920 81,485 49,381
Amortization of debt
issuance cost 30,857 -- --
Amortization of discount
related to issuance of
convertible debentures
(Note C) 1,000,000 -- --
Common stock issued for
technology rights -- -- --
Changes in assets and
liabilities:
Inventories (153,425) (702,641) (58,720)
Prepaid expenses & other
assets (17,204) 58,720 (15,000)
Accounts payable and
other current 711,575 (217,103) 334,730
liabilities ------------ ----------- ------------
Total adjustments 720,723 (779,539) 310,391
------------ ----------- ------------
Net cash used for operating (2,456,916) (2,463,587) (1,462,489)
activities ------------ ----------- ------------
Cash flows from investing
activities:
Capital expenditures (158,571) (94,562) (444,814)
------------ ---------- ------------
Net cash used for investing (158,571) (94,562) (444,814)
activities ------------ ---------- ------------
Cash flows from financing
activities:
Proceeds from notes payable
and warrants 3,000,000 -- --
Debt issuance costs (220,000) -- --
Payment of notes payable -- -- --
Public offering of stock,
net -- -- --
Costs of Public Offering -- -- --
Sale of option to purchase
units -- -- --
Proceeds from sale of stock
and exercise of warrants -- 3,199,886 469,060
Net cash provided by
financing 2,780,000 3,199,886 469,060
activities ------------ ---------- ------------
Cash and cash equivalents:
Net increase (decrease) 164,513 641,737 (1,438,243)
Balance, beginning of period 1,832,563 1,190,826 3,434,513
------------ ---------- ------------
Balance, end of period $(1,997,076 $1,832,563 $ 1,996,270
============ ========== ============
Cumulative
from July 2, 1992
Year Ended (inception) to
December 31, 1994 September 30, 1996
----------------- -------------------
Cash flows from operating
activities:
Net Loss $(2,503,162) $(12,848,005)
------------ -------------
Adjustments to reconcile net
loss to net cash flows from
operating activities:
Depreciation and
amortization 76,889 1,100,090
Amortization of debt issuance
cost -- 82,682
Amortization of discount
related to issuance of
convertible debentures
(Note C) -- 1,000,000
Common stock issued for
technology rights -- 40,000
Changes in assets and
liabilities:
Inventories (267,338) (1,123,404)
Prepaid expenses & other
assets (73,720) (27,204)
Accounts payable and other 293,424 908,595
current liabilities ------------ ------------
Total adjustments 29,255 980,759
------------ ------------
Net cash used for operating (2,473,907) (10,867,246)
activities ------------ ------------
Cash flows from investing
activities:
Capital expenditures (479,095) (978,429)
------------ -------------
Net cash used for investing (479,095) (978,429)
activities ------------ -------------
Cash flows from financing
activities:
Proceeds from notes payable
and warrants -- 5,000,000
Debt issuance costs -- (530,962)
Payment of notes payable -- (2,000,000)
Public offering of stock,
net -- 8,901,000
Costs of Public Offering -- (1,436,617)
Sale of option to purchase
units -- 129
Proceeds from sale of stock 709,315 3,909,201
and exercise of warrants ------------ -------------
Net cash provided by financing 709,315 13,842,751
activities ------------ -------------
Cash and cash equivalents:
Net increase (decrease) (2,243,687) 1,997,076
Balance, beginning of period 3,434,513 $ --
------------ -------------
Balance, end of period $ 1,190,826 $ 1,997,076
============ =============
The accompanying notes to financial statements are an integral part hereof.
F-6
<PAGE>
ADVANCED MAMMOGRAPHY SYSTEMS, INC.
(A DEVELOPMENT STATE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(NOTE A) The Company:
--------------------
Advanced Mammography Systems, Inc. (the "Company") was
incorporated on July 2, 1992 as a wholly owned subsidiary of
Advanced NMR Systems, Inc. ("ANMR"). At September 30, 1996, ANMR
owns approximately 48% of the outstanding common stock of the
Company. The Company was formed to develop a dedicated magnetic
resonance imaging system for mammography. The Company obtained
its mammography technology and certain rights to other technology
from ANMR (Note D). The Company also intends to pursue other
dedicated imaging systems in the future.
The accompanying financial statements have been restated
from those originally issued to reflect a change in accounting for
the May 1996 issuance of the convertible debentures described in
Note 3 to the financial statements. The debentures may be converted
at a discount to the traded market price of the common stock into
which the debentures are convertible. Previously, the measurement
of the conversion feature was calculated assuming that the
estimated fair value of the common stock into which the security
is convertible was the quoted market price adjusted to reflect
transferability restrictions. Accordingly, no portion of the
proceeds on the debt issuance was allocated to the intrinsic
value of the "fixed discount". In March 1997, the Securities
and Exchange Commission's ("SEC") position was announced that a
discount should be computed based on the Company's quoted market
price and an allocation of a portion of the proceeds of the
offering should be recognized as additional interest expense on
the debentures. The Company is restating its financial statements
to comply with this accounting treatment.
This amended Form 10-K should be read in conjunction
with all subsequent filings with the SEC which disclose
significant developments including a proposed merger of ANMR
and AMS. The impact on the results of operations for the year
ended September 30, 1996 was to increase the net loss by
approximately $1,000,000 and to increase the net loss per
share by $.24.
The Company is in the development stage and its efforts
through September 30, 1996 have been principally devoted to
organizational activities, raising capital and research and
development efforts. Management anticipates incurring
substantial additional losses as it pursues its research and
development efforts and production and marketing activities.
The Company shares facilities and certain other
resources with ANMR and costs are allocated between the companies
based on estimated usage. Certain of ANMR's officers serve as
officers of the Company and the Company obtains management and
administrative support from ANMR's staff.
In August 1996, ANMR's Board of Directors adopted a
formal plan to discontinue its Imaging Systems Business Segment.
The Company is renegotiating its Shared Services agreement based
upon this discontinuance of operations for the upcoming year.
F-7
<PAGE>
ADVANCED MAMMOGRAPHY SYSTEMS, INC.
(A DEVELOPMENT STATE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(NOTE A) - The Company: (continued)
-----------------------------------
The Company currently has no sources of recurring
revenues and has incurred operating losses since its inception.
At September 30, 1996, the Company has an accumulated deficit of
$11,848,005. Such losses have resulted principally from costs
incurred in research and development and from general and
administrative expenses associated with the Company's operations.
The Company expects that operating losses will continue for at
least the next few years as product development, clinical testing
and other operations continue. The Company currently funds its
operations principally through the use of cash obtained from
third party financing. The Company is continuing to actively
pursue various funding options, including equity offerings,
commercial and other borrowings, strategic corporate alliances
and business combination transactions, or a combination of these
methods for obtaining the additional financing that would be
required to continue the research and development necessary to
complete the development of its product and bring it to
commercial markets. There can be no assurance that these efforts
will be successful.
(NOTE B) Summary of Significant Accounting Policies:
----------------------------------------------------
[1] Fiscal year end
---------------
During 1995, the Company changed its fiscal year from
December 31 to September 30. All references to years in these
notes to financial statements represent fiscal years unless
otherwise noted.
[2] Depreciation and amortization:
------------------------------
Depreciation is computed using the straight-line method
over the estimated useful lives of the assets. When property is
retired or otherwise disposed of, the cost and accumulated
depreciation is removed from the accounts, and any resulting gain
or loss is included in expense.
[3] Loss per share of common stock:
-------------------------------
The loss per share of common stock for the twelve
months ended September 30, 1996 and the nine months ended
September 30, 1995 and the nine months ended September 30, 1994
and the year ended December 31, 1994 is based on the weighted
average number of common shares outstanding during the respective
periods.
Shares held in escrow are not treated as outstanding
because their effect would be antidilutive (Note C[1]).
F-8
<PAGE>
ADVANCED MAMMOGRAPHY SYSTEMS, INC.
(A DEVELOPMENT STATE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(NOTE B) Summary of Significant Accounting Policies: (continued)
----------------------------------------------------------------
[4] Cash Equivalents:
-----------------
The Company considers all highly liquid debt
instruments purchased with a maturity of three months or less to
be cash equivalents.
[5] Inventories:
------------
Inventories are stated at the lower of cost (first-in,
first-out method) or market. Inventory is comprised principally
of components to be used in the production of the mammography
imaging systems.
[6] 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.
[7] Recent pronouncements:
----------------------
The Financial Accounting Standards Board has issued
Statement of Financial Accounting Standards No. 123 "Accounting
for Stock-Based Compensation" ("SFA 123"). The Company will
adopt the disclosure requirements of SFAS 123 during the
Company's fiscal year ending September 30, 1997, but will account
for its stock option plans under Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" as
permitted under SFAS 123.
In addition, the Financial Accounting Standards Board
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" ("SFAS 121"): SFAS 121 is also
effective for the Company's fiscal year ending September 30,
1997. The Company believes adoption of SFAS No. 121 will not
have a material impact on its financial statements.
(NOTE C) Capitalization:
------------------------
[1] Common stock:
------------
As discussed in Note D, the Company has issued
4,000,000 shares of common stock to ANMR for a purchase price of
$40,000. In connection with its initial public offering, ANMR
placed 2,750,000 of the 4,000,000 shares outstanding into escrow.
The escrow shares are to be released based upon the Company
attaining certain levels of pretax income for the years ending
F-9
<PAGE>
ADVANCED MAMMOGRAPHY SYSTEMS, INC.
(A DEVELOPMENT STATE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(NOTE C) Capitalization: (continued)
------------------------------------
December 31, 1995 and/or 1996 and if the market price of the
Company's common stock reaches certain levels during defined
periods ending December 31, 1996. If the shares are released
from escrow the Company will incur an expense related to the
value of the shares at the time they are released. The Company
believes that it is highly unlikely that the escrow shares will
be released.
[2] Preferred stock:
----------------
The Company has authorized the issuance of 5,000,000
shares of preferred stock, par value $.01 per share. The Board
of Directors of the Company has broad discretion to create one or
more series of preferred stock and to determine the rights,
preferences and privileges of any such series.
[3] Notes payable and related warrants:
-----------------------------------
As of July 30, 1992, the Company issued $2,000,000 of
notes, with an annual interest rate of 10%, originally payable on
June 30, 1993. The notes were issued with detachable warrants to
purchase 1,000,000 shares of common stock at a price equal to
one-half the offering price of the initial public offering which
was $6.00 per share. The notes were redeemed, including accrued
interest, on the closing date of the Company's initial public
offering in January 1993. Of the gross proceeds of $2,000,000
from the issuance of the notes, $500,000 was attributed to the
value of the warrants and accounted for as debt discount and
amortized over the term the debt was outstanding. Expenses
incurred in connection with the issuance of the notes, amounting
to $310,962 were amortized on the same basis.
During 1996, pursuant to Regulation S of the Securities
act of 1933, the Company issued $3,000,000 of 4% convertible
notes payable. The notes are due in full on December 1, 1998.
The principal amount of the notes is convertible into shares of
common stock at a conversion price equal to the lesser of 125% of
the market price on the issuance date, or 75% of the market price
on the conversion date. The market price, as defined in the
agreement, equals the average closing bid price of the common
stock for the three trading days immediately preceding the
issuance date or the conversion date, as may be applicable, as
reported by the National Association of Securities Dealers
Automated Quotation system ("NASDAQ"). The beneficial conversion
feature of a 25% discount from the market price at which the
notes may be converted, as measured at the issuance date of the
notes, has been accounted for as additional interest expense on
the notes. Such additional interest amounted to a total of
$1,000,000. Through September 30, 1996, a total of $1,438,000
of the principal amount of the notes payable had been converted
into 1,748,364 shares of common stock of the Company and the
F-10
<PAGE>
ADVANCED MAMMOGRAPHY SYSTEMS, INC.
(A DEVELOPMENT STATE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(NOTE C) Capitalization: (continued)
------------------------------------
principal amount of the notes outstanding at September 30, 1996,
is $1,562,000. In conjunction with these notes, the Company
issued warrants for the purchase of 395,000 shares of its common
stock. The warrants are exercisable until May 15, 2001 at a price
of $2.50 per share. The value assigned to these warrants,
amounting to $200,000, is accounted for as debt discount and is
being amortized over the period of time the notes are expected to
be outstanding. The effective interest rate on the notes,
including the debt discount, is approximately 201%.
[4] Stock option plans:
-------------------
The Company has a stock option plan that provides for
the granting of options to purchase up to 1,250,000 shares of
common stock. The Plan provides for the granting of both
incentive stock options and nonstatutory stock options to
employees, directors and consultants.
In addition, the Company has a Nonemployee Directors'
Stock Option plan that provides for the granting of options to
purchase up to 350,000 shares of common stock to nonemployee
directors of the Company.
The Company has had the following option activity
through September 30, 1996:
Number Option Price
of Shares Per Share
--------- -------------
Balance - 12/31/92 0 $-0-
Granted 100,000 $6.00 - $ 9.98
-------
Balance - 12/31/93 100,000 $6.00 - $ 9.98
Granted 187,500 $4.63 - $10.00
Canceled (50,000) $10.00
Exercised (5,000) $8.00
---------
Balance - 12/31/94 232,500 $4.63 - $10.00
Granted 232,500 $4.63 - $12.81
Canceled (20,000) $6.00
Exercised (5,000) $6.00
---------
Balance - 9/30/95 440,000 $4.63 - $12.81
Granted 850,000 $1.17 - $ 8.00
Canceled (165,000) $1.17 - $12.81
--------- --------------
Balance - 9/30/96 1,125,000 $1.17 - $ 8.00
========= ==============
F-11
<PAGE>
ADVANCED MAMMOGRAPHY SYSTEMS, INC.
(A DEVELOPMENT STATE COMPANY)
NOTES TO FINANCIAL STATEMENTS
(NOTE D) Research and Development Activities: (continued)
---------------------------------------------------------
Options for 241,250 shares are exercisable as of September
30, 1996, at various prices ranging from $1.17 to $8.00 per
share. The number of shares available for future options is
300,000 under the Employee Plan and 175,000 under the Directors
Plan.
The Company utilized $1,680,000 of the net proceeds from the
issuance of the notes described in the first paragraph of Note
C[3], and issued 4,000,000 shares of common stock, which were
assigned a value of $40,000, to purchase rights to certain
technology owned by ANMR. The purchase price was determined
without independent appraisal. The Company charged the cost of
the rights to operations since the technology acquired is still
in the development stage.
From inception through September 30, 1996, the Company
incurred research and development expenses totaling $3,726,862.
These charges represent costs associated with the ongoing
development of a dedicated mammography system.
(NOTE E) Related Party Transactions:
------------------------------------
As mentioned in Notes A, C and D, the Company has
entered into significant transactions with ANMR, including the
purchase of certain technology rights and an agreement to share
facilities and reimburse ANMR for allocated general and
administrative expenses. The Company incurred allocated expenses
of approximately $1,600,000 for the year ended September 30,
1996. In addition, the Company has been granted a sublicense
from ANMR to certain patent rights which may be useful in its
research and development efforts. The Company has assumed
certain of ANMR's obligations in connection with this patent
license including a payment of a license fee to the patent holder
of $50,000 and royalties on future sales of products
incorporating the technology underlying the patent. The Company
also paid the patent holder a consulting fee of $52,000 in 1994.
(NOTE F) Income Taxes:
----------------------
Pursuant to the provisions of the Internal Revenue Code, the
Company is deferring all start-up costs and research and
development costs until operations, as defined by the Internal
Revenue Code, commence. Accordingly, through September 30, 1996,
only interest income and interest expense have entered into the
determination of taxable income.
At September 30, 1996 and September 30, 1995, the Company
had no current tax liability or deferred tax liability. It had
deferred tax assets due to net temporary differences and net
operating loss carryforwards amounting to approximately
$4,620,000, all of which had been fully reserved because the
likelihood of the realization of the benefits cannot be
F-12
<PAGE>
ADVANCED MAMMOGRAPHY SYSTEMS, INC.
(A DEVELOPMENT STATE COMPANY)
NOTES TO FINANCIAL STATEMENTS
established. The temporary differences principally relate to the
deferral of start up and research and development costs noted
above.
At September 30, 1996, the Company's net operating loss
carryover for federal income tax purposes amounts to
approximately $400,000 and expires through 2011.
The following table reconciles the tax benefit per the
accompanying statements of operations with the expected provision
obtained by applying statutory tax rates to the pretax loss:
The Internal Revenue Code contains provisions which may
limit the net operating loss carryforwards available for use in
any given year if significant changes in ownership interest of
the Company occur.
Year Ended Nine Months Ended
September 30, September 30,
1996 1995 1994
------------ ------------ -------------
Pretax (loss)
per
accompanying
statements
of operations $(4,178,000) $(1,684,000) $(1,773,000)
Expected tax
(benefit) at
39%, including
the net effect
of state
income taxes (1,239,000) (657,000) (691,000)
Adjustments due to:
Increase in
valuation reserve 1,241,000 685,000 691,000
Benefit of net
operating loss
carryover (2,000) (28,000) --
Tax provision per
financial
statements $ - 0 - $ - 0 - $ - 0 -
Year Ended
December 31, 1994
-----------------
Pretax (loss)
per
accompanying
statements
of operations $(2,503,000)
Expected tax
(benefit) at
39%, including
the net effect
of state
income taxes (976,000)
Adjustments due to:
Increase in
valuation reserve 1,000,000
Benefit of net
operating loss
carryover (24,000)
Tax provision per
financial
statements $ - 0 -
F-13
