THIS DOCUMENT IS A COPY OF THE 10-QSB FILED ON
MAY 22, 1996 PURSUANT TO A RULE 202(d) TEMPORARY
HARDSHIP EXEMPTION
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996.
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from ____________________ to ________________
Commission File Number: 0-18798
IMAGING MANAGEMENT ASSOCIATES, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
COLORADO 84-1110294
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
5143 West Woodmill Drive, Suite 23
Wilmington, Delaware 19808
(Address of Principal Executive Offices)
Telephone: (302) 633-6900
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 No __X__
At May 20, 1996 there were 16,525,744 shares outstanding of the Registrant's
no par value Common Stock.
Transitional Small Business Disclosure Format (check one):
Yes No X
IMAGING MANAGEMENT ASSOCIATES, INC.
INDEX TO FORM 10-QSB
March 31, 1996
Page
Number
Part I - Financial Information
Item 1. Financial Statements:
Balance Sheets - March 31, 1996 and December 31, 1995. 1 - 2
Consolidated Statements of Earnings for the
three months ended March 31, 1996 and 1995. 3
Consolidated Statements of Cash Flows
for the three months ended March 31, 1996 and 1995. 4 - 5
Notes to Consolidated Financial Statements. 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 7 - 10
Part II - Other Information
11
IMAGING MANAGEMENT ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December
31,
1996 1995
(UNAUDITED) (AUDITED)
ASSETS
Current Assets
Cash and Cash Equivalents $ 20,545 $ 68,458
Accounts Receivable, less allowance for
doubtful accounts of $4,284,672 and
$3,976,736, respectively 5,922,476 5,836,961
Inventory 61,080 61,080
Prepaid Expenses 116,252 151,905
Current Portion of notes receivable 78,252 78,252
_________ _________
Total Current Assets 6,198,604 6,196,656
Notes Receivable 81,168 92,465
Equipment and leasehold improvements, at
cost, net of accumulated depreciation
and amortization of $ 5,185,144 and
$5,014,777, respectively 1,984,374 2,154,741
Intangible assets, less accumulated
amortization of $ 480,572 and
$ 448,914, respectively 882,324 957,171
Other Assets
Deposits 265,209 265,208
Receivables related parties 1,234,276 1,216,577
Other Assets 139,707 91,908
_________ _________
Total Assets $10,785,662 $10,974,726
========== ==========
IMAGING MANAGEMENT ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1996 1995
(UNAUDITED) (AUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of notes payable $ 669,812 $ 628,559
Current portion of capital lease
obligations 2,460,789 2,759,831
Convertible debentures 31,000 31,000
Accounts Payable and accrued expenses 5,105,611 4,910,358
Loans Payable - Related parties 152,579 164,394
__________ __________
Total Current Liabilities 8,419,791 8,494,142
__________ ___________
Long Term debt:
Notes Payable 96,260 138,328
Obligations under capital leases 183,284 204,063
Minority Interest in consolidated partnerships 76,507 77,489
___________ ___________
Total Liabilities 8,775,842 8,914,022
___________ ___________
Stockholders' Equity:
Common Stock - no par value, 100,000,000
shares authorized,16,525,744 issued and
outstanding at March 31, 1996 and
December 31, 1995, respectively 4,922,035 4,922,035
Retained Deficit (2,912,214) (2,861,331)
___________ ___________
Total Stockholders' Equity 2,009,821 2,060,704
___________ ___________
Total Liabilities and Stockholders' Equity $10,785,663 $10,974,726
============ ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
IMAGING MANAGEMENT ASSOCIATES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
For the Three Months Ended March 31, 1996 and 1995
Unaudited
1996 1995
Revenues:
Revenues from Operations of centers $1,826,590 $2,032,359
Other Income 226,321 22,258
_________ __________
Total Revenue 2,052,911 2,054,617
__________ ___________
Costs and Expenses:
Operating Expenses 1,807,153 2,042,650
Depreciation and amortization of
equipment and leasehold improvements 170,367 218,129
Amortization of intangibles 31,658 40,374
Interest Expense 90,720 90,861
__________ __________
2,099,898 2,392,014
___________ ___________
Income (loss) before minority interest
and income taxes (46,987) (337,397)
Minority Interest in (net income) loss
of consolidated partnerships (3,896) 0
_______________ ____________
Loss from continuing operations
before income taxes (50,883) (337,397)
_______________ ____________
Benefit for income taxes 134,959
Loss from continuing Operations (50,883) (202,438)
________________ ____________
Discontinued Operations (net of taxes)
162,760
______________ ______________
Net Loss $ (50,883) $ (39,679)
===============
==============
Net Loss per share
Primary
Continuing Operations ($0.00) ($0.01)
Discontinued Operations $0.00 $0.01
Fully diluted
Continuing Operations ($0.00) ($0.01)
Discontinued Operations $0.00 $0.01
Primary Common stock and common
stock equivalents 16,525,744 16,525,744
Fully Diluted Common stock and common
stock equivalents 16,525,744 16,525,744
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
IMAGING MANAGEMENT ASSOCIATES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flow
For the Three Months Ended March 31, 1996 and 1995
Unaudited
1996 1995
Cash Flows from operating activities
Net Income (loss) $ (50,883) $ (39,679)
Adjustments to reconcile net income to net _________ __________
cash provided by operating activities
Depreciation and amortization 240,335 303,210
Minority interest in net income
of consolidated partnerships 3,896 0
Deferred Income Taxes 26,452
Equity in net income of unconsolidated partnerships
(Increase) decrease in:
Accounts Receivable (85,515) 35,069
Prepaid Expenses 35,653 13,050
Other Assets (54,201) (8,219)
Increase (decrease) in:
Accounts payable and accrued expenses 195,253 (132,524)
Taxes Payable (26,452)
Loans Related -related parties (11,815) (5,982)
___________ _________
Net Cash provided by operating activities 272,723 164,925
_________ __________
Investments in and advances from (to)
unconsolidated partnerships 0 0
Capital Expenditures 0 0
_________ ___________
Net cash used by investing activities 0 0
__________ ___________
Cash flows from financing activities
Net decrease in notes payable and capital lease
obligations (320,636) (175,400)
Proceeds from issuance of common stock and
warrants - net 0
Net Cash used by financing activities (320,636) (175,400)
_________ __________
Net increase (decrease) in cash and
cash equivalents (47,913) (10,475)
Cash and Cash equivalents at Beginning of period 68,458 65,378
__________ __________
Cash and Cash equivalents at end of period $ 20,545 $ 54,903
======= =======
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
IMAGING MANAGEMENT ASSOCIATES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1996 and 1995
1. In the opinion of management, the accompanying unaudited financial
statements contain all adjustments, consisting of normal recurring accruals,
necessary to represent fairly the financial position, as of March 31, 1996 and
December 31, 1995 and the statements of operations for the three months and
the three months March 31, 1996 and 1995 and the statements of cash flows
for the three months ended March 31, 1996 and 1995.
The statements of operations for the three months ended March 31,
1996 and 1995 are not necessarily indicative of results for the full year.
While the Company believes that the disclosures presented are
adequate to make the information, not misleading, these financial statements
should be read in conjunction with the financial statements and
accompanying notes included on the Company's annual report on
Form 10-KSB for the fiscal year ended December 31, 1995.
2. Earnings per share are based on the weighted average number of shares of
common stock outstanding including common stock equivalents.
IMAGING MANAGEMENT ASSOCIATES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Plan of Operations
The Company's financial performance depends substantially upon the
scan volume of its MRI and other diagnostic imaging equipment and the
payment it receives for such scans. Since a majority of the Company's
expenses are fixed, increased revenues as a result of higher scan volume and
payment it receives for scans significantly improve the Company's
profitability. Conversely, lower scan volume and lower payment per scan
results in lower profitability.
The health care industry is highly regulated and very competitive.
The current health care environment is characterized by increasing cost
containment pressures, which have resulted in decreased revenues per scan.
As discussed in the "Liquidity and Capital Resources" below,
management is pursuing the following alternatives to address its working
capital deficit of $2,221,187 at March 31, 1996 and the arrears or defaults
under its principal equipment leases and to provide the anticipated cash
requirements for its present operations for the next 12 months: (i) the sale of
the operating assets for the North Jersey Imaging Center and the Company's
60th Street MRI Center; (ii) restructuring of principal lease obligations; (iii)
discontinuing or relocating unprofitable modalities at certain centers; (iv)
downsizing its executive staff and reducing the size of its corporate offices;
(v) financing of accounts receivable; (vi) increasing productivity to its
remaining core group of centers; and (vii) re-opening its St. Petersburg,
Florida Center.
Results of Operations for the Three Months Ended March 31, 1996
Compared to the Three Months Ended March 31, 1995.
Total revenues from continuing operations of $2,052,911 for the three
months ended March 31, 1996 decreased slightly from total revenues from
continuing operations of $2,054,617 for the corresponding period in 1995.
Revenues for the first quarter of 1996 were adversely affected by inclement
weather in the Northeastern United States in January and February 1996.
Revenues also reflect decreased revenue per scan as a result of the changing
health care market place, including decreased reimbursement and increased
scrutiny of utilization by managed care providers.
The Company's total revenues for the first quarter of 1995 and its
operating expenses were computed without reflecting the operating results of
the Company's former Jersey City Imaging Center ("JCIC"), which was sold
on August 31, 1995. The results of operations of JCIC for the first quarter of
1995 are reflected on the Company's Statement of Operations as income (loss)
from discontinued operations.
The Company's operating expenses from continuing operations for the
quarter ended March 31, 1996 of $1,807,153 decreased by 11.5% from
operating expenses of $2,042,650 from the quarter ended March 31, 1995.
The decrease in expenses reflects the Company's continued efforts to reduce
operating costs and to address the increased use by managed care providers,
including the Health Maintenance Organizations ("HMO's). The Company is
continuing to implement a plan to decrease its operating expenses to better
adapt the Company to the changing health care marketplace. This plan
includes restructuring of the financing of MRI equipment leases, selling the
operating assets of its 60th Street MRI Center and the North Jersey Imaging
Center and discontinuing unprofitable modalities.
Depreciation and amortization from continuing operations decreased
by 22% to $170,367 for the first three months of 1996 compared to $218,129
for the corresponding period in 1995.
The Company's operations do not reflect the operations of the
Company's Center in Orlando, Florida subsequent to the second quarter of
fiscal 1992, due to pending litigation with the manager of that Center.
Commencing in the second quarter of 1992, the Company was denied access
to the Center and the manager refused to remit revenues of the Center to the
Company and commenced legal proceedings against the manager.
The Company's total costs and expenses from continuing operations of
$2,099,898 for the first quarter of 1996 represent a 12.2% decrease from total
costs are expenses of $2,392,014 for the first quarter of 1995. Even though
the Company's total costs and expenses decreased, the Company still reported
a loss from operations due to (i) the fixed nature of the Company's costs; (ii)
the increased utilization of the Company's centers by HMO' s with their lower
reimbursement per scan; (iii) overall cost containment within the insurance
industry; and (iv) the reduced number of scans performed at certain centers.
Loss from continuing operations before minority interest and taxes
was $46,987 for the three months ended March 31, 1996 as compared to
$337,397 for the three ended March 31, 1995.
The Company had no benefit for income taxes from continuing
operations for the three months ended March 31, 1996 and a benefit of
$134,959 for the three months ended March 31, 1995.
As a result of the foregoing, the Company had a net loss of $50,883
for the three months ended March 31, 1996, as compared to a net loss of
$202,438 for the three months ended March 31, 1995. Primary and fully
diluted net loss per share from continuing operations was $.00 for the three
months ended March 31, 1996, as compared to net loss per share from
continuing operations of $.01 and a net income from discontinued operations of
$.01 for the three months ended March 31, 1995.
Liquidity and Capital Resources
During the first three months of 1996, the Company funded its losses
with cash generated from operations and extending terms with creditors,
including lessors of diagnostic imaging equipment. At March 31, 1996, the
Company had working capital deficit of $2,221,187 as compared to a working
capital deficit of $2,297,486 at December 31, 1995. Cash and cash
equivalents at March 31, 1996 was $20,545 as compared to $68,458 at
December 31, 1995.
The Company's net cash provided by operating activities for the three
months ended March 31, 1996, of $272,723 was primarily attributable to the
Company's net loss from operations (net of adjustments for noncash items) of
$193,348, an increase in accounts payable and accrued expenses of $195,253
offset by an increase in accounts receivable of $85,515. The increase in
accounts payable and accrued expenses was a result of the Company extending
terms with creditors.
Financing activities used a total of $320,636, resulting from a net
decrease in notes payable and capital lease obligations. Cash and cash
equivalents decreased by $47,913 to $20,545 at March 31, 1996.
The Company's ability to meet its current obligations is primarily
dependent on its ability to maintain future revenues from existing assets while
reducing the costs to generate such revenues, and/or by terminating
unprofitable operations and either redeploying the assets to profitable
locations or disposing of assets. Revenue on a per procedure basis may be
difficult to maintain due to declining reimbursements. In addition, a number
of uncertainties exist that could have an impact on the Company's future
business prospects including: (i) changes in health care legislation which
may limit reimbursement; (ii) numerous competitive factors in the health care
industry, including the increased proliferation of managed care and overall
cost containment in the insurance industry; and (iii) the increased
utilization of the Company's centers by managed care entities and their
lower reimbursement rate per scan.
The Company has negotiated the terms of a discounted buy-out with
its principal equipment lessor Highline Financial Services, Inc. ("Highline"),
for the buy-out of three MRI units which are currently leased directly to the
Company or leased to Leonard F. Vernon or Joseph F. Rooney, and subleased
to the Company, and the release of liability from the lease of the MRI
equipment used at the Sand Lake Imaging Center. The Company has paid
Highline $200,000 towards the buy-out and is required to pay the remaining
$1,200,000 purchase price over the next 10 months. This buy-out will enable
the Company to eliminate its debt services on three of its MRI systems.
Independently, the Company is actively negotiating the financing of the buy-out
if it is more beneficial towards the Company's long term goals.
The Company has been informed by Marine Midland Business Loans,
Inc., that it is in default on a settlement agreement relating to a lease for
MRI equipment used and located at the 60th Street MRI Center. The Company is
negotiating offers for the sale of the operating assets of its 60th Street MRI
Center and the buy-out of the MRI equipment for $292,000, to satisfy the
default.
In order to reduce the outstanding obligations on the MRI equipment
and fixtures located at the Company's former Metropolitan Imaging Center,
the Company, in October 1995, with the cooperation of the equipment lessor,
relocated the MRI equipment with a third party. The Company also plans to
re-open its MRI center in St. Petersburg, Florida after renovations to the
center and an upgrade to the MRI equipment is completed.
Should the Company not be able to satisfy the terms of agreements
with its lessors, the lessors may exercise their remedies under the leases,
including repossession of the equipment and acceleration of all future amounts
due under the leases.
The Company is pursuing other alternatives to improve its cash flow
and reduce its expenses which include: (i) the sale of the operating assets of
the North Jersey Imaging Center and the Company's 60th Street MRI Center,
both located in West New York, New Jersey; (ii) discontinue or relocate
unprofitable modalities at certain centers; (iii) downsizing its executive staff
and reducing the size of its corporate offices; (iv) financing of the accounts
receivable at certain centers; (v) increasing productivity of the remaining core
group of Centers and (vi) acquiring or developing business opportunities in
other health care fields and utilizing the Company's existing resources to
achieve efficiencies.
The Company has no bank lines of credit available. Medical
equipment purchases, capital improvements, acquisitions and center
development have been funded through third party capital lease, debt
obligations, private sales of securities, exercise of warrants and internally
generated cash flow. The debt is generally secured by the equipment, and
sometimes other assets of the Centers. Interest rates in connection with the
leases and borrowings range between ten and eighteen percent.
The Company's cash flow has been and will in the future be adversely
affected by the slow paying process of third party carriers. These third party
carriers include Blue Cross, Blue Shield, Medicare, worker's compensation
carriers, as well as other third party carriers such as HMO's. Reimbursement
times for these carriers vary from 30 days to over 180 days.
IMAGING MANAGEMENT ASSOCIATES, INC.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
In May, 1996, the Company received a complaint in an action entitled
Southern Dependacare, Inc. and Jack Hilton vs. Imaging Management
Associates, Inc., Joseph F. Rooney, Leonard F. Vernon and Medicorp, Inc.
which was filed in the Circuit Court of Franklin County, Alabama (Case CV
94-048.01). The complaint alleges breach of contract and fraud in connection
with an alleged agreement between the Company and plaintiffs. The
Company believes that it does not have any liability to plaintiffs and will
vigorously defend itself in this action. This action was filed by plaintiff
as a result of the Alabama Supreme Court reversing a default judgment which the
plaintiffs received against the Company and then remanding the case to the
trial court.
Item 3. Defaults of Senior Securities
See "Management's Discussion and Analysis of Financial Conditions
and Results of Operations - Liquidity and Capital Resources" for a
discussion of defaults monthly payment obligation on equipment
leases, and forbearance and standstill terms being negotiated by the
Company.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
IMAGING MANAGEMENT ASSOCIATES, INC.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IMAGING MANAGEMENT ASSOCIATES, INC.
Date: May 22, 1996 By: /s/ Leonard F. Vernon
Leonard F. Vernon, Chairman of the
Board, President and Chief
Executive Officer
Date: May 22, 1996 By: /s/ Joseph F. Rooney
Joseph F. Rooney, Executive
Vice President, Secretary, Treasurer
Director and Principal and
Accounting Officer