UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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 number 0-26206
_____________________________________________________
Norland Medical Systems, Inc.
____________________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 06-1387931
__________________________________ ____________________________________
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
106 Corporate Park Drive, Suite 106
White Plains, New York 10604
____________________________________________________________________________
(Address of principal executive offices)
(Zip Code)
(914) 694-2285
____________________________________________________________________________
(Registrant's telephone number, including area code)
142 Temple Street
New Haven, Connecticut 06510
____________________________________________________________________________
(Former name, former address and former fiscal year, if changed since last
report)
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 1, 1996, 4,576,192 shares of the registrant's Common Stock,
$0.0005 par value, were outstanding.
- 1 -
<PAGE>
NORLAND MEDICAL SYSTEMS, INC.
TABLE OF CONTENTS FOR FORM 10-Q
-------------------------------
Page
----
Title Page . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Document Table of Contents . . . . . . . . . . . . . . . . . . . . . . . . . 2
PART I FINANCIAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . 3
Item 1. Condensed Financial Statements . . . . . . . . . . . . . . . . . . 3
Condensed Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . 3
Condensed Statements of Income . . . . . . . . . . . . . . . . . . . . 4
Condensed Statements of Changes in Stockholders' Equity . . . . . . . 5
Condensed Statements of Cash Flows . . . . . . . . . . . . . . . . . . 6
Notes to Condensed Financial Statements . . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . . . . . . . . . . . . 9
PART II OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 2. Changes in Securities . . . . . . . . . . . . . . . . . . . . . . . 11
Item 3. Defaults Upon Senior Securities . . . . . . . . . . . . . . . . . . 11
Item 4. Submission of Matters to a Vote of Security Holders . . . . . . . . 11
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . 11
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . 11
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Statement Regarding Computation of Earnings Per Share . . . . . . . . . . . . 14
Financial Data Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
- 2 -
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Condensed Financial Statements
------------------------------
Norland Medical Systems, Inc.
Condensed Balance Sheets
<TABLE><CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash $ 17,639,970 $ 19,218,865
Accounts receivable - trade, less allowance for
doubtful accounts of $150,000 at March 31, 1996
and December 31, 1995 5,708,930 4,571,520
Accounts receivable - affiliate 142,395 180,253
Inventories 879,132 798,484
Prepaid expenses and other current assets 157,415 68,989
------------ ------------
Total current assets 24,527,842 24,838,111
------------ ------------
Property and equipment 84,013 --
Product development loan receivable - affiliate 75,906 48,519
------------ ------------
Total assets $ 24,687,761 $ 24,886,630
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities: $ 1,685,351 $ 2,139,656
Accounts payable - Stratec 892,975 493,424
Accounts payable - Norland -- 32,000
Accounts payable - trade 374,156 361,003
Accrued expenses 485,837 1,305,037
Income taxes payable 40,072 34,664
Customer deposits ------------ ------------
3,478,391 4,365,784
Total current liabilities ------------ ------------
Stockholders' equity:
Common stock, par value of $0.0005 per share,
10,000,000 shares authorized, 4,465,500 shares issued
at March 31, 1996 2,233 2,000
Additional paid-in capital 18,347,348 18,350,313
Retained earnings 2,859,789 2,168,533
------------ ------------
Total stockholders' equity 21,209,370 20,520,846
------------ ------------
Total liabilities and stockholders' equity $ 24,687,761 $ 24,886,630
============ ============
</TABLE>
See accompanying notes to condensed financial statements.
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<PAGE>
Norland Medical Systems, Inc.
Condensed Statements of Income
(Unaudited)
Three Months Ended
----------------------------------
March 31, 1996 March 31, 1995
-------------- --------------
Revenue $ 5,218,290 $ 3,895,921
Cost of revenue 3,415,911 2,600,531
----------- -----------
Gross profit 1,802,379 1,295,390
Sales and marketing expense 575,348 334,553
General and administrative expense 305,716 225,453
----------- -----------
Operating income 921,315 735,384
Other income 242,941 2,515
----------- -----------
Income before taxes 1,164,256 737,899
Provision for taxes 473,000 299,587
---------- -----------
Net income $ 691,256 $ 438,312
=========== ===========
Earnings per share $ 0.15 $ 0.16
=========== ===========
Weighted average number of common
and common equivalent shares 4,704,673 2,668,000
=========== ===========
See accompanying notes to condensed financial statements.
- 4 -
<PAGE>
Norland Medical Systems, Inc.
Condensed Statements of Changes in Stockholders' Equity
For the Three Months Ended March 31, 1996 and 1995
(Unaudited)
<TABLE><CAPTION>
Common Paid-In Stock Retained
Total Shares Stock Capital Subscriptions Earnings
------------ ---------- ------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance as of
December 31, 1995 $ 20,520,846 4,000,000 $ 2,000 $ 18,350,313 -- $ 2,168,533
Issuance of shares for
stock options exercised 270 465,500 233 37 -- --
Cost and expenses
directly related to the
stock offering (3,002) -- -- (3,002) -- --
Net income 691,256 -- -- -- -- 691,256
-------------- --------- ------- ----------- ----------- -----------
Balance as of
March 31, 1996 $ 21,209,370 4,465,500 $ 2,233 $ 18,347,348 -- $ 2,859,789
============== ========= ======= ============ =========== ===========
Balance as of
December 31, 1994 $ 68,044 2,000,000 $ 1,000 -- $ (1,000) $ 68,044
Proceeds from common
stock subscriptions 500 -- -- -- 500 --
Net income 438,312 -- -- -- -- $ 438,312
-------------- --------- ------- ----------- ----------- -----------
Balance as of
March 31, 1995 $ 506,856 2,000,000 $ 1,000 -- $ (500) $ 506,356
============== ========= ======= ============ =========== ===========
</TABLE>
See accompanying notes to condensed financial statements.
- 5 -
<PAGE>
Norland Medical Systems, Inc.
Condensed Statements of Cash Flows
(Unaudited)
<TABLE><CAPTION>
Three Months Ended
--------------------------------
March 31, 1996 March 31, 1995
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 691,256 $ 438,312
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization expense 12,933 --
Inventory obsolescence expense 15,000 --
Changes in:
Accounts receivable (1,099,552) (493,475)
Inventories (108,581) --
Prepaid expenses and other current assets (88,426) (13,190)
Accounts payable (86,754) (48,370)
Accrued expenses 13,153 155,273
Income taxes payable (819,200) 268,587
Customer deposits 5,408 20,937
------------ ------------
Total adjustments (2,156,019) (13,498)
------------ ------------
Net cash (used in) provided by
operating activities (1,464,763) 424,814
------------ ------------
Cash flows from investing activities:
Purchases of property and equipment (84,013) --
Product development loan to affiliate (27,387) --
------------ ------------
Net cash used in investing activities (111,400) --
------------ ------------
Cash flows from financing activities:
Notes payable to stockholders -- (500,000)
Cost and expenses of issuance of common stock (3,002) --
Proceeds from stock options exercised 270 --
Proceeds from common stock subscriptions -- 500
------------ ------------
Net cash used in financing activities (2,732) (499,500)
------------ ------------
Net decrease in cash (1,578,895) (74,686)
Cash at beginning of period 19,218,865 554,732
------------- -------------
Cash at end of period $ 17,639,970 $ 480,046
============== ==============
</TABLE>
See accompanying notes to condensed financial statements.
- 6 -
<PAGE>
NORLAND MEDICAL SYSTEMS, INC.
Notes to Condensed Financial Statements
(Unaudited)
(1) BASIS OF PRESENTATION
The condensed financial statements of Norland Medical Systems, Inc. (the
"Company") presented herein, have been prepared pursuant to the rules of
the Securities and Exchange Commission for quarterly reports on Form 10-Q
and do not include all of the information and note disclosures required
by generally accepted accounting principles. These statements should be
read in conjunction with the financial statements and notes thereto for
the year ended December 31, 1995, which were audited by Coopers & Lybrand
L.L.P., and included in the Company's Form 10-K as filed with the Securities
and Exchange Commission on March 28, 1996.
The condensed balance sheet as of March 31, 1996, the condensed statements
of income, changes in stockholders' equity and cash flows for the three months
then ended are unaudited but, in the opinion of management, include all
adjustments (consisting of normal, recurring adjustments) necessary for a
fair presentation of results for these interim periods.
The results of operations for the three months ended March 31, 1996 are not
necessarily indicative of the results to be expected for the entire fiscal
year ending December 31, 1996.
(2) INVENTORIES
As of March 31, 1996, inventories consist of the following:
Rental systems $ 433,680
Demonstration systems,
less accumulated amortization
of $30,348 276,368
Spare parts and sub-assemblies,
less an obsolescence reserve
of $15,000 85,597
Product kits 83,487
----------
$ 879,132
==========
Systems used in the Company's short-term rental and pay-per-scan programs
are carried in inventory at the lower of cost or net realizable value until
the time of sale.
- 7 -
<PAGE>
Notes to Condensed Financial Statements, continued:
(2) INVENTORIES, continued:
The Company maintains an inventory of demonstration systems to support its
marketing efforts. Such systems are carried in inventory at the lower of cost
or net realizable value until the time of sale. From time to time, the Company
may judge it desirable for marketing purposes to provide a device to a prominent
scientist or research institution specializing in the study of bone disease.
In such cases, the Company will carry the device in demonstration system
inventory at cost less amortization expense calculated on a straight-line basis
over thirty-six months.
Spare parts and sub-assemblies inventories are stated at the lower of cost or
market; cost is determined principally by the first-in, first-out method.
Inventory includes product kits purchased from Stratec which are recorded in
inventory at purchase cost until the time of sale or rental of the assembled
product.
(3) NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
Primary income per share is calculated by dividing net income by the average
shares of common stock and common stock equivalents outstanding during the
period. Common stock equivalents are stock options which have been included
using the treasury stock method only when their effect is dilutive.
- 8 -
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
----------------------------------------------------------------
Results of Operations
---------------------
Results of Operations
- - ---------------------
Revenue for the three months ended March 31, 1996 increased $1,322,369 (33.9%)
to $5,218,290 from $3,895,921 for the comparable period of 1995. The increase
was largely a result of greater sales volume in the United States following the
introduction of the pDEXA in the fourth quarter of 1995 and increased customer
interest in the Company's other products. In October 1995, following the
clearance by the FDA of Merck's Fosamax(R) for the non-hormonal treatment of
osteoporosis in post-menopausal women, the Company began marketing the pDEXA in
the United States. Sales in Japan and the United States represented 50.9% and
28.5%, respectively, of total revenue for the three months ended March 31, 1996.
Sales in Japan and the United States represented 81.5% and 6.3%, respectively,
of total revenue for the three months ended March 31, 1995. Sales of complete
bone densitometry systems represented 92.9% and 93.2% of total revenue for the
three months ended March 31, 1996 and 1995, respectively. Sales of parts and
services and rental income comprised the balance of revenues for such periods.
Cost of revenue as a percentage of revenue was 65.5% and 66.8% for the three
months ended March 31, 1996 and 1995, respectively, resulting in a gross margin
of 34.5% for the three months ended March 31, 1996 compared to 33.2% for the
comparable period of 1995.
Sales and marketing expense increased $240,795 (72.0%) to $575,348 for the
three months ended March 31, 1996 from $334,553 for the three months ended
March 31, 1995, and increased as a percentage of revenue to 10.9% from 8.6%. The
increases were primarily due to increased salaries, commissions and incentive
payments related to the increased sales staff and sales volume, increased
expenses related to customer service and marketing expenses related to United
States market introduction of the pDEXA.
General and administrative expense increased $80,263 (35.6%) to $305,716 for
the three months ended March 31, 1996 from $225,453 for the three months ended
March 31, 1995 and increased as a percentage of revenue to 5.9% from 5.8%. The
increases were primarily due to increased expenses of new and existing personnel
and legal, accounting and other expenses attributable to the Company being a
public company.
Other income in the three months ended March 31, 1996 consisted primarily of
$246,747 of interest earned on the initial public offering proceeds and other
cash balances, which amount was reduced by $3,806 of other expenses, which
consisted primarily of bank charges and other fees related to bank transfers.
In the three months ended March 31, 1995, other income consisted primarily
of interest earned on cash balances which was reduced by charges and other fees
related to bank transfers.
- 9 -
<PAGE>
The provision for taxes for the three months ended March 31, 1996 increased by
$173,413 (57.9%) to $473,000 from $299,587 for the three months ended March 31,
1995. The Company has provided for income taxes at its current effective
tax rate of 40.6% for the three months ended March 31, 1996 and 1995. The
increase was entirely due to the relative increase in income before taxes.
The Company had net income of $691,256 for the three months ended March 31, 1996
compared to net income of $438,312 for the three months ended March 31, 1995, an
increase of $252,944 (57.7%). The increase was due primarily to greater sales
volume of the Company's pDEXA system and interest earned on cash balances.
Liquidity and Capital Resources
- - -------------------------------
Cash decreased $1,578,895 to $17,639,970 in the three months ended March 31,
1996. The decrease in cash is primarily the result of the Company making
nearly $1.3 million in payments of its corporate tax liabilities related to
1995 and the first quarter of 1996. The Company's accounts receivable
increased 23.1% to $5,851,325 at March 31, 1996 from $4,751,773 at
December 31, 1995. The increase in accounts receivable reflects higher sales
volume. Property and equipment consist of computer equipment and a management
information system that were acquired during the first quarter of 1996.
On April 2, 1996, the Company acquired Dove Medical Systems ("Dove") and certain
assets that were licensed to Dove, and the Company gave as consideration 107,692
shares of its Common Stock and $3,600,000 in cash.
Other capital expenditures in 1996 are expected to include improvements to
leased facilities. The Company also expects to purchase additional systems in
1996 for its short-term rental and pay-per-scan programs and as demonstration
systems. In addition, the Company expects to provide additional financing to
Norland Corporation and Stratec Medizintechnik GmbH under the Product
Development Loan Agreement with such manufacturers.
Management believes that its current cash position, together with cash flow from
operations, will be adequate to fund the Company's growth and operations for at
least the next twelve months. However the nature of the Company's business
is that it is subject to changes in technology, government approval and
regulation, and changes in third-party reimbursement in numerous foreign markets
and the United States. Significant changes in one or more of these factors in
a major market for the Company's products could significantly affect the
Company's ability to meet its cash needs through internal sources.
- 10 -
<PAGE>
Norland Medical Systems, Inc.
PART II OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
None
Item 2. Changes in Securities
---------------------
None
Item 3. Defaults Upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
No matters were submitted to a vote of stockholders during the quarter
ended March 31, 1996. The Annual Meeting of Company Stockholders will
be held at the Crowne Plaza Hotel, 66 Hale Avenue, White Plains, New
York 10601, at 10:00 a.m. on Thursday, May 30, 1996.
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits Furnished:
(11) Statement Regarding Computation of Earnings Per Share
(b) Reports on Form 8-K:
No reports on Form 8-K were filed by the Company during the quarter ended
March 31, 1996. On April 16, 1996, the Company filed a report on Form 8-K
describing its acquisition of Dove.
- 11 -
<PAGE>
Norland Medical Systems, Inc.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
NORLAND MEDICAL SYSTEMS, INC.
(Registrant)
/s/ Ralph G. Theodore
______________________________
Date: May 9, 1996 Ralph G. Theodore
Vice President, Operations
/s/ Kurt W. Streams
______________________________
Date: May 9, 1996 Kurt W. Streams
Vice President, Finance
(Principal Financial and Accounting Officer)
- 12 -
<PAGE>
Exhibit Index
Number Description Page
- - ------ ----------- ----
11 Statement Regarding Computation of Earnings Per Share 14
27 Financial Data Schedule 15
- 13 -
Exhibit 11
Norland Medical Systems, Inc.
Statement Regarding Computation of Earnings Per Share
(Unaudited)
Three Months Ended
---------------------------------------
March 31, 1996 March 31, 1995
-------------- --------------
Primary Basis:
Net income $ 691,256 $ 438,312
Weighted average shares
outstanding 4,230,192 2,000,000
Stock options 474,481 668,000
Weighted average number of
common and common equivalent
shares outstanding 4,704,673 2,668,000
Earnings per share $ 0.15 $ 0.16
Fully Diluted Basis:
Net income $ 691,256 $ 438,312
Weighted average shares
outstanding 4,230,192 2,000,000
Stock options 484,048 668,000
Weighted average number of
common and common equivalent
shares outstanding 4,714,240 2,668,000
Earnings per share $ 0.15 $ 0.16
- 14 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Condensed Financial Statements and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 17,639,970
<SECURITIES> 0
<RECEIVABLES> 5,851,325
<ALLOWANCES> 150,000
<INVENTORY> 879,132
<CURRENT-ASSETS> 24,527,842
<PP&E> 84,013
<DEPRECIATION> 0
<TOTAL-ASSETS> 24,687,761
<CURRENT-LIABILITIES> 3,478,391
<BONDS> 0
0
0
<COMMON> 2,233
<OTHER-SE> 21,207,137
<TOTAL-LIABILITY-AND-EQUITY> 24,687,761
<SALES> 5,147,461
<TOTAL-REVENUES> 5,218,290
<CGS> 3,415,911
<TOTAL-COSTS> 3,415,911
<OTHER-EXPENSES> 881,064
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,164,256
<INCOME-TAX> 473,000
<INCOME-CONTINUING> 691,256
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 691,256
<EPS-PRIMARY> 0.15
<EPS-DILUTED> 0.15
</TABLE>
