**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**WASHINGTON, D.C. 20549**

 

**FORM 10-QSB**

 
| **ý** |   | **QUARTERLY REPORT UNDER  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|------------|--------|---------------------------------------------------------------------------------------------|

 

**For the quarterly period ended****                            December 31,2003**

 
| **o** |   | **TRANSITION REPORT PURSUANT TO  SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934** |
|-------|--------|----------------------------------------------------------------------------------------------------|

 

**For the transition periodfrom                      to                      **

 
| **Commission File Number:** |   | **0-19632** |
|-----------------------------|--------|-------------|

 

**4-D NEUROIMAGING**

(Exact name of small businessissuer as specified in its charter)

 

| **California**                                                                      |   | **95-2647755**                        |
|-------------------------------------------------------------------------------------|--------|---------------------------------------|
| (State or  other jurisdiction of incorporation or organization)                     |   | (I.R.S.  Employer Identification No.) |
|                                                                                |   |                                  |
| **9727 Pacific Heights Boulevard, San Diego,  California**                          |   | **92121-3719**                        |
| (Address of  principal executive offices)                                           |   | (zip code)                            |
|                                                                                |   |                                  |
| **(858) 453-6300**                                                                  |
| (Registrant’s  telephone number, including area code)                          |
|                                                                                |   |                                  |
|                                                                                |
| (Former  name, former address and formal fiscal year, if changed since last report) |

 

APPLICABLE ONLY TO CORPORATEISSUERS:

 

Number of shares of issuer’s Common Stock outstanding, no par value, asof February 7, 2004 was 221,859,748 shares.

 
| Transitional Small Business Disclosure Format. |   | o Yes |   | ý No |
|------------------------------------------------|--------|-------|--------|-----------|

 

 

----

 

**PARTI       FINANCIAL INFORMATION**

 

## **ITEM1.        FINANCIAL STATEMENTS**

## ** **

**4-D NEUROIMAGINGCONSOLIDATED BALANCE SHEETS(in thousands, except share data)(unaudited)**

 
|                                                                                                                                                                  |   | **December 31,  2003** |   | **September 30,  2003** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-----------------------------|--------|------------------------------|--------|
|                                                                                                                                                                  |   |                        |   |                         |   |
| **ASSETS**                                                                                                                                                            |   |                        |   |                         |   |
| Cash and  cash equivalents                                                                                                                                            |   | $                           | 233    |                         | $      | 681 |   |
| Accounts  receivable, less allowance for doubtful accounts of $286 and $284 0at  December 31, 2003 and September 30, 2003, respectively                     |   | 322                         |   | 422                          |   |
| Inventories                                                                                                                                                           |   | 3,499                       |   | 2,936                        |   |
| Prepaid  expenses and other current assets                                                                                                                            |   | 157                         |   | 508                          |   |
| Total  current assets                                                                                                                                                 |   | 4,211                       |   | 4,547                        |   |
|                                                                                                                                                                  |   |                        |   |                         |   |
| Property and  equipment, net                                                                                                                                          |   | 144                         |   | 156                          |   |
| Other assets                                                                                                                                                          |   | 57                          |   | 57                           |   |
| Total assets                                                                                                                                                          |   | $                           | 4,412  |                         | $      | 4,760 |   |
|                                                                                                                                                                  |   |                        |   |                         |   |
| **LIABILITIES AND SHAREHOLDERS’ DEFICIT**                                                                                                                        |   |                        |   |                         |   |
| Notes  payable                                                                                                                                                        |   | $                           | 1,000  |                         | $      | 1,000 |   |
| Accounts  payable                                                                                                                                                     |   | 1,987                       |   | 1,780                        |   |
| Accrued  liabilities                                                                                                                                                  |   | 584                         |   | 997                          |   |
| Accrued  salaries and employee benefits                                                                                                                               |   | 330                         |   | 375                          |   |
| Customer  deposits                                                                                                                                                    |   | 2,487                       |   | 1,641                        |   |
| Deferred  revenues                                                                                                                                                    |   | 207                         |   | 151                          |   |
| Current  portion of royalty obligation                                                                                                                                |   | 312                         |   | 312                          |   |
| Current  portion of capital lease obligations                                                                                                                         |   | 4                           |   | 8                            |   |
| Total  current liabilities                                                                                                                                            |   | 6,911                       |   | 6,264                        |   |
|                                                                                                                                                                  |   |                        |   |                         |   |
| Royalty  obligation, net of current portion                                                                                                                           |   | 1,153                       |   | 1,128                        |   |
| Customer  deposits                                                                                                                                                    |   | 1,108                       |   | 1,108                        |   |
| Deferred  revenues                                                                                                                                                    |   | 453                         |   | 180                          |   |
| Total  liabilities                                                                                                                                                    |   | 9,625                       |   | 8,680                        |   |
|                                                                                                                                                                  |   |                        |   |                         |   |
| **COMMITMENTS AND CONTINGENCIES**                                                                                                                                     |   |                        |   |                         |   |
|                                                                                                                                                                  |   |                        |   |                         |   |
| **SHAREHOLDERS’ DEFICIT**                                                                                                                                        |   |                        |   |                         |   |
| Common stock  — no par value; 500,000,000 shares authorized; 221,859,748 shares issued and  outstanding as of December 31, 2003 and September 30, 2003 |   | 117,762                     |   | 117,762                      |   |
| Additional  paid-in capital                                                                                                                                           |   | 3,007                       |   | 3,007                        |   |
| Accumulated  deficit                                                                                                                                                  |   | (125,982                    | )      | (124,689                     | )      |
| Total  shareholders’ deficit                                                                                                                                     |   | (5,213                      | )      | (3,920                       | )      |
| Total  liabilities & shareholders’ deficit                                                                                                                   |   | $                           | 4,412  |                         | $      | 4,760 |   |

 

**See notes to consolidated financialstatements**

 

2

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**4-DNEUROIMAGINGCONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per-share amounts)(unaudited)**

 
|                                                                    |   | **Three Months Ended  December 31,** |   |
|-------------------------------------------------------------------------|--------|-------------------------------------------|--------|
|                                                                    |   | **2003**                                  |   | **2002** |   |
| **REVENUES**                                                            |   |                                      |   |   |   |
| Product  sales                                                          |   | $                                         | 172    |   | $ | 476 |   |
| Product  services                                                       |   | 214                                       |   | 228 |   |
|                                                                    |   | 386                                       |   | 704 |   |
|                                                                    |   |                                      |   |   |   |
| **COST OF REVENUES**                                                    |   |                                      |   |   |   |
| Product                                                                 |   | 202                                       |   | 553 |   |
| Product  services                                                       |   | 183                                       |   | 134 |   |
|                                                                    |   | 385                                       |   | 687 |   |
|                                                                    |   |                                      |   |   |   |
| **GROSS MARGIN**                                                        |   | 1                                         |   | 17 |   |
|                                                                    |   |                                      |   |   |   |
| **OPERATING EXPENSES**                                                  |   |                                      |   |   |   |
| Research and  development                                               |   | 228                                       |   | 207 |   |
| Marketing  and sales                                                    |   | 516                                       |   | 287 |   |
| General and  administrative                                             |   | 576                                       |   | 373 |   |
|                                                                    |   | 1,320                                     |   | 867 |   |
|                                                                    |   |                                      |   |   |   |
| **OPERATING LOSS**                                                      |   | (1,319                                    | )      | (850 | ) |
|                                                                    |   |                                      |   |   |   |
| Interest  expense                                                       |   | (57                                       | )      | (34 | ) |
| Other  income, net                                                      |   | 84                                        |   | 170 |   |
|                                                                    |   |                                      |   |   |   |
| **LOSS BEFORE PROVISION FOR INCOME TAXES AND  DISCONTINUED OPERATIONS** |   | (1,292                                    | )      | (714 | ) |
| Provision  for income taxes                                             |   | 1                                         |   | 1 |   |
|                                                                    |   |                                      |   |   |   |
| **NET LOSS FROM OPERATIONS**                                            |   | (1,293                                    | )      | (715 | ) |
|                                                                    |   |                                      |   |   |   |
| **DISCONTINUED OPERATONS**                                              |   |                                      |   |   |   |
| Income from  discontinued operations                                    |   | —                                    |   | 1,391 |   |
|                                                                    |   |                                      |   |   |   |
| **NET INCOME (LOSS)**                                                   |   | $                                         | (1,293 | ) | $ | 676 |   |
|                                                                    |   |                                      |   |   |   |
| **BASIC AND DILUTED NET EARNINGS (LOSS) PER  SHARE**                    |   |                                      |   |   |   |
| Loss from  operations                                                   |   | $                                         | (0.006 | ) | $ | (0.004 | ) |
| Earnings  from discontinued operations                                  |   | —                                    |   | 0.008 |   |
| Earnings  (loss) per share                                              |   | $                                         | (0.006 | ) | $ | 0.004 |   |
| Weighted  average number of common shares outstanding                   |   | 221,860                                   |   | 163,599 |   |
|                                                                    |   |                                      |   |   |   |
| COMPREHENSIVE  INCOME (LOSS):                                           |   | $                                         | (1,293 | ) | $ | 676 |   |

 

**See notes to consolidated financial statements**

 

3

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**4-DNEUROIMAGINGCONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands)(unaudited)**

 
|                                                                                       |   | **Three Months Ended  December 31,** |   |
|--------------------------------------------------------------------------------------------|--------|-------------------------------------------|--------|
|                                                                                       |   | **2003**                                  |   | **2002** |   |
| **OPERATING ACTIVITIES**                                                                   |   |                                      |   |   |   |
| Net income  (loss)                                                                         |   | $                                         | (1,293 | ) | $ | 676 |   |
| Adjustments  to reconcile net loss to net cash provided by (used in) operating activities: |   |                                      |   |   |   |
| Depreciation                                                                               |   | 21                                        |   | 26 |   |
| Amortization  of minimum royalty obligation                                                |   | 26                                        |   | (131 | ) |
| Gain on sale  of Neuromag Oy                                                               |   | —                                    |   | (1,391 | ) |
| Changes in  operating assets and liabilities excluding effects of disposition:             |   |                                      |   |   |   |
| Accounts  receivable                                                                       |   | 100                                       |   | (893 | ) |
| Inventories                                                                                |   | (563                                      | )      | 543 |   |
| Prepaid  expenses and other                                                                |   | 351                                       |   | (118 | ) |
| Accounts  payable                                                                          |   | 206                                       |   | 221 |   |
| Accrued  liabilities                                                                       |   | (425                                      | )      | (488 | ) |
| Accrued  salaries and employee benefits                                                    |   | (45                                       | )      | (127 | ) |
| Customer  deposits                                                                         |   | 846                                       |   | 724 |   |
| Deferred  revenue                                                                          |   | 330                                       |   | (255 | ) |
| Interest  payable                                                                          |   | 12                                        |   | (187 | ) |
| Net cash  used in operating activities                                                     |   | (434                                      | )      | (1,400 | ) |
|                                                                                       |   |                                      |   |   |   |
| **INVESTING ACTIVITIES**                                                                   |   |                                      |   |   |   |
| Purchases of  property and equipment                                                       |   | (10                                       | )      | (6 | ) |
| Proceeds  from sale of Neuromag Oy                                                         |   | —                                    |   | 4,000 |   |
| Net cash  provided by (used in) investing activities                                       |   | (10                                       | )      | 3,994 |   |
|                                                                                       |   |                                      |   |   |   |
| **FINANCING ACTIVITIES**                                                                   |   |                                      |   |   |   |
| Proceeds  from notes payable                                                               |   | —                                    |   | 1,000 |   |
| Proceeds  from issuance of common stock                                                    |   | —                                    |   | 3,000 |   |
| Repayments  of notes payable                                                               |   | —                                    |   | (4,040 | ) |
| Payments on  capital lease obligations                                                     |   | (4                                        | )      | (4 | ) |
| Net cash  used in financing activities                                                     |   | (4                                        | )      | (44 | ) |
|                                                                                       |   |                                      |   |   |   |
| Net increase  in cash and cash equivalents                                                 |   | (448                                      | )      | 2,550 |   |
|                                                                                       |   |                                      |   |   |   |
| Cash and  cash equivalents at beginning of period                                          |   | 681                                       |   | 167 |   |
|                                                                                       |   |                                      |   |   |   |
| Cash and  cash equivalents at end of period                                                |   | $                                         | 233    |   | $ | 2,717 |   |
|                                                                                       |   |                                      |   |   |   |
| SUPPLEMENTAL  DISCLOSURES:                                                                 |   |                                      |   |   |   |
| Cash paid  for interest                                                                    |   | $                                         | 43     |   | $ | 114 |   |

 

See notes to consolidatedfinancial statements

 

4

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**4-D NEUROIMAGINGNOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)**

 

### NOTE1.        BUSINESS AND BASIS OFPRESENTATION

###  

4-D Neuroimaging, or 4-D, (formerly Biomagnetic Technologies, Inc.), aCalifornia corporation, originally founded in 1970 to produce equipment forphysics labs, currently develops, produces, markets and sells medicalinstrumentation that allows physicians to monitor how the body is functioning,and provides an important tool to neuroscientists, helping them to unravel howthe brain functions.  The basictechnology is referred to as Magnetoencephalography, or MEG (sometimes MagneticSource Imaging or MSI).  MEG systemsmeasure and locate magnetic fields generated by the human body, and assist inthe noninvasive diagnosis of a potentially broad range of medicaldisorders.  These measurements provideuseful information about the normal and abnormal functioning of the brain,heart, spine and other organs. Currently, we are focusing our efforts on MEG applications for thebrain.

 

The unaudited consolidated condensed financial statements of 4-DNeuroimaging and its subsidiary, Biomagnetic Technologies, GmbH, an inactivewholly owned German entity (together, the “Company”, “we”, “our”, or “4-D”),have been prepared in accordance with the rules and regulations of theSecurities and Exchange Commission. Certain information and footnote disclosures normally included infinancial statements prepared in accordance with accounting principlesgenerally accepted in the United States have been condensed or omitted pursuantto such rules and regulations.  TheCompany suggests that these financial statements be read in conjunction withthe financial statements and notes thereto included in the Company’s annualreport on Form 10-KSB for the fiscal year ended September 30, 2003.

 

In the opinion of the Company, the accompanying unaudited consolidatedcondensed financial statements contain all adjustments, consisting only ofnormal recurring entries, necessary to present fairly its financial position atDecember 31, 2003 and the results of its operations and its cash flows forthe periods presented.

 

The preparation of financial statements, in conformity with accountingprinciples generally accepted in the United States, requires management to makeestimates and assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilities at the date ofthe financial statements and the reported amounts of revenues and expensesduring the reporting period.  Actualresults could differ from these estimates. Results for the interim periods presented in this report are notnecessarily indicative of results that may be reported for any other interimperiod or for the entire fiscal year.

 

In June 2002, the FASB issued SFAS No. 145, “Rescission of FASBStatements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and TechnicalCorrections.”  This statement requiresthe classification of gains or losses from the extinguishments of debt to meetthe criteria of Accounting Principles Board, or APB, Opinion No. 30 “Reportingthe Results of Operations – Reporting the Effects of Disposal of a Segment of aBusiness, and Extraordinary, Unusual and Infrequently Occurring Events andTransactions” before they can be classified as extraordinary in the incomestatement.  Those companies that usedebt extinguishments as a part of their risk management strategy are requiredto classify the gain or loss from extinguishments of debt as a part ofoperating income in the income statement. The Company adopted SFAS No. 145 during the quarter endedDecember 31, 2002 with no material impact.

 

In September 2002, the FASB issued SFAS No. 146, “Accounting forCosts Associated with Exit or Disposal Activities.”  This statement addresses financial accounting and reporting forcosts associated with exit or disposal activities.  This statement requires that a liability for a cost associatedwith an exit or disposal activity be recognized when the liability isincurred.  The provisions of thisstatement are effective for exit or disposal activities that are initiatedafter December 31, 2002.  TheCompany adopted SFAS No. 146 during the quarter ended December 31, 2002.  There were no additional costs associatedwith the sale of Neuromag Oy other than the costs reflected in the financialstatements and disclosed in Note 3, Sale of Finnish Subsidiary Neuromag Oy.

 

5

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In November 2002, the FASB issued FASB Interpretation No. 45, “Guarantor’sAccounting and Disclosure Requirements for Guarantees, Including IndirectGuarantees of Indebtedness of Others.” This interpretation addresses the disclosures to be made by a guarantorin its interim and annual financial statements about its obligations underguarantees.  This interpretation alsoclarifies the requirements related to the recognition of a liability by aguarantor at the inception of a guarantee for the obligations that theguarantor has undertaken in issuing that guarantee.  Management has assessed the impact of this interpretation andbelieves it has no material impact.

 

In December 2002, the FASB issued SFAS No. 148, “Accounting forStock-Based Compensation – Transition and Disclosure.”  This statement amends FASB statement No. 123to provide accounting guidance related to stock based employeecompensation.  SFAS No. 123, as amended,encourages, but does not require, companies to record compensation cost forstock-based employee compensation plans at fair value.  The Company has chosen to continue toaccount for stock-based compensation using the intrinsic value methodprescribed in APB Opinion No. 25, “Accounting for Stock Issued to Employees”,and related interpretations for all periods presented.  Accordingly, compensation cost for stockoptions is measured as the excess, if any, of the fair value of the Company’sstock at the date of the grant over the amount an employee must pay to acquirethe stock.

 

The following table summarizes the impact on the Company’s net loss hadcompensation cost been determined based upon the fair value at the grant datefor awards under the stock option plans consistent with the methodologyprescribed under SFAS No. 123 (in thousands, except per share data):

 
|                                                                                                                                                                                                                   |   | **Three Months Ended  December 31,** |   |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------------|--------|
|                                                                                                                                                                                                                   |   | **2003**                                  |   | **2002** |   |
|                                                                                                                                                                                                                   |   |                                      |   |   |   |
| Net income (loss), as reported                                                                                                                                                                                         |   | $                                         | (1,293 | ) | $ | 676 |   |
| Deduct:           Total stock-based  employee compensation  expense  determined under fair value based   method for all awards, net of related tax effects |   | —                                    |   | 3 |   |
|                                                                                                                                                                                                                   |   |                                      |   |   |   |
| Pro forma  net income (loss)                                                                                                                                                                                           |   | $                                         | (1,293 | ) | $ | 673 |   |
| Basic and  diluted earnings (loss) per share:                                                                                                                                                                          |   |                                      |   |   |   |
| As reported                                                                                                                                                                                                            |   | $                                         | (0.006 | ) | $ | 0.004 |   |
| Pro forma                                                                                                                                                                                                              |   | $                                         | (0.006 | ) | $ | 0.004 |   |

 

The Company accounts for stock options granted to non-employees usingthe fair value method.  Compensation expensefor options granted to non-employees has been determined in accordance withEmerging Issues Task Force, or EITF, No. 96-18, “Accounting for EquityInstruments that are Issued to Other than Employees for Acquiring, or inConjunction with Selling, Goods or Services”, as the fair value of theconsideration received or the fair value of the equity instruments issued,whichever is more reliably measurable. Compensation expense for options granted to non-employees isperiodically remeasured as the underlying options vest and is recorded asexpense and deferred compensation in the financial statements.

 

Holders of common stock are entitled to one vote per share.  Basic earnings per share are computed bydividing net income or loss by the weighted average of common sharesoutstanding during the period.  Dilutedearnings per share reflects the potential dilution that could occur ifsecurities or other contracts to issue common stock (warrants to purchasecommon stock and common stock options using the treasury stock method) wereexercised or converted into common stock. Potential common shares in the diluted earnings per share computationare excluded when their effect would be antidilutive.

 

In January 2003, the FASB issued FASB Interpretation No. 46.“Consolidation of Variable Interest Entities.” This interpretation clarifies the application of Accounting ResearchBulletin No. 51, “Consolidated Financial Statement”, to certain entities inwhich equity investors do not have the characteristics of a controlling financialinterest or do not have sufficient equity at risk for the entity to finance itsactivities without additional subordinated financial support from otherparties.  It further clarifies whetheran entity shall be subject to consolidation according to the provisions of thisinterpretation, if by design, certain conditions exist.  Management has assessed the impact of thisinterpretation and believes it has no material impact.

 

6

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In May 2003, the FASB issued SFAS No. 150, “Accounting for CertainFinancial Instruments with Characteristic of both Liabilities andEquities.”  This statement establishesstandards for how an issuer classifies and measures in its statement offinancial position certain financial instruments with characteristics of bothliabilities and equity.  It requiresthat an issuer classify a financial instrument that is within its scope as aliability (or an asset in some circumstances) because that financial instrumentembodies an obligation of the issuer. Management has assessed the impact of this statement and believes it hasno material impact.

 

### NOTE2.        BASIC AND DILUTED NETEARNINGS (LOSS) PER SHARE

###  

Shares used in computing basic and diluted net loss per share includethe weighted average number of common shares outstanding as ofDecember 31, 2003.  Potentiallydilutive securities, including stock options, are antidilutive and are excludedfrom the computation of diluted net loss per share.

 

### NOTE3.        SALE OF FINNISH SUBSIDIARYNEUROMAG OY

###  

In December 1999, the Company acquired Neuromag Oy, located inHelsinki Finland for $10 million in cash and an interest-free minimum royaltyobligation of $312,500 per year for eight years (totaling $2.5 million) toMarconi Medical Systems, Inc., Cleveland, Ohio. The funds for the purchase wereprovided by a loan from AIG Private Bank Ltd. (“AIG”) totaling $11 millionsecured by 100% of the outstanding and issued capital stock of Neuromag Oy andguaranteed by an entity unaffiliated with the Company.

 

In April 2001, $8,951,000of the debt to AIG was cancelled in exchange for 42,623,810 shares of commonstock of the Company as part of a private placement transaction with specifiedinvestors in accordance with Rule 506 of Regulation D and Section 4(2) ofthe Securities Act of 1933, as amended. The common stock was issued at a per-share price of $0.21.

 

The remainder of the AIG bankloan was restructured.  As restructured,the loan in the principal amount of $3,357,000 from AIG matured in July 2002at which time the Company defaulted on the loan.

 

Due to changes in the businessenvironment and to satisfy the debt to AIG the Company decided to sell itsFinnish subsidiary, Neuromag Oy.  Thesubsidiary was sold to Vaandramolen Holding BV, or VHBV, in October 2002,for a total of $4,000,000 in cash. $3,694,000 of the proceeds were used to fully pay the AIG bank debt,$100,000 were used to pay part of the existing intercompany debt and theremainder for general corporate purposes.

 

The Company had early adoptedSFAS No. 142 in fiscal 2002 which requires that goodwill and certainintangibles no longer be amortized, but instead be tested for impairment atleast annually.  Therefore, there was nogoodwill amortization in fiscal 2002, compared to $1,319,000 in fiscal2001.  In the Company’s consolidatedfinancial statements dated September 30, 2002, the Company recognized agoodwill impairment of $5,974,000 due to the sale of the Company’s Finnishsubsidiary in October 2002.

 

In December 2002, theCompany recorded a gain on the sale of our Finnish subsidiary of $1,391,000 byeliminating goodwill of $2,204,000 and intercompany payables and other relatedaccounts for $405,000.  In addition, thereduction in deferred income taxes of $588,000 consists of deferred foreigntaxes of Neuromag Oy.

 

### NOTE4.        DEBT OBLIGATIONS

 

In January 2002, 4-DNeuroimaging obtained two $125,000 unsecured loans, one from Enrique Maso andone from Swisspartners Investment Network Ltd., or Swisspartners, with aninterest rate of 8% per annum.  InAugust 2002, 4-D Neuroimaging obtained two $100,000 unsecured loans, onefrom MATRUST, S.L. and one from International Sequoia Investment Ltd., with aninterest rate of 8% per annum.  Theprincipal amounts of the loans were repaid in November 2002, accruedinterest for Enrique Maso was recorded as a gain on extinguishment of debt andis reflected in other income on the statement of operations.  The accrued interest for Swisspartners wasdue and payable in March 2003 and paid in April 2003.

 

In November 2002, the Company entered into another line of creditwith AIG Bank for $1,000,000.  Theinterest on

 

7

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the line of credit is 4.17% and initially the line of credit was dueand payable November 5, 2003.  InJanuary 2003 the maturity of the line of credit was extended untilMay 31, 2004.  Proceeds were usedto pay off the two $125,000 unsecured loans from Enrique Maso andSwisspartners, the two $100,000 unsecured loans from MATRUST, S.L. and InternationalSequoia Investment Ltd. and to pay certain accounts payable in the amount of$120,000 to Dr. Galleon Graetz, a member of the board of directors and aconsultant for the Company.  All ofthese amounts, totaling $570,000, were then pledged by the respective partiesas collateral against the loan.  Theremaining amount was used for general corporate purposes.

 

As additional collateral against the loan, Mr. Egli, a member of theCompany’s board of directors, provided a personal guarantee of $500,000 and theCompany pledged its patent portfolio and a Magnes 2500 WH system, currentlyinstalled at the University of Alabama, to which the Company retains title.

 

NOTE 5.        ADDITIONALFINANCING

 

These financial statements have been prepared assuming that the Companywill continue as a going concern.  TheCompany has operating and liquidity concerns, has incurred a loss of $3,708,000for the year ended September 30, 2003, an accumulated deficit of$124,689,000 through the fiscal year ended September 30, 2003, and as ofthat date, current liabilities exceeded current assets by $1,717,000.  These factors, among others, createsubstantial doubt about the Company’s ability to continue as a going concern.  There can be no assurance that the Companywill be able to successfully acquire the necessary capital to continue theiroperations.  Management’s plans toacquire future funding include additional product sales and seeking additionalequity investments through private placements.

 

### NOTE6.        INVENTORIES

###  

The composition of unaudited inventories is as follows (in thousands):

 
|             |   | **December 31, 2003** |   | **September 30, 2003** |   |
|------------------|--------|----------------------------|--------|-----------------------------|--------|
| Raw  materials   |   | $                          | 121    |                        | $      | 156 |   |
| Work-in  process |   | 2,575                      |   | 1,977                       |   |
| Finished  goods  |   | 803                        |   | 803                         |   |
|             |   | $                          | 3,499  |                        | $      | 2,936 |   |

 

NOTE 7.        SEGMENTAND GEOGRAPHIC INFORMATION

 

The Company operates in one segment that includes developing,manufacturing and selling MSI products. The Company’s operations can be divided into three markets: the basicresearch market, the clinical applications development market, and thecommercial clinical market. Substantially all of its revenues have been derived from, andsubstantially all its assets have been devoted to, the basic research market.  The following table summarizes the Company’scontinuing operations of its revenues and long-lived assets, excludingintangible, deferred tax and prepaid assets.

 

In October 2002, the Company sold its Finnish subsidiary, NeuromagOy, and these operations have been accounted for as discontinued operations forall of the periods presented and are not included in the segment data.

 
|                |   | **Three Months Ended  December 31,  (unaudited )** |    |
|---------------------|--------|---------------------------------------------------------|---------|
|                |   | **2003**                                                |    | **2002** |   |
| Revenues:           |   |                                                    |    |   |   |
| North  America      |   | $                                                       | 190,616 |   | $ | 498,768 |   |
| Europe              |   | 186,000                                                 |    | 151,209 |   |
| Asia                |   | 9,451                                                   |    | 54,408 |   |
|                |   | $                                                       | 386,067 |   | $ | 704,385 |   |
|                |   |                                                    |    |   |   |
| Long-Lived  Assets: |   |                                                    |    |   |   |
| North  America      |   | $                                                       | 107,175 |   | $ | 169,039 |   |
| Europe              |   | 37,223                                                  |    | 46,205 |   |
|                |   | $                                                       | 144,398 |   | $ | 215,244 |   |

 

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## **ITEM 2.**                                                     MANAGEMENT’SDISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

The following information should be read in conjunction with thecondensed consolidated financial statements and the accompanying notes includedin Item 1 of this quarterly report, and the audited financial statements,accompanying notes and Management’s Discussion and Analysis of FinancialCondition and Results of Operations contained in our annual report on Form10-KSB for the fiscal year ended September 30, 2003.  This report may contain predictions,estimates and other forward-looking statements that involve a number of risksand uncertainties including, but not limited to, those discussed in “Risks andUncertainties.”  See “Risks andUncertainties” for a discussion of some of the factors known to us that couldcause reported financial information not to be necessarily indicative of futureresults.  We are not obligated topublicly release the results of any revisions to forward-looking statements toreflect events and circumstances arising after the date this report is filed.

 

OVERVIEW

 

4-D Neuroimaging is engaged primarily in the business of developing,manufacturing and selling innovative medical imaging systems to medicalinstitutions.  The MEG systems developedby the Company measure magnetic fields created by the human body for thenoninvasive diagnosis of certain medical disorders, primarily in thebrain.  We are focusing on the use ofour technology for potential commercial market applications such as thediagnosis and planning for surgical treatment of epilepsy, and the functionalmapping of areas of the brain at risk during surgery. We continue toinvestigate the potential applications of our technology for neuro-psychiatricdisorders of the brain such as schizophrenia, as well as for problems of theheart, spine and other organs.

 

As of December 2003, thirty-two (32) of our MEG systems areinstalled in medical and research institutions worldwide. Related findings byus, and our collaborators, have been published in more than 240 scientific andmedical papers.  More than 200 insurancecompanies have approved reimbursement on a case-by-case basis.

 

Our current Magnes product line consists ofthe Magnes 2500 WH, the Magnes 3600 WH, and the Magnes 1300 C, pricing forwhich ranges from approximately $1.0 to $2.5 million, depending on theconfiguration. Major portions of our sales have been in foreign markets.  We have previously priced certain of ourEuropean sales in the currency of the country in which the product was sold andthe prices of such products in dollars varied as the value of the dollarfluctuated against the quoted foreign currency price.  There can be no assurances that currency fluctuations will notreduce the dollar return to us on such sales if made in the future. Although atDecember 31, 2003, we did not have any open forward exchange contracts, wemay in the future enter into forward exchange contracts to partially hedge suchforeign currency exposure, if appropriate.

 

In October 2002, we sold 100% of our shares in Neuromag Oy toVaandramolen Holding BV, or VHBV, for $4,000,000, as discussed in more detailin Note 3 of the consolidated financial statements.  We used $3,694,000 of the proceeds from the sale to fully pay theremaining debt outstanding under a loan from AIG, which had been used to fundour acquisition of Neuromag in December 1999.  At that time we had acquired all of the issued and outstandingcapital stock, or Shares, of Neuromag Oy pursuant to the terms of a sharepurchase agreement by and between us and Marconi Medical Systems, Inc., orMarconi.  Under the terms of the sharepurchase agreement, we paid a total of $10 million in cash to Marconi for thepurchase of the Shares.  We also agreedto pay an interest-free minimum royalty obligation of $312,500 per year(totaling $2,500,000) to Marconi under an ancillary royalty agreement over thenext 8 years.  4-D retainsresponsibility for the royalty agreement after the sale of Neuromag.

 

We believe that to date the relatively small number of proven medicalapplications for MEG systems, the lack of routine reimbursement for MEGprocedures, and the uncertainty of product acceptance in the U.S. market have

 

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limited system sales through fiscal 2003.  With the issuance of CPT codes for MEG, the clinical acceptanceof MEG system may begin to increase.  Itis not possible to reliably predict the timing and extent of future productsales due to the long sales cycles and the uncertainties in the rate of impactthe CPT codes will have on the market. We do not anticipate multiple sales to the same end-user at currentsales volumes, and the sale of one MEG system may still have a significantimpact on our financial position and results of operations during any reportingperiod.  As a result, quarterly andannual operating performance will continue to fluctuate significantly.

 

CRITICAL ACCOUNTING POLICIES

 

Management believes there have been no material changes during thethree-month period ended December 31, 2003 to the critical accountingpolicies reported in the Management’s Discussion and Analysis section ofour annual report on Form 10-KSB for the year ended September 30, 2003.

 

RESULTS OF OPERATIONS

 

Total revenues for the first quarter of fiscal 2004 were $386,000,including $214,000 of service revenues, compared to $704,000 of total revenues,including $228,000 of service revenues, for the first quarter of fiscal2003.  This decrease in total revenueswas due primarily to a lower recognition of revenue for MSI system sales in thefirst quarter of 2004 as compared to that for the first quarter of 2003.  The revenues for the first quarter of fiscal2004 were due primarily to the recognition of revenue associated with thecompletion of a previous contract.

 

Cost of revenues for the first quarter of fiscal 2004 were $385,000,compared to $687,000 for the first quarter of fiscal 2003.  The cost of revenues for the first quarterof fiscal 2004 were due primarily to costs associated with the completion of aprevious contract and related unabsorbed overhead.

 

Research and development expenses for the first quarter of fiscal 2004amounted to $228,000, compared to $207,000 for the first quarter of fiscal2003.  The increase in research anddevelopment expenses in the first quarter of fiscal 2004 as compared to thefirst quarter of fiscal 2003 was due primarily to a certain reimbursement inOctober 2002 related to a clinical collaboration agreement.

 

Marketing and sales expenses amounted to $516,000 for the first quarterof fiscal 2004, compared to $287,000 for the first quarter of fiscal 2003. Theincrease in marketing and sales expenses in the first quarter of fiscal 2004 ascompared to the first quarter of fiscal 2003 was due primarily to an expansionof sales activity in the first quarter of 2004.

 

General and administrative expenses totaled $576,000 for the firstquarter of fiscal 2004, compared to $373,000 for the first quarter of fiscal2003.  The increase in general andadministrative expenses in the first quarter of fiscal 2004 as compared to thesame prior year period was due primarily to the increased legal fees associatedwith arbitration with Elekta regarding our distribution agreements with ElektaInstruments and Elekta KK.

 

Interest expense totaled $57,000 for the first quarter of fiscal 2004,compared to $34,000 during the first quarter of fiscal 2003.  The increase in interest expense in thefirst quarter of fiscal 2004 as compared to the first quarter of fiscal 2003was due primarily to interest accrued on certain payables.

 

Other income totaled $84,000 in the first quarter of fiscal 2004,compared to $170,000 in the first quarter of fiscal 2003.  The decrease in other income is dueprimarily to foreign currency exchange effects.

 

Net loss for the first quarter ended December 31, 2003 amounted to$1,293,000 compared to a net gain of $676,000 for the comparable period in theprior fiscal year.  This change is dueprimarily to a one-time gain on the sale of our Finnish subsidiary of$1,391,000 and the reduction of costs resulting from that sale.

 

LIQUIDITY AND CAPITAL RESOURCES

 

We continued to experience substantial losses of $3,708,000 and$10,038,000 in fiscal 2003 and 2002, respectively.  We had negative cash flows from operations of $3,409,000 and$2,757,000 in fiscal 2003 and 2002, respectively.

 

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In December 1999, we acquired all of the issued and outstandingcapital stock, or Shares, of Neuromag Oy pursuant to the terms of a sharepurchase agreement with Marconi.  Underthe terms of the share purchase agreement, we paid Marconi a total of$10,000,000 in cash for the purchase of the Shares and agreed to pay Marconibetween a minimum of $2,500,000 and a maximum of $5,000,000 in royalties underan ancillary royalty agreement over an eight-year period.  The acquisition was funded by a loan fromAIG.  Mr. Egli, a member of our board ofdirectors, is also a member of the board of directors of AIG.

 

In October 2002, we sold our Finnish subsidiary, Neuromag, toVaandramolen Holdings, BV, a Dutch company, for $4,000,000 in cash.  $3,694,000 of these funds we used to payback the $3,590,000 of principle and $94,000 of interest due on our loan fromAIG and to pay the  $10,000 bank servicefee.  See Note 3 of the consolidatedfinancial statements for additional information with regard to our sale ofNeuromag.

 

In November 2002, we entered into another line of credit with AIGBank for $1,000,000.  The interest onthe line of credit is 4.17% and initially the line of credit was due andpayable November 5, 2003.  InJanuary 2003 the maturity of the line of credit was extended untilMay 5, 2004.  Proceeds were used topay off the two $125,000 unsecured loans from Enrique Maso and Swisspartnersand the two $100,000 unsecured loans from MATRUST, S.L. and InternationalSequoia Investment Ltd.  Each loan hadan interest of 8% per annum.  Accruedinterest was recorded as a gain on extinguishment of debt and is reflected inother income on the statement of operations. Proceeds were also used to pay certain accounts payable in the amount of$120,000 to Dr. Galleon Graetz, a member of the board of directors and aconsultant for the company.  Therespective parties then pledged all of these amounts, totaling $570,000 ascollateral against the loan.  Theremaining amount was used for general corporate purposes.

 

As additional collateral against the loan, Mr. Martin Egli, a member ofour board of directors, provided a personal guarantee of $500,000 and wepledged our U. S. patent portfolio and a Magnes 2500 WH system, currentlyinstalled at the University of Alabama, to which we retain title.

 

In December 2002, we were authorized to offer and issue up to anadditional 60,000,000 shares of our common stock at a price not less than $0.05per share.  During December 2002 anadditional 60,000,000 shares were issued to Swisspartners Investment Network AGin a private placement transaction in accordance with Rule 506 of Regulation Dand Section 4(2) of the Securities Act of 1933, as amended, in exchangefor cash in the aggregate sum of $3,000,000.

 

Capital equipment expenditures totaled $10,000 in first quarter offiscal 2004 compared to $6,000 for the first quarter of fiscal 2003.  The increase in the first quarter of fiscal2004 can be attributed principally to a purchase of equipment during the year.

 

Historically, we have raised additional capital through our majorityshareholders and related parties to fund continuing operations.  There can be no assurance that these sourcesof capital will continue to be available on terms acceptable to us, if at all.  These factors, among others, createsubstantial doubt about the Company’s ability to continue as a goingconcern.  There can be no assurance thatthe Company will be able to successfully acquire the necessary capital tocontinue our operations.

 

FACTORS THAT MAY AFFECT FUTURE RESULTS

 

This quarterly report on Form 10-QSB may contain forward-lookingstatements that involve risks and uncertainties. Such statements include, butare not limited to, statements containing the words “believes”, “anticipates”,“expects”, “estimates”, and words of similar import.  The Company’s results could differ materially from anyforward-looking statements, which reflect management’s opinions only as of thedate hereof, as a result of factors, such as those more fully described under“Risks and Uncertainties.”  The Companyundertakes no obligation to publicly release the results of any revisions tothese forward-looking statements. Readers should carefully review the risk factors set forth below as wellas other factors addressed in this report, our annual report on Form 10-KSB andin other documents we file from time to time with the Securities and ExchangeCommission.  This caution is made underthe safe harbor provisions of the Private Securities Litigation reform Act of1995.

 

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RISKS AND UNCERTAINTIES

 

We face the following risks associated with our business operations:

 

*We have historicallyreported significant net losses and negative cash flows from operations.  If we continue to incur operating losses andnegative cash flows from operations, we may be unable to continue ouroperations.  As a result, there issubstantial doubt about our ability to continue to operate as a going concern.*

 

Our financial position reflects that we have been focused on researchand development and that a commercial MEG market has not developed, resultingin low volume sales to medical research institutions.  Our net losses in the last two years have been as follows:

 

•                  $3,708,000of losses in fiscal year 2003 and

•                  $10,038,000of losses in fiscal year 2002

 

In the last two years, our negative cash flows from operations havebeen as follows:

 

•                  $3,409,000in fiscal year 2003 and

•                  $2,757,000in fiscal year 2002

 

Our total assets have also decreased in the last two fiscal years to$4,760,000 in 2003 compared to $8,514,000 in 2002.  As of September 30, 2003, our accumulated deficit was$124,689,000, the shareholders’ deficit was $3,920,000 and we had negativeworking capital of $1,717,000.

 

Historically, we have raised additional capital through our majorityshareholders and related parties to fund continuing operations.  There can be no assurance that these sourcesof capital will continue to be available on terms acceptable to us, if atall.  We are uncertain with respect toadditional funding and may be unable to meet our future capital needs.  As a result, there is substantial doubtabout our ability to continue to operate as a going concern.

 

*If we are unable tosatisfy customer performance and service requirements we may be unable tocompete effectively.*

 

Our success may be limited by our ability to satisfy customerperformance requirements for our systems, as well as by our ability tocomplete, in a timely fashion, product developments and enhancements to satisfycustomer requirements.  In addition, ifwe or our distributors are not able to respond in a timely manner to servicerequirements, our competitiveness may be adversely impacted.

 

*Our management andcontrolling shareholders, which together control in excess of a majority ourcommon stock, may control our operations and make decisions that othershareholders do not consider in their best interest.*

 

Our present directors, executive officers and principal shareholdersand their affiliates beneficially own a majority of our outstanding commonstock.  As a result, if all or some ofthese shareholders were to act together, they could exercise significantinfluence over all matters requiring shareholder approval, including theelection of directors and approval of significant corporate transactions.  Such concentration of ownership may alsohave the effect of delaying or preventing a change in our control that may befavored by other shareholders.

 

*Our vendors may notcontinue providing favorable credit terms.*

 

Due to our liquidity issues, we have extended vendor payments beyondnormal credit terms.  If our majorvendors were to decline further credit or require cash on delivery payments,our financial position, results of operations and cash flows would be adverselyimpacted.

 

*Our currentarrangements for distribution of our products in the U.S. and Japan areuncertain and may adversely impact our rate of sales in those regions.*

 

In March 2003, Elekta AB, the parent company of Elekta InstrumentsInc. and Elekta KK, our distribution partners in the United States and Japanrespectively, announced their acquisition of 4-D Oy (also known as NeuromagOy),

 

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our former subsidiary, which had been sold to Vaandramolen Holding BVin October 2002.  This acquisitionmay have an adverse impact on the distribution of our products in theseterritories.  We are currently indispute regarding our distribution agreements with Elekta Instruments andElekta KK and arbitration proceedings were commenced on or about April 30,2003, and June 16, 2003, before the American Arbitration Association andInternational Chamber of Commerce, respectively.  Elekta Instruments is seeking termination of our distributionagreement as well as unspecified monetary damages and costs.  We are seeking unspecified monetary damagesand certain other equitable remedies in our claims and counterclaims againstElekta KK and Elekta Instruments.  Thesedisputes may result in, among other things, a change in our distributors or thetermination or a change in the structure of our distribution agreements.  We intend to vigorously pursue our rightsunder the distribution agreements and we expect to incur significant additionalfees for professional services as a result of these disputes.  We are unable to predict the outcome ofthese proceedings.

 

*If foreign currencyexchange rates fluctuate, our return on sales in U.S. dollars may suffer.*

 

Significant portions of our sales to date have been in foreign markets.  Revenues from international salesrepresented 24% of our revenues from MEG systems for the fiscal year endingSeptember 30, 2003.  We expect thatrevenues from international sales will continue to represent a significantportion of our annual revenues.  Becausewe sell in foreign markets, we are exposed to potential risks of increases anddecreases in foreign currency exchange rates. Fluctuations may reduce thereturn in U.S. dollars that we actually receive on our sales.  Although as of September 30, 2003 and2002 we did not have any open forward exchange contracts, upon occasion, we mayenter into forward exchange contracts to partially hedge (or protect) againstsuch foreign currency exchange risks.

 

*If we are unable toidentify additional clinical applications for our MEG systems, there will belimited commercially viable markets for our products.*

 

Currently, there are only a few established diagnostic uses for MEGsystems known by the medical industry. A commercial market may never develop for multiple uses of ourproducts.  A lack of additional clinicalapplications may limit the commercial market for our MEG systems and will havea material adverse impact on our financial position, results of operations andcash flows.

 

*If we fail tocompete successfully, our revenues and operating results will be adverselyaffected.*

 

Historically, our industry has been characterized by ongoing pricecompetition.  Our competitors competewith us for the limited number of whole head systems currently being purchasedworldwide.  The future profitability ofour systems may be negatively impacted by this competition.

 

*If we are unable todevelop additional products, our ability to commercialize our products will beadversely impacted.*

 

Our success may be limited by our dependence on our current line of MEGsystems.  We are currently dependent onsales of our MEG systems to basic research institutions that represent a marketof limited size.  Our current productline may not fully meet the needs of a commercial clinical market and we may berequired to develop additional products directly suited to an emerging set ofneeds from this market.  Our financialresults may be materially adversely affected if our current line of MEG productsdoes not fully meet the commercial applications that emerge, or we are not ableto offer new products in a timely and cost effective manner.

 

*If new governmentlegislation is enacted or unfavorable medical industry trends arise, we may beunable to sell our products and our revenues will suffer.*

 

We cannot predict what adverse effect, if any, future legislation orFDA regulations may have on the MEG market and our financial results.  Medical industry cost containment trends mayimpose restrictions on sizeable third-party reimbursements for diagnosticprocedures, limiting the market opportunity. Further, if federal government agencies or any state legislature enactslegislation or guidelines relating to our business or the health care industrythat create additional business hurdles, including legislation relating tothird party reimbursement, our financial position and results of operationscould be negatively affected.

 

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*If discoveries ordevelopments of new technologies occur, our products and technology may becomeobsolete.*

 

Our industry is characterized by rapid technological change, which mayalso impact our commercial success. Competitors may develop products using other technologies or may improveexisting products.  This competition mayreduce the size of the potential market for our products or make them obsoleteor non-competitive.  Competitors mayalso develop new or different products using technology or imaging modalitiesthat provide, or are perceived as providing, greater value than ourproducts.  Our financial position andresults of operations will be materially adversely affected if such competitivedevelopments occur.

 

*Our success isdependent upon our ability to attract and retain qualified scientific andmanagement personnel.*

 

The loss of services of any one of our executive management or keyscientific personnel would delay our ability to execute our business plans andreduce our ability to successfully develop and commercialize products, maintaingood customer relationships and compete in the marketplace.  There can be no assurance that we will beable to hire, train or retain such qualified personnel.

 

In addition, the loss of the services of Dr. Buchanan, who currentlyserves as our President, Chief Executive Officer and Principal FinancialOfficer would have a material adverse effect on our prospects.  Currently none of our executive officershave an employment agreement or contract with us.  All of our executive officers are “at-will” employees and underno specified term arrangements.

 

**ITEM3.  CONTROLS AND PROCEDURES**

 

*Evaluation of Disclosure Controls and Procedures*

 

Our chief executive and principal financial officer has evaluated theeffectiveness of our disclosure controls and procedures (as defined in ExchangeAct Rules 13a-14(c) and 15d-14(c)) as of a date within 90 days prior to thefiling date of this quarterly report on Form 10-QSB (the “EvaluationDate”).  Based on such evaluation, hehas concluded that, as of the Evaluation Date, our disclosure controls and proceduresare effective in alerting him on a timely basis to material informationrelating to our company (including our consolidated subsidiary) required to beincluded in our reports filed or submitted under the Exchange Act.

 

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**PART II.****                                                OTHERINFORMATION**

 

## **ITEM 6.**     EXHIBITS ANDREPORTS ON FORM 8-K.

 
| (a) Exhibit No.         |   | Description                                                                                                                                                                                                                                                                                                                                                                                                                                         |
|-------------------------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 3.1                     |   | Seventh Amended and Restated Articles of  Incorporation

This exhibit was previously filed as a part  of, and is hereby incorporated by reference to, the same numbered exhibit in  the Quarterly Report on Form 10-QSB for the quarterly period ended  March 31, 2003, filed with the SEC on May 15, 2003.                                                                                                                               |
|                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 3.2                     |   | Restated By-Laws

This exhibit was previously filed as a part  of, and is hereby incorporated by reference to, the same numbered exhibit in  the Registration Statement filed pursuant to the Securities Act of 1933 on  Form S-1 Registration Statement No. 33-29095, filed June 7, 1989, as  amended by Amendment No. 1, filed June 13, 1989, Amendment No. 2, filed  July 21, 1989 and Amendment No. 3, filed July 28, 1989. |
|                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 31                      |   | Certification of Chief Executive Officer  and Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a), as  adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                    |
|                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| 32                      |   | Certification of Chief Executive Officer  and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as  adopted pursuant to Section 906 of Sarbanes-Oxley Act of 2002.                                                                                                                                                                                                                                                          |
|                    |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                |
| (b) Reports on Form 8-K |
|                    |
| None                    |

 

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**SIGNATURES**

 

In accordance with the requirements of the Exchange Act of 1934, theregistrant caused this report to be signed on its behalf by the undersignedthereunto duly authorized.

 

 
| 4-D NEUROIMAGING       |                                |
|------------------------|-------------------------------------|
|                   |                                |
|                   |                                |
| February 13, 2004 |                                | /s/ D. Scott  Buchanan |   |
| Date                   | D. Scott Buchanan                   |
|                   | President, Chief Executive Officer, |
|                   | Principal Financial Officer         |
|                        |                                     |  |  |

 

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