<PAGE>
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, 2000
-------------------------------------------------
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 (I.R.S. Employer Identification No.)
of 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)
- --------------------------------------------------------------------------------
(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 10, 2000, 27,045,166 shares of the registrant's Common Stock,
$0.0005 par value, were outstanding.
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<PAGE>
NORLAND MEDICAL SYSTEMS, INC.
TABLE OF CONTENTS FOR FORM 10-Q
-------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Title Page........................................................................................................1
Document Table of Contents........................................................................................2
Introduction......................................................................................................3
PART I FINANCIAL INFORMATION................................................................................4
Item 1. Consolidated Financial Statements....................................................................4
Consolidated Balance Sheets..........................................................................4
Consolidated Statements of Operations................................................................5
Consolidated Statements of Cash Flows................................................................6
Notes to Consolidated Financial Statements...........................................................7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................................................9
Item 3. Quantitative and Qualitative Disclosures About Market Risks.........................................12
PART II OTHER INFORMATION...................................................................................13
Item 1. Legal Proceedings...................................................................................13
Item 2. Changes in Securities...............................................................................13
Item 3. Defaults Upon Senior Securities.....................................................................13
Item 4. Submission of Matters to a Vote of Security Holders.................................................13
Item 5. Other Information...................................................................................13
Item 6. Exhibits and Reports on Form 8-K....................................................................13
Signatures ......................................................................................................14
Exhibit Index....................................................................................................15
</TABLE>
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<PAGE>
NORLAND MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
I N T R O D U C T I O N
THE STATEMENTS INCLUDED IN THIS REPORT REGARDING FUTURE FINANCIAL PERFORMANCE
AND RESULTS AND THE OTHER STATEMENTS THAT ARE NOT HISTORICAL FACTS ARE
FORWARD-LOOKING STATEMENTS. THE WORDS "BELIEVES," "INTENDS," "EXPECTS,"
"ANTICIPATES," "PROJECTS," "ESTIMATES," "PREDICTS," AND SIMILAR EXPRESSIONS ARE
ALSO INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE FORWARD-LOOKING
STATEMENTS ARE BASED ON CURRENT EXPECTATIONS AND ARE SUBJECT TO RISKS AND
UNCERTAINTIES. IN CONNECTION WITH THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
SECURITIES LITIGATION REFORM ACT OF 1995, THE COMPANY CAUTIONS THE READER THAT
ACTUAL RESULTS OR EVENTS COULD DIFFER MATERIALLY FROM THOSE SET FORTH OR IMPLIED
BY THE FORWARD-LOOKING STATEMENTS AND RELATED ASSUMPTIONS DUE TO CERTAIN
IMPORTANT FACTORS, INCLUDING, WITHOUT LIMITATION, THE FOLLOWING: (I) THE
CONTINUED DEVELOPMENT OF NEW PRODUCTS AND PRODUCT ENHANCEMENTS THAT CAN BE
MARKETED BY THE COMPANY; (II) THE IMPORTANCE TO THE COMPANY'S SALES GROWTH THAT
THE EFFICACY OF NEW THERAPIES FOR THE TREATMENT OF OSTEOPOROSIS AND OTHER BONE
DISORDERS BE DEMONSTRATED AND THAT REGULATORY APPROVAL OF SUCH THERAPIES BE
GRANTED, PARTICULARLY IN THE UNITED STATES; (III) THE ACCEPTANCE AND ADOPTION BY
PRIMARY CARE PROVIDERS OF NEW OSTEOPOROSIS THERAPIES AND THE COMPANY'S ABILITY
TO EXPAND SALES OF ITS PRODUCTS TO THESE PHYSICIANS; (IV) THE COMPANY MAY BE
ADVERSELY AFFECTED BY CHANGES IN THE REIMBURSEMENT POLICIES OF GOVERNMENTAL
PROGRAMS (E.G., MEDICARE AND MEDICAID) AND PRIVATE THIRD PARTY PAYORS, INCLUDING
PRIVATE INSURANCE PLANS AND MANAGED CARE PLANS; (V) THE HIGH LEVEL OF
COMPETITION IN THE BONE DENSITOMETRY MARKET; (VI) CHANGES IN BONE DENSITOMETRY
TECHNOLOGY; (VII) THE COMPANY'S ABILITY TO CONTINUE TO MAINTAIN AND EXPAND
ACCEPTABLE RELATIONSHIPS WITH THIRD PARTY DEALERS AND DISTRIBUTORS; (VIII) THE
COMPANY'S ABILITY TO PROVIDE ATTRACTIVE FINANCING OPTIONS TO ITS CUSTOMERS AND
TO PROVIDE CUSTOMERS WITH FAST AND EFFICIENT SERVICE FOR THE COMPANY'S PRODUCTS;
(IX) CHANGES THAT MAY RESULT FROM HEALTH CARE REFORM IN THE UNITED STATES MAY
ADVERSELY AFFECT THE COMPANY; (X) THE COMPANY'S CASH FLOW AND THE RESULTS OF ITS
ONGOING FINANCING EFFORTS; (XI) THE EFFECT OF REGULATION BY THE UNITED STATES
FOOD AND DRUG ADMINISTRATION AND OTHER AGENCIES; (XII) THE EFFECT OF THE
COMPANY'S ACCOUNTING POLICIES; (XIII) THE OUTCOME OF PENDING LITIGATION; AND
(XIV) OTHER RISKS DESCRIBED ELSEWHERE IN THIS REPORT AND IN OTHER DOCUMENTS
FILED BY THE COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE COMPANY IS
ALSO SUBJECT TO GENERAL BUSINESS RISKS, INCLUDING ADVERSE STATE, FEDERAL OR
FOREIGN LEGISLATION AND REGULATION, ADVERSE PUBLICITY OR NEWS COVERAGE, CHANGES
IN GENERAL ECONOMIC FACTORS AND THE COMPANY'S ABILITY TO RETAIN AND ATTRACT KEY
EMPLOYEES. NOTHING CONTAINED IN THE REPORT SHOULD BE VIEWED AS SUGGESTING THE
EXISTENCE OF A TREND OR PROTECTION OF ANY FUTURE TREND WITH RESPECT TO ANY
MATTER. ANY FORWARD-LOOKING STATEMENTS INCLUDED IN THIS REPORT ARE MADE AS OF
THE DATE HEREOF, BASED ON INFORMATION AVAILABLE TO THE COMPANY AS OF THE DATE
HEREOF, AND THE COMPANY ASSUMES NO OBLIGATION TO UPDATE ANY FORWARD-LOOKING
STATEMENTS.
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<PAGE>
NORLAND MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
PART I FINANCIAL INFORMATION
Item 1. CONSOLIDATED FINANCIAL STATEMENTS
NORLAND MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31,
2000 December 31,
(UNAUDITED) 1999
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 350,433 $ 67,666
Accounts receivable - trade, less allowance for
doubtful accounts of $301,000 and $351,000, respectively 1,664,577 2,517,583
Inventories, net 2,771,477 2,244,317
Prepaid expenses and other current assets 228,651 201,370
Deferred income taxes 1,490,755 1,690,755
----------- -----------
Total current assets 6,505,893 6,721,691
----------- -----------
Property and equipment, net 1,051,586 1,175,947
Deferred income taxes, net 2,479,086 2,279,086
Goodwill, net 7,406,800 7,555,564
----------- -----------
Total assets $17,443,365 $17,732,288
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank borrowings $ 164,816 $ 311,816
Accounts payable - related parties 705,046 372,244
Accounts payable - trade 1,871,652 2,218,639
Accrued expenses 1,378,310 1,633,641
Accrued warranty expenses 485,000 530,000
Unearned service revenue 600,015 387,598
Interest payable 169,305 143,720
----------- -----------
Total current liabilities 5,374,144 5,597,658
----------- -----------
Note payable, net of discount 1,119,843 1,106,562
Stockholders' equity:
Common stock-par value $.0005 per share, 45,000,000
shares authorized, 26,845,166 and 25,956,278 shares
issued and outstanding, respectively 13,421 12,977
Additional paid-in capital 38,042,335 37,542,279
Accumulated deficit (27,106,378) (26,527,188)
----------- -----------
Total stockholders' equity 10,949,378 11,028,068
----------- -----------
Total liabilities and stockholders' equity $17,443,365 $17,732,288
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
NORLAND MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------------
2000 1999
----------- -----------
<S> <C> <C>
Revenue $ 3,719,202 $ 4,825,934
Cost of revenue 2,203,547 2,531,898
----------- -----------
Gross profit 1,515,655 2,294,036
Sales and marketing expense 973,832 1,434,997
General and administrative expense 811,572 944,821
Research and development expense 232,684 394,126
----------- -----------
Operating loss (502,433) (479,908)
Interest expense (79,655) (145,005)
Interest income 2,898 10,029
----------- -----------
Loss before income taxes (579,190) (614,884)
Income tax benefit -- --
----------- -----------
Net loss $ (579,190) $ (614,884)
=========== ===========
Basic and diluted weighted average shares 26,005,118 14,265,997
=========== ===========
Basic and diluted loss per share $ (0.02) $ (0.04)
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
NORLAND MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------------
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (579,190) $ (614,884)
---------- ----------
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Amortization expense 171,584 204,623
Depreciation expense 139,313 138,346
Inventory obsolescence credit -- (191,780)
Provision for doubtful accounts (40,021) 20,077
Changes in assets and liabilities:
Accounts receivable 893,027 (680,709)
Inventories 22,840 827,498
Prepaid expenses and other current assets (36,820) (56,738)
Accounts payable (64,185) 320,119
Accrued expenses (62,329) (41,374)
---------- ----------
Total adjustments 1,023,409 540,062
---------- ----------
Net cash provided by (used in)
operating activities 444,219 (74,822)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (14,952) (113,761)
Other -- (1,184)
---------- ----------
Net cash used in investing activities (14,952) (114,945)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from bank borrowings 2,369,000 --
Payments on bank borrowings (2,516,000) --
Issuance of common stock 500 --
---------- ----------
Net cash used in financing activities (146,500) --
---------- ----------
Net increase (decrease) in cash 282,767 (189,767)
Cash and cash equivalents at beginning of period 67,666 1,105,140
---------- ----------
Cash and cash equivalents at end of period $ 350,433 $ 915,373
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
NORLAND MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) BASIS OF PRESENTATION
The consolidated financial statements of Norland Medical Systems, Inc. and
Subsidiaries (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 footnote disclosures
required by generally accepted accounting principles. These statements should be
read in conjunction with the audited financial statements and notes thereto for
the year ended December 31, 1999, and included in the Company's Report on Form
10-K as filed with the Securities and Exchange Commission on March 30, 2000. In
the opinion of management, the accompanying interim unaudited consolidated
financial statements contain all adjustments (consisting of normal, recurring
accruals) necessary for a fair presentation of the consolidated financial
position, results of operations and cash flows for these interim periods.
The results of operations for the three months ended March 31, 2000 are not
necessarily indicative of the results to be expected for the entire fiscal year
ending December 31, 2000.
(2) BANK BORROWINGS
On August 10, 1999, the Company entered into a $2 million bank line of credit in
which the Company may make borrowings according to an accounts receivable based
formula. Interest on any outstanding borrowings accrues at a variable rate based
on the prime rate plus 1.25%. Borrowings under the agreement are collateralized
by the Company's assets. In connection with such agreement, the Company has
granted to the bank warrants to purchase 20,000 shares of the Company's Common
Stock at a price of $0.01 per share. As of March 31, 2000 and December 31, 1999,
the Company had outstanding borrowings of $164,816 and $311,816 with interest
accruing at 10.25% and 9.75% respectively.
(3) INVENTORIES
As of March 31, 2000 and December 31, 1999 inventories consisted of the
following:
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
-------------- -----------------
<S> <C> <C>
Raw materials, product kits,
spare parts and
Sub-assemblies $ 1,888,657 $2,093,351
Work in progress 143,704 380,511
Finished goods 1,389,116 420,455
Inventory reserve (650,000) (650,000)
------------ ----------
$ 2,771,477 $2,244,317
============ ==========
</TABLE>
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<PAGE>
NORLAND MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued):
(Unaudited)
(4) CASH FLOWS
Cash paid for interest was $31,251 and $287,500 for the three months ended March
31, 2000 and 1999, respectively. Cash paid for income taxes was $3,169 and $950
for the three months ended March 31, 2000 and 1999, respectively.
In March 1999, income taxes receivable of $340,000 were reclassified to deferred
income taxes and the Company elected to pay $4,310,000 of Note principal by the
issuance of 11,122,580 shares of its Common Stock. During the first quarter of
fiscal 2000, $200,000 of current deferred income taxes were reclassified to long
term. On February 17, 2000, the Company exchanged 888,888 shares of its common
stock (fair market value of $500,000) for a marketing credit of $500,000. The
credit was utilized by the Company to purchase inventory through an affiliate,
Bionix LLC.
-8-
<PAGE>
NORLAND MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THE FOLLOWING DISCUSSION OF THE FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF
THE COMPANY SHOULD BE READ IN CONJUNCTION WITH THE CONSOLIDATED FINANCIAL
STATEMENTS AND RELATED NOTES THERETO INCLUDED IN ITEM 1 OF THIS REPORT. THE
FOLLOWING DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS WHICH INVOLVE RISKS AND
UNCERTAINTIES, SOME OF WHICH ARE DESCRIBED IN THE INTRODUCTION TO THIS REPORT.
THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN
THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE
DISCUSSED IN THE INTRODUCTION.
RESULTS OF OPERATIONS
Revenue for the three months ended March 31, 2000 decreased $1,106,732 (22.9%)
to $3,719,202 from $4,825,934 from the comparable period of 1999. The decrease
in sales was the result of significantly decreased sales of the Company's
DXA-based systems in the United States. Sales of complete bone densitometry
systems represented 81.9% and 89.1% of total revenue for the three months ended
March 31, 2000 and 1999, respectively. Sales of parts and services and rental
income comprised the balance of revenues for such periods.
Sales in the United States have been affected by changes in the Medicare
reimbursement rates for bone densitometry tests. Revenues and the mix of
products sold are expected to continue to be influenced by the relative degree
of difference in reimbursement rate levels for peripheral and central systems.
They will also be influenced by the Company's ability to bring to the market
systems that can be operated more profitably by end users at the applicable
reimbursement levels.
With the osteoporosis market having remained flat for the past twelve months,
especially in the U.S., and management's expectation that conditions in the
osteoporosis market may not change in the short-term, the Company announced in
November 1999 a product diversification program into musculoskeletal therapy.
The Company is launching the distribution of new lines of products in several
musculoskeletal market segments, including sports medicine, pain management and
rehabilitation. The Company is exploring other opportunities to distribute new
products as part of its sales diversification program. There can be no assurance
that the Company will be able to successfully distribute such products.
Norland's new musculoskeletal products include three models of the GALILEO, a
patent-pending exercise system designed for use in sports medicine to improve
muscle strength and in rehabilitation to improve mobility through the rebuilding
of muscles. The diversification program includes another musculoskeletal
product, the ORBASONE, a novel therapeutic device designed for use in pain
management to treat joints, muscles and ligaments. The Company further expanded
its product diversification program into urology by signing an agreement that
provides Norland the exclusive U.S. distribution rights to a novel Lithotripsor.
Sales of these new products are expected shortly, however there can be no
assurance that the Company will sell a material quantity of such products.
Cost of revenue as a percentage of revenue was 59.2% and 52.5% for the three
months ended March 31, 2000 and 1999, respectively, resulting in a gross margin
of 40.8% for the three months ended March 31, 2000 compared to 47.5% for the
comparable period of 1999. The gross margin for the
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<PAGE>
first quarter of 1999 benefited from a $191,780 inventory obsolescence credit
and by $240,000 in sales of refurbished demonstration systems, which had been
carried at relatively low costs. In addition, because Norland Corp. has certain
fixed manufacturing costs each quarter, to the extent that revenues are lower,
such fixed costs have a more negative impact on gross margins.
Sales and marketing expense decreased $461,165 (32.1%) to $973,832 for the three
months ended March 31, 2000 from $1,434,997 for the three months ended March 31,
1999, and decreased as a percentage of revenue to 26.2% from 29.7%. The dollar
decrease was primarily due to a reduction in personnel and decreased
advertising, marketing, promotion and travel related expenses incurred by sales
and customer service personnel.
General and administrative expense decreased $133,249 (14.1%) to $811,572 for
the three months ended March 31, 2000 from $944,821 for the three months ended
March 31, 1999 and increased as a percentage of revenue to 21.8% from 19.6%. The
decrease was attributable to a reduction in professional fees.
Research and development expense decreased $161,442 (41.0%) to $232,684 for the
three months ended March 31, 2000 from $394,126 for the three months ended March
31, 1999, and also decreased as a percentage of revenue to 6.3% from 8.2%. The
decrease was primarily attributable to a reduction in personnel.
Interest expense decreased $65,350 (45.1%) to $79,655 for the three months ended
March 31, 2000 from $145,005 for the three months ended March 31, 1999. Interest
expense for both periods represents interest on the Note payable issued by the
Company in connection with the acquisition of Norland Corporation on September
11, 1997. The decrease in interest expense reflects the reduced outstanding
principal balance of the Note payable. The decrease was offset by borrowings
under the Company's new credit facility during the three months ended March 31,
2000. Interest income in the three-month periods ended March 31, 2000 and 1999
consisted primarily of interest earned on the Company's cash balances. The
decrease in interest income in the three-month period ended March 31, 2000 as
compared to March 31, 1999 reflects the Company's reduced cash position.
For the quarter ended March 31, 2000 the Company did not recognize a benefit for
income taxes on the loss before income taxes. Management believes that, it is
more likely than not that future levels of income will be sufficient to realize
all deferred tax assets, net of the valuation reserve.
The Company had a net loss of $579,190 ($0.02 per share based on 26,005,118
weighted average shares) for the three months ended March 31, 2000 compared to a
net loss of $614,884 ($0.04 per share based on 14,265,997 weighted average
shares) for the three months ended March 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1999, the Company had cash of $67,666. At March 31, 2000, the
Company had cash of $350,433. The increase in cash was primarily the result of
the increased collection of accounts receivable.
At the present time, capital expenditures for the balance of 2000 are not
expected to be significant. The Company's most significant cash needs are for
the purchase of inventory associated with its diversification program. The
Company may fund these purchases with equity, cash available from operations and
or, other financing arrangements. There can be no assurance that the Company
will
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<PAGE>
be successful in obtaining such financing. In the first quarter of fiscal 2000
the Company funded $500,000 of inventory purchases through the issuance of its
common stock.
The Company believes that its current cash position, together with cash flows
from operations, and its bank credit facility will be adequate to fund the
Company's operations for at least the next twelve months. In order to increase
its cash flow, the Company is continuing its efforts to stimulate sales of bone
densitometers and launch new products through its diversification program. There
can be no assurance that such program will be successful. The Company is also
continuing to focus its efforts on improving the aging of its accounts
receivable and reducing the level of bone densitometer inventory. To do so, the
Company has implemented higher credit standards for its customers and is
emphasizing the receipt of down payments from customers at the time their
purchase orders are received and attempting to more closely coordinate the
timing of purchases of parts and sub-assemblies. The Company is also continuing
to be more aggressive in seeking to collect outstanding receivables and selling
its inventory of used bone densitometers
The nature of the Company's business is such that it is subject to changes in
technology, government approval and regulation, and changes in third-party
reimbursement in the United States and numerous foreign markets. Significant
changes in one or more of these factors in a major market for the Company's
products could significantly affect the Company's cash needs.
FORWARD-LOOKING STATEMENTS
As indicated in the Introduction to this Report, forward-looking statements,
including those contained in this Management's Discussion and Analysis section,
are subject to risks and uncertainties. This section includes forward-looking
statements with respect to the effect of reimbursement rates on future sales and
product mix, the Company's ability to realize deferred tax assets as recorded,
future capital expenditures and the Company's plans for funding its ongoing
operations. Such forward-looking statements are subject to the factors cited in
the Introduction.
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<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
The table below provides information about the Company's market sensitive
financial instruments and constitutes a "forward-looking statement". The
Company's major financial market risk exposure is changing interest rates,
primarily in the Unites States. The Company's policy has been to manage its
interest rate risks through use of a fixed rate debt. See Note 2 for a
description of the Note payable. All items described are non-trading and are
stated in U.S. dollars.
<TABLE>
<CAPTION>
Expected Maturity Dates Fair Value
------------------------------------------------------- ----------
2000 2001 2002 2003 Thereafter Total March 31,
---- ---- ---- ---- ---------- ----- ---------
2000
----
<S> <C> <C> <C> <C> <C> <C> <C>
CASH AND CASH EQUIVALENTS
Bank deposits-non interest bearing $350,433 $ 350,433 $ 350,433
NOTE PAYABLE
Fixed interest rate - 6.5% $1,250,000 $1,250,000 $1,119,843
BANK BORROWINGS
Variable interest rate- 10.25% $164,816 $ 164,816 $ 164,816
</TABLE>
-12-
<PAGE>
NORLAND MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
PART II OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The shareholders' class action settlement agreement (previously disclosed in the
Company's annual report on Form 10-K, December 31, 1999) was approved by the
U.S. District Court, as submitted, on March 30, 2000.
On March 31, 2000 the Company received a summons alleging patent infringement
regarding the distribution of one of the Company's product lines. The Company is
a distributor of the product and does not manufacture or assemble the product.
The Company's distribution agreement with the manufacturer of the product
provides indemnification to the Company from any claim of a third party arising
from patent infringement. At this time the Company is unable to determine the
merits of the summons and any possible outcome or impact on the Company, if any.
The manufacturer has informed the Company that it intends to vigorously defend
the claim. Sales of the product accounted for approximately 3.5% of the
Company's revenue for the first quarter ended March 31, 2000.
In the normal course of business, the Company is named in lawsuits in which
claims are asserted against the Company. In the opinion of management, the
liabilities, if any, which may ultimately result from such lawsuits are not
expected to have a material adverse effect on the financial position, results of
operations or cash flows of the Company.
Item 2. CHANGE IN SECURITIES
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits furnished:
27 Financial Data Schedule
(b) Reports on Form 8-K:
None
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<PAGE>
NORLAND MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
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)
Date: May 12, 2000 /s/ Reynald G. Bonmati
----------------------------
Reynald G. Bonmati
President
Date: May 12, 2000 /s/ Robert J. Larson
----------------------------
Robert J. Larson
Chief Financial Officer
(Principal Financial and Accounting Officer)
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<PAGE>
NORLAND MEDICAL SYSTEMS, INC. AND SUBSIDIARIES
EXHIBIT INDEX
- -------------
NUMBER DESCRIPTION
- --------------------
27 Financial Data Schedule
-15-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED 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-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 350,433
<SECURITIES> 0
<RECEIVABLES> 1,664,577
<ALLOWANCES> 301,000
<INVENTORY> 2,771,477
<CURRENT-ASSETS> 6,505,893
<PP&E> 1,051,586
<DEPRECIATION> 0
<TOTAL-ASSETS> 17,443,365
<CURRENT-LIABILITIES> 5,374,144
<BONDS> 1,119,843
0
0
<COMMON> 13,421
<OTHER-SE> 10,935,957
<TOTAL-LIABILITY-AND-EQUITY> 17,443,365
<SALES> 3,719,202
<TOTAL-REVENUES> 3,719,202
<CGS> 2,203,547
<TOTAL-COSTS> 2,018,088
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 79,655
<INCOME-PRETAX> (579,190)
<INCOME-TAX> 0
<INCOME-CONTINUING> (579,190)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (579,190)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
