-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GOjJL2S3Q58FRy1Qkb/Cn5sDiIJSaY3q51i587KIXgmTl0QGD7rvy0LLzZUODusM SXp+P6eB9OHbCtBOzN4NGw== 0000912057-96-017526.txt : 19960814 0000912057-96-017526.hdr.sgml : 19960814 ACCESSION NUMBER: 0000912057-96-017526 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960813 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORLAND MEDICAL SYSTEMS INC CENTRAL INDEX KEY: 0000946428 STANDARD INDUSTRIAL CLASSIFICATION: LABORATORY ANALYTICAL INSTRUMENTS [3826] IRS NUMBER: 061387931 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-26206 FILM NUMBER: 96610853 BUSINESS ADDRESS: STREET 1: 106 CORPORATE PARK DRIVE STREET 2: SUITE 106 CITY: WHITE PLAINS STATE: NY ZIP: 10604 BUSINESS PHONE: 914-694-2285 MAIL ADDRESS: STREET 1: 106 CORPORATE PARK DRIVE STREET 2: SUITE 106 CITY: WHITE PLAINS STATE: NY ZIP: 10604 FORMER COMPANY: FORMER CONFORMED NAME: OSTECH INC DATE OF NAME CHANGE: 19950608 10-Q 1 10-Q 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 June 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 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) - -------------------------------------------------------------------------------- (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 July 31, 1996, 6,895,781 shares of the registrant's Common Stock, $0.0005 par value, were outstanding. -1- 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 Consolidated Financial Statements. . . . . . . . . . . . . 3 Condensed Consolidated Balance Sheets. . . . . . . . . . . . . . . . 3 Condensed Consolidated Statements of Income. . . . . . . . . . . . . 4 Condensed Consolidated Statements of Changes in Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Condensed Consolidated Statements of Cash Flows. . . . . . . . . . . 6 Notes to Condensed Consolidated 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 Exhibit Index. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 -2-
PART I FINANCIAL INFORMATION Item 1. Condensed Financial Statements NORLAND MEDICAL SYSTEMS, INC. Condensed Consolidated Balance Sheets June 30, 1996 December 31, 1995 ------------- ----------------- (Unaudited) ASSETS Current assets: Cash $ 11,676,698 $ 19,218,865 Accounts receivable - trade, less allowance for doubtful accounts of $150,000 at June 30, 1996 and December 31, 1995 8,287,971 4,571,520 Accounts receivable - affiliate 266,955 180,253 Inventories 1,354,236 798,484 Prepaid expenses and other current assets 224,934 68,989 ------------ ------------ Total current assets 21,810,794 24,838,111 ------------ ------------ Investment in Vitel, Inc. 250,000 -- Property and equipment 204,075 -- Product development loan receivable - affiliate 75,906 48,519 Patent, net 397,020 -- Goodwill, net 3,217,288 -- Other intangible assets, net 2,947,229 -- ------------ ------------ Total assets $ 28,902,312 $ 24,886,630 ------------ ------------ ------------ ------------ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable - Stratec $ 1,108,088 $ 2,139,656 Accounts payable - Norland 1,708,132 493,424 Accounts payable - trade 185,207 32,000 Accrued expenses 476,100 361,003 Income taxes payable 123,245 1,305,037 Customer deposits 30,740 34,664 ------------ ------------ Total current liabilities 3,631,512 4,365,784 ------------ ------------ Stockholders' equity: Common stock, par value of $0.0005 per share, 10,000,000 shares authorized, 6,895,781 shares issued at June 30, 1996 3,448 3,000 Additional paid-in capital 21,658,170 18,349,813 Retained earnings 3,609,182 2,168,033 ------------ ------------ Total stockholders' equity 25,270,800 20,520,846 ------------ ------------ Total liabilities and stockholders' equity $ 28,902,312 $ 24,886,630 ------------ ------------ ------------ ------------
See accompanying notes to condensed consolidated financial statements. -3- NORLAND MEDICAL SYSTEMS, INC. Condensed Consolidated Statements of Income (Unaudited)
Three Months Ended Six Months Ended --------------------------------- ------------------------------- June 30, 1996 June 30, 1995 June 30, 1996 June 30, 1995 ------------- ------------- ------------- ------------- Revenue $ 6,949,116 $ 4,003,310 $ 12,167,406 $ 7,899,231 Cost of revenue 4,380,130 2,749,148 7,796,041 5,349,679 ------------ ------------ ------------ ------------ Gross profit 2,568,986 1,254,162 4,371,365 2,549,552 Sales and marketing expense 883,172 286,829 1,458,520 621,382 General and administrative expense 594,056 171,199 899,772 396,652 ------------ ------------ ------------ ------------ Operating income 1,091,758 796,134 2,013,073 1,531,518 Other income 170,757 4,650 413,698 7,164 ------------ ------------ ------------ ------------ Income before taxes 1,262,515 800,784 2,426,771 1,538,682 Provision for taxes 512,458 325,118 985,458 624,705 ------------ ------------ ------------ ------------ Net income $ 750,057 $ 475,666 $ 1,441,313 $ 913,977 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Earnings per share $ 0.10 $ 0.12 $ 0.20 $ 0.23 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------ Weighted average number of common and common equivalent shares 7,263,912 4,002,000 7,157,296 4,002,000 ------------ ------------ ------------ ------------ ------------ ------------ ------------ ------------
See accompanying notes to condensed consolidated financial statements -4- NORLAND MEDICAL SYSTEMS, INC. Condensed Consolidated Statements of Changes in Stockholders' Equity For the Six Months Ended June 30, 1996 and 1995 (Unaudited)
Common Paid-In Stock Retained Total Shares Stock Capital Subscriptions Earnings ----------- --------- ------ ----------- ------------- ----------- Balance as of December 31, 1995 $20,520,846 6,000,000 $3,000 $18,349,813 -- $ 2,168,033 Issuance of shares for stock options exercised 288 734,250 367 (79) -- -- Issuance of shares to acquire Dove Medical Systems 3,311,519 161,538 81 3,311,438 -- -- Cost and expenses directly related to the stock offering (3,002) -- -- (3,002) -- -- Cash paid in lieu of fractional shares on 3-for-2 stock split on June 14, 1996 (164) (7) -- -- -- (164) Net income 1,441,313 -- -- -- -- 1,441,313 ----------- -------- ------ ----------- ------------- ----------- Balance as of June 30, 1996 $25,270,800 6,895,781 $3,448 $21,658,170 -- $ 3,609,182 ----------- --------- ------ ----------- ------------- ----------- ----------- --------- ------ ----------- ------------- ----------- Balance as of December 31, 1994 $68,044 3,000,000 $1,500 -- $ (1,000) $ 67,544 Proceeds from common stock subscriptions 1,000 -- -- -- 1,000 -- Net income 913,977 -- -- -- -- $ 913,977 ----------- --------- ------ ----------- ------------- ----------- Balance as of June 30, 1995 $983,021 3,000,000 $1,500 -- $ -- $ 981,521 ----------- --------- ------ ----------- ------------- ----------- ----------- --------- ------ ----------- ------------- -----------
See accompanying notes to condensed consolidated financial statements. -5- NORLAND MEDICAL SYSTEMS, INC. Condensed Consolidated Statements of Cash Flows (Unaudited)
Six Months Ended --------------------------------- June 30, 1996 June 30, 1995 ------------- ------------- Cash flows from operating activities: Net income $ 1,441,313 $ 913,977 Adjustments to reconcile net income to net cash provided by operating activities: Provision for doubtful accounts -- 40,000 Amortization expense 116,200 -- Depreciation expense 10,612 -- Inventory obsolescence expense 30,000 -- Changes in: Accounts receivable (3,703,846) (15,077) Inventories (380,055) (221,723) Prepaid expenses and other current assets (138,680) (51,068) Accounts payable 217,280 (55,652) Accrued expenses (32,304) 127,142 Income taxes payable (1,181,792) 533,555 Customer deposits (28,424) (118,000) ----------- ---------- Total adjustments (5,091,009) 199,177 ----------- ---------- Net cash (used in) provided by operating activities (3,649,696) 1,153,154 ----------- ---------- Cash flows from investing activities: Payment for purchase of certain, intangible assets of Dove Medical Systems, net of cash acquired (3,432,937) Investment in Vitel, Inc. (250,000) Purchases of property and equipment (179,269) -- Product development loan to affiliate (27,387) -- ----------- ---------- Net cash used in investing activities (3,889,593) -- ----------- ---------- Cash flows from financing activities: Notes payable to stockholders -- (750,000) Cost and expenses of issuance of common stock (3,002) -- Cash paid for fractional shares (164) -- Proceeds from stock options exercised 288 -- Proceeds from common stock subscriptions -- 1,000 ----------- ---------- Net cash used in financing activities (2,878) (749,000) ----------- ---------- Net decrease in cash (7,542,167) 404,154 Cash at beginning of period 19,218,865 554,732 ----------- ---------- Cash at end of period $11,676,698 $ 958,886 ----------- ---------- ----------- ---------- Non-cash investing activities: On April 2, 1996, the Company acquired Dove Medical Systems, issuing 161,538 shares of Common Stock valued at $3,311,519.
See accompanying notes to condensed consolidated financial statements. -6- NORLAND MEDICAL SYSTEMS, INC. Notes to Condensed Consolidated Financial Statements (Unaudited) (1) BASIS OF PRESENTATION The condensed consolidated 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 footnote 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 figures in these statements have been restated to reflect the 3-for-2 stock split which was effective June 14, 1996. The condensed consolidated balance sheet as of June 30, 1996, the condensed consolidated statements of income for the three and six months ended June 30, 1996, and changes in stockholders' equity and cash flows for the six 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 and six months ended June 30, 1996 are not necessarily indicative of the results to be expected for the entire fiscal year ending December 31, 1996. (2) INVENTORIES As of June 30, 1996, inventories consist of the following: Demonstration systems, less accumulated amortization of $45,406 $592,341 Rental systems 417,955 Raw materials, product kits spare parts and sub-assemblies, less an obsolescence reserve of $30,000 231,162 Finished goods 86,664 Work in process 26,114 --------- $1,354,236 --------- --------- -7- Notes to Condensed Consolidated Financial Statements, continued: (2) INVENTORIES, continued: 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. The Company maintains an inventory of demonstration systems used for marketing and customer service purposes. 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. 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. (3) ACQUISITION OF DOVE MEDICAL SYSTEMS On April 2, 1996, the Company acquired Dove Medical Systems (Dove) in a transaction accounted for under the purchase method of accounting. The condensed consolidated financial statements reflect the issuance of 161,538 shares of Company Common Stock in exchange for all outstanding Dove shares. In addition, the statements reflect a payment by the Company of $3,600,000 in exchange for certain patent and other intangible assets owned by the Dove majority shareholder and other investors. The goodwill, patent and other intangible assets are amortized over their useful lives of 20, 10 and 20 years, respectively. (4) INVESTMENT IN VITEL, INC. On May 31, 1996, the Company entered into a distribution agreement with Vitel, Inc. of Dallas, Texas (Vitel), pursuant to which the Company has the worldwide rights to all products that may be developed by Vitel. The Company also made a $250,000 investment in Vitel which represents a minority interest that is accounted for according to the cost method. Vitel has not yet developed any products which are marketed. Vitel is currently developing bone diagnostic devices that use technology called Ultrasound Critical Angle Reflection under an exclusive license from the University of Texas Southwestern Medical Center of Dallas. (5) 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- Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Revenue for the three months ended June 30, 1996 increased $2,945,806 (73.6%) to $6,949,116 from $4,003,310 for the comparable period of 1995. Revenue for the six months ended June 30, 1996 increased $4,268,175 (54.0%) to $12,167,406 from $7,899,231 for the comparable period in 1995. The increases were largely a result of increased sales of pDEXA systems in the United States following its introduction in the fourth quarter of 1995, increased sales of the Company's other products and sales by Dove (which was acquired by the Company on April 2, 1996). Sales of pDEXA systems in Japan declined due in part to increased competition, reductions in reimbursement for certain densitometry sales in Japan and recent operational difficulties experienced in pDEXA units installed in Japan and the southeastern United States related to the effects of humidity on one component. The Company believes that these operational difficulties have been addressed. The Company anticipates that pDEXA sales in Japan will decline further in the third quarter. Sales in Japan and the United States represented 31.7% and 43.1%, respectively, of total revenue for the three months ended June 30, 1996 and 62.1% and 7.2%, respectively, of total revenue for the three months ended June 30, 1995. Sales in Japan and the United States represented 40.0% and 36.8%, respectively, of total revenue for the six months ended June 30, 1996 and 71.6% and 6.7%, respectively, of total revenue for the six months ended June 30, 1995. Sales of complete bone densitometry systems represented 94.1% and 96.0% of total revenue for the three months ended June 30, 1996 and 1995, respectively, and 93.6% and 94.6% of total revenues for the six months ended June 30, 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 63.0% and 68.7% for the three months ended June 30, 1996 and 1995, respectively, resulting in a gross margin of 37.0% for the three months ended June 30, 1996 compared to 31.3% for the comparable period of 1995. Cost of revenue as a percentage of revenue was 64.1% and 67.7% for the six months ended June 30, 1996 and 1995, respectively, resulting in a gross margin of 35.9% for the six months ended June 30, 1996 compared to 32.3% for the comparable period of 1995. The increases in gross margin are attributed primarily to second quarter sales of OsteoAnalyzer Systems manufactured by Dove, for which the Company receives the entire margin between the manufacturer's cost and the Company's sale price. A portion of such margin on the Company's other products is paid to the manufacturers. Sales and marketing expense increased $596,343 (207.9%) to $883,172 for the three months ended June 30, 1996 from $286,829 for the three months ended June 30, 1995, and increased as a percentage of revenue to 12.7% from 7.2%. Sales and marketing expense increased $837,138 (134.7%) to $1,458,520 for the six month period ended June 30, 1996 from $621,382 for the six months ended June 30, 1995, and increased as a percentage of revenue to 12.0% from 7.9%. The increases were primarily due to increased salaries and commissions related to increased sales staff and sales volume, increased expenses related to customer service, marketing expenses related to penetration of the United States market, and inclusion of the sales expenses of Dove for the second quarter of 1996. General and administrative expense increased $422,857 (247.0%) to $594,056 for the three months ended June 30, 1996 from $171,199 for the three months ended June 30, 1995 and increased as a percentage of revenue to 8.6% from 4.3%. General and administrative expense increased $503,120 (126.8%) to $899,772 for the six months period ended June 30,1996 from $396,652 for the six months ended June 30, 1995 and increased as a percentage of revenue to 7.4% from 5.0%. The increases were primarily due to increased expenses of new and existing personnel, legal, accounting and other expenses attributable to the Company being a public company, and the inclusion of Dove's operations for the second quarter of 1996. Other income in 1996 consisted primarily of interest earned on the proceeds of the Company's initial public offering and on other cash balances, reduced by other expenses consisting primarily of bank charges and other fees related to bank transfers. Other income in 1995 consisted primarily of interest earned on cash balances which was reduced by charges and other fees related to bank transfers. -9- The provision for taxes for the three months ended June 30, 1996 increased by $187,340 (57.6%) to $512,458 from $325,118 for the three months ended June 30, 1995. The provision for taxes for the six months ended June 30, 1996 increased by $360,753 (57.7%) to $985,458 from $624,705 for the six months ended June 30, 1996. The Company has provided for income taxes at its current effective tax rate of 40.6% for both the three months and six months ended June 30, 1996 and 1995. The increases were entirely due to the relative increase in income before taxes. The Company had net income of $750,057 for the three months ended June 30, 1996 compared to net income of $475,666 for the three months ended June 30, 1995, an increase of $274,391 (57.7%). The Company had net income of $1,441,313 for the six months ended June 30, 1996 compared to net income of $913,977 for the six months ended June 30, 1995, an increase of $527,336 (57.7%). The increases were due primarily to increased sales and interest earned on cash balances. LIQUIDITY AND CAPITAL RESOURCES Cash decreased $7,542,167 to $11,676,698 in the six months ended June 30, 1996. The decrease in cash was primarily the result of the Company acquiring Dove and certain intangible assets used by Dove in exchange for shares of Company Common Stock and $3.6 million in cash, accounts receivable increasing $3.8 million and the payment of $1.9 million in corporate income taxes. The Company's accounts receivable increased 80.0% to $8,554,926 at June 30, 1996 from $4,751,773 at December 31, 1995. The increase in accounts receivable reflects both higher sales volume and less prompt payments by the Company's customers. At June 30, 1996, the largest balance, 41.6% of total outstanding trade receivables, was owed by Nissho Iwai, the Company's distributor in Japan. At December 31, 1995, the Company employed no fixed assets other than leased computers and office furniture. Property and equipment as of June 30, 1996 consisted of computer and telephone equipment and a management information system that were obtained during 1996. Other capital expenditures in 1996 are expected to include continued improvements to leased facilities and information systems. The Company may also 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 under its Product Development Loan Agreement with Norland Corporation and Stratec Medizintechnik GmbH. In June of 1996, the Company filed a registration statement with the Securities and Exchange Commission with respect to the offering of 2,250,000 shares of the Company's Common Stock. As a result of the general stock market decline and the decline in the price of the Company's Common Stock since June, the Company determined that it was not in the Company's best interests to proceed with the offering and requested that the registration statement be withdrawn. The Company will recognize expenses incurred with respect to this offering in the third quarter of 1996. 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- 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 (a) The Annual Meeting of Stockholders of Norland Medical Systems, Inc. was held on May 30, 1996. (b) The following persons were elected as directors of the Company at the Annual Meeting: Reynald G. Bonmati, James J. Baker, Michael W. Huber, Robert L. Piccioni and Albert S. Waxman. (c) The following matters were voted on at the Annual Meeting: (1) The proposal to elect the five persons named in Item 4(b) as directors of the Company for the ensuing year was approved as follows: 4,000,082 shares in favor of each candidate, 1,300 shares withheld for each candidate and no broker non- votes. (2) The proposal to approve and adopt the Company's Amended and Restated 1994 Stock Option and Incentive Plan was approved as follows: 3,023,156 shares for, 541,063 shares against, 2,742 shares abstaining and 434,421 shares broker non-votes. (3) The proposal to ratify the selection of Coopers & Lybrand L.L.P. as the Company's independent auditors for 1996 was approved as follows: 4,001,182 shares for, 100 shares against, 100 shares abstaining and no broker non-votes. Item 5. OTHER INFORMATION None Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Furnished: 10.4 Distributorship Agreement between the Company, Nissho Iwai Corporation and Nissho Iwai American Corporation 11 Statement Regarding Computation of Earnings Per Share -11- (b) Reports on Form 8-K: On April 16 and June 6, 1996, the Company filed reports on Forms 8-K and 8- K/A, respectively, relating to the acquisition of Dove Medical Systems. The Form 8-K/A contained the following financial statements: audited financial statements of Dove Medical Systems for the years ended December 31, 1995 and 1994; unaudited financial statements of Dove Medical Systems for the three months ended March 31, 1996 and 1995; and unaudited pro forma combined condensed financial statements giving effect to the acquisition of Dove Medical Systems by the Company. -12- 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: August 13, 1996 Ralph G. Theodore Vice President, Operations /s/ Kurt W. Streams ------------------------------ Date: August 13, 1996 Kurt W. Streams Vice President, Finance (Principal Financial and Accounting Officer) -13- Exhibit Index Number Description - ------ ----------- 10.4 Distributorship Agreement 11 Statement Regarding Computation of Earnings Per Share 27 Financial Data Schedule -14- EX-10.4 2 EXHIBIT 10.4 Exhibit 10.4 DISTRIBUTORSHIP AGREEMENT BETWEEN NORLAND MEDICAL SYSTEMS, INC. AND NISSHO IWAI CORPORATION AND NISSHO IWAI AMERICAN CORPORATION DISTRIBUTORSHIP AGREEMENT THIS AGREEMENT (the "Agreement") is entered into as of July 1, 1996 among NORLAND MEDICAL SYSTEMS, INC., a Delaware corporation having its principal place of business at 106 Corporate Park Drive, Suite 106, White Plains, New York 10604 ("COMPANY"), NISSHO IWAI CORPORATION, a Japanese corporation having its principal place of business at 4-5, Akasaka 2-chome, Minato-ku, Tokyo 107, Japan ("DISTRIBUTOR"), and NISSHO IWAI AMERICAN CORPORATION, a New York corporation having an office at 44 Montgomery Street, Suite 2150, San Francisco, California 94104 ("NIAC"). WHEREAS, Norland Corporation and Stratec Medizintechnik GmbH (collectively, the "Manufacturers"), and COMPANY, formerly Ostech, Inc., entered into a Distribution Agreement, dated April 1, 1995, as amended (the "Manufacturers' Agreement") for the distribution of Products; WHEREAS, COMPANY, DISTRIBUTOR and NIAC wish to enter into a distributorship agreement which will supersede the previous agreement for the distribution of the Products. In consideration of the mutual covenants set forth herein, the parties hereto agree as follows: ARTICLE 1. DISTRIBUTORSHIP 1.01 COMPANY hereby appoints DISTRIBUTOR as its sole and exclusive distributor of the products designated in EXHIBIT A attached hereto (the "Products") in the territory specified in EXHIBIT B attached hereto (the "Territory"). COMPANY represents and warrants that it has the right to grant DISTRIBUTOR and NIAC the rights granted hereunder to them. 1.02 COMPANY shall not (and COMPANY shall cause manufacturers to not) directly or indirectly offer, sell or export Products to customers in the Territory through channels other than DISTRIBUTOR and shall (and COMPANY shall cause manufacturers to) refer to DISTRIBUTOR all inquiries or orders for Products which COMPANY or manufacturers may receive from any person or firm in or for shipment into the Territory during the term of this Agreement. 1.03 DISTRIBUTOR agrees not to directly or indirectly resell COMPANY's Products outside the Territory without the explicit written consent of COMPANY. 1.04 COMPANY shall not (and COMPANY shall cause manufacturers to not) sell or gant any license to use its patents, trademarks, copyrights, or other industrial property rights concerning the manufacture or sale of the Products or their components to any third party in the Territory. 1.05 During the term of this Agreement, DISTRIBUTOR and Subdistributor shall not directly or indirectly sell or otherwise deal with any product competitive with Products in the Territory. 1.06 DISTRIBUTOR is hereby granted the right to appoint subdistributors within the Territory pursuant to terms determined by DISTRIBUTOR, subject to COMPANY's approval, which shall not be unreasonably withheld; COMPANY hereby confirms its approval of Nishimoto Sangyo Co., Ltd. as a subdistributor in the Territory (collectively "Subdistributor"). 1.07 Upon the request of DISTRIBUTOR, COMPANY shall provide to DISTRIBUTOR, free of charge, a reasonable number of catalogs, brochures and other promotional materials which may be useful to promote the sale of the Products. ARTICLE 2. GOVERNMENT LICENSES DISTRIBUTOR shall pay for and make its reasonable efforts to obtain in its name all import licenses and product approvals (the "Government Licenses") required for the importation, sale and distribution of Products which have reasonable prospects for sale in the Territory. COMPANY shall furnish DISTRIBUTOR with a sufficient number of demonstration models of each Product for which an application for Government License(s) is made hereunder ("Sample Units") at a mutually agreed discount price. COMPANY shall furnish DISTRIBUTOR at no charge with clinical test data, technical specifications of new Products and other information which DISTRIBUTOR reasonably requires for the applications for obtaining Government Licenses. ARTICLE 3. INDIVIDUAL CONTRACT Each individual contract under this Agreement shall be subject to this Agreement, and in the event that any term in an individual contract is inconsistent with the terms of this Agreement, the terms of this Agreement shall prevail. ARTICLE 4. PRICE 4.01 The prices for the Products shall be set forth in EXHIBIT A attached hereto. -2- 4.02 All prices are F.O.B., place of manufacture in Germany or the United States, as the case may be. All sales, excise or other taxes or duties imposed in the Territory in connection with the sale of the Products, shall be borne by DISTRIBUTOR. ARTICLE 5. NIAC AS DISTRIBUTOR'S AGENT The parties hereto agree that NIAC, DISTRIBUTOR's wholly-owned subsidiary, shall act as DISTRIBUTOR's agent on behalf of DISTRIBUTOR: (a) to submit the purchase orders of the Products in NIAC's form to COMPANY and receive their confirmation from COMPANY; (b) to take delivery of the Products from COMPANY pursuant to each individual contract; (c) to pay for the Products to COMPANY pursuant to each individual contract; and (d) to communicate with COMPANY in connection with the performance of this Agreement and individual contracts related thereto, except technical matters of the Products which shall be directly communicated between COMPANY and DISTRIBUTOR with a copy to NIAC. ARTICLE 6. INSPECTION 6.01 DISTRIBUTOR or its subdistributor shall inspect and/or test the Products as to quality and conformity with the Specifications within ten (10) days after delivery to the warehouse of DISTRIBUTOR ("Inspection"). The Inspection period may be extended by mutual agreement. 6.02 In the event of any shortage, damage or other non-conformity of the Products, DISTRIBUTOR may reject such Products and COMPANY shall, at its own cost and risk, replace the defective Products with conforming Products or, in the case of shortage, replenish the shortage. ARTICLE 7. PAYMENT All payments by DISTRIBUTOR for the Products shall be made in cash in U.S. dollars by NIAC within net thirty (30) business days from date of the bill of lading for the Products, subject to the Products passing the Inspection. Neither payment nor inspection shall be deemed a waiver of DISTRIBUTOR's warranty or other rights hereunder. -3- ARTICLE 8. ORDERS/DELIVERY 8.01 NIAC shall place with COMPANY purchase orders for Products on behalf of DISTRIBUTOR. 8.02 Delivery date of the Products shall be negotiated and agreed upon between the parties for each individual purchase order. COMPANY reserves the right to refuse an order which has a delivery date which is less than 90 days from the date of the purchase order, PROVIDED however, that COMPANY shall deliver spare parts as soon as possible when requested by DISTRIBUTOR. 8.03 COMPANY shall pack the Products to withstand international transportation, exposure and handling. ARTICLE 9. TITLE AND RISK OF LOSS Title and risk of loss to the Products purchased by DISTRIBUTOR shall pass to DISTRIBUTOR when such Products leave the Manufacturers' facility. ARTICLE 10. REPRESENTATION DISTRIBUTOR shall exert its reasonable best efforts to promote and sell the Products within the Territory and shall establish sufficient and qualified sales and service networks in the Territory. ARTICLE 11. PURCHASE TARGETS 11.01 The parties agree that the following is their target for existing Products: Purchase Targets Time Period For All Products ----------- ----------------- 5/1/96 - 3/31/97 $3,000,000 4/1/97 - 3/31/98 $3,300,000 4/1/98 - 3/31/99 $3,650,000 4/1/99 - 3/31/00 $4,000,000 4/1/00 - 3/31/01 $4,400,000 4/1/01 - 3/31/02 $4,900,000 -4- 11.02 IF DISTRIBUTOR DOES NOT PURCHASE THE FOREGOING AMOUNT(S), DISTRIBUTOR SHALL NOT BE PENALIZED IN ANY MANNER AND COMPANY SHALL NOT BE ENTITLED TO TERMINATE THIS AGREEMENT OR MAKE ANY CLAIM AGAINST DISTRIBUTOR OR NIAC FOR ANY LOSS, DAMAGES, LIABILITY, COSTS OR EXPENSES SUFFERED OR INCURRED BY THE COMPANY ARISING THEREFROM OF OR IN CONNECTION THEREWITH. ARTICLE 12. REPORTS DISTRIBUTOR shall provide COMPANY with such information on sales of the Products in Territory and its marketing efforts as COMPANY may from time to time reasonably require, including but not limited to, customer names, mailing address, installation and service reports, and quarterly sales reports. ARTICLE 13. WARRANTY 13.01 COMPANY warrants that the Products shall be free from defects in material, design and workmanship and that the Products shall meet the specifications. COMPANY shall warrant the Products for twelve (12) months after the date of their shipment by DISTRIBUTOR to the customer, but in no event shall the warranty period continue after fourteen (14) months from the date of shipment from Manufacturer's facility; PROVIDED, FURTHER, that if COMPANY or the Manufacturers grant to any purchaser or user of a Product any warranty which extends beyond the warranty contained in this Section 13.01 (other than extended warranties sold by COMPANY for additional compensation), DISTRIBUTOR shall also receive the benefits of such extended warranty. 13.02 EXCEPT AS SPECIFICALLY PROVIDED HEREIN, THERE ARE NO OTHER WARRANTIES, EXPRESSED OR IMPLIED, INCLUDING, BUT NOT LIMITED TO ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. DEFECTIVE OR DAMAGED PRODUCTS SHALL BE REPAIRED OR REPLACED AT THE EXPENSE OF COMPANY. COMPANY SHALL BEAR ANY TRANSPORTATION AND HANDLING COSTS RELATING TO THE DEFECTIVE OR DAMAGED PRODUCTS AND THEIR REPLACEMENTS. IN NO EVENT SHALL COMPANY BE LIABLE FOR LOSS OF PROFITS, INDIRECT, SPECIAL, OR CONSEQUENTIAL DAMAGES ARISING OUT OF THE USE OF ITS PRODUCTS. SOFTWARE AND HARDWARE DESIGNATED FOR USE WITH A PRODUCT IS WARRANTED TO EXECUTE THE PROGRAM INSTRUCTIONS WHEN INSTALLED IN THE PRODUCT. COMPANY DOES NOT WARRANT THAT THE OPERATION OF THE SOFTWARE OR THE HARDWARE WILL BE UNINTERRUPTED OR ERROR FREE. -5- 13.03 The provisions of this Article 13 shall in no way limit theindemnification obligations of COMPANY under Section 14.01 hereof. ARTICLE 14. PRODUCT LIABILITY INDEMNITY; INSURANCE 14.01 COMPANY shall indemnity and hold DISTRIBUTOR, NIAC and Subdistributor harmless from and against any and all damages, losses, liabilities, costs and expenses, including reasonable attorneys' fees, arising from any claim of a third party resulting from or in connection with any breach of warranty or representation or any defect in materials, design or manufacture or any Product; PROVIDED HOWEVER, that COMPANY shall not be responsible for any such damage, loss, liability or expense resulting from the gross negligence or willful misconduct of DISTRIBUTOR, NIAC or Subdistributor. COMPANY's obligations hereunder shall survive the expiration or termination of this Agreement. 14.02 COMPANY shall arrange that the insurance provided by each Manufacturer shall also cover DISTRIBUTOR and NIAC and Subdistributor as additional named insureds (with no liability for premium payments). Upon request from DISTRIBUTOR and NIAC, COMPANY shall use its best efforts to cause each Manufacturer to promptly submit certificates of insurance to DISTRIBUTOR and NIAC evidencing such coverage, and to have such insurance policies provide that they may not be cancelled or materially changed except on at least 30 days' prior written notice to DISTRIBUTOR and NIAC. ARTICLE 15. INTELLECTUAL PROPERTY INDEMNITY COMPANY agrees to indemnify and hold DISTRIBUTOR, NIAC, and Subdistributor harmless from and against any and all damages, losses, liabilities, costs and expenses, including reasonable attorney's fees arising from any claim of a third party of infringement of patent, know-how, trademark, copyright or intellectual property right, in the use or sale of Products in the Territory. In case any Product or component thereof is held by a court to constitute an infringement of a patent, know-how, trademark, copyright or intellectual property right, COMPANY shall at its own cost either procure for DISTRIBUTOR or its subdistributors or customers the right to continue using such Product, or replace the same with a comparable non-infringing product, or modify Product so that it becomes non- infringing, or accept the return of such Products and refund the purchase price plus transportation and handling costs and duties paid thereon. DISTRIBUTOR shall assist COMPANY to the extent reasonably required for such defense at no expense to COMPANY. -6- ARTICLE 16. TRADEMARK 16.01 DISTRIBUTOR may use COMPANY's trademarks only in connection with the distribution of Products in Territory under this Agreement. 16.02 As soon as practicable after execution of this Agreement, COMPANY shall apply at its expense for the registration of its trademark under the trademark laws in the Territory. DISTRIBUTOR will not contest the validity of such trademarks of COMPANY duly registered in the Territory. ARTICLE 17. INSTALLATION AND OTHER SERVICE 17.01 DISTRIBUTOR shall install and provide maintenance service excluding warranty service for all Products sold by it to its customers in the Territory. Such maintenance service shall be performed in a competent and workmanlike manner, consistent with industry standards, and in accordance with COMPANY's Service Manual. 17.02 After termination of this Agreement, the maintenance service for Products sold by DISTRIBUTOR under this Agreement shall be rendered by the New Distributor (as defined in Section 22.01) 17.03 DISTRIBUTOR shall maintain an inventory of parts of Products. COMPANY guarantees that it will supply DISTRIBUTOR or the New Distributor with parts of Products for a minimum period of seven (7) years after the last shipment of Products. ARTICLE 18. TECHNICAL ADVICE AND TRAINING COMPANY shall provide, or cause Manufacturers to provide, DISTRIBUTOR at no cost with such technical advice, information and support as may be necessary for a full understanding and maintenance of Products, and DISTRIBUTOR shall have the right from time to time, at times agreed with COMPANY to send up to four (4) employees to Manufacturers' manufacturing facility for instruction and training free of charge two (2) times per year. DISTRIBUTOR shall pay travel, lodging and personal expenses incurred by its employees so dispatched. ARTICLE 19. CONFIDENTIALITY Each party agrees, during the term of this Agreement and for five (5) years after its termination, not to divulge to any third party any trade or business secrets -7- confidentially disclosed to it by the other party, except that either party may disclose such information to a subsidiary or affiliate as necessary for performance under this Agreement, and also except that DISTRIBUTOR and NIAC may disclose such information as is normally disclosed in the sale of Products to Subdistributors or customers in its marketing efforts, PROVIDED such Subdistributors or customers are bound by same. ARTICLE 20. TERM Unless this Agreement is earlier terminated in accordance with the provisions of Article 21, the initial term of this Agreement shall commence upon execution hereof and continue until March 31, 2002 and shall thereafter be automatically renewed for successive terms of five (5) years each, unless not less than one hundred and eighty (180) days prior to the expiration of the then current term either party gives the other party written notice terminating this Agreement upon the expiration of the then current term. ARTICLE 21. TERMINATION 21.01 Either party may forthwith terminate this Agreement by giving a written notice to the other party, if a petition is filed for: (a) Bankruptcy or insolvency of the other party; (b) Voluntary or involuntary liquidation of the other party (except for liquidation following a transfer of all or substantially all of the assets of the other party); or (c) Voluntary or involuntary reorganization of the other party. 21.02 If either party defaults in any material respect in performing any of the material provisions of this Agreement and does not cure such default within ninety (90) days after receipt of the notice given by the other party requesting such defaulting party to cure the default, the other party may terminate this Agreement at any time after the said period by giving a written notice to the defaulting party. 21.03 The parties expressly agree that any change in shareholders or management of either party, or a transfer of all or substantially all of the assets of either party, shall not constitute a cause of termination by any of the parties hereto. -8- ARTICLE 22. EFFECT OF TERMINATION 22.01 In the event that this Agreement is terminated for whatever reason, COMPANY shall (i) without delay appoint a new distributor of its Products in the Territory ("New Distributor") whose responsibility shall include providing maintenance service for Products sold by DISTRIBUTOR under this Agreement and (ii) cause the New Distributor to purchase any and all Products and spare parts then in DISTRIBUTOR's inventory at the original purchase price plus DISTRIBUTOR's cost of delivery and duties. In such case and subject to the reimbursement by COMPANY of documented costs and expenses (including, but not limited to, the cost of Sample Units, clinical tests, reports, applications, etc.) which have been incurred by DISTRIBUTOR (and which are not otherwise fully recouped by DISTRIBUTOR through respective sales of the respective Products) in connection with the application for the Government Licenses and which shall be mutually agreed, DISTRIBUTOR shall immediately take all steps necessary to transfer the Government Licenses to COMPANY or the New Distributor, PROVIDED that such reimbursement amount as to Products which as of the date hereof have already received Government Licenses shall not exceed One Hundred Thousand Dollars ($100,000) in the aggregate. 22.02 Termination of this Agreement for whatever reason shall not affect any rights or obligations of either party which have accrued before the effective date of termination, including but not limited to, the rights and obligations of each party under Articles 14 and 15 herein. 22.03 Upon termination of this Agreement, DISTRIBUTOR shall immediately cease to describe itself as a distributor of COMPANY's products. ARTICLE 23. FORCE MAJEURE No party shall be liable for any failure or delay in performing its obligations hereunder which is caused by fire, strike, war, governmental regulations or other causes beyond the reasonable control of such party, provided that such party shall take diligent action to perform its obligation as promptly as possible. ARTICLE 24. RELATIONSHIP The relationship between COMPANY and DISTRIBUTOR shall be that of seller and buyer, and neither party shall have the authority to obligate the other party to third parties. -9- ARTICLE 25. ASSIGNMENT This Agreement may not be assigned by either party, in whole or in part, without the prior written approval of the other party, except that DISTRIBUTOR may assign it to a subsidiary or an affiliate of such party, provided that DISTRIBUTOR shall remain fully liable hereunder. ARTICLE 26. ENTIRE AGREEMENT This Agreement constitutes the entire agreement among the parties hereto and supersedes all negotiations, agreements and commitments in respect thereto including the 1993 Agreement, and shall not be released, discharged, or modified in any manner except by written instruments signed by duly authorized representatives of each of the parties hereto. ARTICLE 27. GOVERNING LAW This Agreement shall be governed by and interpreted in accordance with the laws of New York, U.S.A. ARTICLE 28. ARBITRATION All disputes, controversies or differences between the parties which may arise from, or relate to, this Agreement or a breach thereof, shall be finally settled by arbitration held in Borough of Manhattan, New York City, New York, U.S.A., according to the rules of the American Arbitration Association. The decision rendered by arbitrator(s) shall be final and binding on all the parties hereto. The prevailing party shall be entitled to reimbursement by the other party of all of its costs incurred in connection with such arbitration, including, but not limited to, attorney fees and expenses. ARTICLE 29. LANGUAGE This Agreement is in English only, and no translation into other languages shall be taken into consideration in the interpretation of the Agreement. -10- ARTICLE 30. NOTICE All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given when mailed by registered or certified airmail, postage prepaid, delivered personally (against receipt), delivered by reputable international express air courier, or sent by facsimile, provided a copy thereof is sent by any of the other modes above within 24 hours of such facsimile transmission: (a) If to COMPANY, to: Norland Medical Systems, Inc. 106 Corporate Park Drive, Suite 106 White Plains, New York 10604 Fax: (914) 636-3549 Attention: President (b) If to DISTRIBUTOR, to: Nissho Iwai Corporation 4-5 Akasaka 2-chome, Minato-ku, Tokyo 107 Japan Fax: (81) -3-3588-3975 Attention: General Manager, Medical & Electronic Systems Dept. with a copy to: Nissho Iwai American Corporation 44 Montgomery Street, Suite 2150 San Francisco, California 94104-4375 Fax: (415) 788-6959 Attention: General Manager, Machinery Dept. and Nissho Iwai American Corporation 1211 Avenue of the Americas New York, New York 10036 Fax: (212) 840-2317 Attention: General Manager, Legal Dept. -11- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized representatives on the date and year first above-written. NORLAND MEDICAL SYSTEMS, INC. NISSHO IWAI CORPORATION By: /s/ Reynald G. Bonmati By: /s/ Ryuichi Kumagai ------------------------- ---------------------- Name: Reynald G. Bonmati Name: Ryuichi Kumagai Title: President Title: General Manager Medical & Electronic Systems Dept. NISSHO IWAI AMERICAN CORPORATION By: /s/ Saintaro Mirata ---------------------- Name: Saintaro Mirata Title: Sup. & GM -12- EXHIBIT A PRODUCTS: The Products covered by this Agreement are (i) any and all existing and future bone measuring equipment including bone densitometers manufactured by COMPANY and/or Manufacturers and/or their present and future subsidiaries and distributed by COMPANY and/or its subsidiaries (including, but not limited to, the XCT-960, XCT-960A, XCT-960M, pDEXA, XCT-3000, XR-36 and XR-26S (Eclipse)), (ii) all components, accessories and options related thereto, PROVIDED that if COMPANY acquires another company or business which manufactures bone measuring equipment (including bone densitometers) and which, at the time of such acquisition, has a distribution agreement in place for the Territory with someone other than DISTRIBUTOR, then such equipment shall not be covered by this Agreement until such other distribution agreement is terminated, at which point COMPANY and DISTRIBUTOR shall negotiate in good faith and shall mutually agree on the terms of such distribution. The parties may mutually agree to make reasonable substitution regarding accessories and options related to the above Products lines due to availability. COMPANY shall notify DISTRIBUTOR sufficiently in advance of any planned or proposed modification in the design or specifications or any planned or proposed new Products. PRICES: Prices for the following Products during the period ending March 31, 1997 (the "Initial Period") shall be agreed upon by COMPANY and DISTRIBUTOR prior to the effective date of this Agreement: XCT-960 Standard XCT-960 with the latest version of software available at time of each shipment with 486 computer, color monitor, deskjet printer, CPU table, one operation guide and one set of instruction manual. XCT-960A (animal use) Standard XCT-960A with the latest version of software available at time of each shipment with 486 computer, color monitor, deskjet printer, CPU table, sample holder and tubes, one operation guide and one set of instruction manual. XCT-960M (animal use) Standard XCT-960A with the latest version of software available at time of each shipment with 486 computer, color monitor, deskjet printer, CPU table, sample holder and tubes, one operation guide and one set of instruction manual. pDEXA Standard pDEXA with the latest version of software available at time of each shipment with 486 computer, color monitor, deskjet printer, CPU table, one operation guide and one set of instruction manual. -13- XCT-3000 XR-36 XR-26S (Eclipse) For prices of the Products for the period beyond the Initial Period, during the period of October 1 - November 15 of each year commencing in 1996, DISTRIBUTOR and COMPANY shall negotiate in good faith and agree in good faith on prices for the Products for the immediately following year (April 1 - March 31), based on the past practice of the parties and trends in the industry. The prices of the Products not specifically identified above shall be agreed upon in good faith by DISTRIBUTOR and COMPANY on an annual basis as provided above. -14- EXHIBIT B EXCLUSIVE TERRITORY: The country of JAPAN In addition to the Exclusive Territory above, DISTRIBUTOR shall have the right to enter into negotiations with the COMPANY in order to become a distributor in such countries where COMPANY has not already appointed an exclusive distributor. Such arrangements shall be mutually agreed. -15- EX-11 3 EXHIBIT 11 NORLAND MEDICAL SYSTEMS, INC. Exhibit 11 Statement Regarding Computation of Primary Earnings Per Share (Unaudited) Three Months Ended ------------------------------ June 30, 1996 June 30, 1995 ------------------------------- Primary and Fully-Diluted Basis: Net income $ 750,057 $ 475,666 Weighted average shares outstanding 6,838,320 3,000,000 Stock options 399,887 1,002,000 Weighted average number of common and common equivalent shares outstanding 7,263,912 4,002,000 Earnings per share $0.10 $0.12 Six Months Ended ------------------------------ June 30, 1996 June 30, 1995 ------------------------------ Net income $ 1,441,313 $ 913,977 Weighted average shares outstanding 6,582,532 3,000,000 Stock options 574,764 1,002,000 Weighted average number of common and common equivalent shares outstanding 7,157,296 4,002,000 Earnings per share $0.20 $0.23 EX-27 4 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-1996 JUN-30-1996 11,676,698 0 8,287,971 150,000 1,354,236 21,810,794 204,075 26,382 28,902,312 3,631,512 0 0 0 3,448 25,267,352 28,902,312 6,538,803 6,949,116 4,380,130 4,380,130 1,477,228 0 0 1,262,515 512,458 750,057 0 0 0 750,057 0.10 0.10
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