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                          SECURITIES AND EXCHANGE COMMISSION
                                WASHINGTON, D.C. 20549
                            -----------------------------

                                      FORM 10-K

          [X]  ANNUAL  REPORT  PURSUANT  TO  SECTION 13  OR  15(d)  OF  THE
               SECURITIES EXCHANGE ACT OF 1934

          For the Fiscal Year Ended September 30, 1996____________________

          [ ]  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 0-11914


                              ADVANCED NMR SYSTEMS, INC.
                             ----------------------------
                (Exact name of Registrant as specified in its charter)

                       DELAWARE                               22-2457487   
          ---------------------------------                 ---------------
          -
          (State or other jurisdiction                     (I.R.S. Employer
          of incorporation or organization)             Identification No.)

               46 JONSPIN ROAD
              WILMINGTON, MASSACHUSETTS                          01887     
          ----------------------------------                ---------------
          (Address of principal executive offices)            (Zip Code)   

          REGISTRANT'S TELEPHONE  NUMBER, INCLUDING AREA CODE:   (508) 657-
          8876

             SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
                                         None

             SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
                        Common Stock, $.01 par value per share
                        Warrants for purchase of Common Stock

               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
          requirement for the past 90 days.


                    YES  X    NO    
                        ----     ---

               Indicate by  check mark  if disclosure of  delinquent filers
          pursuant to Item 405  of Regulation S-K is not  contained herein,
          and  will not  be  contained, to  the  best of  the  Registrant's
          knowledge,   in  definitive   proxy  or   information  statements
          incorporated by  reference in Part III  of this Form 10-K  or any
          amendment to this Form 10-K. 

               The aggregate market value of the Registrant's Common Stock,
          $.01 par value, held  by non-affiliates computed by  reference to
          the average of the  closing bid and asked  prices as reported  by
          NASDAQ  on December 31, 1996 (based upon the assumption that each
          officer,  director and person who  is known by  the Registrant to
          own more than five percent of the outstanding common Stock of the
          Registrant is an affiliate of the Registrant for purposes of this
          computation): $9,531,551.

               Number of shares of the  Registrant's Common Stock, $.01 par
          value, outstanding as of December 31, 1996:  38,126,204

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          [page break]

                                        INDEX

                                                                   Page No.

          PART I  . . . . . . . . . . . . . . . . . . . . . . . . . . .   3
               Item 1.   Business . . . . . . . . . . . . . . . . . . .   3
               Item 2.   Properties . . . . . . . . . . . . . . . . . .  14
               Item 3.   Legal Proceedings  . . . . . . . . . . . . . .  15
               Item 4.   Submission of Matters to a vote of Securities
                          Holders . . . . . . . . . . . . . . . . . . .  16

          PART II . . . . . . . . . . . . . . . . . . . . . . . . . . .  17
               Item 5.   Market for Registrant's Common Equity and 
                          Related Stockholder Matters . . . . . . . . .  17
               Item 6.   Selected Financial Data  . . . . . . . . . . .  18
               Item 7.   Management's Discussion and Analysis of 
                          Financial Conditions and Results of Operations  
                                                                         21
               Item 8.   Financial Statements and Supplementary Data  .  24
               Item 9.   Changes and Disagreements with Accountants on
                          Accounting and Financial Disclosure.  . . . .  24
               Item 10.  Directors and Executive Officers of the
                          Registrant  . . . . . . . . . . . . . . . . .  25
               Item 11.  Executive Compensation . . . . . . . . . . . .  27
               Item 12.  Security  Ownership  of Certain  Beneficial Owners
                         and
                          Management  . . . . . . . . . . . . . . . . .  34
               Item 13.  Certain Relationships and Related Transactions  36

          PART IV . . . . . . . . . . . . . . . . . . . . . . . . . . .  38
               Item 14.  Exhibits, Financial Statement Schedules, and
                          Reports on Form 8-K . . . . . . . . . . . . .  38

          SIGNATURES  . . . . . . . . . . . . . . . . . . . . . . . . .  47

          [page break]

                                        PART I
                                        ------
          ITEM I.   BUSINESS
                    --------

          GENERAL

               Advanced  NMR Systems,  Inc. ("ANMR"  or the  "Company") was
          founded  in  1983 to  develop  echo  planar imaging  ("EPI"),  an
          ultrafast  magnetic resonance  imaging ("MRI") technology.   From
          its  inception  through   November  1992,  the  Company   engaged
          exclusively  in research  and development  activities.   In 1992,
          ANMR received U.S. Food and Drug Administration ("FDA") clearance
          for  its InstaScan   system  and  commenced commercial  marketing
          activities to  clinical institutions.   The Company,  through its
          Imaging Systems  business, provides  very high field  MRI systems
          for clinical applications and advanced research.

               In  July  1992,  the  Company  formed  Advanced  Mammography
          Systems,  Inc.  ("AMS")  as  a  subsidiary  for  the  purpose  of
          financing  the development  of  its Aurora   dedicated MR  Breast
          Imaging  System.  In early 1993, AMS completed its initial public
          offering.  Prior to August 1996, the Company held a 61% ownership
          interest  in AMS  (including shares  under an  escrow arrangement
          which will terminate in May 1997) which has since been reduced to
          48% as  the result  of the conversion  into AMS  Common Stock  of
          certain  AMS debentures which had  been issued in  a Regulation S
          private  placement.    In  February  1996,  AMS was  granted  FDA
          clearance for commercial use of its Aurora System.

               In  August  1995, ANMR  acquired  Medical Diagnostics,  Inc.
          ("MDI"),  a  provider of  diagnostic  imaging  and rehabilitation
          services.     This  unit  is  referred  to  as  the  Imaging  and
          Rehabilitation Services business.

               In  May   1996,  ANMR   closed  a  private   placement  (the
          "Placement") of $3.7 million face amount of newly issued Series A
          Convertible  Preferred  Stock, $.01  par  value, (the  "Preferred
          Stock") at a purchase price of $1,000 per share.  Preferred Stock
          stockholders  are entitled  to  receive dividends  at  a rate  of
          $40.00 per share per annum, when and as declared by  the Board of
          Directors of  the Company.   At December 31,  1996, approximately
          2,200  shares of  Preferred  Stock were  still outstanding  after
          certain  conversions.   The net  proceeds from  the  Placement of
          approximately $3,320,000,  after  payment  of  fees  and  related
          expenses, is being  used for working  capital.   See "Note F"  of
          Notes to Financial Statements as to conversion features.

               In May  1996, AMS  closed a  Regulation S  private placement
          (the  "AMS   Placement")  of  $3  million   principal  amount  4%
          Convertible  Debentures of AMS due December 1, 1998.  At December
          31, 1996, approximately $1,472,000  in debt was still outstanding
          after  certain  conversions.   The  net  proceeds  from  the  AMS
          Placement of approximately $2,752,000,  after payment of fees and
          related  expenses  is  being   used  for  completion  of  product
          development  of  the  Aurora system,  the  commercialization  and
          marketing of the Aurora system and working capital.

               Upon the closing of  the AMS Placement, the Company  and AMS
          terminated a  previously announced Agreement and  Plan of Merger,
          dated as of  February 4, 1996, which had provided  for the merger
          of  AMS  Merger Corporation,  a  wholly owned  subsidiary  of the
          Company, with and into AMS.

               In  August 1996,  ANMR announced  a new  strategic direction
          which  it  expects  will   leverage  the  Company's  strength  in
          healthcare services  and  capitalize on  the ongoing  outsourcing
          trend among  healthcare providers  seeking to  increase operating
          efficiencies while  providing the highest  quality patient  care.
          The  Company intends to focus  on its breast  imaging centers and
          fixed  and mobile MRI services  and to develop its rehabilitation
          services  business.  As part  of the Company's  new mission, ANMR
          will  eliminate  research,  development  and  production  of  its
          Instascan technology.  In conjunction with this effort, ANMR  had
          reduced its work force  to realign with the refocused  research &
          development effort.  The Company expects to continue its contract
          with General Electric  Medical Systems ("GEMS")  to serve as  the
          exclusive integrator of 3T and 4T MRI systems through June 1999.

          MAGNETIC RESONANCE IMAGING TECHNOLOGY

               A  majority of the  Company's business is  based on magnetic
          resonance imaging technology.   MRI provides very high resolution
          medical images of  soft tissue.   When interpreted  by a  trained
          physician, the images can be used in many applications, including
          determining the  extent and  contour of tumors,  assessing damage
          from  brain   hemorrhage,  and   detecting  a  wide   variety  of
          neurological   and  joint  disorders.   A  technique   called  MR
          angiography is used as  a means of non invasive imaging  of blood
          flow through blood vessels.

               MRI   systems  use  large  magnets,  digital  computers  and
          controlled   radio   waves   to   derive   cross-sectional   (two
          dimensional)  and  volume  (three-dimensional)   high  resolution
          images  of  the body's  internal  organs,  tissues and  function.
          Information  can be  displayed  either on  film or  video monitor
          about the concentration and the physical and chemical environment
          of  atomic nuclei  without the  need for  invasive surgery.   MRI
          systems present no known  risks to patients in contrast  to other
          diagnostic  techniques  that subject  the patient  to potentially

          harmful   ionizing   radiation   (including   Positron   Emission
          Tomography  ("PET"),  Computerized  Axial Tomography  ("CT")  and
          conventional x-ray).


          MARKETING AND PRODUCT DEVELOPMENT

               In July 1994,  the Company concluded an  agreement with GEMS
          for  the sale of  3T and 4T  research MR systems  to GEMS through
          June 1999.   These systems, which were  not submitted to the  FDA
          for  clearance   for  commercial  use,  were   sold  to  research
          institutions  throughout  the world.    Very  high field  systems
          utilizing InstaScan have been  installed at University of Florida
          at  Gainsville,  the  University  of California  at  Los  Angeles
          ("UCLA") and  Massachusetts General  Hospital.  In  addition, two
          systems were shipped to universities in Japan during fiscal 1996.
          In  addition,  a  3T  system   installed  at  the  University  of
          Pittsburgh and a 4T  system at the National Institutes  of Health
          were upgraded with the InstaScan product.  In June 1995, the 1993
          Agreement was  modified to commit revenues realized from the sale
          of  3T and  4T systems  through December  31, 1995  towards GEMS'
          obligation under the 1993 Agreement.  At December 31, 1996, there
          are  twenty-four  (24)  InstaScan  systems and  seven  (7)  3T/4T
          systems  in the field.   The Company will  continue its exclusive
          contract  with GEMS  to provide  engineering integration  of very
          high field 3T and 4T MRI systems through June 1999.

          MANUFACTURING

               Although  the   Company  has  reduced   its  involvment   in
          manufacturing activities, the  Company's facility in  Wilmington,
          Massachusetts  has sufficient capacity to satisfy its commitments
          under existing contracts.

          RESEARCH AND DEVELOPMENT

               The  Company has  ceased all new  R&D activity  in InstaScan
          technology.    The Company  continues  to  offer maintenance  and
          service contracts to customers for all installed systems.

               Under  the ANMR  License Agreement,  AMS holds  an exclusive
          license to proprietary rights  and know-how, including the rights
          to  any  patents owned  by the  Company which  relate to,  or are
          useful  in connection with, the development of an MRI scanner for
          use in the field of breast imaging.

          UNCONSOLIDATED SUBSIDIARY

               Through  its subsidiary,  AMS, the  Company has  developed a
          dedicated  MR Breast Imaging system known as Aurora.  In February
          1996, the FDA cleared the commercial use of AMS' Aurora dedicated
          MR  Breast Imaging System.   In order to  fully commercialize the
          Aurora System  and to demonstrate diagnostic  effectiveness as an
          accepted tool for the diagnosis and management  of breast disease
          and  permit  reimbursement  for  dedicated breast  MRI  by  third
          parties  such as  Medicare,  private insurance  and managed  care
          consortiums, AMS must develop maximum  clinical utility.  AMS has
          launched   a   clinical  study   which   includes  a   scientific
          investigation of  the improved breast  imaging device in  a large
          patient population to provide  objective evidence of its clinical
          utility.  The System  has been placed at the  University of Texas
          Medical Branch at Galveston  and AMS expects to install  a second
          System  at the Faulkner-Sagoff  Centre for Breast  Health Care in
          Boston, Massachusetts  for the establishment of  clinical trials.
          It is  anticipated that the breast imaging technology should gain
          clinical  acceptance over  the  next two  years  and continue  to
          evolve  as  further information  is  obtained  from the  clinical
          studies concerning additional applications.

               In  July  1992,  the  Company licensed  (the  "ANMR  License
          Agreement")  to AMS  the right  to use  ANMR's technology  in the
          development of a dedicated breast  imaging system (the "Field  of
          Use").

               The Company and AMS may develop other dedicated MRI scanners
          in addition to the breast imaging system.  With respect to future
          product  development, AMS has not  been granted the  right to use
          any  technology  now or  hereafter  obtained  by  the Company  in
          connection  with any other dedicated  use MRI scanners.  However,
          AMS  has been  granted  a 50%  interest in  any  net profits,  as
          defined  in  the  ANMR  License Agreement  (after  allocation  of
          development expenses), derived  by the Company  from the sale  or
          license of dedicated use MRI scanners utilizing or based upon the
          Licensed  Technology outside  of  the Field  of  Use.   The  ANMR
          License Agreement  provides that  (i) any inventions  outside the
          Field of Use  developed solely by the  Company or an ANMR  entity
          shall  be  owned  by   the  Company  or  such  ANMR   entity  and
          automatically licensed  to AMS on an  exclusive, worldwide basis,
          within  the Field of Use, (ii) any inventions developed solely by
          AMS  shall  be  automatically  licensed  to  the  Company  on  an
          exclusive, worldwide basis  for use solely  outside the Field  of
          Use,  and (iii) any inventions  outside the Field  of Use jointly
          developed by  the Company  and  AMS or  an ANMR  entity shall  be
          jointly  owned in equal shares  by the Company,  on the one hand,
          and AMS or an ANMR  entity, on the other hand, and AMS or an ANMR
          entity shall automatically license its interest to the Company on
          an exclusive,  worldwide basis.   Accordingly, the  Company would
          obtain the right to future technology developed by AMS for use in
          connection  with mammography, and  AMS shall obtain  the right to
          future technology developed  by the Company  for use outside  the
          Field of Use. 

               To optimize the Company's and AMS' operating efficiency, the
          Company  and AMS entered into  a Shared Services  Agreement as of
          January  25, 1993 whereby the companies share common expenses and
          functions,  for example,  executive  officers,  marketing,  field
          service,   administration,   regulatory  approvals   and  outside
          services.    On  August  29,  1996,  the original  Agreement  was
          terminated and the Company  and AMS entered into a  new agreement
          which outlines  a more accurate method of allocating the services
          that  are shared  by  the  companies.    The  new  agreement  has
          developed  as a  result  of two  significant  factors:   (a)  the
          changes in the  company profile  of ANMR which  is modifying  its
          technology operations related to the manufacture of its InstaScan
          retrofit system and is attending to its service division, and (b)
          the  growing  independence  of  both companies  as  each  company
          pursues  divergent objectives.   Vendors  for parts  and services
          have been instructed to provide separate invoices directly to the
          Company  or AMS,  as  the case  may be.   The  Company's expenses
          related to the use of the facilities, such as rent, utilities and
          insurance, will be apportioned based on the number of square feet
          occupied  by the  Company  or AMS,  respectively.   The remaining
          expenses,   including   senior  management,   administration  and
          miscellaneous supplies and resources, will be allocated equitably
          between  the  companies but  will  be  modified as  circumstances
          dictate.

          IMAGING AND REHABILITATION SERVICES

               Through its 100% owned subsidiary, MDI, the Company provides
          advanced radiology  services such as MRI,  Single Photon Emission
          Computed  Tomography ("SPECT") and  Computerized Axial Tomography
          ("CT")  to patients  in Massachusetts,  New York,  Virginia, West
          Virginia and Tennessee through a  network of hospital and clinic-
          affiliated  and   freestanding  facilities.    MDI  believes  its
          operations  are  unique as  to  utilization  rates achieved  and,
          further,  believes it  is the  only operator of  mobile radiology
          services in  the United  States that  operates as  a full-service
          medical  provider  under  its  own  clinic  licenses  where  that
          operation is allowed under state regulation.

               MDI often  acts as  a full-service  medical provider in  its
          radiology  services business,  particularly MRI  services.   As a
          full-service  medical  provider,  MDI   provides  MRI  and  SPECT
          equipment  and  technologists  and  typically  provides  for  the
          necessary  physician   and  support  personnel,   scheduling  and
          screening of  patients,  maintaining medical  and  administrative
          records, establishing charges and billing and collecting revenues
          from  patients and third-party payers.   In these instances, host
          hospitals generally function as a landlord for the MDI subsidiary
          or affiliate operating the MRI or SPECT service.  By operating in
          this manner,  MDI is able  to control the hours  of operation for
          its units and manage patient  scheduling, permitting MDI to  more
          fully utilize its equipment.   MDI is also able to  expand demand
          for its  services by  marketing directly to  referring physicians
          and  third-party  payers,  the  primary sources  of  MRI  patient
          business, including  physicians who  are not affiliated  with the
          host hospitals.  MDI believes that controlling all or most of the
          radiology   services,  including  holding   the  required  clinic
          licenses  when  possible,  enhances   its  ability  to  negotiate
          renewals  or  extensions  of   its  arrangements  with  the  host
          hospitals.  

               A majority  of MDI's  MRI  services are  provided under  the
          "full-service"  model.   SPECT services  are provided  under both
          vendor  and provider models.  In circumstances where MDI does not
          operate  as  a provider,  it endeavors  to achieve  an equivalent
          level of operating control through contracted services offered to
          hospital and clinic customers.

               "FULL-SERVICE PROVIDER"

               MDI's  MRI facilities are generally open from 10 to 16 hours
          per day up to seven days per week to  enhance patient convenience
          and  increase the utilization of MDI's medical equipment.  On the
          scheduled examination date, the  patient goes to the area  in the
          hospital where the MRI unit is located.  MDI's MRI technologists,
          or  other professionals,  interview patients  to screen  them for
          claustrophobia, obesity, electronic  implants or other  potential
          problems and  complete the  necessary paper  work.   Patients are
          encouraged to view an educational video about the procedure prior
          to the exam and are offered audio and video entertainment options
          to relieve possible anxiety.

               MRI examinations typically last  30 to 60 minutes.  Once the
          patient is inside the scanner, the technologist communicates with
          him or  her using an intercom system.  The patient experiences no
          physical  sensations  during  the  procedure  and  hears  only  a
          knocking sound  as the  gradients within  the magnetic  field are
          altered to generate the image.  Once the MRI scans are generated,
          they  are  reviewed  and  interpreted  by  trained  radiologists.
          Written  reports  are  forwarded  to  the  referring  physicians,
          usually within 48 to 78 hours of the examination.

               Upon receipt of the written report, MDI generates an invoice
          that is sent to  the patient's insurance company or  other third-
          party  payer  and/or  to  the patient,  completes  any  necessary
          insurance  forms and follows up  on and collects  the payment for
          the services rendered.  Generally, MDI renders a bill that covers
          the  charges for  its technical services.   Total  charges billed
          vary  depending   on  the  type  and   duration  of  examination.
          Insurance reimbursements are normally  less than rates charged by
          MDI.  In addition, MDI enters  into contractual arrangements with
          third-party payers  that provide  for volume or  group discounts.
          Professional service charges due to the radiologists who read and
          interpret the examination results are generally billed separately
          by the radiologists.

               VENDOR-OPERATOR SERVICES

               When necessary  or advantageous for competitive reasons, MDI
          functions as  a vendor-operator  in dealing with  medical service
          providers  that desire to offer mobile  radiology services.  When
          competing  on this basis, MDI offers its full range of additional
          services.    The  medical  service  providers  can  select  those
          services that they  find most troublesome or  expensive to handle
          internally,    including     patient    scheduling,    marketing,
          transcription and/or billing.  Because MDI already provides these
          services in connection with its full-service provider operations,
          it can offer these  additional services as an adjunct  to vendor-
          operator arrangements  on a profitable basis  at attractive rates
          to the medical service providers.

               OPERATIONS AND EQUIPMENT

               MDI's mobile  MRI  and SPECT  units are  located in  custom-
          designed trailers that are driven to specially prepared sites  at
          hospitals,  clinics and  other appropriate  sites according  to a
          planned schedule.   MDI currently operates or  manages two fixed-
          site MRI facilities and  10 mobile MRI units serving  43 hospital
          customers  and two free-standing  facilities, three  mobile SPECT
          units  that serve 10 hospitals and clinics, generally under three
          to  five-year agreements  with each  facility, and  one  fixed CT
          unit.   Two  hospitals  are contracted  for  both MRI  and  SPECT
          services with MDI and one clinic is contracted for both SPECT and
          CT services with MDI.  Of these units, MDI owns six, leases eight
          and manages two others for a non-affiliated hospital consortium.

               CUSTOMERS

               Many medical  service  providers do  not  own MRI  or  SPECT
          equipment because of insufficient patient volume to justify costs
          associated   with  acquiring   and   operating  such   equipment.
          Depending upon features and options selected, a  MRI unit similar
          to the units operated by MDI costs between approximately $700,000
          and $1,700,000  plus siting  and facility  costs.   Many  medical
          service providers  in rural  areas or  other small  hospitals and
          clinics cannot afford a capital investment of this size or cannot
          utilize the  equipment in a  cost-effective manner.   However,  a
          medical service  provider that  does not have  sufficient patient
          volume and resources may still wish to contract for services with
          a  third-party  company  like  MDI  for  a  variety  of  reasons,
          including avoidance of the  risk of technological obsolescence of
          the equipment,  elimination of  the  need to  recruit and  employ
          qualified technologists, elimination of  the need for the medical
          service providers to  expend the time and  resources necessary to
          obtain regulatory approval for a MRI  unit, where applicable, and
          elimination of  the costs and  risks associated with  billing and
          collecting from third-party payers.

               MDI  generally enters  into  three to  five-year affiliation
          agreements with medical service providers  served by its MRI  and
          SPECT units.  These contracts are generally non-cancelable except
          for cause.  

               MARKETING

               MDI has  developed a multi-faceted marketing  strategy.  MDI
          markets its  services to  referring physicians through  visits to
          physicians' offices, by exhibiting MDI's services at professional
          association  meetings,  notices  of  equipment  enhancements  and
          upgrades  and reprints  of pertinent  articles from  professional
          journals.

               In  addition  to  its  direct  marketing  efforts  aimed  at
          physicians and  hospitals, MDI  markets its services  directly to
          third-party  payers, including insurance  companies, managed care
          entities,  and  government payers.    By  operating regional  MRI
          networks,  MDI is  able  to offer  third-party payers  aggressive
          discount pricing  schedules geared to the  volume of examinations
          provided to each third-party payer's subscriber population.

               MDI  places  substantial   emphasis  on  the  training   and
          motivation  of  its technologists  by  both  MDI's personnel  and
          equipment manufacturers.   MDI regularly conducts  surveys of its
          contracted hospitals, physicians and patients to monitor customer
          satisfaction.

               EXPANSION OF MARKETS AND SERVICES

               MDI  believes  that,  as  imaging  technology  continues  to
          develop,  new applications  should  increase and  the demand  for
          diagnostic imaging as a means of detecting diseases at an earlier
          stage  will be greater.  Current  pressures on utilization should
          be  offset in the  future as a  result of an  increased number of
          cost-effective new applications for advanced imaging that replace
          exploratory surgeries and invasive diagnostic procedures, as well
          as  the increased demand  that should occur  from the  aging of a
          large percentage  of the population.   Further, earlier detection
          of  diseases,  particularly  through non-invasive  and  minimally
          invasive imaging  technologies, can help reduce  medical costs to
          third-party payers  by reducing  treatment costs  and malpractice
          claims.  MDI believes that, as physicians and  third-party payers
          become  more  knowledgeable and  familiar  with  advanced imaging
          capabilities, these  services may  become the primary  diagnostic
          tools for many additional clinical conditions.  

               EQUIPMENT; SUPPLIES

               All  of   the  diagnostic  equipment  utilized   by  MDI  is
          technologically   complex.     MDI   contracts   with   equipment
          manufacturers   and   third-party   service   organizations   for
          comprehensive  maintenance and  repair services  for its  MRI and
          SPECT  units  to   minimize  the  period  of  time  equipment  is
          unavailable during  scheduled use hours  because of unanticipated
          malfunctions or breakdowns.  MDI also has extensive relationships
          with  other  vendors for  maintenance and  repair  of all  of the
          related  and auxiliary equipment on the units that are subject to
          mechanical  failures,  such  as   on-board  generators  and   air
          conditioning systems.  
               A significant  portion of MDI's tangible  assets consists of
          diagnostic  imaging  equipment  and  trailers.    Generally, each
          trailer is moved, sometimes  daily, or even during the  day, from
          one  location to  another,  and there  is always  a  risk that  a
          traffic  accident  or  trailer  breakdown will  occur  while  the
          equipment  is  in transit.    Although MDI's  major  equipment is
          insured  against the risks of  damage in an  accident, repairs to
          damaged equipment may  not restore the equipment  to its original
          condition and level of performance.   MDI also maintains business
          interruption  insurance to offset lost revenue  that may occur in
          the event of prolonged equipment downtime.  However, no assurance
          can be given that MDI would receive sufficient insurance proceeds
          following  any damage to its equipment to fully compensate it for
          the losses resulting from such damage.  

               There  are  at least  three  suppliers  of FDA-approved  MRI
          contrast agents  used to enhance  the images produced  in certain
          types  of examinations.    Further,  several  new  organ-specific
          contrast agents are in the FDA approval process that are expected
          to  increase  abdominal  applications  for  MRI  which  may  have
          significant value in diagnosing a variety of benign and malignant
          conditions that would otherwise require exploratory surgery.  MDI
          has  not  experienced   any  problems  in   obtaining  sufficient
          quantities of  contrast agents.  In addition,  there are numerous
          suppliers  of  radiopharmaceuticals  required  to  perform  SPECT
          imaging.

               REHABILITATION SERVICES

               MDI  has  diversified a  portion  of its  business  in niche
          rehabilitation  markets  through its  acquisition  of  a majority
          interest  in  MVA Rehabilitation  Associates.    Through the  MVA
          centers,  MDI provides  comprehensive  physician  care,  physical
          therapy and case management  for motor vehicle accident patients.
          The  MVA Center has developed a system to document valid personal
          injury  claims and exclude false claims that enable it to provide
          more efficient patient  care.   In addition to  the original  MVA
          Center,  MDI established  one new  center  and one  new satellite
          center during fiscal  1996 in Massachusetts where the business is
          concentrated.

               MDI's rehabilitation services  business operates with  lower
          fixed costs than its  radiology services, providing a lower  risk
          diversification opportunity.

          GOVERNMENT REGULATION AND REIMBURSEMENT

               The Company's  operations are  subject to  extensive federal
          and state regulations and are directly and indirectly impacted by
          government regulations with respect  to reimbursement for medical
          services.

               Magnetic  Resonance Diagnostic Devices  ("MRDD") are subject
          to regulation by the  FDA and certain state and  federal agencies
          that  regulate the  provision  of health  care, particularly  the
          Health   Care  Financing   Administration   ("HCFA")     and  the
          Environmental Protection Agency ("EPA").   In addition, providers
          of  diagnostic  imaging services  are  subject  to various  state
          regulations that limits the  acquisition of MRI equipment through
          Certificate of  Need ("CON") and "Determination  of Need" ("DON")
          programs and  other federal and state regulation that is directed
          at cost containment.

               FDA REGULATION

               In  February 1996, the FDA cleared the commercial use of the
          AMS Aurora breast imaging system.

               In addition,  there are  numerous applications  for contrast
          agents and pharmaceuticals currently  pending before the FDA that
          have  significant   potential   to  positively   impact   Company
          operations. New  organ specific contrast agents  will enhance MRI
          sensitivity    and    specificity    in    diagnosing    disease.
          Pharmaceuticals in clinical trials show significant potential for
          stroke  treatment.  MRI can not only detect stroke within minutes
          of  onset, but  it can  differentiate between  strokes caused  by
          blood clots and those caused by hemorrhage.  Strokes arising from
          clots can be treated with thrombolytic agents while strokes  that
          involve bleeding  are appropriately treated with neuron protector
          drugs. MRI  is the only  imaging technology that  can effectively
          distinguish between the two causes of strokes.

               HCFA AND RELATED HEALTH CARE REGULATION

               Imaging Systems
               ---------------
               The  market for  MRI systems  and services  is significantly
          affected by the amount that Medicare and Medicaid, or other third
          party  payers  including  indemnity  insurance  and  managed care
          organizations,   reimburse   providers   of  diagnostic   imaging
          procedures.  With the emphasis on limiting costs for health care,
          MR  manufacturers  must  more  clearly demonstrate  the  clinical
          efficacy and cost-effectiveness of upgrades and new MR systems in
          order to generate sales.

               Imaging and Rehabilitation Services
               -----------------------------------
               In its  Imaging Services operations, the  Company is subject
          to HCFA Medicare and Medicaid anti-fraud and abuse statutes which
          prohibit bribes,  kickbacks, rebates  and any direct  or indirect
          remuneration in  connection  with providing  services,  items  or
          equipment for which payment may be made in whole or in part under
          Medicare or Medicaid.  These statutes are intended to prevent the
          improper referral of patients for  medical tests or treatment  by
          health service providers who may have a financial interest in the
          entity  which  provides  such   services.    Violation  of  these
          provisions  may result  in  significant  criminal  penalties  and
          exclusion  from participation in  Medicare and  Medicaid programs
          for both the entity paying the kickback or rebate and  the entity
          receiving it.

               The  Company believes  that none  of its  operations are  in
          violation of the anti-fraud and abuse statutes. 

               Congress  has also enacted legislation generally prohibiting
          physicians  from  billing  Medicare  and  Medicaid  for  patients
          referred  by  a  physician to  any  of  a broad  range  of health
          services (including diagnostic imaging services) if the physician
          has  (i)  an  ownership  or  investment  interest  in the  health
          service, or (ii) otherwise receives compensation (broadly defined
          in the  legislation) from  the health  service.  The  legislative
          prohibitions  were effective January 1, 1995.  The Company has no
          physician  ownership in  its businesses  that would  violate this
          statute.

               MDI  currently  delivers  diagnostic  imaging   services  in
          Massachusetts, New  York, Virginia,  West Virginia and  Tennessee
          and  SPECT services in Virginia, West Virginia and Tennessee.  In
          New  York, Virginia, West Virginia  and Tennessee, a  CON, and in
          Massachusetts, a  DON,  generally  must be  obtained  by  an  MRI
          operator and/or the hospital where services are provided in order
          for  services to  be provided  at hospital  sites or  to hospital
          inpatients  and/or to  receive certain  third-party reimbursement
          payments.  The CON and DON programs of each of the five states in
          which MDI  currently  conducts business  vary significantly  from
          each other in the  scope of regulation.  Generally,  however, the
          CON or DON  authorizes the holder to provide,  or in the instance
          of a hospital, to  receive, services at specific sites  and/or to
          acquire  equipment to provide services.   In Massachusetts, a DON
          is also required to obtain a clinic license.  Where required, MDI
          holds  all CONs  and DONs  necessary for  it to  conduct business
          where  it  currently operates.   In  New  York, MDI  is presently
          ineligible to obtain a  CON as state law prohibits  publicly-held
          corporations from qualifying for  a CON.  Thus, MDI  contracts to
          provide MRI  equipment and  management to a  professional medical
          corporation ("P.C.") that is licensed to actually provide the MRI
          and other services.

               In addition to its DON requirements,  Massachusetts licenses
          and  regulates  MDI's  MRI   operations.    Massachusetts  clinic
          licensure regulations establish  physical plant requirements  for
          each MRI service  site, require  inspection of the  MRI unit  and
          require  that  certain  operational  policies  be  in  place,  in
          addition  to other  standards.    MDI  believes  that  it  is  in
          compliance with the Massachusetts licensure requirements.

               ENVIRONMENTAL PROTECTION AGENCY ("EPA") REGULATION

               The Company, and any research facility which it operates, is
          required  to  comply  with   any  applicable  federal  and  state
          environmental  regulations  and   other  regulations  related  to
          hazardous materials  used, generated,  and/or disposed of  in the
          course of its operations.  The Company currently is registered as
          a Very Small Quantity  Generator of hazardous waste.   This means
          that  the Company is making  an effort to  reduce hazardous waste
          produced, and to track the waste generated.

               Future EPA  regulations may  impact Company policies  on air
          pollution,  waste  management,  and  radon testing.    While  the
          Company does not  expect to  have to incur  substantial costs  in
          order to comply  with existing regulations, no  assessment may be
          made  as to the impact  of future regulations  upon operations of
          the Company.

               NUCLEAR REGULATORY AGENCY REGULATION

               In providing SPECT services, the Company is  also subject to
          the Nuclear Regulatory Commission regulations established for the
          safe use,  storage, transport and disposal of radioisotopes.  The
          Company  employs  a Radiation  Safety  Officer,  as required,  to
          monitor its compliance with applicable regulations.

          COMPETITION

               The  health care  industry  in general  and  the market  for
          diagnostic   imaging   equipment,   in   particular,   is  highly
          competitive.  

               With respect to the  Imaging Systems business, virtually all
          of the competitors known to the Company presently offer their own
          versions  of echo  planar  imaging.   Such manufacturers  include
          General Electric  Company; Toshiba; Bruker Medical  Imaging Inc.;
          Elscint Ltd.;  Siemens Corporation;  Philips  Medical Systems,  a
          division  of  Philips   Industries,  N.V.;  Picker  International
          Corporation; Shimadzu; and Hitachi.

               With  respect to  the  Imaging  and Rehabilitation  Services
          business, the Company competes with other MRI and SPECT providers
          at  hospitals, private  clinics,  physician  practices and  other
          independent  providers of MRI and SPECT  services at fixed sites.
          Competitive  factors  include  the  range of  services  provided,
          equipment  capabilities and the ability to serve a broad range of
          patients.  Barriers  to entry into the  Company's markets include
          the  cost of  equipment,  hiring of  qualified technologists  and
          management, proprietary business practices and, where applicable,
          CON or DON regulation and other regulatory constraints.

               Although  the Company's  rehabilitation  services  are  also
          considered  to  be in  highly  competitive  markets, the  Company
          believes the market sector it is targeting, (value-added services
          for motor vehicle accident victims and their insurers) is unique.
          The Company is not aware of any other significant participants in
          this industry.

          PATENTS

               The Company and AMS currently own twenty (20) and two (2) U.
          S.  patents relating  to  MRI imaging,  respectively.   All major
          patents  are protected in  Japan, Canada and  the European Market
          countries.

          EMPLOYEES

               As  of December 31, 1996, the Imaging Systems business had a
          staff  of 31  full time  employees and 3  short-term contractors,
          including  14  persons  who  were full  time  employees  of  AMS.
          Pursuant to a Shared  Services Agreement with AMS,  ANMR provides
          the  services  of its  executives,  administrative  personnel and
          research scientists to AMS on an as-needed basis.

               As  of December  31,  1996, the  Imaging and  Rehabilitation
          Services  business had 142  full time employees  and 38 part-time
          employees  including  5  senior   management  personnel,  65  MRI
          technologists,  3 non-executive  employees involved  in marketing
          and  development  and  107  employees  involved  in  general  and
          administrative  activities,  including  patient   scheduling  and
          billing.

               None  of the  Company's  employees is  represented by  labor
          organizations  and the  Company is  not aware  of any  activities
          seeking such  organization.  The Company  considers its relations
          with employees to be good.


          ITEM 2.   PROPERTIES
                    ----------

               The Company leases  a facility in  Wilmington, Massachusetts
          (the "Shared Facility") consisting of approximately 61,000 square
          feet  of office,  research  and  development,  manufacturing  and
          warehouse space.  The  Company has exercised its option  to renew
          its  lease as  of May  1996 for  another  5 year  term at  a base
          monthly  rental of  approximately $37,000.   As  of December  31,
          1996, the activities  of AMS  utilized approximately  17% of  the
          Shared  Facility.    The  Company  believes  that  the  space  it
          currently  occupies is adequate  for the Company's  needs for the
          foreseeable future.

               ANMR  also leases office space  in Fort Lee,  New Jersey for
          its  administrative  and  investor  relations  personnel.     The
          approximate 1,290 square feet of space is leased by ANMR pursuant
          to a lease expiring March  31, 1999, at a base monthly  rental of
          approximately $2,300.   The personnel located  in the New  Jersey
          office also perform services on behalf of AMS.  Approximately 28%
          of the costs  of maintaining  this office space  is allocated  to
          AMS.

               MDI  owns  a facility  in  Roanoke,  Virginia consisting  of
          approximately 6,000 square feet of office space.  MDI also leases
          approximately  2,000 square  feet of  space in  West Springfield,
          Massachusetts at a current rental rate of $42,000 per annum, plus
          operating expenses under a lease that expires on August 31, 1998.
          MDI has the  option to extend  this lease for two  additional one
          year periods.

               MDI also leases specially prepared sites and patient waiting
          areas  at  certain  hospitals  and other  locations  at  which it
          operates  its mobile  MRI,  SPECT and  CT  units.   These  leases
          generally  are  for  the   term  of  the  hospital's  affiliation
          agreement  with  MDI,  with  monthly  rental  payments  generally
          ranging from approximately $1,000  to $5,000.  The  rental amount
          is  generally designed to reimburse the  hospital or landlord for
          its cost of preparing the site.

               MDI leases  facilities for its Rehabilitation  operations in
          Springfield  Massachusetts,  Holyoke  Massachusetts   and  Malden
          Massachusetts.    These facilities  include  approximately 7,400,
          3,100 and 7,400 square feet , respectively, over lease terms that
          expire on  June 30,  2001, June 1,  2001, and  January 31,  2001,
          respectively.    The  current   rent  for  these  facilities  are
          $142,000,  $19,000  and  $82,000  per  annum, respectively,  plus
          operating expenses.

          ITEM 3.   LEGAL PROCEEDINGS
                    -----------------
               MDI,  as general  partner  of Mass.  Mobile Imaging  Venture
          (MMIV),  and Western  Massachusetts Magnetic  Resonance Services,
          Inc. (WMMRS)  filed a  complaint in  September 1992  in Middlesex
          County Superior Court,  Cambridge, Massachusetts against  Medical
          Imaging Partners,  L.P. (MIP), which  is wholly  owned by  Raytel
          Medical  Corporation (Raytel),  and  certain  of its  affiliates,
          seeking a  declaration, damages and equitable  relief relating to
          an alleged  breach by  MIP of  certain fiduciary  and contractual
          obligations with respect to the business of MMIV.   MIP has filed
          a counterclaim  against MDI also seeking  a declaratory judgment,
          damages and equitable relief on the basis of an alleged breach of
          fiduciary and contractual obligations by  MDI with respect to the
          business of MMIV.   The parties  have nearly completed  pre-trial
          proceedings, including discovery.  Several pre-trial motions have
          been argued  and are awaiting decision.  A trial date has not yet
          been  set.   Although the  outcome of  this litigation  cannot be
          predicted,  MDI  does  not  believe  that  the  results  of  this
          litigation will have a material effect on MDI.

               On November 29, 1994,  Raytel filed a complaint in  Delaware
          Chancery Court naming MDI as a defendant.  The lawsuit relates to
          matters arising in  conjunction with a  tender offer launched  by
          Raytel  to   acquire  MDI's  predecessor.     Raytel  is  seeking
          injunctive relief against certain actions that  MDI's predecessor
          took or may have  taken to defend itself against  Raytel's tender
          offer.   On December 22, 1994, Raytel filed an amended complaint.
          No trial  date has been set.   On May 4,  1995, Raytel terminated
          its  tender offer.  MDI believes that it has meritorious defenses
          to this lawsuit and, if necessary, intends to defend this lawsuit
          vigorously.

               In February and in March 1996, class action  complaints, all
          of which were  consolidated in  a matter styled  In Re:  Advanced
          Mammography Systems, Inc.  Shareholders Litigation  (consolidated
          C.A. No. 14821), were filed in the Court of Chancery in the State
          of Delaware, in and for  New Castle County, on behalf of  all the
          public  stockholders  of both  the  Company and  AMS  against the
          Company and AMS  and their  directors seeking to  (a) enjoin  the
          previously announced merger of  the two companies, or (b)  if the
          merger  is  consummated,  to  award  rescissory  damages  to  the
          proposed class  of plaintiffs.   The plaintiffs  and the  Company
          entered into a  stipulation of settlement whch is  pending before
          the court. 

               Effective  November  28,  1995,  ANMR  terminated  the   Key
          Employment  Agreement, dated May 2, 1995, of John A. Lynch, Chief
          Executive Officer  of MDI.   MDI's  Chief  Operating Officer  was
          named  the Acting  President  of MDI.    At September  30,  1995,
          accrued  expenses include  approximately  $500,000  of  severance
          benefits  accrued  in  accordance  with  the  terms  of  the  Key
          Employment  Agreement.  In March 1996, the Company's former Chief
          Executive  Officer  filed a  demand  for arbitration  seeking a  
          declaratory ruling, equitable  relief and  damages related to  
          claims arising out of the  Key Employment Agreement.    Although 
          the  outcome of this arbitration  is uncertain, the Company does 
          not believe that the  results of this arbitration  will have a  
          material effect on the consolidated  financial position or results
          of operations of the Company.

               During 1996,  the Company became engaged  in litigation with
          International  Magnetic  Imagimg,  Inc.,  one  of  its  customers
          regarding the performance of  its enhancement package for several
          MRI systems  sold to  the customer for  approximately $1,500,000.
          The  suit,  entitled  International Magnetic  Imaging,  Inc.  vs.
          Adavanced NMR  Systems, Inc. (Case No.  96-014750(03)), was filed
          in the  Circuit Court  of the  17th Judicial  Circuit in  and for
          Broward  County,  Florida.     The  Company  believes  that  this
          situation  was exacerbated  by  its decision  to discontinue  its
          imaging systems operations.   The Company is seeking an equitable
          resolution  to  the  dispute.   The  outcome  of  this matter  is
          unpredictable,  but the Company  does not believe  that the final
          outcome will have a material effect on the consolidated financial
          position or results of operations of the Company.

          ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
                    ---------------------------------------------------

               No  matters were  submitted to  a vote  of  security holders
          during the last quarter of fiscal year 1996.

          [page break]
                                       PART II
                                       -------

          ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
                    -------------------------------------------------
                    STOCKHOLDER MATTERS
                    -------------------
               (A)   Since  February 1994, the  Company's Common  Stock has
          been included  in the  NASDAQ National  Market  System under  the
          symbol  ANMR.  Trading in the Warrants (NASDAQ:  ANMRW) commenced
          on August 31, 1995, after the closing of the MDI merger.

               The  following table sets  forth the quarterly  high and low
          bid prices for the  Common Stock and the Warrants  as reported by
          NASDAQ  for the  periods indicated.   These  prices are  based on
          quotations between  dealers, and  do not reflect  retail mark-up,
          mark-down or commissions.

          Common Stock                       High      Low
          ------------                       ----      ---
          1996
          ----
          October 1 through December 31      2  1/4    1 1/16
          January 1 through March 31         2 9/16    1
          April 1 through June 30            2         1 3/32
          July 1 through September 30        1 1/4     7/16

          1995
          ----
          January 1 through March 31         3 11/16   2 3/4
          April 1 through June 30            3 1/4     2 1/8
          July 1 through September 30        3 1/16    2 1/32

          1994
          -----
          October 1 through December 31      4 1/4     2 1/4

          Warrants
          --------
          1996
          ----
          October 1 through December 31      9/16       1/8
          January 1 through March 31         15/16      1/2
          April 1 through June 30            3/4        1/4
          July 1 through September 30        3/8        1/8

          1995
          ----
          August 31 through September 30     1/8        1/8

               (B)    On December  31, 1996,  there  were 1,125  holders of
          record of  the Common Stock of the Company.  Since certain of the
          shares of  Common Stock are held  in street name,  it is believed
          that there  are substantial additional beneficial  holders of the
          Company's  Common  Stock.    On December  31,  1996,  there  were
          38,126,204 shares outstanding.

               (C)   The  Company has  paid no dividends  on its  shares of
          Common Stock since its organization in July 1983.  The Company is
          prohibited  from   the  payment  of  cash   dividends  under  the
          provisions of its credit facility with its primary lender.


          ITEM 6.   SELECTED FINANCIAL DATA
                    -----------------------

          Statement of Operations Data:
          -----------------------------

               The  selected  financial  information  for  the  year  ended
          September 30, 1996, the nine months ended September 30, 1995, and
          for each  of the years ended December 31, 1994, 1993 and 1992, is
          derived from the audited financial statements of the Company  and
          its subsidiaries, AMS and MDI.

               This  information  should  be   read  in  conjunction   with
          "Management's Discussion and Analysis of Financial  Condition and
          Results  of Operations"  and the  financial statements  and notes
          thereto included elsewhere in this Form 10-K.


          <PAGE>


                                               Year Ended     Nine Months ended
                            Year Ended     September 30, 1995 September 30, 1995
                        September 30, 1996 ------------------ ------------------
                        ------------------         -                  -
                                              (unaudited)
     Revenues:
      Net patient
      service revenue          $25,480,813         $1,934,322         $1,934,322
       Management fees
       and other                   653,425             40,220             40,220
       revenue                ------------       ------------       ------------
     Total Revenues             26,134,238          1,974,542          1,974,542
                              ------------       ------------       ------------
     Operating
     Expenses:
       Cost of service
       operations               16,205,961          1,203,497          1,203,497
       Research &
       development                      --            940,141            664,786
       Selling, general
       & administrative          4,254,964          2,449,364          2,002,075
       Provision for
       bad debt &                2,126,471            162,377            162,377
       collection costs       ------------       ------------       ------------
     Total Operating
     Expenses                   22,587,396          4,755,379          4,032,735
                              ------------       ------------       ------------
     Income (Loss) from
     Continuing
     Operations                  3,546,842        (2,780,837)        (2,058,193)
     Interest expense          (1,847,910)          (139,020)          (139,020)
     Interest income               212,814            195,191            265,208
     Other Income                  126,263            579,758            579,758
     Minority interest         (1,005,831)            783,520            569,354
     Equity in loss of
     subsidiary                (1,830,880)                 --                 --
     Provision for                (42,288)                 --                 --
     income taxes             ------------       ------------       ------------
     Loss from
     Continuing
     Operations                  (840,990)        (1,361,388)          (782,893)
     Loss from
     operations of
     Discontinued
        Division               (3,928,706)        (2,521,580)          (894,865)
     Loss on Disposal
     of Discontinued
     Division                  (3,510,563)                 --                 --
                              ------------       ------------       ------------
     Net Loss                 $(8,280,259)       $(3,882,968)       $(1,677,758)
                              ============       ============       ============
     Loss Per Share:
       Loss from
       continuing
       operations                   $(.03)             $(.06)             $(.03)
       Loss from
       operations of
       discontinued
       division                      (.13)              (.10)              (.04)
       Loss on disposal
       of discontinued               (.11)                 --                 --
       division               ------------       ------------       ------------
       Net loss per                 $(.27)             $(.16)             $(.07)
       share                  ============       ============       ============
     Weighted average
     number of common           30,583,320         24,020,652         24,243,902
     shares                   ============       ============       ============



                                          Year Ended
                       Nine Months ended December 31,   Year Ended  Year Ended
                         September 30,       1994      December 31,December 31,
                             1994        ------------      1993        1992
                       -----------------     ----      -----------  -----------
                          (unaudited)
     Revenues:
      Net patient    
      service revenue        $         -- $         -- $         -- $         --
      Management fees 
        and other                      --           --           --           --
        revenue              ------------ ------------ ------------ ------------
     Total Revenues                    --           --           --           --
                             ------------ ------------ ------------ ------------
     Operating
     Expenses:
       Cost of
       service
        operations                     --           --           --           --
       Research &     
        development               717,010      992,365      822,994      239,423
       Selling,       
        general &     
       administrative           1,135,531    1,582,820      870,414           --
       Provision for 
        bad debt &
        collection                                                 
        costs                          --           --           --           --
                             ------------ ------------ ------------ ------------
     Total Operating
       Expenses                 1,852,541    2,575,185    1,693,408      239,423
                             ------------ ------------  -----------  -----------
     Income (loss)
     from 
     Continuing
     Operations               (1,852,541)  (2,575,185)  (1,693,408)    (239,423)
     Interest expense                  --           --           --           --
     Interest income              278,497      208,480      170,720           --
     Other Income                      --           --    (801,750)           --
     Minority                                                                   
     interest                     488,799      702,965      414,641           --
     Equity in loss
     of subsidiary                     --           --           --           --
     Provision for 
      income taxes                     --           --           --           --
                             ------------ ------------  -----------  -----------
     Loss from 
     Continuing 
     Operations               (1,085,245)  (1,663,740)  (1,909,797)    (239,423)
     Loss from
     operations of
     Discontinued
     Division                   (256,543)  (1,883,258)  (4,040,764)  (5,253,106)
     Loss on Disposal
     of Discontinued                                               
     Division                          --           --           --           --
                             ------------ ------------  -----------  -----------
     Net Loss                $(1,341,788) $(3,546,998) $(6,166,950) $(5,492,529)
                             ============ ============ ============ ============
     Loss Per Share: 
     Loss from 
       continuing
       operations                  $(.05)       $(.07)       $(.10)       $(.01)
       Loss from
       operations of 
       discoontinued
       division
                                    (.01)        (.08)        (.21)        (.33)
       Loss on
       disposal of   
       discontinued                    --           --           --           --
       division              ------------ ------------ ------------ ------------
       Net loss per
        share                      $(.06)       $(.15)       $(.32)       $(.34)
                             ------------ ------------ ------------ ------------
      Weighted
       average number
       of common               23,543,842   23,603,251   19,184,275   16,157,623
       shares.               ============ ============ ============ ============


     <PAGE>


      BALANCE SHEET DATA:   September    September     December
      -------------------      30,          30,          31,
                              1996          1995         1994
                           -----------  -----------   ----------
      Working Capital      $(6,735,989)  $11,083,145  $ 8,614,161
      (Deficit)
      Total Assets           50,724,530   58,431,709   12,692,152

      Total Liabilities      26,906,107   27,799,636    2,511,853
      Stockholders'          23,818,423   28,017,966    9,698,924
      Equity



      BALANCE SHEET DATA:   December    December
      -------------------     31,          31,
                              1993        1992
                           ----------  ----------
      Working Capital      $12,452,896 $ (759,956)
      (Deficit)
      Total Assets          15,864,126   2,685,896

      Total Liabilities      2,335,099   2,659,378
      Stockholders'         12,551,838      26,518
      Equity


     <PAGE>



     ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
               -------------------------------------------------
               CONDITIONS AND RESULTS OF OPERATIONS
               ------------------------------------
     General
     -------

          The financial statements for the year ended September 30, 1996 include
     a  full  year  of operations  for  the  Company  and  MDI.   The  financial
     statements  for the year  ended September 30,  1995 include a  full year of
     operations for the  Company and AMS  and one month  of operations for  MDI.
     Accordingly,  it is  not  always possible  to  draw meaningful  comparisons
     between  periods ended  September  30,  1996  and 1995.    The  results  of
     operations  for the  year  ended September  30,  1996 are  not  necessarily
     indicative of the results for future periods.

     Fiscal Year Ended September  30, 1996 Compared to Year Ended  September 30,
     --------------------------------------------------------------------------
     1995 (unaudited)
     -----------------
          During fiscal 1996, 1,748,364  shares of AMS Common Stock  were issued
     in connection with the  conversion of convertible debentures issued  in May
     1996.  As a result of these conversions, the Company's percentage ownership
     of AMS  has  been reduced  to  approximately  48% at  September  30,  1996.
     Accordingly, the Company has switched from consolidation of AMS in  1995 to
     the equity method of accounting for fiscal 1996.

          Loss from  operations of  Imaging Systems business segment includes 
     all activity associated with the August  1996 plan to suspend the 
     operations of a significant portion of such segment.  Based on 
     management's periodic  review of  the assumptions used in determining the
     estimated loss from the disposal of the  Imaging Systems business segment,
     the Company  recorded a  provision of $3,510,563 for the loss on disposal
     of the  discontinued business in  the fourth quarter of 1996.

          As a result of the change in accounting method for  the AMS subsidiary
     and the  discontinued Imaging  Systems business  segment,  all fiscal  1996
     revenues  and  operating  expenses  represent  those  of  the  Imaging  and
     Rehabilitation Services business segment exclusively.

          Net  patient service revenue of $25,481,000 for fiscal 1996 represents
     a  full year  of operations  from the  Imaging and  Rehabilitation Services
     business  acquired on  August 31, 1995.  The cost of  service operations of
     $16,206,000 and provision for  bad debt and collection costs  of $2,126,000
     similarly represent a full year of operations of the service  segment.  The
     year ended  September 30, 1995 includes  only one month of  the Imaging and
     Rehabilitation Services business.

          Management  fees  and other  revenues of  $653,000  in fiscal  1996 is
     primarily attributable to fees earned from an entity managed by MDI.

          Selling,   general,  and   administrative   expenses  increased   from
     $2,449,000 to $4,255,000, respectively, from  the year ended September  30,
     1995 to fiscal  1996.   This increase was  primarily due to  a full  twelve
     months  of Imaging  and Rehabilitation  Services operations in  fiscal 1996
     versus  only  one month  in 1995  offset by  the  consolidation of  the AMS
     subsidiary  in  1995 versus  an equity  accounting  for this  subsidiary in
     fiscal 1996.

          Interest expense increased from  $139,000 to $1,848,000 reflecting the
     full twelve months of Imaging and Rehabilitation Services operations during
     fiscal 1996 as  well as  the financing  of the  MDI acquisition,  effective
     August 31, 1995.

          Minority  interests in  net income  of consolidated  MDI entities  for
     fiscal 1996 totaled  $1,006,000.  During the year ended  September 30, 1995
     the minority interests in net loss of consolidated entities included ANMR's
     proportionate share  of  AMS' losses  incurred  in that  period,  partially
     offset by one  months' allocation  of income from  certain subsidiaries  of
     MDI.

          Equity  in loss  of unconsolidated  subsidiary reflects  the Company's
     equity accounting for the AMS subsidiary losses during fiscal 1996.

     Nine  Months Ended  September  30,  1995  Compared  to  Nine  Months  Ended
     ---------------------------------------------------------------------------
     SEPTEMBER 30, 1994, (unaudited)
     --------------------------------

          Net patient  service revenue  for September  30,  1995 represents  one
     month of operations  from the Imaging and  Rehabilitation Services business
     acquired  on August 31, 1995. The  cost of service operations of $1,203,000
     and  provision  for bad  debt and  collection  costs of  $162,000 similarly
     represent one month of operations of MDI.

          Selling,   general,  and   administrative   expenses  increased   from
     $1,136,000 to $2,002,000,  respectively, in  the 1994 and  1995 nine  month
     periods.  This increase was primarily due to the one month of operations of
     MDI,  which  included  an accrual  of  approximately  $500,000  for certain
     severance benefits due to a former executive officer of MDI.

          The decrease  of  $13,000  in  interest income  reflects  the  reduced
     average  cash and short-term investment balances available due to cash used
     in operations and the acquisition of MDI.

          Other  income  of  $580,000  consists  largely  of $392,000  from  the
     cancellation of  certain stock options previously  granted as consideration
     to a consultant and $180,000 in proceeds from an insurance claim.

          Interest  expense  of  $139,000  reflects  the financing  of  the  MDI
     acquisition, effective August 31, 1995 and MDI's one month of operations.

          The increased allocation of losses to minority interests is due to the
     increase of the minority shareholders percentage ownership of AMS from 1994
     as  a  result of  the exercise  of $3.2  million  in warrants  and options,
     partially  offset  by  one  months'  allocation  of  income  from   certain
     subsidiaries of MDI.

          Loss from  operations of Imaging Systems business segment includes
     all activity associated with the August 1996 plan to suspend the 
     operations of a significant portion of such segment. 

     Liquidity and Capital Resources
     -------------------------------

          The Company has available  cash and cash equivalents of  $3,288,000 at
     September  30, 1996  (including $1,451,000  at MDI).   As  part of  the MDI
     acquisition, the Company  entered into a $15,000,000  bank credit facility,
     consisting  of a $6,000,000 revolving  credit loan which  matures in August
     1998,  and a  $9,000,000 term  loan  which expires  in August  2001. As  of
     December  31, 1996,  $5,555,000 of  the revolving  loan has  been utilized,
     including  $1,200,000  for letters  of  credit securing  certain  MRI units
     operated by MDI, and the term loan has a balance of $7,500,000.

          In May 1996, ANMR closed a private placement (the "Placement") of $3.7
     million  principal amount  of newly  issued Series A  Convertible Preferred
     Stock,  $.01  par   value,  (the  "Preferred  Stock").     Preferred  Stock
     shareholders are  entitled to  receive dividends  at a rate  of $40.00  per
     share  per annum, when  and as declared  by the  Board of Directors  of the
     Company.  At  December 31,  1996, approximately 2,200  shares of  Preferred
     Stock were still outstanding  after certain conversions.  The  net proceeds
     from the Placement of  approximately $3,320,000, after payment of  fees and
     related expenses, is being used for working capital.

          In May 1996,  AMS closed a private placement (the  "AMS Placement") of
     $3 million principal 4% convertible debentures.   Net proceeds from the AMS
     Placement was approximately  $2,752,000 after payment  of fees and  related
     expenses.   As of  September 30, 1996,  an additional  1,748,364 shares  of
     common  stock had  been issued in  connection with the  conversion of these
     debentures  whereby  the Company's  percentage  ownership of  AMS  has been
     reduced  to  approximately 48%  at September  30,  1996.   Accordingly, the
     Company  has switched from  consolidation of  AMS to  the equity  method of
     accounting for its investment in AMS.

          The  Significant Cash  Flows from  operating activities  for the  year
     ended September 30, 1996 include non-cash  adjustments for the discontinued
     operations totaling $3,511,000 as well as the  Company's equity in the loss
     of the AMS Subsidiary of $1,831,000.  Net cash used in investing activities
     reflects the reduction  of cash associated  with the formerly  consolidated
     AMS  Subsidiary  totaling  $1,833,000.   Net  cash  provided  by  financing
     activities reflects the proceeds from the issuance of convertible preferred
     stock totaling $3,317,000.

          The Company currently funds its operations principally through the use
     of  cash  obtained  from a  private  equity  placement.   The  Company  has
     had discussions  and negotiations with several companies in connection with
     the disposition  of significant portions of its  Imaging business,  and 
     these  negotiations and discussions  are  continuing.   Any  proceeds from
     such  disposition should generate  sufficient  cash to  repay the bank 
     credit facility and meet its other obligations as they come due through 
     fiscal 1997.  However, there can be no assurance that an agreement 
     would  be entered into or that any of the transactions contemplated by 
     such an agreement would be consummated.  See Independent Auditor's Report
     on page  F-2 and Note C to the financial statements on page F-11.

     Inflation
     ---------
          To  date, inflation  has not  had a material  effect on  the Company's
     business.  The Company believes that the effects of future inflation may be
     minimized  by  controlling  costs  and  increasing  efficiency  through  an
     increase in the volume of MRI examinations performed.

          The  Company is  including the following  cautionary statement  in its
     Annual Report  on Form 10-K  to make applicable  and take advantage  of the
     safe harbor provisions of  the Private Securities Litigation Reform  Act of
     1995  for any  forward-looking  statements made  by, or  on  behalf of  the
     Company.  Forward-looking  statements include statements concerning  plans,
     objectives, goals, strategies, future  events or performance and underlying
     assumptions  and  other statements  which  are  other  than  statements  of
     historical facts.  Certain statements  contained herein are forward looking
     statements  and accordingly  involve  risks and  uncertainties which  could
     cause  actual results or outcomes to differ materially from those expressed
     in the forward-looking statements.  The Company's expectations, beliefs and
     projects are expressed  in good faith   and are believed by  the Company to
     have  a  reasonable  basis,  including  without  limitations,  management's
     examination of historical operating trends, data contained in the Company's
     records and  other data available from  third parties, but there  can be no
     assurance  that  management's  expectations,  beliefs  or  projections will
     result or  be achieved or accomplished.   In addition to  other factors and
     matters  discussed elsewhere  herein, the  following are  important factors
     that,  in the  view of the  Company, could  cause actual  results to differ
     materially  from  those  discussed   in  the  forward-looking   statements:
     technological advances by the Company's competitors, changes in health care
     reform, including reimbursement programs, capital needs  to fund any delays
     or  extensions of research programs, delays in product development, lack of
     market  acceptance of technology and  the availability of  capital on terms
     satisfactory  to  the Company.   The  Company  disclaims any  obligation to
     update any  forward-looking statements  to reflect events  or circumstances
     after the date hereof.

     ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
               -------------------------------------------
          See  Item 14  and the  Index therein  for a  listing of  the financial
     statements and supplementary data as a part of this report.


     ITEM 9.   CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON
               ---------------------------------------------
               ACCOUNTING AND FINANCIAL DISCLOSURE.
               ------------------------------------

          No  change  in the  Registrant's  accountants occurred  during  the 24
     months  prior to  the  date  of  the  Registrant's  most  recent  financial
     statements, nor did  any disagreements  occur on any  matter of  accounting
     principles or  practices or  financial statement  disclosure that would  be
     required to be reported on a Form 8-K.

 [page break]

                                       PART III
                                       --------

     ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
               --------------------------------------------------

          The directors and executive officers of the Company are:


     Name                     Age       Position
     -----                    ---       --------

     Jack Nelson(1)(4)        46        Chairman of the Board,
                                        Chief Executive Officer
                                        and Treasurer 

     Robert Spira, MD(1)
                  (3)(4)      48        Vice Chairman of the Board

     Enrique Levy (1)(4)      59        President, Chief Operating Officer
                                        and Director

     Charles Moche            47        Chief Financial Officer

     Robert Kwolyk            49        Vice President, Sales and Marketing

     George Aaron(2)(3)       44        Director

     David Gaynor             47        Director

     Sol Triebwasser, PhD(2)  75        Director
     ____________________
     (1)  Member of the Executive Committee.
     (2)  Member of the Audit Committee.
     (3)  Member of the Compensation/Option Committee.
     (4)  Member of the Strategic Development Committee

          The  principal occupations and brief summary of the background of each
     Director  and executive officer  of ANMR during  the past five  years is as
     follows:

          Jack Nelson.  
          -----------    Mr. Nelson has  been Chairman of  the Board since  June
     1991 and  Treasurer since November 1990.  He  has also been Chairman of the
     Board of AMS since its formation in July 1992.  From 1976 through 1993, Mr.
     Nelson had  been engaged in the  private practice of law  as senior partner
     with the  law firm of Zaslowsky,  Marx & Nelson  in New York, New  York for
     more than five  years prior to December 31,  1993.  Since January  1994, he
     has  been employed full-time with the Company  and AMS.  Mr. Nelson holds a
     B.A. degree from Yeshiva University and J.D. degree from Hofstra University
     School of Law.  Mr. Nelson serves on the Board of Directors of ARC Capital,
     a publicly traded company (NASDAQ: ARCCA).

          Robert Spira, M.D. 
          ------------------  Dr. Spira has been a director of the Company since
     September  1990, and Vice Chairman since February  1994, and a director and
     Vice  Chairman of AMS since  August 1992.  Since  October 1992, he has been
     the Director of the Department of Gastroenterology at St. Michael's Medical
     Center in Newark,  New Jersey, and for more than  five years prior thereto,
     he served as Chief  of Gastrointestinal Endoscopy at St.  Michael's Medical
     Center.   Dr. Spira is a graduate of New  York University Medical School, a
     past president of the New Jersey Society for Gastrointestinal Endoscopy and
     President-elect of the New  Jersey Society of Gastroenterology.   Dr. Spira
     is a graduate of New York University School of Medicine.

          Enrique Levy.  
          ------------   Mr. Levy has been President and Chief Operating Officer
     of ANMR and  AMS since October 1995  and a Director  of ANMR and AMS  since
     August  31,  1995.    From  May  1994  to  October  1995  he  was  Manager,
     Manufacturing for Xerox  Graphic Systems, the manufacturer of Verde Digital
     Recording Film, Purchase, New York, a  venture of Xerox Corporation.   From
     April  1989 to  May  1994, he  was Executive  Vice  President of  Worldwide
     Process Technologies,  Allendale, New  Jersey, a manufacturer  of machinery
     and  equipment for the web handling  and film and paper coating industries.
     He   holds  a  B.S.  in  Chemical  Engineering  from  the  Louisiana  State
     University.

          Charles Moche, CPA.  
          ------------------   Mr. Moche has been Chief Financial Officer of the
     Company and AMS since January 1, 1994.   He has practiced accounting in New
     York with a concentration on  tax planning and auditing from 1987  to 1993.
     He is a member of the  American Institute of Certified Public  Accountants,
     the New York State  Society of CPA's, and  the Board of Accountancy  of the
     State of New  Jersey Consumer Affairs Division.  Mr. Moche  holds an MBA in
     Accountancy  from the Bernard M. Baruch  Graduate School of Business, and a
     BA  in  Economics  from  Yeshiva  University.    He  received  an  Advanced
     Certificate Degree in Taxation from the New York University Graduate School
     of Business.

          Robert Kwolyk.  
          --------------    Mr.  Kwolyk  has  been  Vice  President,  Sales  and
     Marketing  since May 1, 1994.  From 1988 through 1994, Mr. Kwolyk served as
     Manager, MR Sales Planning  and Sales Support and subsequently  Manager, MR
     Market  Development  of  General  Electric  Medical Systems.    Mr.  Kwolyk
     received  his B.S.  in  Electrical Engineering  from  Stevens Institute  of
     Technology.

          George Aaron.  
          ------------   Mr. Aaron has been  a director of both  the Company and
     AMS since August 1992.  He is  the President of Portman Group Inc. in  Fort
     Lee, New Jersey, an investment and consulting firm  primarily in the health
     care and  consumer goods industries, which he co-founded in  1981.  He is a
     founder, President and Chief  Operating Officer of Portman Pharmaceuticals,
     Inc., which is engaged in the  research and development of therapeutic  and
     diagnostic  products for autoimmune diseases and immunomodulation.  He also
     serves in various capacities with other private  health care companies.  He
     is a graduate of the University of Maryland.

          David Gaynor.
          ------------    Mr. Gaynor  joined MDI as  Vice President for  Project
     Implementation  in April 1988, has served as MDI's Executive Vice President
     and  Chief  Operating Officer  August 1988  through  December 1995  when he
     became President  of MDI.  From  October 1986 to December  1987, Mr. Gaynor
     served as  Chief Executive  Office of  Wellcare  of New  England, a  Health
     Maintenance  Organization ("HMO").    Mr. Gaynor  holds  a B.A.  degree  in
     English  Literature from Manhattan College  and a Masters  degree in Health
     and Hospital Administration from Cornell University.

          Sol Triebwasser, Ph.D. 
          ----------------------   Dr.  Triebwasser has  been a director  of the
     Company since July  1984 and a  director of AMS  since August 1992.   Until
     recently,  Dr.   Triebwasser  was   Director  of  Technical   Journals  and
     Professional  Relations for  the  IBM Corporation  in Thornwood,  New York.
     Since receiving  his Ph.D. in physics from Columbia in 1952, he had managed
     various  projects  in  device  research  and  applications  at  IBM.    Dr.
     Triebwasser  is a  fellow of  the Institute  for Electrical  and Electronic
     Engineers, the American Physical Society  and the American Association  for
     the Advancement of Science.

          All  directors   hold  office  until   the  next  annual   meeting  of
     stockholders  of  the Company  or until  their  successors are  elected and
     qualified.   Executive  officers  hold office  until  their successors  are
     chosen and qualified, subject to earlier removal by the Board of Directors.
     See   Item  12.  Security  Ownership   of  Certain  Beneficial  Owners  and
     Management.
          ---------------------------------------------------------------

          The  Board  of  Directors met,  either  in  person  or telephonically,
     eighteen  times  in  fiscal  1996.    Each of  the  directors  attended  or
     participated in 75% or more of the meetings.

          The  Executive Committee exercises all the powers and authority of the
     Board of Directors  in the  management and affairs  of the Company  between
     meetings of the  Board of Directors, to the  extent permitted by law.   The
     executive committee met four times during fiscal 1996.

          The Audit Committee reviews with the Company's independent accountants
     the scope  and timing  of the  accountants' audit  services  and any  other
     services they are asked to perform, their report on the Company's financial
     statements  following completion of their audit  and the Company's policies
     and  procedures with respect to internal accounting and financial controls.
     In   addition,  the  Audit  Committee   reviews  the  independence  of  the
     independent  public accountants  and  makes annual  recommendations to  the
     Board  of Directors for  the appointment of  independent public accountants
     for the ensuing year.  The Audit Committee met twice in fiscal 1996.

          The Compensation/Option Committee reviews  and recommends to the Board
     of  Directors the compensation and benefits of all officers of the Company,
     reviews general  policy matters relating  to compensation  and benefits  of
     employees  of the Company and administers the Company's Stock Option Plans.
     The Compensation/Option Committee met once in fiscal 1996.

          The  Strategic Development  Committee  reviews and  recommends to  the
     Board  of  Directors major  business prospects  and  future planning  as to
     products,  marketing  and joint  ventures.   The  Committee met  four times
     during fiscal 1996.

     ITEM 11.  EXECUTIVE COMPENSATION
               ----------------------

          The following table sets forth the aggregate cash compensation paid by
     the  Company to (i)  its Chief Executive  Officer and (ii)  its most highly
     compensated officers whose cash compensation exceeded $100,000 for services
     performed  during the  year  ended  September 30,  1996.   The  Company  is
     reimbursed by AMS for a  portion of the executive salaries pursuant  to the
     Shared Services Agreement.


     <PAGE>


                             Annual Compensation
                          -------------------------

      Name and Principal           Salary    Bonus   Other Annual
           Position        Year      ($)      ($)    Compensation
      ------------------  ------- --------  -------  ------------

      Jack Nelson(1)     1996(4)  $234,999   $50,000      -0-
      Chairman and CEO   1995      176,250       -0-      -0-
                         1994      239,853       -0-      -0-
      Enrique Levy(5)    1996(4)   246,346       -0-      -0-
      President & COO


      David Gaynor(2)    1996(4)   212,538       -0-      -0-
      President, MDI

      Robert Kwolyk      1996(4)   170,769       -0-      -0-

      VP, Sales &        1995      109,615       -0-      -0-
      Marketing


                                 Long-Term Compensation
                              ---------------------------
                               Awards              Payouts
                             ----------            -------
                             Restricted    Stock
                                Stock     Options    LTIP     All Other
        Name and Principal    Award(s)   Award(s)  Payouts  Compensation
             Position            ($)        (#)      ($)         ($)
      ---------------------  ----------  --------  -------  ------------
      Jack Nelson(1)             -0-      250,000    -0-      $16,200(3)

      Chairman and CEO           -0-          -0-    -0-       12,150(3)
                                 -0-      300,000    -0-       18,900(3)
      Enrique Levy(5)            -0-          -0-    -0-        8,400(3)
      President & COO


      David Gaynor(2)            -0-      150,000    -0-        6,000(3)
      President, MDI

      Robert Kwolyk              -0-          -0-    -0-             -0-

      VP, Sales & Marketing      -0-          -0-    -0-        4,500(3)

     (1)  Mr. Nelson became a full-time employee beginning January 1, 1994.

     (2)  Mr. Gaynor became President of MDI beginning December 1, 1995.

     (3)  Paid  to  Mr.   Nelson  for  the  purpose   of  reimbursing  him   for
          transportation  and other  expenses; and  to Messrs. Levy,  Gaynor and
          Kwolyk for the purpose of reimbursing them for transportation.

     (4)  Salary, all  other compensation and  stock options awarded  during the
          year ended September 30, 1996.

     (5)  Mr. Levy  became President  and COO  beginning October 1,  1995.   Mr.
          Levy's salary includes a "signing" bonus of $30,000.

     Employment Agreements
     ---------------------
          As of  December  20,  1995, both  the  Company and  AMS  entered  into
     employment   agreements  with   Jack   Nelson   (the   "Nelson   Employment
     Agreements"), employing  him  as Chairman  of  the Board,  Chief  Executive
     Officer and Treasurer of the Company and AMS, respectively through December
     31, 2000 at an  aggregate base salary of $235,000,  with a 10% increase  in
     base salary from  both companies effective during the  second year and with
     any additional  increases in  base  salary from  both companies  thereafter
     being  instituted by the Board of Directors  subject to the Company meeting
     revenue and net income budget projections.

          Mr.  Nelson was  granted  options to  purchase 250,000  shares  of the
     Company's Common Stock, with  50,000 shares to vest  each year. AMS did not
     grant any stock options as part  of Mr. Nelson's employment agreement  with
     AMS.  The  Nelson Employment Agreements further provide that  if Mr. Nelson
     terminates his employment "for  cause" or the Company  or AMS, as the  case
     may be,  terminates his employment  "without cause" (as  each such  term is
     defined in the Nelson Employment Agreements), or upon Mr. Nelson's death or
     disability, Mr. Nelson  or his representative shall receive his annual base
     salary as paid by the Company or AMS, as the case may be for two full years
     from  the date  of his  termination, less  any amounts  received under  the
     Company's or AMS' insurance  policies, as the  case may be.   In the  event
     that the Company  or AMS, as the  case may be,  without the consent of  Mr.
     Nelson,  assigns its  rights  and obligations  under either  of  the Nelson
     Employment Agreements to any company with or into  which the Company or AMS
     may merge  or  consolidate, or  to which  the Company  or AMS  may sell  or
     transfer all or  substantially all of its assets or of which 50% or more of
     the  equity investment  and  of the  voting control  is owned,  directly or
     indirectly,  by the Company or AMS, and  if the assignee was not previously
     part of a consolidated group with  the Company or AMS, then Mr. Nelson  may
     terminate  the applicable  Nelson Employment  Agreement within  thirty days
     after notice of assignment, and he shall receive 2.99 times his full annual
     base salary  plus any bonuses,  but not to  exceed such amount  which would
     result in an excise tax.  

          As of September 1995, the Company entered into an Employment Agreement
     with  Enrique  Levy (the  "Levy  Employment Agreement"),  employing  him as
     President  and Chief Operating Officer of the Company commencing October 1,
     1995,  through December 31,  2000, at a  base salary of  $225,000 per annum
     with  a 10% increase in base salary  effective during the second year, with
     any  additional increases during  the third, fourth  and fifth  years to be
     based upon increasing  net income of the  Company and AMS in excess  of the
     annual  budgeted net  income of  the respective companies.   Mr.  Levy also
     received a $30,000 "signing" bonus and  is entitled to receive annual  cash
     bonuses based upon Mr. Levy's overall performance including a comparison of
     the  actual annual  financial results  of each  of the  Company and  AMS as
     compared to budgets for  the year.   Mr. Levy was  also granted options  to
     purchase (i) 250,000 shares of the Common Stock of the Company to vest over
     a three year period and  (ii) 100,000 shares of Common Stock of AMS to vest
     over  a three year period.  The  Levy Employment Agreement further provides
     that  if Mr.  Levy terminates  his employment  "for cause"  or the  Company
     terminates his employment "without cause"  (as such term is defined in  the
     Levy Employment Agreement),  or upon  Mr. Levy's death  or disability,  Mr.
     Levy or  his representative shall  receive his annual  base salary for  two
     full  years from  the date  of his  termination, less any  amounts received
     under the  Company's insurance policies.   In  the event that  the Company,
     without the consent of  Mr. Levy, assigns its rights and  obligations under
     the Levy Employment Agreement to any company with or into which the Company
     may merge or consolidate, or to which the Company may  sell or transfer all
     or substantially all  of its assets or  of which 50% or more  of the equity
     investment  and of the voting control is  owned, directly or indirectly, by
     the Company, and if the assignee  was not previously part of a consolidated
     group  with the Company,  then Mr. Levy  may terminate  the Levy Employment
     Agreement  within  thirty days  after notice  of  assignment, and  he shall
     receive 2.99 times his full annual base salary plus any bonuses, but not to
     exceed such amount  which would result in an  excise tax.  AMS pays  50% of
     all compensation paid to Mr. Levy pursuant to the Company's Shared Services
     Agreement with AMS.

          On November 1,  1996, each  member of senior  management accepted  the
     opportunity to  have the exercise price  of all outstanding   stock options
     held by them repriced to the market price of the  Company's Common Stock as
     of August 22, 1996 ($0.50) if, in exchange for such  repricing, such member
     of senior  management agreed to  defer 17% of his  salary for one  year, at
     which time  the Compensation  Committee would determine  whether additional
     deferrals  were necessary.  Messrs.  Nelson, Levy and  Gaynor agreed to the
     repricing of  options  held by  them on  such terms.   See  "Report of  the
     Compensation  Committee of the Board of Directors on Executive Compensation
     and Repricing of Options.", below.

          As of December 1, 1995, MDI entered into an Employment Agreement  with
     David  Gaynor  (the  "Gaynor   Employment  Agreement"),  employing  him  as
     President of MDI through  June 30, 1999, at a  base salary of $225,000  per
     annum.   The base salary is increased by  10% without any conditions on the
     first  anniversary  and  a  minimum  10%   increase  subject  to  achieving
     performance  targets on each anniversary  thereafter during its  term.  Mr.
     Gaynor is entitled to  receive a bonus if MDI  achieves performance targets
     and  as  determined by  the  Board  or the  Compensation  Committee of  the
     Company.  Mr.  Gaynor was also granted options under  the ANMR Stock Option
     Plan for the purchase  of 150,000 shares of ANMR Common  Stock, exercisable
     over five years and with one-third of the shares on the date of  the Gaynor
     Employment Agreement  and one-third to vest  of the shares to  vest on each
     successive anniversary of the  same date.  The Gaynor  Employment Agreement
     further provides that if the Company terminates his employment "for cause",
     Mr. Gaynor is  not entitled to any compensation other  than his base salary
     through the date of termination.  If the Company terminates  his employment
     "without cause" or if Mr. Gaynor terminates his employment "for cause", Mr.
     Gaynor shall receive his annual base  salary for two full years in addition
     to  health insurance  coverage for  one year  and any  outstanding invested
     stock  options would be exercisable for a  period of twelve months from the
     date of  termination.   In the  event of Mr.  Gaynor's death,  Mr. Gaynor's
     estate  is entitled to his annual  base salary for one year.   In the event
     that  the Company  assigns  its rights  and  obligations under  the  Gaynor
     Employment Agreement  to any  company with  or into  which the Company  may
     merge, or  to which the Company  may sell or transfer  all or substantially
     all of its assets or  of which 50% or more of the equity  investment and of
     the voting control  is owned, directly  or indirectly, by  the Company,  or
     there  is a complete or  substantial liquidation or  dissolution of MDI, or
     the  sale of  all or  substantially all  of the  assets of  MDI and  if the
     assignee was not previously part of  a consolidated group with the Company,
     then  Mr. Gaynor may terminate the Gaynor Employment Agreement within sixty
     days  after notice of assignment, and he  shall receive 2.99 times his full
     annual base  salary plus any bonuses,  but not to exceed  such amount which
     would result in an excise tax.

          As of  May 1, 1994, the  Company entered into an  Employment Agreement
     with  Robert Kwolyk (the  "Kwolyk Employment Agreement"),  employing him as
     Vice President, Sales and Marketing of the Company through April  30, 1997,
     at  a base salary  of $150,000  per annum with  a $15,000  increase in base
     salary  effective on  each anniversary  during its  term.  Mr.  Kwolyk also
     received a $20,800  "signing" bonus and is entitled to  receive annual cash
     bonuses  based upon the recommendation  of the Compensation  Committee.  No
     bonuses were awarded for 1994 or 1995.  Mr. Kwolyk was also granted options
     to purchase (i)  200,000 shares of the Common Stock of  the Company to vest
     over a three year period and  (ii) 50,000 shares of Common Stock of  AMS to
     vest over a  three year  period.  The  Kwolyk Employment Agreement  further
     provides that  if Mr. Kwolyk terminates  his employment "for cause"  or the
     Company  terminates his employment "without cause" (as such term is defined
     in  the Kwolyk  Employment  Agreement),  or  upon  Mr.  Kwolyk's  death  or
     disability,  Mr. Kwolyk or his representative shall receive his annual base
     salary  for two  full years  from  the date  of his  termination, less  any
     amounts received under the Company's insurance policies.  In the event that
     the Company, without  the consent  of Mr.  Kwolyk, assigns  its rights  and
     obligations  under the Kwolyk Employment  Agreement to any  company with or
     into which  the Company may merge  or consolidate, or to  which the Company
     may sell or transfer all or substantially all of its assets or of which 50%
     or  more of  the equity  investment  and of  the voting  control is  owned,
     directly  or indirectly,  by  the  Company, and  if  the  assignee was  not
     previously part of a consolidated  group with the Company, then Mr.  Kwolyk
     may  terminate the  Kwolyk  Employment Agreement  within thirty  days after
     notice of  assignment, and he shall receive 2.99 times his full annual base
     salary  plus any bonuses, but not to  exceed such amount which would result
     in an excise tax.

          The Company does not have any annuity, retirement, pension or deferred
     compensation plan or other  arrangement under which any executive  officers
     are  entitled  to  participate   without  similar  participation  by  other
     employees.

     STOCK OPTIONS
     -------------

          In 1983,  the  Company adopted  an Incentive  and Non-Qualified  Stock
     Option  Plan  (the "1983  Plan")  (which  was amended  and  restated  as of
     February  1, 1988), which provided for  the granting of options to purchase
     not  more than 1,000,000  shares of Common  Stock.  The  options could have
     been "incentive stock options"  within the meaning of the  Internal Revenue
     Code of  1986 as  amended (the  "Code"), or non-qualified.   The  1983 Plan
     terminated on June 29, 1993.  Options for an aggregate of 152,090 shares of
     Common   Stock  at  exercise  prices  ranging  from  $0.50  to  $3.15  were
     outstanding under the 1983 Plan as of December 31, 1996.

          In November 1993, the  Company adopted the 1993 Employee  Stock Option
     Plan (the  "1993 Employee Plan") and  the 1993 Directors Stock  Option Plan
     for Non-Employee Directors (the "1993 Directors Plan").

          1993 EMPLOYEE STOCK OPTION PLAN

          The 1993  Employee Plan is open  to all employees and  officers of the
     Company, and certain advisors or consultants  to the Company as selected by
     the Option Committee, which administers the Plan.   This Plan includes Non-
     Qualified  Options and  Incentive Options, as  denominated under  the Code.
     The maximum number  of shares of  Common Stock which  may be issued  by the
     Company under the 1993 Employee Plan is 2,250,000 shares.

          The  Option Committee  determines,  subject to  the provisions  of the
     Plan,  to whom options  are granted, the  number of shares  of Common Stock
     subject  to option  and whether  or  not options  shall be  incentive stock
     options  or non-qualified stock options.   The exercise  price of incentive
     stock options granted under the Plan must be at least equal the fair market
     value (110% of the fair market value if the recipient owns more than 10% of
     the combined  voting  power of  all  classes of  outstanding stock  of  the
     Company ("10%  Stockholder")) of the Common Stock on the date of the grant.
     The aggregate fair market value (determined as of the date of the grant) of
     the shares of  Common Stock with respect  to which incentive  stock options
     are exercisable  for the first time by an employee during any calendar year
     may not exceed $100,000.   The exercise price of non-qualified  options may
     not  be  less than  such  fair market  value.   As  of  December  31, 1996,
     incentive and  non-qualified  stock options  to  purchase an  aggregate  of
     1,920,688 shares  of Common Stock at per share exercise prices ranging from
     $0.50 to $4.255  were outstanding under the Plan, and  no options have been
     exercised under this Plan.

          Options and warrants  assumed in  the MDI Merger  are exercisable  for
     ANMR Common Stock and warrants to purchase ANMR Common Stock.

          1993 DIRECTORS STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS

          The 1993 Directors Plan  covers all directors  of the Company who  are
     not employees of the Company.  In 1994, this Plan was amended to reduce the
     number  of options to  15,000 shares from  25,000 shares of  Common Stock a
     person  is granted upon becoming  a director, and  10,000 shares thereafter
     annually if  such person has been a  director of the Company  for more than
     six  months.  The maximum  number of shares  which may be  issued under the
     1993 Directors  Plan  is  625,000.    At  December  31,  1996,  there  were
     outstanding options under this Plan for  the purchase of 180,000 shares  of
     Common Stock at per share exercise price of $0.50.

          OTHER STOCK OPTIONS

          In  addition to  the above  plans, at  December  31, 1996,  there were
     outstanding options  and warrants to  purchase 1,366,698  shares of  Common
     Stock at prices  ranging from $0.50 to $3.75 per  share exercisable through
     March 2005.

         -------------------------------------------------------------------
                        OPTION/SAR GRANTS IN LAST FISCAL YEAR

                                         Individual
                                           Grants
              (a)             (b)           (c)          (d)          (e)

                           Number of     % of Total
                          Securities    Options/SARs   Exercise
                          Underlying     Granted to    on Base
                         Options/SARs   Employees in    Price     Expiration
              Name        Granted (#)   Fiscal Year     ($/Sh)       Date

         -------------------------------------------------------------------
         Jack Nelson        250,000         62.5        $.50      12/20/2000


         Enrique Levy           -0-



         David Gaynor       150,000         37.5        $.50      12/01/2000


         Robert Kwolyk          -0-



         -----------------------------------------------------------
                    OPTION/SAR GRANTS IN LAST FISCAL YEAR

                                 Potential Realizable      Alternativ
                                Value at Assumed Annual     e to (f)
                                 Rates of Stock Price       and (g)
                                Appreciation for Option    Grant Date
                                         Term                Value

                 (a)               (f)           (g)          (h)

                                                           Grant Date
                                                            Present
                Name             5% ($)        10% ($)      Value $
         ------------------------------------------------------------

         Jack Nelson            $27,000      $58,000


         Enrique Levy


         David Gaynor           $16,000      $35,000



         Robert Kwolyk



        <PAGE>


           ---------------------------------------------------------------
                             FISCAL YEAR END OPTION VALUE

                                                             VALUE OF
                                NUMBER OF UNEXERCISED     UNEXERCISED IN-
                                 OPTIONS AT SEPT. 30,    THE-MONEY OPTIONS
                                  1996 EXERCISABLE/      AT SEPT. 30, 1996
           NAME                     UNEXERCISABLE           EXERCISABLE
           ----                 ----------------------   -----------------


           Jack Nelson . . .       250,000/250,000             $-0-


           David Gaynor  . .        191,791/50,000              -0-


           Robert Kwolyk . .        133,333/66,667              -0-



           Enrique Levy  . .        83,333/166,667              -0-


          <PAGE>



          REPORT OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS ON
          EXECUTIVE COMPENSATION AND THE REPRICING OF OPTIONS

               The Compensation  Committee of  the Board of  Directors (the
          "Committee") establishes the general compensation policies of the
          Company,   establishes  the   compensation  plans   and  specific
          compensation levels for  executive officers, and  administers the
          Employee and Directors Plans.   The Committee is composed  of two
          independent, non-employee Directors.

               The Committee  believes that  the chief  executive officer's
          ("CEO") compensation and the compensation of the  officers of the
          Company  should be  heavily  influenced  by Company  performance.
          Stock  options  are  granted to  the  CEO  and  other executives,
          primarily  based upon  the executive's  ability to  influence the
          Company's long term growth.  In addition, the Committee considers
          factors  such as relative  Company performance,  the individual's
          past  performance  and  future   potential  in  establishing  the
          compensation levels and stock option awards.

               During  1996 the  Committee  considered that  fact that  the
          exercise price for existing stock options for executive officers,
          employees,  current directors  and  consultants  of  the  Company
          granted  in prior  years  had become  considerably  in excess  of
          market prices for the Company's Common Stock and that as a result
          such  options  did  not  provide  the  holders  with the  desired
          incentive  of  linking  their  long term  compensation  with  the
          performance  goals   of  the   Company's   stockholders.     This
          consideration along with the Committee's consideration of certain
          cash  pressures  experienced  by   the  Company  which   prohibit
          increases in cash compensation of executive officers lead to  the
          Committee's  recommendation  that  previously issued  options  be
          canceled  and reissued  at exercise  prices close  to the  market
          value of the Company's Common Stock.

               As  a result,  in August  1996 the  Committee and  the Board
          approved the  cancellation and  reissuance of certain  previously
          issued options  held by current executive  officers and directors
          on the following  terms.   Each member of  senior management  was
          given  the  opportunity  to  have  the  exercise  price  of   all
          outstanding  stock options  held by  them repriced to  the market
          price of the Company's common stock as of August 22,  1996 ($.50)
          if,  in  exchange  for  such  repricing, such  member  of  senior
          management agreed to  defer 30.00% of his salary for one year, at
          which time  the  Compensation Committee  would determine  whether
          additional deferrals  were necessary.   Messrs. Nelson,  Levy and
          Moche agreed to the repricing of the options held by them on such
          terms and  Dr.  Roemer did  not  accept such  offer.   Each  non-
          employee director  of the Company was also  given the opportunity
          to  have  the exercise  price of  options  presently held  by him
          repriced to the market price of the Corporation's Common Stock as
          of  August  22, 1996  if, in  exchange  for such  repricing, such
          director agreed to forego  the $10,000 board fee.   All incumbent
          non-employee directors  agreed to the repricing  of their options
          on such terms.

               The  Committee and the Board  felt that the  deferral in the
          salaries  of the  executive officers and  the elimination  of the
          board  fee in exchange for repricing of options held by executive
          officers and  directors, respectively, was  the best way  for the
          Company  to  continue  to  provide  incentive  to  its  executive
          officers  and  directors   while  simultaneously  addressing  the
          Company's cash pressures by reducing payroll expenses.

          Respectfully submitted,
          THE COMPENSATION COMMITTEE
          Robert Spira
          George Aaron

           ----------------------------------------------------------------
                            10-YEAR OPTION/SAR REPRICINGS
                                      Number of
                                      Securities  Market Price   Exercise
                                      Underlying  Of Stock At    Price At
                                     Options/SARs   Time Of      Time Of
                                     Repriced Or  Repricing Or Repricing Or
                                       Amended     Amendment    Amendment
               Name         Date         (#)          ($)          ($)
               (a)          (b)          (c)          (d)          (e)

           ----------------------------------------------------------------
           Jack Nelson,   8/22/96         250,000          .50         3.13
           CEO            8/22/96         250,000          .50         1.16
           ----------------------------------------------------------------
           Enrique
           Levy,
           President &
           COO            8/22/96         250,000          .50         2.06

           ----------------------------------------------------------------
           David Gaynor   8/22/96          23,840          .50         1.75
                          8/22/96          20,267          .50         2.01
                          8/22/96          47,684          .50         1.45
                          8/22/96         150,000          .50         1.28




           -------------------------------------------------------------
                           10-YEAR OPTION/SAR REPRICINGS
                                                            Length Of
                                                         Original Option
                                                         Term Remaining
                                              New          At Date Of
                                            Exercise      Repricing Or
                       Name                  Price          Amendment
                        (a)                   (f)              (g)
           -------------------------------------------------------------

           Jack Nelson, CEO                   .50           02/09/98
                                              .50           12/20/00

           -------------------------------------------------------------
           Enrique Levy, President &
           COO                                .50           10/04/00
           -------------------------------------------------------------

           David Gaynor                       .50           08/09/01
                                              .50           11/20/02
                                              .50           12/16/03
                                              .50           12/01/00



          ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                    -------------------------------------------------------
                    MANAGEMENT
                    ----------

               The  following table  sets forth, as  of December  31, 1996,
          certain information regarding the  beneficial ownership of Common
          Stock  by (i)  each person  who is  known by  the Company  to own
          beneficially  more than  five percent  of the  outstanding Common
          Stock, (ii) each director of the Company, and (iii) all directors
          and executive officers as a group:

          [page break]
                                                Amount and    Percentage
                                  Position       Nature of        of
           Name and Address         with        Beneficial      Common
           Of Beneficial Owner    Company      Ownership (1)     Stock
           ------------------    ----------    -------------   ---------
           J. Morton Davis     None           1,562,142 (2)      4.1%
           44 Wall Street
           New York, NY 10005


           D.H. Blair          None           1,562,142 (2)      4.1%
           Holdings, Inc.
           44 Wall Street
           New York, NY 10005

           Jack Nelson         Chairmand of     300,000 (3)       .8%
                               the
                               Board; Chief
                               Executive
                               Officer
                               Treasurer
           Enrique Levy        President;         83,333(4)       .2%
                               Chief
                               Operating
                               Officer;
                               Director
           George Aaron        Director         112,500 (5)       .3%

           David Gaynor        DIirector        229,791 (6)       .5%

           Robert Spira, MD    Director         100,000 (7)       .3%

           Sol Triebwasser,    Director          95,000 (8)       .2%
           Ph.D.

           All directors and                       882,624       2.3%
           executive
           officers as a group (7 persons)    (3)(4)(5)(6)(7)(8)

          (1)  All  shares of  Advanced NMR  Common Stock  are beneficially
               owned, and the sole  voting and investment power is  held by
               the persons named, except  as set forth in the  notes below.
               A person is deemed to be the beneficial owner of shares that
               can  be acquired within  60 days of  the date of  this table
               upon exercise of options or warrants.

          (2)  Includes (i) 1,291,242 shares  held by D.H. Blair Investment
               Banking  Corp., an  investment  banking firm  of which  D.H.
               Blair Holdings Inc.  is the sole  stockholder, of which  Mr.
               Davis is the Chairman and sole stockholder, and (ii) 270,900
               shares held by Engex,  Inc., a closed-end investment company
               of  which Mr.  Davis is  the President  and Chairman  of the
               Board  and  as  to  which  Mr.  Davis  disclaims  beneficial
               ownership.   The information  set forth with  respect to the
               holdings of J. Morton Davis is taken from Amendment No. 2 to
               Schedule  13G  filed  by  J. Morton  Davis  and  D.H.  Blair
               Investment Banking Corp. ("D.H.  Blair") with the Securities
               and Exchange  Commission with  respect to their  holdings of
               Advanced NMR Common Stock.

          (3)  Includes  300,000  shares  underlying presently  exercisable
               options granted under the 1993 Employee Plan.   Excludes (i)
               2,000  shares owned by Mr. Nelson's wife, as to which shares
               he disclaims  beneficial ownership; and (ii)  200,000 shares
               underlying  options granted  under  the 1993  Employee  Plan
               which are subject to vesting thereunder.

          (4)  Includes  83,333  shares  underlying  presently  exercisable
               options  and  excludes  166,667  shares  underlying  options
               granted   which  become   exercisable  subject   to  vesting
               thereunder.

          (5)  Includes   112,500   shares  underlying   options  presently
               exercisable under the 1983 Plan and the 1993 Directors Plan,
               and excludes 7,500 shares  underlying options under the 1983
               Plan  and the  1993 Directors Plan  which are  not presently
               exercisable.

          (6)  Includes  (1)  38,000 shares  held  by Mr.  Gaynor  and (ii)
               191,791  shares  underlying  options  presently  exercisable
               under  the 1993  Employee Plan,  and excludes  50,000 shares
               underlying options  under the  1993 Employee Plan  which are
               not presently exercisable.

          (7)  Includes   100,000   shares  underlying   options  presently
               exercisable  granted  under  the  1983  Plan  and  the  1993
               Directors Plan.

          (8)  Includes  87,500  shares  underlying  presently  exercisable
               options granted under  the 1983 Plan and the  1993 Directors
               Plan, and  excludes 7,500 shares  underlying options granted
               under  the 1983 Plan and  the 1993 Directors  Plan which are
               not presently exercisable.


          ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
                    ----------------------------------------------

               In July 1992, the Company in forming AMS as a subsidiary for
          the  purpose of  financing the  development of  MRI  scanners for
          breast imaging entered into  the ANMR License Agreement, pursuant
          to which  the  Company licensed  to  AMS  the right  to  use  the
          Company's  technology in  the development  of a  dedicated breast
          imaging system.  In consideration, AMS paid $1,680,000 and issued
          to the Company  4,000,000 shares  of AMS Common  Stock, of  which
          2,750,000  shares are  subject to  an escrow  agreement described
          below.

               On August 29, 1996,  the Company's Shared Services Agreement
          with AMS, dated January  25, 1992 was terminated and  the Company
          and  AMS entered  into  a new  agreement  which outlines  a  more
          accurate method of allocating the services that are shared by the
          companies.   The new  agreement has developed as  a result of two
          significant  factors:   (a)  the changes  in  the profile  of the
          Company which  is modifying its technology  operations related to
          the manufacture of its InstaScan retrofit system and is attending
          to its service division, and (b) the growing independence of both
          companies as each company  pursues divergent objectives.  Vendors
          for parts and  services have been instructed  to provide separate
          invoices  directly to the  Company and AMS,  as the case  may be.
          Expenses  related to  the use  of the  facilities, such  as rent,
          utilities and  insurance, will be apportioned based on the number
          of square feet occupied by the Company or AMS, respectively.  AMS
          also  pays the Company a monthly fee for overhead services, which
          is  calculated by  apportioning  the total  amount  spent by  the
          Company  on  all general  overhead  expenses,  based  on a  fixed
          percentage   of  overhead   expenses   plus   an  allocation   of
          compensation of the  executive officers based upon  the amount of
          time spent with the respective companies.  The Company's officers
          and employees are  required by the  Shared Services Agreement  to
          devote as much time to AMS business as they, in their discretion,
          consider appropriate.  The Boards  of Directors and the President
          of both the Company  and AMS are responsible for  determining the
          appropriate amount  of time spent  by the Company's  officers and
          employees  pursuant  to  the   Shared  Services  Agreement,   and
          overseeing  the provision  of such  services.   Seven of  the ten
          officers  and directors of AMS are also officers and directors of
          the  Company.   Any conflicts  will be  resolved by  Jack Nelson,
          Chairman of the  Board of both  the Company and  AMS, and by  the
          Board  of  Directors  of  each  company,  consistent  with  their
          fiduciary duties.

               As  of September 30, 1996, the Company had made advances and
          been  reimbursed  for expenses  incurred  on  behalf  of AMS  for
          research  and development  and other  activities relating  to the
          development of  AMS' MRI  scanner for breast  imaging aggregating
          approximately $3,626,000.

               Also, in  connection with  the public offering,  the Company
          had  placed 2,750,000 of its 4,000,000 shares of AMS Common Stock
          into escrow.   On May 1,  1997, all shares subject  to the escrow
          will be  forfeited and  contributed to the  capital of  AMS as  a
          result of  AMS' failure to achieve  certain financial milestones,
          which  if  achieved would  have resulted  in  the release  of the
          escrowed shares.  Upon the forfeiture of the escrowed shares, AMS
          will incur  an  expense based  on the  fair market  value of  AMS
          Common Stock and the Company's interest in AMS will be reduced to
          approximately  20%.    For consolidation  purposes,  the  Company
          treats the escrow shares as if they were outstanding.

               The Company  believes  that  the  transactions  between  the
          Company  and AMS described above were on terms not less favorable
          to the Company than the terms that would have been available from
          unaffiliated  parties   under  similar  circumstances.     Actual
          comparisons with other transactions are not possible, however.

          [page break]
                                       PART IV
                                      ---------

          ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
                    -------------------------------------------------------
                    FORM 8-K
                    --------

          (a)(1)  The following financial statements are filed herewith:

                    Independent Auditors' Report

                    Consolidated Balance Sheets 

                    Consolidated Statements of Operations

                    Consolidated Statements of Stockholders' Equity 

                    Consolidated Statements of Cash Flows

                    Notes to Financial Statements

          (a)(2)    The following Financial  Statement Schedules are  filed
                    herewith:  None All schedules have been omitted because
                    they  are   inapplicable  or  not   required,  or   the
                    information is included in  the financial statements or
                    notes thereto.

          (a)(3)    Exhibits, including those incorporated by reference.

          [page break]

          Exhibit
          -------
          No.       Description
          ---       -----------
          2         Agreement and  Plan  of Merger  among Registrant,  ANMR
                    Acquisition   Corp.   and  Medical   Diagnostics,  Inc.
                    ("MDI"), dated  May 2, 1995  (incorporated by reference
                    to Annex  A to the Joint  Proxy Statement/Prospectus to
                    Registrant's  Registration  Statement   on  Form   S-4,
                    declared  effective  August  3,  1995   (File  No.  33-
                    95302)("Registrant's Form S-4").
          3.1       Certificate    of    Incorporation    of    Registrant.
                    (incorporated  by reference  to  Exhibit  3 filed  with
                    Registrant's  Registration Statement  on Form  S-2, and
                    amendments  thereto, declared effective August 18, 1993
                    (File No. 2084785 ("Registrant's Form S-2"))
          3.2       Amendment to Certificate of Incorporation of Registrant
                    filed November  5, 1993  (incorporated by reference  to
                    Exhibit 3.2 to Registrant's Form S-4).
          3.3       Amendment   to   Certificate   of    Incorporation   of
                    Registrant,  filed  August 31,  1995,  (incorporated by
                    reference to  Exhibit 3.1 to Registrant's  Form 8-K for
                    an event of August  31, 1995 (the "August 1995  Form 8-
                    K")).
          3.4       Amendment   to   Certificate   of    Incorporation   of
                    Registrant, filed September 21, 1995.
          3.5       Amended    and    Restated   By-laws    of   Registrant
                    (incorporated   by   reference   to  Exhibit   3.4   to
                    Registrant's Form S-4).
          4.1.1     Form   of  Warrant  Agreement  between  Registrant  and
                    American  Stock  Transfer &  Trust Company,  as Warrant
                    Agent  (incorporated  by  reference  to  Exhibit  4  to
                    Registrant's August 1995 Form 8-K).
          4.1.2     Form of Warrant  Certificate (incorporated by reference
                    to Annex  B to the Registrant's  Joint Proxy Statement,
                    dated August 31, 1995).
          4.2       Specimen Certificate for  Common Stock, par  value $.01
                    per share, of Registrant (incorporated  by reference to
                    Exhibit 4.2 to Registrant's Form S-4).
          4.3.1     Form of Supplemental Agreement relating to Registrant's
                    assumption  of  MDI's  Obligations  under  the  Warrant
                    Agreement  between MDI and First Albany Corporation and
                    Janney   Montgomery   Scott,   Inc.  (incorporated   by
                    reference to Exhibit 4.3.1 to Registrant's Form S-4).
          4.3.2     Form of Supplemental Agreement relating to Registrant's
                    assumption  of  MDI's  Obligations  under  the  Warrant
                    Agreement between  MDI and Jacob  Agam (incorporated by
                    reference to Exhibit 4.3.2 to Registrant's Form S-4).
          4.4       Form of Warrant Certificate, dated as of March 6, 1994,
                    issued    to    Dominick   &    Dominick   Incorporated
                    (incorporated   by  reference   to   Exhibit   4.4   to
                    Registrant's Form S-4).
          4.5       Certificate of Designation of  Series A Preferred Stock
                    of  the  Company  (incorporated  by  reference  to  the
                    Company's Current  Report on  Form 8-K, filed  on March
                    31, 1996 (File No. 0-11914)).
          10.1      Registrant's  1983  Incentive  and Non-Qualified  Stock
                    Option  Plan, Amended  and Restated  as of  February 1,
                    1988, and form of incentive stock  option (incorporated
                    by reference to Exhibit 10.4 to Registrant's Form S-2).
          10.2      Registrant's   1993   Employee   Stock    Option   Plan
                    (incorporated by  reference to  Exhibit A of  the Proxy
                    Statement  for  Registrant's  1993  Annual  Meeting  of
                    Stockholders (File No. 0-11914)).
          10.3      Registrant's 1993  Directors Stock Option Plan for Non-
                    Employee  Directors  (incorporated   by  reference   to
                    Exhibit B of the  Proxy Statement for Registrant's 1993
                    Annual Meeting of Stockholders (File No. 0-19914)).
          10.4.1    Amended and Restated  Agreement between the  Registrant
                    and General Electric  Company, dated November  30, 1989
                    (incorporated by reference  to Exhibit 10.6 filed  with
                    Registrant's Annual Report on  Form 10-K for the fiscal
                    year ended December 31, 1990 (File No. 0-19914)).
          10.4.2    Amended  1989 Agreement with  General Electric Company,
                    dated  March  5,  1993  (incorporated  by  reference to
                    Exhibit 10.12 filed with  Registrant's Annual Report on
                    Form 10-K for  the fiscal year ended  December 31, 1992
                    (File No. 0-11914)).
          10.4.3    Amended 1993  Agreement with General  Electric Company,
                    dated  March  5,  1993  (incorporated  by reference  to
                    Exhibit 10.4.2 filed with Registrant's Annual Report on
                    Form 10-K for  the fiscal year ended  December 31, 1994
                    (File No. 0-11914) (the "ANMR 1994 Form 10-K")).
          10.4.5    1994  Agreement between Registrant and General Electric
                    Company, dated July 29, 1994 (incorporated by reference
                    to Exhibit 10.4.5 to Registrant's Form S-4).
          10.5      Employment  Agreement  between   Registrant  and   Jack
                    Nelson, dated  as of December 6,  1993 (incorporated by
                    reference to Exhibit 10.5 filed with the ANMR 1994 Form
                    10-K).
          10.6      Employment   Agreement   among   Registrant,   Advanced
                    Mammography Systems,  Inc.  ("AMS") and  Enrique  Levy,
                    dated September 17, 1995.
          10.7      Employment Agreement  between Registrant and  Robert L.
                    Kwolyk,  dated as  of April  25, 1994  (incorporated by
                    reference to Exhibit 10.8 to Registrant's Form S-4).
          10.8      Employment Agreement among Registrant, MDI  and John A.
                    Lynch, dated May 2,  1995 (incorporated by reference to
                    Exhibit 47  to MDI's Schedule 14D-9  (Amendment No. 18)
                    filed on May 3, 1995).
          10.9      Lease   Agreement  between   Registrant  and   John  T.
                    Spinelli,
                    dated May 5, 1991 (incorporated by reference to Exhibit
                    10.9 filed with Registrant's Annual Report on Form 10-K
                    for the fiscal year  ended December 31, 1995  (File No.
                    0-19914)).
          10.10     License Agreement  between  Registrant and  AMS,  dated
                    July  29, 1992  (incorporated  by reference  to Exhibit
                    10.13 to Registrant's Form S-2).
          10.11*    Shared  Services Agreement  between Registrant  and AMS
                    dated August 29, 1996.
          10.12     Escrow  Agreement among  Registrant,  AMS and  American
                    Stock Transfer  &  Trust Company,  dated December  1992
                    (incorporated   by  reference   to  Exhibit   10.15  to
                    Registrant's Form S-2).
          10.13     Loan  and Security  Agreement, dated  as of  August 31,
                    1995,  between MDI and Chemical Bank (without exhibits)
                    (incorporated   by  reference   to   Exhibit  10.2   to
                    Registrant's August 1995 Form 8-K).
          10.14     Guaranty and Security Agreement, dated as of August 31,
                    1995,  between Registrant  and  Chemical Bank  (without
                    exhibits) (incorporated by reference to Exhibit 10.3 to
                    Registrant's August 1995 Form 8-K).
          10.15     Guaranty and Security Agreement, dated as of August 31,
                    1995, between certain subsidiaries of  MDI and Chemical
                    Bank (without exhibits)  (incorporated by reference  to
                    Exhibit 10.4 to Registrant's August 1995 Form 8-K).
          10.16     Pledge Agreement, dated as  of August 31, 1995, between
                    Registrant and Chemical Bank (incorporated by reference
                    to Exhibit 10.5 to Registrant's August 1995 Form 8-K).
          10.17     Pledge Agreement, dated as  of August 31, 1995, between
                    MDI  and  Chemical Bank  (incorporated by  reference to
                    Exhibit 10.6 to Registrant's August 1995 Form 8-K).
          10.18     Amended and Restated Joint Venture Agreement  among MDI
                    and  Medical Imaging  Partners, L.P.,  dated August  6,
                    1990 (incorporated by reference to Exhibit 10(b)(1)  to
                    MDI's Registration Statement on  Form S-1 as amended on
                    October   30,  1991  (File  No.  33-42748))  (the  "MDI
                    Registration Statement").
          10.19     Restated Management  Agreement  between MDI  and  Mass.
                    Mobile   Imaging  Venture,   dated   August   6,   1990
                    (incorporated by  reference to Exhibit 10(b)(2)  to the
                    MDI Registration Statement).
          10.20     Restated and Amended Medical Imaging Lease and Services
                    Agreement  between  Western  Mass.  Magnetic  Resonance
                    Services, Inc. and Mass. Mobile  Imaging Venture, dated
                    August 6,  1990 (incorporated  by reference  to Exhibit
                    10(b)(3) to the MDI Registration Statement).
          10.21     Medical Imaging Lease and Services Agreement between 
                    Mobile  MRI of  Western  Massachusetts  Associates  and
                    Mass.  Mobile  Imaging Venture,  dated  August  6, 1990
                    (incorporated by reference to  Exhibit 10(b)(4) to  the
                    MDI Registration Statement).
          10.22     Lease Agreement between  Medical Imaging Partners, L.P.
                    and Mass.  Mobile Imaging Venture,  dated December  31,
                    1986 (incorporated by reference  to Exhibit 10(b)(9) to
                    the MDI Registration Statement).
          10.23     MRI  Management  Services  Agreement between  Merrimack
                    Valley Health  Services, Inc. and MDI  dated October 1,
                    1990 (incorporated by reference to Exhibit  10(f)(1) to
                    the MDI Registration Statement).
          10.24     Joint  Venture  Agreement  of  Mobile  MRI  of  Western
                    Massachusetts Associates, between Mobile MRI of Western
                    Massachusetts,  Inc.  and  MRI  Associates  Inc., dated
                    December 22, 1986 (incorporated by reference to Exhibit
                    10(h)(1) to the MDI Registration Statement).
          10.25.1   Lease Agreement between MDI and the Trustees of Six New
                    England   Executive  Park,   dated  January   22,  1988
                    (incorporated by reference to  Exhibit 10(j) to the MDI
                    Registration Statement).
          10.25.2   First Amendment to Lease  Agreement between MDI and the
                    Trustees  of  Six  New  England Executive  Park,  dated
                    October 15, 1992.
          10.25.3   Second Amendment to Lease Agreement between MDI and the
                    Trustees of Six New England Executive Park, dated April
                    6, 1993.
          10.26     Severance Agreements  between MDI  and each of  Judy C.
                    Erbstein, David  C. Gaynor, Steven J.  James, Eileen H.
                    Kirrane, Elaine H.  McCarthy, Ruselle  W. Robinson  and
                    John  F.   Sweeney,  each   dated  February  16,   1995
                    (incorporated  by  reference  to  Exhibit  35 to  MDI's
                    Schedule  14D-9  (Amendment  No.  13)  filed  with  the
                    Commission on February 23, 1995).
          10.27     Stock Purchase  Agreement between  MDI, John  W. Hammer
                    and   Hi-Chicago   Trust,   dated   October   12,  1988
                    (incorporated by reference to  Exhibit 10(o) to the MDI
                    Registration Statement).
          10.28     Clinical License  for  MRI Services  by  Western  Mass.
                    Magnetic  Resonance  Services,  Inc.  (incorporated  by
                    reference to  Exhibit 10(p)(1) to  the MDI Registration
                    Statement).
          10.29     Clinical  License for  MRI  Services by  Mobile MRI  of
                    Western   Massachusetts  Associates   (incorporated  by
                    reference to  Exhibit (10(p)(2) to the MDI Registration
                    Statement).
          10.30     Clinical License for MRI  Services by Central Mass. MRI
                    Limited Partnership ("Central Mass.")  (incorporated by
                    reference to  Exhibit 10(p)(4) to the  MDI Registration
                    Statement).
          10.31     Clinical License for MRI Services by Greater Boston MRI
                    Limited Partnership ("Greater Boston") (incorporated by
                    reference to  Exhibit 10(p)(3) to the  MDI Registration
                    Statement).
          10.32.1   Determination of Need issued to  Western Mass. Magnetic
                    Resonance   Services,  Inc.,  to   provide  Mobile  MRI
                    Services, dated May 29, 1986 (incorporated by reference
                    to Exhibit 10(q)(1) to the MDI Registration Statement).
          10.32.2   Determination of Need issued to Western Mass.  Magnetic
                    Resonance  Services,  Inc.,  to provide  free-standing,
                    fixed  site   MRI  services,   dated   April  3,   1989
                    (incorporated by reference  to Exhibit 10(q)(2) to  the
                    MDI Registration Statement).
          10.33     Determination  of Need issued  to Central  Mass., dated
                    July  20, 1988  (incorporated by  reference to  Exhibit
                    10(q)(3) to the MDI Registration Statement).
          10.34.1   Determination  of Need  issued  to  Greater Boston  MRI
                    Services, Inc. ("Greater Boston"), dated April 8, 1988,
                    with letter transferring ownership of the Determination
                    of Need to Greater Boston (incorporated by reference to
                    Exhibit 10(q)(4) to the MDI Registration Statement).
          10.34.2   Determination of  Need issued to Greater  Boston, dated
                    October 12, 1989 (incorporated by reference to  Exhibit
                    10(q)(5) to the MDI Registration Statement).
          10.35     Determination of  Need issued to Mobile  MRI of Western
                    Massachusetts   Associates,   dated  August   28,  1989
                    (incorporated by reference to  Exhibit 10(q)(6) to  the
                    MDI Registration Statement).
          10.36     Agreement between  Stephen O. Dell,  Seacoast Scanning,
                    Inc., MDI and  Casco Bay MR Services,  Inc., dated June
                    20, 1987 (incorporated by reference to Exhibit 10(u) to
                    the MDI Registration Statement).
          10.37     Agreement in principle between MDI  and Toshiba America
                    Medical   Systems,   Inc.,  dated   November   8,  1991
                    (incorporated by reference to Exhibit 10(ae)(7)  to the
                    MDI Registration Statement).
          10.38     "Maxiservice"  MRI  Lease  Agreement   between  General
                    Electric  Company  and  Mass. Mobile  Imaging  Venture,
                    dated February 21,  1991 (incorporated by  reference to
                    Exhibit 10(af)(1) to the MDI Registration Statement).
          10.39     "Masterline"  Van  Lease   Agreement  between   General
                    Electric  Company  and  Mass.  Mobile  Imaging Venture,
                    dated February  21, 1991 (incorporated by  reference to
                    Exhibit 10(af)(2) to the MDI Registration Statement).
          10.40     Asset Purchase Agreement and Support Services Agreement
                    (incorporated by  reference to  Exhibit E-1 and  E-2 to
                    MDI's  Report on  Form 8-K  filed on November  17, 1993
                    (File No. 0-11914)).
          10.41     Stock  Purchase Agreement and  First Amendment to Stock
                    Purchase  Agreement  (incorporated   by  reference   to
                    Exhibit E-1 and E-2 to MDI's Report on Form 8-K/A filed
                    on July 25, 1994 (File No. 0-11914)).
          10.42     Amended   License   and   Services  Agreement   between
                    Burlington  Imaging  Associates,  Inc.,  P.C.  and  MDI
                    (incorporated  by  reference  to Exhibit  10  to  MDI's
                    Annual Report  on Form 10-K  for the fiscal  year ended
                    September 30, 1994 (File No. 0-19736)).
          10.43     Purchase and  Sale Agreement  dated  November 17,  1994
                    between   MDI   Rehab,   Inc.   and  MVA   Center   for
                    Rehabilitation,  P.C.  (incorporated  by  reference  to
                    Exhibit 2 to MDI's Report on Form 8-K filed on February
                    15, 1995 (File No. 0-19736)).
          10.44     Amended Management Agreement between MDI and ICI  dated
                    October   30,  1987   and  amended   October  1,   1991
                    (incorporated  by  reference  to Exhibit  10(a)(1)  and
                    10(a)(2) to the MDI Registration Statement).
          10.45     Key  Employment  Agreement  between MVA  Rehabilitation
                    Associates and Eric T. Shebar, M.D. dated as of January
                    31, 1995 (incorporated by reference to Exhibit 10(b) to
                    MDI's Report  on Form  8-K filed  on February 15,  1995
                    (File No. 0-19736)).
          10.46     Amended  and Restated  Agreement of Partnership  of MVA
                    Rehabilitation Associates (incorporated by reference to
                    Exhibit 10(a)  to MDI's  Report on  Form  8-K filed  on
                    February 15, 1995 (File No. 0-19736)).
          10.47*    Employment  Agreement, dated December 20, 1995, between
                    ANMR and Jack Nelson.
          10.48*    Employment  Agreement, dated December  1, 1995, between
                    MDI and David Gaynor.
          10.49     Form of Regulation  S Securities Subscription Agreement
                    relating  to  the  Company's Series  A  Preferred Stock
                    (incorporated  by  reference to  the  Company's current
                    report on Form 8-K,  dated March 31, 1996 (File  No. 0-
                    11914)).
          21.       List of Company's subsidiaries.
          23.*      Consent  of   Richard  A.   Eisner   &  Company,   LLP,
                    independent public accountants for Company.



          (b)  Reports on Form 8-K
               -------------------

               None.

          -----------------------
          *  Filed herewith

          [page break]
                                      EXHIBIT 21


                            SUBSIDIARIES OF THE REGISTRANT

                                                               Percentage  
          Subsidiary          State of Incorporation           of Ownership
          -----------------------------------------------------------------
          Advanced Mammography 
          Systems, Inc.                      Delaware                  48
          Medical Diagnostics, Inc.          Delaware                 100
          Western Massachusetts Magnetic 
              Resonance Services, Inc.*      Massachusetts            100
          MRI Associates, Inc.*              Massachusetts            100
          MDI Investment, Inc.*              Massachusetts            100
          Greater Springfield MRI, Inc.*     Massachusetts            100
          Greater Boston MRI Services, Inc.* Massachusetts            100
          Mobile MRI of Western Mass., Inc.* Massachusetts            100
          Central Massachusetts MRI 
               Services, Inc.*               Massachusetts            100
          Casco Bay MR Services, Inc.*       Maine                    100
          MDI Finance & Leasing, Inc.*       Massachusetts            100
          Merrimack Scanning, Inc.*          New Hampshire            100
          Middlesex MRI Center, Inc.*        Massachusetts            100
          MDI-New York Inc.*                 New York                 100
          MDI Rehab, Inc.*                   Massachusetts            100
          Meritus PLS, Inc.*                 Virginia                 100


               * Owned directly by Medical Diagnostics, Inc.

          [page break]

                                                                 Exhibit 23


                            INDEPENDENT AUDITORS' CONSENT

               We consent to the incorporation by reference in Registration
          Statements No.  33-47517, 33-70834  and 33-78928 of  Advanced NMR
          Systems, Inc. (the  "Company") on  Form S-8 of  our report  dated
          November 22, 1996 on the consolidated financial statements of the
          Company and  its subsidiaries  for the  year ended  September 30,
          1996, the nine month period ended September 30, 1995 and the year
          ended December 31, 1994  appearing in this Annual Report  on Form
          10-K of the Company.

					/s/ Richard A. Eisner & Company, LLP
					-----------------------------------
                                      Richard  A. Eisner  & Company, LLP

          Cambridge, Massachusetts
          January 10, 1997


  [page break]

                                      SIGNATURES
                                     -----------

               Pursuant to the requirements  of the Section 13 or  15(d) 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 on the 10th day of January 1997.

          ADVANCED NMR SYSTEMS, INC.


          By:  /s/ Enrique Levy            
               ---------------------------
               Enrique Levy, President/COO

               Pursuant to the requirements  of the Securities Exchange Act
          of  1934 this report has been  signed by the following persons in
          the capacities and on the dates indicated.

                 Signature                  Title                 Date
                 ---------

                /s/ Jack Nelson   Chairman of the Board       January 10,
           --------------------                                   1997
           Jack Nelson

                /s/ Enrique       President, Chief            January 10,
           Levy                   Operating Officer and           1997
           --------------------   Director
           Enrique Levy
           -------------------
                /s/ Robert        Vice Chairman of the        January 10,
           Spira, M.D.            Board                           1997
           --------------------
           Robert Spira, M.D.
           --------------------
                /s/ Charles       Chief Financial and         January 10,
                 Moche            Accounting Officer              1997
           --------------------
           Charles Moche

           --------------------   Director
           George Aaron

           --------------------   Director
           David Gaynor


           /s/ Sol Triebwasser,
           Ph.D.                  Director                    January 10,
           --------------------                                   1997
           Sol Triebwasser,
           Ph.D.

                     ADVANCED NMR SYSTEMS, INC. AND SUBSIDIARIES



                                    - I N D E X -
                                   ---------------
                                                                      PAGE 
                                                                     NUMBER
                                                                    -------

          INDEPENDENT AUDITORS' REPORT                                  F-2


          CONSOLIDATED BALANCE SHEETS AS AT 
          SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995                     F-3


          CONSOLIDATED STATEMENTS OF OPERATIONS FOR 
          THE YEARS ENDED SEPTEMBER 30, 1996 AND
          SEPTEMBER 30, 1995 (UNAUDITED), THE NINE MONTH
          PERIODS ENDED SEPTEMBER 30, 1995 AND
          SEPTEMBER 30, 1994 (UNAUDITED) AND FOR THE YEAR
          ENDED DECEMBER 31, 1994                                       F-4


          CONSOLIDATED STATEMENTS OF STOCKHOLDERS' 
          EQUITY FOR THE YEAR ENDED SEPTEMBER 30, 1996, THE
          NINE MONTH PERIOD ENDED SEPTEMBER 30, 1995 AND FOR
          THE YEAR ENDED DECEMBER 31, 1994                              F-5


          CONSOLIDATED STATEMENTS OF CASH FLOWS FOR
          THE YEARS ENDED SEPTEMBER 30, 1996 AND 
          SEPTEMBER 30, 1995 (UNAUDITED), THE NINE 
          MONTH PERIODS ENDED SEPTEMBER 30, 1995 
          AND SEPTEMBER 30, 1994 (UNAUDITED) AND FOR THE
          YEAR ENDED DECEMBER 31, 1994                                  F-6


          NOTES TO FINANCIAL STATEMENTS                                 F-7


   [page break]


                             INDEPENDENT AUDITORS' REPORT

          The Board of Directors and Stockholders
          Advanced NMR Systems, Inc.

               We have audited the accompanying consolidated balance sheets
          of Advanced  NMR Systems, Inc.  and subsidiaries as  at September
          30,  1996 and September  30, 1995,  and the  related consolidated
          statements  of operations,  stockholders' equity, and  cash flows
          for  year ended September 30,  1996, the nine  month period ended
          September 30, 1995  and the year ended December 31,  1994.  These
          consolidated  financial statements are  the responsibility of the
          Company's  management.    Our  responsibility is  to  express  an
          opinion on  these consolidated financial statements  based on our
          audits.

               We  conducted  our  audits  in   accordance  with  generally
          accepted  auditing standards.   Those  standards require  that we
          plan and perform the  audit to obtain reasonable assurance  about
          whether   the  financial   statements   are   free  of   material
          misstatement.    An audit  includes examining,  on a  test basis,
          evidence supporting the amounts  and disclosures in the financial
          statements.   An  audit  also includes  assessing the  accounting
          principles used and significant  estimates made by management, as
          well as evaluating the  overall financial statement presentation.
          We believe that  our audits  provide a reasonable  basis for  our
          opinion.

               In  our  opinion,  the  consolidated   financial  statements
          enumerated above  present fairly,  in all material  respects, the
          consolidated financial position of Advanced NMR Systems, Inc. and
          subsidiaries  at September 30,  1996 and September  30, 1995, and
          the results of their operations and their cash flows for the year
          ended September 30,  1996, the nine month  period ended September
          30,  1995 and the year ended December 31, 1994 in conformity with
          generally accepted accounting principles.

               The accompanying  financial  statements have  been  prepared
          assuming  that  the Company  will  continue as  a  going concern.
          However, the  Company has experienced recurring  losses and based
          on  current estimates of  cash flow, management  does not believe
          that it will  have sufficient  cash flow to  make scheduled  term
          loan payments.  Accordingly,  the entire amount outstanding under
          the  bank credit facility of $11,855,000 has been classified as a
          current  liability in  the  accompanying  consolidated  financial
          statements resulting in a working capital deficiency at September
          30,  1996.   These  matters  raise  substantial doubt  about  the
          Company's ability to continue  as a going concern.   Management's
          plans in regard  to these matters are described in  Note L to the
          consolidated financial statements.   The financial statements  do
          not include any adjustments that might result from the outcome of
          this uncertainty.

               As  discussed  in  Note  G  to  the  consolidated  financial
          statements, the  Company has  switched from consolidation  to the
          equity method for one of its subsidiaries.


           /s/ Richard A. Eisner & Company, LLP
          ---------------------------------------
          Richard A. Eisner & Company, LLP
          Cambridge, Massachusetts
          November 22, 1996


          January 13, 1997 as
           to Note C

   [page break]

                     ADVANCED NMR SYSTEMS, INC. AND SUBSIDIARIES

                             CONSOLIDATED BALANCE SHEETS
                                       September 30,    September 30,
           ASSETS                          1996             1995
           ------                       -----------      -----------
           Current assets:
           Cash and cash equivalents 
                                        $3,287,880       $7,542,508
           Accounts receivable, net
           of reserve for bad debts
           of $2,459,000 at
           September 30, 1996 and
           $2,119,000 at September
           30, 1995  . . . . . . . .     8,015,083        9,741,892
           Inventories:
           Work-in-process . . . . .                        907,128

           Raw materials . . . . . .       526,597        2,405,463
                                       -----------      -----------
                                           526,597        3,312,591
                                       -----------      -----------
           Other current assets  . .     1,002,846        1,972,871
                                       -----------      -----------
           Total current assets  . .    12,832,406       22,569,862
                                       -----------      -----------

           Equipment, building,
           furniture and leasehold
           improvements (Note C):
           Medical equipment . . . .     8,633,505        4,562,423
           Office furniture and
           equipment . . . . . . . .       685,133          833,886

           Other equipment . . . . .       899,983        2,714,170
           Leasehold improvements  .     1,912,115        1,852,778
           Building  . . . . . . . .       210,739          210,739
                                        ----------       ----------
                                        12,341,475       10,173,996
           Less:  accumulated
           depreciation and
           amortization  . . . . . .     2,759,911        1,966,309
                                       -----------       ----------
                                         9,581,564        8,207,687
                                       -----------       ----------
           Patent costs, net of
           accumulated amortization  
                                                            205,754
                                       -----------       ----------
           Goodwill, net of
           accumulated amortization
           (Note J)  . . . . . . . .    26,205,525       26,858,226

           Investment in and
           advances to
           unconsolidated subsidiary
           (Note G)  . . . . . . . .     1,440,191                 
           Other . . . . . . . . . .       664,844          590,180
                                       -----------      -----------
           TOTAL . . . . . . . . . .   $50,724,530      $58,431,709
                                       ===========      ===========

           LIABILITIES AND
           STOCKHOLDERS'
           -------------------------
           EQUITY
           ------
           Current liabilities:
           Accounts payable  . . . .    $1,870,274       $1,001,130

           Accrued expenses  . . . .     2,335,028        3,644,211
           Accrued compensation  . .       762,028          711,193
           Due to shareholders 
           (Note J)  . . . . . . . .        46,102        1,696,102
           Current portion of long
           -term debt and capital
           lease obligations 
           (Note C)  . . . . . . . .    14,495,637        4,274,110
           Other current liabilities 
                                            59,326          159,971
                                       -----------      -----------
           Total current liabilities 
                                        19,568,395       11,486,717
                                       -----------      -----------

           Long-term debt and
           capital lease
           obligations, less current
           portion (Note C)  . . . .     5,682,719       16,279,352

           Deferred revenues . . . .                         33,567
           Minority interest in net
           assets of consolidated
           entities  . . . . . . . .     1,654,993        2,614,107

           Commitments and
            contingencies 
           (Note E)

           Stockholders' equity
           (Note F):
           Preferred stock, $.01 par
           value; authorized,
           1,000,000 shares; issued,
           2,194 shares in 1996 and
           none in 1995  . . . . . .            22                 
           Common stock, $.01 par
           value; authorized,
           50,000,000 shares;
           issued, 34,180,777 shares
           in 1996 and 30,151,821 in
           1995  . . . . . . . . . .       341,808          301,518
           Additional paid-in
            capital  . . . . . . . .    53,616,726       58,246,689
           Accumulated deficit . . .   (30,137,883)     (30,527,991)
                                       -----------      -----------
                                        23,820,673       28,020,216
           Less:  treasury stock, at
           cost -225,000 common
           shares  . . . . . . . . .         2,250            2,250
                                       -----------       ----------
           Total stockholders'
           equity  . . . . . . . . .    23,818,423       28,017,966
                                                        -----------
           TOTAL . . . . . . . . . .   $50,724,530      $58,431,709
                                       ===========      ===========

        The accompanying notes to financial statements are an integral
                                     part hereof.


  <PAGE>


                     ADVANCED NMR SYSTEMS, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF OPERATIONS

                                                       Year Ended
                                                     September 30,
                                             -----------------------------
                                                  1996           1995
                                             -------------- --------------
                                                              (unaudited)
           Revenues:
              Net patient service revenue  . $25,480,813      $1,934,322
              Management fees and other  . .     653,425          40,220
                                             -----------     -----------

              Total revenues . . . . . . . .  26,134,238       1,974,542
                                             -----------     -----------

           Operating expenses:
             Cost of service operations  . .  16,205,961       1,203,497
             Research and development  . . .                     940,141
             Selling, general and
               administrative  . . . . . . .   4,254,964       2,449,364
             Provision for bad debt and        2,126,471         162,377
               collection costs  . . . . . . -----------     -----------

             Total operating expenses  . . .  22,587,396       4,755,379
                                             -----------     -----------

           Operating income (loss) from
             continuing operations . . . . .   3,546,842      (2,780,837)

           Other income (Note F) . . . . . .     126,263         579,758
           Interest income . . . . . . . . .     212,814         195,191
           Interest expense  . . . . . . . .  (1,847,910)       (139,020)
                                             -----------     -----------

           Income (loss) from continuing
             operations before
             minority interests, equity in
             loss of subsidiary
             and provision for income taxes  
                                               2,038,009      (2,144,908)

           Minority interests in net
             (income) losses of
             consolidated entities . . . . .  (1,005,831)        783,520
           Equity in loss of subsidiary  . .  (1,830,880)               
                                             -----------     -----------

           Loss from continuing operations
             before provision for income
             taxes . . . . . . . . . . . . .    (798,702)     (1,361,388)

           Provision for income taxes  . . .     (42,288)               
                                             -----------     -----------

           Loss from continuing operations .    (840,990)     (1,361,388)

           Discontinued operations (Note K)
           Loss from operations of
             discontinued division . . . . .  (3,928,706)     (2,521,580)

           Loss on disposal of discontinued
             division, including provision
             of $400,000 for operating
             losses during                    (3,510,563)               
             phase-out period  . . . . . . . -----------     -----------

           Net loss  . . . . . . . . . . . . $(8,280,259)    $(3,882,968)
                                             ===========     ===========

           Loss Per Common Share:
           Loss from continuing operations .       $(.03)          $(.06)
           Loss from operations of
             discontinued division . . . . .        (.13)           (.10)
           Loss on disposal of discontinued         (.11)               
             division  . . . . . . . . . . . -----------     -----------
           Net loss per share  . . . . . . .       $(.27)          $(.16)
                                             ===========     ===========

           Weighted average number of common  30,583,320      24,020,652
             shares outstanding              ===========     ===========


                                      Nine Months Ended           Year Ended
                                        September 30,            December 31,
                                ------------------------------ ---------------

                                     1995            1994            1994
                                --------------  -------------- ---------------
                                                 (unaudited)
           Revenues:
             Net patient
             service revenue .    $1,934,322    $                $          
             Management fees          40,220                                
             and other . . . .    ----------    -----------      -----------

             Total revenues  .     1,974,542                                
                                  ----------    -----------      -----------

           Operating expenses:
             Cost of service
             operations  . . .     1,203,497                                
             Research and
             development . . .       664,786        717,010          992,365
             Selling, general
             and administrative  
                                   2,002,075      1,135,531        1,582,820
             Provision for bad
             debt and                162,377                                
             collection costs     ----------    -----------      -----------

             Total operating       4,032,735      1,852,541        2,575,185
             expenses  . . . .    ----------    -----------      -----------

           Operating income
           (loss) from
           continuing
           operations  . . . .    (2,058,193)    (1,852,541)      (2,575,185)

           Other income
           (Note F)  . . . . .       579,758                                
           Interest income . .       265,208        278,497          208,480
           Interest expense  .      (139,020)                               
                                  ----------    -----------      -----------

           Income (loss) from
           continuing
           operations before
           minority interests,
           equity in loss of
           subsidiary and
           provision for income
           taxes . . . . . . .    (1,352,247)    (1,574,044)      (2,366,705)

           Minority interests
           in net (income)
           losses of
           consolidated
           entities  . . . . .       569,354        488,799          702,965
           Equity in loss of                                                
           subsidiary  . . . .    ----------    -----------      -----------

           Loss from continuing
           operations before
           provision for income
           taxes . . . . . . .      (782,893)    (1,085,245)      (1,663,740)

           Provision for income                                             
           taxes . . . . . . .    ----------    -----------      -----------

           Loss from continuing
           operations  . . . .      (782,893)    (1,085,245)      (1,663,740)

           Discontinued
           operations (Note K)
           Loss from operations
           of discontinued
           division  . . . . .      (894,865)      (256,543)      (1,883,258)

           Loss on disposal of
           discontinued
           division, including
           provision of
           $400,000 for
           operating losses
           during phase-out                                                 
           period  . . . . . .    ----------    -----------      -----------

           Net loss  . . . . .   $(1,677,758)   $(1,341,788)     $(3,546,998)
                                 ===========    ===========      ===========

           Loss Per Common
           Share:
           Loss from continuing
           operations  . . . .         $(.03)         $(.05)           $(.07)
           Loss from operations
           of discontinued
           division  . . . . .          (.04)          (.01)            (.08)
           Loss on disposal of
           discontinued                                                     
           division  . . . . .    ----------    -----------      -----------
           Net loss per share          $(.07)         $(.06)           $(.15)
                                  ==========    ===========      ===========

           Weighted average
           number of common       24,243,902     23,543,842       23,603,251
           shares outstanding     ==========    ===========      ===========


          The accompanying  notes to  financial statements are  an integral
          part hereof.


          <PAGE>


                     ADVANCED NMR SYSTEMS, INC. AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

                                   Common Stock     Preferred Stock
                               ------------------------------------
                                 Shares     Amount   Shares  Amount
                               ----------- --------  ------- ------
          Balance  
          December 31, 1993 .   23,467,030  $234,670           $    
            Exercise of stock
            options . . . . .      312,509     3,125                
            Issuance of
            warrant (Note F)                                        
            Increase in
            proportionate
            share of
            subsidiary's
            equity related
            to sale of
            subsidiary's
            equity related
            to sale of
            subsidiary's stock
            (Note F)  . . . .                                       
            Note received in
            exchange for stock
            issued (Note F) .                                       
            Net loss for the                                        
            year  . . . . . .   ----------  -------- -------   -----
          Balance  
          December 31, 1994 .   23,779,539   237,795                

            Exercise of stock
            options . . . . .       15,125       151                
            Cancellation of
            common stock
            issued for
            services (Note F)     (63,000)     (630)                
            Increase in
            proportionate
            share of
            subsidiary's
            equity related to
            sale of
            subsidiary's stock
            (Note F)  . . . .                                       
            Cancellation of
            note received for
            stock issued
            (Note F)  . . . .    (250,000)   (2,500)                

            Common stock
            issued related to
            service business
            acquisition
            (Note J)  . . . .    6,670,157    66,702                
            Net loss for the                                        
            period  . . . . .   ----------  -------- -------   -----
          Balance  
          September 30, 1995    30,151,821   301,518                

            Exercise of stock
            options . . . . .      107,487     1,075                
            Issuance of
            convertible
            preferred stock
            (Note F)  . . . .                          3,700      37
            Increase in
            proportionate
            share of
            subsidiary's
            equity related to
            sale of
            subsidiary's stock
            (Note F)  . . . .                                       
            Cumulative effect
            of change in
            accounting for
            subsidiary from
            consolidation to
            the equity method
            (Note G)  . . . .                                       
            Conversion of
            preferred stock
            (Note F)  . . . .    3,921,469    39,215 (1,506)    (15)
            Net loss for the                                        
            period  . . . . .   ----------  -------- -------   -----
          Balance               34,180,777  $341,808   2,194   $  22
          September 30, 1996    ==========  ======== =======   =====


                                             Note
                              Additional  Receivable
                                Paid-in    For Stock  Accumulated
                                Capital     Issued      Deficit
                              ----------- ---------- -------------
          Balance  
          December 31, 1993   $37,622,653  $          $(25,303,235)
            Exercise of
            stock options .       841,095                          
            Issuance of
            warrant (Note F)  
                                   35,200                          
            Increase in
            proportionate
            share of
            subsidiary's
            equity related
            to sale of
            subsidiary's
            equity related
            to sale of
            subsidiary's
            stock (Note F)        502,164                          
            Note received in
            exchange for
            stock issued
            (Note F)  . . .                 (687,500)              
            Net loss for the                            (3,546,998)
            year  . . . . .   -----------  ---------- -------------
          Balance  
          December 31, 1994    39,001,112   (687,500)  (28,850,233)

            Exercise of
            stock options .         9,680                          
            Cancellation of
            common stock
            issued for
            services
            (Note F)  . . .     (391,620)                          
            Increase in
            proportionate
            share of
            subsidiary's
            equity related
            to sale of
            subsidiary's
            stock (Note F)      1,769,259                          
            Cancellation of
            note received
            for stock issued
            (Note F)  . . .     (685,000)     687,500              
            Common stock
            issued related
            to service
            business
            acquisition
           (Note J) . . . .    18,543,258                          
            Net loss for the                            (1,677,758)
            period  . . . .   -----------  ---------- -------------
          Balance  
          September 30, 1995  
                               58,246,689              (30,527,991)

            Exercise of
            stock options .       129,592                          
            Issuance of
            convertible
            preferred
            stock (Note F)      3,316,608                          
            Increase in
            proportionate
            share of
            subsidiary's
            equity related
            to sale of
            subsidiary's
            stock (Note F)        633,404                          
            Cumulative
            effect of change
            in accounting
            for subsidiary
            from
            consolidation to
            the equity
            method
            (Note G)  . . .   (8,670,367)                 8,670,367
            Conversion of
            preferred stock
            (Note F)  . . .      (39,200)                          
            Net loss for the                            (8,280,259)
            period  . . . .   -----------  ---------- -------------
          Balance             $53,616,726  $          $(30,137,883)
          September 30, 1996  
                              ===========  ========== =============


                                 Treasury Stock
                              ---------------------
                                Shares     Amount       Total
                              ---------- ------------------------
          Balance  
          December 31, 1993     225,000   $(2,250)   $12,551,838
            Exercise of
            stock options .                              844,220
            Issuance of
            warrant (Note F)  
                                                          35,200
            Increase in
            proportionate
            share of
            subsidiary's
            equity related
            to sale of
            subsidiary's
            equity related
            to sale of
            subsidiary's
            stock (Note F)                               502,164
            Note received in
            exchange for
            stock issued
            (Note F)  . . .                             (687,500)
            Net loss for the                          (3,546,998)
            year  . . . . .     -------   -------    -----------
          Balance  
          December 31, 1994     225,000    (2,250)     9,698,924

            Exercise of
            stock options .                                9,831
            Cancellation of
            common stock
            issued for
            services
            (Note F)  . . .                             (392,250)
            Increase in
            proportionate
            share of
            subsidiary's
            equity related
            to sale of
            subsidiary's
            stock (Note F)                             1,769,259
            Cancellation of
            note received
            for stock issued
            (Note F)  . . .                                     
            Common stock
            issued related
            to service
            business
            acquisition
            (Note J)  . . .                           18,609,960
            Net loss for the                          (1,677,758)
            period  . . . .     -------   -------    -----------
          Balance  
          September 30, 1995  
                                225,000    (2,250)    28,017,966

            Exercise of
            stock options .                              130,667
            Issuance of
            convertible
            preferred
            stock (Note F)                             3,316,645
            Increase in
            proportionate
            share of
            subsidiary's
            equity related
            to sale of
            subsidiary's
            stock (Note F)                               633,404
            Cumulative
            effect of change
            in accounting
            for subsidiary
            from
            consolidation to
            the equity
            method (Note G)                                     
            Conversion of
            preferred stock
            (Note F)  . . .                                     
            Net loss for the                          (8,280,259)
            period  . . . .     -------   -------    -----------
          Balance               225,000   $(2,250)   $23,818,423
          September 30, 1996  
                                =======   =======    ===========


          The accompanying  notes to  financial statements are  an integral
          part hereof.


     <PAGE>


                     ADVANCED NMR SYSTEMS, INC. AND SUBSIDIARIES
                        CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                  Year Ended
                                                 September 30,
                                           -------------------------
                                               1996         1995
                                           ------------ ------------
                                                        (unaudited)

          Cash flows from operating
          activities:
             Net loss . . . . . . . . . .  $(8,280,259) $(3,882,968)
             Adjustments to reconcile net
             loss to net cash used in
             operating activities:
             Minority interest in net
             income (loss) of
             subsidiaries . . . . . . . .     1,005,831      783,520
             Equity in loss of
             unconsolidated subsidiary  .     1,830,880             
             Loss on disposal of
             discontinued operations  . .     3,510,563             
             Depreciation and
             amortization . . . . . . . .     3,373,278      779,007
             Gain on sale of assets . . .     (174,891)             
             Common stock and warrant
             issued (canceled) for
             services . . . . . . . . . .                  (357,250)
             Changes in assets and
             liabilities:
                  Accounts receivable,
                  net . . . . . . . . . .     1,726,809    (667,558)
                  Inventories . . . . . .      (50,949)  (1,131,285)
                  Other assets  . . . . .       249,001     (49,174)
                  Accounts payable and
                  accrued expenses  . . .   (2,375,539)    1,463,931
                  Other liabilities . . .                (1,196,720)
                                           ------------ ------------

             Net cash provided (used) in        814,724  (4,258,497)
             operating activities . . . .  ------------ ------------

          Cash flows from investing
          activities:
             Purchase of imaging and
             rehabilitation business
             (Note J) . . . . . . . . . .     (254,249) (12,055,201)
             Proceeds from sale of
             equipment  . . . . . . . . .       344,527             
             Cash of formerly
             consolidated subsidiary
             (Note G) . . . . . . . . . .   (1,832,563)             
             Patent costs . . . . . . . .      (39,998)    (137,172)
             Purchase of equipment,
             furniture and leaseholds       (5,537,275)    (254,056)
             improvements . . . . . . . .  ------------ ------------

          Net cash used in investing        (7,319,558) (12,446,429)
          activities  . . . . . . . . . .  ------------ ------------

          Cash flows from financing
          activities:
             Exercise of stock options  .       130,667        9,831
             Proceeds from issuance of
             preferred stock (Note F) . .     3,316,645             
             Proceeds from issuance of
             long-term debt . . . . . . .     3,949,658   13,500,000
             Repayment of long-term debt
             and capital lease
             obligations  . . . . . . . .   (4,324,764)    (219,731)
             Distributions to minority
             interests  . . . . . . . . .     (822,000)     (37,500)
             Contributions from minority
             interests  . . . . . . . . .                     67,593
             Sale of subsidiary stock . .                  3,909,400
             Payments received on note                       110,000
             receivable (Note F)  . . . .  ------------ ------------

             Net cash provided by             2,250,206   17,339,593
             financing activities . . . .  ------------ ------------

          NET (DECREASE) INCREASE IN CASH
          AND CASH EQUIVALENTS  . . . . .   (4,254,628)      634,667

          CASH AND CASH EQUIVALENTS,          7,542,508    6,907,841
          BEGINNING OF PERIOD . . . . . .  ------------ ------------

          CASH AND CASH EQUIVALENTS, END     $3,287,880   $7,542,508
          OF PERIOD . . . . . . . . . . .  ============ ============

          Supplemental disclosures of
          cash flow information:
          Interest paid during the period    $1,842,591      $50,584
          Note received in exchange for
          stock (Note F)  . . . . . . . .


                                              Nine Months Ended
                                                September 30,        Year Ended
                                           ------------------------ December 31,
                                               1995        1994         1994
                                           ------------------------ ------------
                                                        (unaudited)
          Cash flows from operating
          activities:
             Net loss . . . . . . . . . .  $(1,677,758)$(1,341,788) $(3,546,998)
             Adjustments to reconcile net
             loss to net cash used in
             operating activities:
             Minority interest in net
             income (loss) of
             subsidiaries . . . . . . . .     (569,353)   (488,799)    (702,965)
             Equity in loss of
             unconsolidated subsidiary  .                                       
             Loss on disposal of
             discontinued operations  . .                                       
             Depreciation and
             amortization . . . . . . . .       633,948     330,859      475,918
             Gain on sale of assets . . .                                       
             Common stock and warrant
             issued (canceled) for
             services . . . . . . . . . .     (392,250)                   35,000
             Changes in assets and
             liabilities:
                  Accounts receivable,
                  net . . . . . . . . . .     (669,710) (2,082,539)  (2,080,387)
                  Inventories . . . . . .     (360,735)   (154,603)    (925,153)
                  Other assets  . . . . .        25,193      24,312     (50,055)
                  Accounts payable and
                  accrued expenses  . . .       780,867   (525,314)      157,750
                  Other liabilities . . .                 (712,669)      126,506
                                           ------------ ----------- ------------

             Net cash provided (used) in
             operating activities . . . .   (2,229,798) (4,950,541)  (6,510,384)
          Cash flows from investing
          activities:
             Purchase of imaging and
             rehabilitation business
             (Note J) . . . . . . . . . .  (12,055,201)                         
             Proceeds from sale of
             equipment  . . . . . . . . .                                       
             Cash of formerly
             consolidated subsidiary
             (Note G) . . . . . . . . . .                                       
             Patent costs . . . . . . . .      (91,057)    (83,465)    (129,580)
             Purchase of equipment,
             furniture and leaseholds         (198,328)   (606,573)    (662,301)
             improvements . . . . . . . .  ------------ ----------- ------------

          Net cash used in investing       (12,344,586)   (690,038)    (791,881)
          activities  . . . . . . . . . .  ------------ ----------- ------------

          Cash flows from financing
          activities:
             Exercise of stock options  .         9,831      46,921       47,125
             Proceeds from issuance of
             preferred stock (Note F) . .                                       
             Proceeds from issuance of
             long-term debt . . . . . . .    13,500,000                         
             Repayment of long-term debt
             and capital lease
             obligations  . . . . . . . .     (222,772)   (110,948)    (107,907)
             Distributions to minority
             interests  . . . . . . . . .      (37,500)                         
             Contributions from minority
             interests  . . . . . . . . .        67,593                         
             Sale of subsidiary stock . .     3,199,885     469,060      709,515
             Payments received on note                                   110,000
             receivable (Note F)  . . . .  ------------ ----------- ------------

             Net cash provided by            16,517,037     405,033
             financing activities . . . .  ------------ -----------      758,733

          NET (DECREASE) INCREASE IN CASH
          AND CASH EQUIVALENTS  . . . . .     1,942,653 (5,235,546)  (6,543,532)

          CASH AND CASH EQUIVALENTS,          5,599,855  12,143,387   12,143,387
          BEGINNING OF PERIOD . . . . . .  ------------ ----------- ------------

          CASH AND CASH EQUIVALENTS, END     $7,542,508  $6,907,841   $5,599,855
          OF PERIOD . . . . . . . . . . .  ============ =========== ============

          Supplemental disclosures of
          cash flow information:
          Interest paid during the period       $47,390  $               $21,017
          Note received in exchange for
          stock (Note F)  . . . . . . . .                                797,500

          See Note J  with respect to  imaging and rehabilitation  business
          acquired.
          See Note E with respect to noncash leasing transactions.
          See Note  G with respect  to change  to equity method  for former
          consolidated subsidiary.


          The accompanying  notes to  financial statements are  an integral
          part hereof.


          <PAGE>


                     ADVANCED NMR SYSTEMS, INC. AND SUBSIDIARIES

                            NOTES TO FINANCIAL STATEMENTS
                                  SEPTEMBER 30, 1996
          (NOTE A) Business:
          -------------------
               Through  September 1995, Advanced  NMR Systems, Inc. ("ANMR"
          or the "Company") operated  under two segments (one of  which was
          discontinued during fiscal 1996 see Note K) consisting of Imaging
          Systems and  Imaging and Rehabilitation Services.   The Company's
          results  of  operations  for  the  year  and  nine  months  ended
          September  30,  1995  include  only  one  month  of  Imaging  and
          Rehabilitation Services operations.  

               [1]  Imaging Systems
                    ---------------
               The  Company and one of its subsidiaries have engaged in the
          development, manufacture and  sale of Magnetic  Resonance Imaging
          ("MRI") systems.  In 1989, the Company completed fabrication of a
          high-speed imaging  option enhancement  package for existing  MRI
          systems.  In 1991, the Company commenced commercial manufacturing
          of the  option  enhancement system  and in  August 1992  received
          clearance  by  the United  States  Food  and Drug  Administration
          ("FDA").   Effective August 6, 1996, the Company discontinued its
          Imaging Systems operations (see Note K).

               On  July   2,  1992,  the  Company   formed  a  wholly-owned
          subsidiary, Advanced  Mammography  Systems, Inc.  ("AMS").    The
          subsidiary was formed  to develop  a dedicated MRI  system.   AMS
          obtained its mammography technology from the Company and retained
          certain  rights  to other  dedicated  MRI  systems utilizing  the
          technology  rights.   As  more fully  discussed  in Note  G,  AMS
          completed an initial public offering of its securities in 1993.

               In October 1992, the Company entered  into a Shared Services
          Agreement  with  AMS  that  commenced  on  January  25, 1993  and
          provides that (i)  the Company shall make available  its research
          scientists,  engineers, and  other  personnel  and, (ii)  provide
          executive officers  to AMS  and (iii)  allow AMS  the use  of its
          administrative and research facilities and clerical staff.  Costs
          are  allocated between  the companies  based on  estimated usage.
          Certain  of AMS's officers serve  as officers of  the Company and
          the  Company provides  management and  administrative support  to
          AMS.

               [2]  Imaging and Rehabilitation Services
                    -----------------------------------
               The Imaging and Rehabilitation  Services segment consists of
          Medical Diagnostics, Inc. ("MDI"),  which the Company acquired on
          August 31, 1995.  MDI is an operator and manager  of a network of
          mobile and  fixed MRI units in Massachusetts, New York, Virginia,
          West Virginia  and Tennessee.   MDI  also provides  Single Photon
          Emission  Computer  Tomography  ("SPECT")  nuclear  medicine  and
          Computerized  Axial   Tomography  ("CT")  imaging   services  and
          physical  therapy  services.   The MRI,  SPECT  and CT  units are
          technologically 

          [page break]
                     ADVANCED NMR SYSTEMS, INC. AND SUBSIDIARIES

                              NOTES TO FINANCIAL SYSTEMS
                                  SEPTEMBER 30, 1996

          advanced  medical diagnostic  devices  that  formulate images  of
          internal  anatomy and vascular blood  flow.  The Company's mobile
          MRI,  SPECT and  CT units  are located  in trailers  that can  be
          driven  to  specially prepared  sites  at  hospitals and  clinics
          according to  a predefined  schedule.   MDI  currently serves  40
          hospitals  and clinics  and  two free-standing  sites with  three
          SPECT units, 10 mobile MRI units,  two fixed MRI centers and  two
          managed  MRI  units.   MDI  currently operates  three  centers in
          Massachusetts that provide comprehensive physician care, physical
          therapy and case management  for motor vehicle accident patients.
          MDI operates  much of  its business through  various partnerships
          and joint ventures in  which MDI or a wholly-owned  subsidiary of
          MDI serves as a general partner.

          (NOTE B) Summary of Significant Accounting Policies
          ---------------------------------------------------

               [1]  Principles of consolidation:
                    ---------------------------

               The consolidated  financial statements include  the accounts
          of the Company and its wholly-owned subsidiaries (including MDI's
          wholly-owned   subsidiaries   and   various   majority-owned   or
          controlled  partnerships  and joint  ventures).   All significant
          intercompany transactions have been eliminated  in consolidation.
          See  "Note G" with respect  to a change  in consolidated entities
          for fiscal 1996.

               [2]  Revenue recognition:
                    --------------------

               The  Imaging  Systems segment  generally  recognizes revenue
          when  its  systems  and products  are  shipped  to  the customer.
          During  1994, a special order was received for a prototype system
          with  customer-determined  specifications  whereby   revenue  was
          recognized when the system was substantially complete.

               The Imaging and  Rehabilitation Services segment  recognizes
          revenue as services are  provided to patients. Reimbursements for
          services provided to patients  covered by Blue Cross/Blue Shield,
          Medicare, Medicaid, HMO's and other contracted insurance programs
          are   generally  less   than  rates   charged  by   the  Company.
          Differences  between  gross  charges  and  estimated  third-party
          payments are  recorded as  contractual allowances in  determining
          net  patient service revenue during the  period that the services
          are  provided.     MDI   provides  management  services   to  its
          subsidiaries,  affiliates   and  outside  parties.     Fees   for
          management  services are  generally based  on a  standard monthly
          amount plus a percentage  of net income, as defined.   Management
          fees are recognized  as revenue  during the period  in which  the
          services are provided.

          [page break]
                     ADVANCED NMR SYSTEMS, INC. AND SUBSIDIARIES

                            NOTES TO FINANCIAL STATEMENTS
                                  SEPTEMBER 30, 1996

               [3]  Cash equivalents:
                    -----------------
               The  Company considers  all  highly liquid  debt instruments
          purchased with  a maturity  of three  months or  less to  be cash
          equivalents.

               [4]  Inventories:
                    ------------
               Inventories are accounted for at the lower of cost or market
          using the first-in, first-out ("FIFO") method.

               [5]  Equipment, building, furniture and leasehold
                    ---------------------------------------------
                    improvements:
                    -------------
               Property,  equipment,  furniture and  leasehold improvements
          are recorded at  cost.  Expenditures for  repairs and maintenance
          are charged to expense as incurred, whereas major betterments are
          capitalized.   Depreciation and amortization are  computed by the
          straight-line method  over the estimated lives  of the applicable
          assets, or term of the lease,  if applicable.  Assets are written
          off when they become fully depreciated.

               Property  and equipment under capital lease is stated at the
          lower of  the fair market value  or the net present  value of the
          minimum   lease  payments   at  the   inception  of   the  lease.
          Capitalized lease equipment is amortized over the  shorter of the
          term of the lease or the estimated useful life.

          (NOTE B) Summary of Significant Accounting Policies (Continued):
          ----------------------------------------------------------------

               [5]  Equipment, building, furniture and leasehold
                    --------------------------------------------
                    improvements: (Continued)
                    -------------------------

               Asset Classification                    Useful Lives
               --------------------                    ------------

               Medical and other equipment             5-8 years
               Office furniture and equipment          5 years
               Research and production equipment       5 years
               Leasehold improvements                  Term of lease
               Building                                30 years

               [6]  Patents:
                    --------
                All patent costs have  been written off in  connection with
          the

          [page break]
                     ADVANCED NMR SYSTEMS, INC. AND SUBSIDIARIES

                            NOTES TO FINANCIAL STATEMENTS
                                  SEPTEMBER 30, 1996

           discontinued Imaging Systems business segment.

               [7]  Net loss per share:
                    -------------------
               Net loss  per common share  was computed using  the weighted
          average common shares outstanding during the period.  Outstanding
          warrants  and  options  had  an  anti-dilutive  effect  and  were
          therefore excluded  from the computation  of net loss  per common
          share.

               [8]     Minority  interests   in  net  income   (losses)  of
          consolidated
                    -------------------------------------------------------
          -
                    entities
                    --------
               Minority interests in  net income  (losses) of  consolidated
          entities  represents the  allocation of  net losses  from certain
          consolidated  entities  to   the  respective  minority   interest
          shareholders and joint venture partners.

               [9]  Fiscal year end
                    ---------------

               During  1995,  the  Company  changed its  fiscal  year  from
          December 31 to September 30.

               [10]  Letters of credit
                     -----------------

               The  Company  utilizes letters  of  credit  to back  certain
          financing instruments.  The letters  of credit reflect fair value
          as a condition  of their  underlying purpose and  are subject  to
          fees competitively determined in the market place.

               [11]  Use of Estimates
                     ----------------

               The preparation  of financial statements in  conformity with
          generally accepted accounting  principles requires management  to
          make estimates  and assumptions that affect  the reported amounts
          of assets and liabilities and disclosure of contingent assets and
          liabilities  at  the date  of  the financial  statements  and the
          reported amounts  of revenues  and expenses during  the reporting
          period.  Actual results could differ from those estimates.


          (NOTE B) Summary of Significant Accounting Policies (Continued):
          ---------------------------------------------------

          [page break]
                     ADVANCED NMR SYSTEMS, INC. AND SUBSIDIARIES

                            NOTES TO FINANCIAL STATEMENTS
                                  SEPTEMBER 30, 1996

               [12]  Recent Pronouncements
                     ---------------------

               The   Financial  Accounting   Standards  Board   has  issued
          Statement of Financial Accounting Standards No. 123,  "Accounting
          for  Stock-Based Compensation"  ("SFAS 123").   The  Company will
          adopt  the  disclosure  requirements   of  SFAS  123  during  the
          Company's fiscal year ending September 30,  1997 but will account
          for its  employee stock option plans  under Accounting Principles
          Board  Opinion No. 25, "Accounting for Stock Issued to Employees"
          as permitted under SFAS 123.

               In addition, the Financial Accounting Standards Board issued
          Statement  of Financial Accounting Standards No. 121, "Accounting
          for the Impairment of Long-Lived Assets to be Disposed Of" ("SFAS
          121").  SFAS 121 is also  effective for the Company's fiscal year
          ending September 30, 1997.  The Company believes adoption of SFAS
          121 will not have a material impact on its financial statements.

          (NOTE C) Long-term Debt and Capital Lease Obligations
          -----------------------------------------------------
               Long-term debt  and capital  lease obligations  at September
          30, 1996 and 1995 consisted of the following:

                                                 1996          1995
                                             -----------    ----------
           Term loan and revolver loan
           payable to a bank,                  $11,855,000  $13,500,000
           collateralized by all    the
           business assets of the Company  

           Note payable to a leasing
           company, interest at 11.5%,
           monthly payments of principal
           and interest of $40,147 payable       1,803,000             
           through September 2000,
           collaterized by certain business
           assets of the Company . . . . .

           Note payable to a leasing
           company, interest at 9.5%,
           monthly payments of principal
           and interest of $55,762 payable       1,214,077    1,698,000
           through September 1998,
           collaterized by certain business
           assets of the Company . . . . .

           Note payable to a leasing
           company, interest at the prime
           rate plus 0.5%, monthly
           principal payments of $22,917
           payable through September 1999
           collaterized by certain business        804,061    1,077,440
           assets of the Company . . . . .

           Note payable to a bank, interest
           at 8.7%, monthly payments of
           principal and interest of
           $10,415 payable through January
           1997, collateralized by certain
           business assets of the Company           30,797      156,817

           Other notes payable . . . . . .         384,021      313,405

           Capital lease obligations with
           interest rates ranging primarily
           from 9.6% to 16%  . . . . . . .       4,086,510    3,807,800
                                                ----------  -----------
           Total long-term debt and capital
           lease obligations . . . . . . .      20,178,356   20,553,462

           Less:  Current maturities . . .      14,495,637    4,274,110
                                                ----------  -----------
                                                $5,682,719  $16,279,352
                                               ===========  ===========

          (NOTE C) Long-term Debt and Capital Lease Obligations - Continued
          -----------------------------------------------------

               On  August 31, 1995, MDI entered into a bank credit facility
          to  borrow up  to  $15,000,000 (the  "Credit  Facility") under  a
          $6,000,000 revolving  credit loan  which expires August  31, 1998
          and a $9,000,000 term loan.  The term loan is required to be paid
          in eighteen  quarterly installments of $500,000  commencing March
          31,  1996.    As  of  September 30,  1996  and  1995,  there  was
          $4,355,000  and  $4,500,000,  respectively,  borrowed  under  the
          revolving   credit   loan    and   $7,500,000   and   $9,000,000,
          respectively, borrowed under the term loan.  Borrowings under the
          revolving  credit  loan bear  interest at  either 0.25%  over the
          prime rate or 2.5% over the  30 day LIBOR rate.  Borrowings under
          the term loan bear interest at either 0.5% over the prime rate or
          3.0% over  the 30 day LIBOR  rate.  A condition  of default would
          increase the term loan rate to 2% over the prime rate.


          [page break]
                     ADVANCED NMR SYSTEMS, INC. AND SUBSIDIARIES

                            NOTES TO FINANCIAL STATEMENTS
                                  SEPTEMBER 30, 1996

               The lenders have a security interest in substantially all of
          the  assets of the Company.  The Credit Facility contains various
          restrictive  operating and financial covenants typically included
          in bank  credit arrangements (including limitations  on incurring
          additional  indebtedness, paying  cash  dividends to  the  parent
          company,  and maintaining  certain financial  ratios and  default
          provisions).    At September  30, 1996,  the  Company was  not in
          compliance  with  several restrictive  covenants which  have only
          been  waived  by the  bank  only  through  March 31,  1997.    In
          addition, the bank  has deferred the December  31, 1996 scheduled
          term loan payment of $500,000 until March 31, 1997.  In addition,
          the bank has deferred  the December 31, 1996 scheduled  term loan
          payment  of $500,000  until  March 31,  1997.   Accordingly,  the
          entire amount under the bank  credit facility has been classified
          as current in the accompanying financial statements (see Note L).

               On  August 19, 1996, the Company amended its Credit Facility
          to reduce the revolving  credit loan to a maximum  of $5,555,000,
          including letters of credit  totaling $1,200,000.  Further, under
          the terms  of  the amendment,  ANMR  was required  to  contribute
          $500,000 to MDI.

               In  addition  to  the  $11,855,000  balance  outstanding  at
          September 30, 1996  under the  Credit Facility,  the Company  has
          outstanding letters of credit totaling $1,200,000 which guarantee
          certain MDI equipment financings.

          [PAGE BREAK]

               Capital Lease Obligations
               --------------------------

               Future minimum lease payments, under capital leases, for the
          next five years and thereafter are as follows:

           Fiscal Year
           -----------
                1997                                         $1,608,195
                1998                                          1,223,072
                1999                                          1,041,067
                2000                                            752,175
                2001                                            159,071
                                                             ----------
                                                              4,783,580
           Less:  Amounts representing interest                 697,070
                                                             ----------
                                                              4,086,510
           Less:  Current maturities                          1,263,771
                                                             ----------
                                                             $2,822,739
                                                             ==========



          [page break]
                     ADVANCED NMR SYSTEMS, INC. AND SUBSIDIARIES

                            NOTES TO FINANCIAL STATEMENTS
                                  SEPTEMBER 30, 1996


          (NOTE C) Long-term Debt and Capital Lease Obligations - Continued
          -----------------------------------------------------
               Maturities of long-term  debt and capital lease  obligations
          over the next five years and thereafter are as follows:

           Fiscal Year
                                                    $14,495,637
                1997                                  2,286,060
                1998                                  1,574,319
                1999                                  1,155,231
                                                        667,109
                2000                                -----------
                2001                                $20,178,356
                                                    ===========


           Property and equipment under capital lease at September
           30, 1996 is as follows:

           Property and equipment      $4,976,000

           Less:  Accumulated           1,109,000
           amortization                ----------
                                       $3,867,000
                                      ===========
          (NOTE D) Income Taxes:
          ----------------------
               As of September 30, 1996 and 1995, the components of the net
          deferred tax asset and liability are as follows:

                                         September 30,    September 30,
                                              1996            1995
                                         --------------   -------------
           Deferred tax assets:
                Net operating loss        $10,280,000      $9,000,000
           carryforward  . . . . . . .
           Provision for discontinued       1,404,000              --
           operations  . . . . . . . .
                Deferred gains . . . .         13,000          57,000
                Stock option                                  322,000
           compensation  . . . . . . .
                Capital lease  . . . .         22,000          59,000
                Other  . . . . . . . .         57,000)         88,000)
           Valuation Allowance . . . .    (11.260,000)     (8,760,000)
                                         ------------     -----------
                                             $516,000        $766,000
                                         ------------     -----------
           Deferred tax liabilities:
                Depreciation . . . . .       $296,000       $,420,000

                Amortization . . . . .        184,000         137,000
                                         ------------     -----------
                                             $480,000        $557,000
                                         ------------     -----------
                                              $36,000        $209,000
                                         ============     ===========


               At  September 30, 1996 and September 30, 1995, the valuation
          allowance  relates principally  to  uncertainty  surrounding  the
          realization of the net operating loss carryforward benefit.

               At September 30,  1996 and September  30, 1995, the  Company
          had available net operating  loss carryforwards for tax purposes,
          expiring   through   2011   of   approximately   $26,000,000  and
          $21,000,000,  respectively.  The  Internal Revenue  Code contains
          provisions which  may limit  the net operating  loss carryforward
          available for  use in any  given year  if significant changes  in
          ownership interest of the Company occur.

               The Company  and MDI file  a consolidated  tax return.   The
          Company and  AMS file separate income tax  returns.  Accordingly,
          losses incurred by AMS are not available to the Company to offset
          its future income.

          (NOTE D) Income Taxes: (Continued)
          ---------------------

               The  following table  reconciles the  tax provision  per the
          accompanying statements of operations with the expected provision
          obtained by applying statutory tax rates to the pretax loss:


                                                      Year Ended
                                                     September 30,
                                                1996             1995
                                          ---------------  -----------------
                                                              (unaudited)

           Pretax loss . . . . . . . . .   $(8,139,575)       $(3,882,968)

           Loss attributable to AMS  . .                        2,414,331
                                           -----------        -----------

           Parent company pretax           $(8,139,575)       $(1,468,637)
                 income (loss) . . . . .   ===========        ===========

           Expected tax (benefit) 
                 at 34%  . . . . . . . .   $(2,767,456)         $(499,337)

           Adjustment due to increase
                in valuation reserve . .     2,767,456            499,337

           Other . . . . . . . . . . . .        42,288                   

           Utilization of available net
                operating loss                                           
                carryforward . . . . . .   -----------        -----------

           Tax provision per financial     $    42,288        $          
                statements . . . . . . .   ===========        ===========


                                           Nine Months Ended        Year Ended
                                             September 30,         September 30,
                                          1996           1995          1994
                                     -------------- -------------- -------------
                                                     (unaudited)

          Pretax loss . . . . . . .   $(1,677,758)   $(1,341,788)  $(3,546,998)

          Loss attributable to AMS      1,684,048      1,772,880     2,503,162
                                      -----------    -----------   -----------

          Parent company pretax            $6,290      $(431,092)  $(1,043,836)
                income (loss) . . .   ===========    ===========   ===========

          Expected tax (benefit)           $2,000      $(147,000)    $(355,000)
                at 34%  . . . . . .

          Adjustment due to increase                     147,000       355,000
               in valuation reserve 

          Other . . . . . . . . . .                                           

          Utilization of available         (2,000)                            
               net operating loss     -----------    -----------   -----------
               carryforward . . . .

          Tax provision per           $              $             $          
               financial statements   ===========    ===========   ===========


          (NOTE E) Commitments and Contingencies:
          ---------------------------------------

               [1]  Operating leases:
                    -----------------
               The   Company  leases   facilities   and   equipment   under
          noncancelable operating  leases expiring at various dates through
          fiscal 2001. Facility  leases require the Company  to pay certain
          insurance, maintenance  and real  estate taxes.   Rental expenses
          totaled  approximately $2,349,000  and  $1,555,000 for  the years
          ended  September 30, 1996 and 1995, $485,000 and $300,000 for the
          nine month periods ended September 30, 1995 and 1994 and $398,000
          and  $370,000 for  the years  ended December  31, 1994  and 1993,
          respectively.


          (NOTE E) Commitments and Contingencies: Continued
          ---------------------------------------

               Future basic rental  commitments under operating leases  are
          as follows:

                         Fiscal Year
                        -------------
                             1997                $1,828,087
                             1998                 1,426,630
                             1999                   847,086
                             2000                   618,138
                             2001                   172,318
                                                 ----------
                                 Total           $4,892,259
                                                 ==========

               The Company also leases specially prepared sites at  certain
          hospitals at  which it  operates its mobile  MRI units.  Space is
          also generally leased within the hospital facilities for  patient
          registration  and  clinical  and other  administrative  services.
          Lease agreements with the hospitals are typically for five years.

               Future   rentals  under  hospital  rent  agreements  are  as
          follows:

                         Fiscal Year
                         ------------
                             1997                  $471,417
                             1998                   435,581
                             1999                   249,801
                             2000                   135,401
                             2001                    11,167
                                                   --------
                                 Total           $1,303,367
                                                 ==========


          [page break]
                     ADVANCED NMR SYSTEMS, INC. AND SUBSIDIARIES

                            NOTES TO FINANCIAL STATEMENTS
                                  SEPTEMBER 30, 1996

               Hospital rental  expenses for the years  ended September 30,
          1996  and 1995  and  the  nine months  ended  September 30,  1995
          totaled $481,000, $38,000 and $38,000, respectively.

               [2]  Legal proceedings:
                    -----------------

               Effective  November  28,  1995,  ANMR  terminated   the  Key
          Employment Agreement, dated May 2,  1995, of John A. Lynch, Chief
          Executive Officer  of  MDI.   MDI's Chief  Operating Officer  was
          named  the Acting  President  of  MDI.   At  September 30,  1995,
          accrued  expenses  include  approximately $500,000  of  severance
          benefits  accrued  in  accordance  with  the  terms  of  the  Key
          Employment Agreement.  In March 1996,  the Company's former Chief
          Executive
          Officer filed  a demand  for  arbitration seeking  a  declaratory
          ruling, equitable relief  and damages related  to claims  arising
          out of the Key  Employment Agreement.    Although the outcome  of
          this arbitration is uncertain, the Company does  not believe that
          the results  of this arbitration  will have a material  effect on
          the consolidated  financial position or results  of operations of
          the Company.

               During 1996,  the Company became engaged  in litigation with
          one of its customers regarding the performance of its enhancement
          package  for  several  MRI  systems  sold  to  the  customer  for
          approximately  $1,500,000.    The  Company   believes  that  this
          situation was  exacerbated by  its  decision to  discontinue  its
          imaging systems operations (see Note  K).  The Company is seeking
          an  equitable resolution  to the  dispute.   The outcome  of this
          matter is  unpredictable, but the  Company does not  believe that
          the final outcome will have a material effect on the consolidated
          financial position or results of operations of the Company.

               The Company is also subject to legal proceedings and  claims
          that  arise  in  the  normal  course  of  business.    Management
          believes,  based  on consultation  with  counsel,  that any  such
          liabilities resulting  from these  matters  would not  materially
          affect the consolidated financial position of the Company  or its
          results of operations.




          [page break]
                     ADVANCED NMR SYSTEMS, INC. AND SUBSIDIARIES

                            NOTES TO FINANCIAL STATEMENTS
                                  SEPTEMBER 30, 1996

          (NOTE F) Capital Transactions:
          ------------------------------
               [1] Convertible Preferred Stock:

               In May  1996, the  Company closed  a private  placement (the
          "Placement")  of $3.7  million principal  amount of  newly issued
          Series  A  Convertible  Preferred  Stock, $.01  par  value,  (the
          "Preferred Stock").  Preferred Stock shareholders are entitled to
          receive  dividends at a rate of $40.00  per share per annum, when
          and as  declared by the  Board of Directors  of the Company.   At
          December 31, 1996, approximately  2,200 shares of Preferred Stock
          was  still  outstanding  after  certain  conversions.    The  net
          proceeds from  the Placement  of approximately  $3,320,000, after
          payment of fees and  related expenses, is being used  for working
          capital.

               Each  share of Preferred Stock is convertible into shares of
          common stock at a conversion price equal to the lesser of 125% of
          the market price on the issuance date, or 75% of the market price
          on the  conversion date.   The  market price,  as defined in  the
          agreement equals  the average  closing  bid price  of the  common
          stock  for  the  five  trading  days  immediately  preceding  the
          issuance  date or the conversion  date, as may  be applicable, as
          reported  by  the  National  Association  of  Securities  Dealers
          Automated  Quotation System  ("NASDAQ").   Through  September 30,
          1996,  a total  of  1,506 shares  of  Preferred Stock  have  been
          converted into a total of  39,215 shares of common stock.


          (NOTE F) Capital Transactions: Continued
          -----------------------------

               [2]  Warrants: Continued
                    --------

               In  connection with the acquisition of MDI (see Note J), the
          Company issued 2,331,722 warrants to purchase the Company's stock
          at  a purchase price  of $3.75  per share at  any time up  to the
          expiration date on August 31, 2000.

               In  connection  with  various   debt  and  equity  financing
          arrangements prior to  1994, the Company  had issued warrants  to
          purchase  the Company's  common  stock.   During  1993, all  such
          outstanding  warrants  were either  exercised  or  expired.   The
          warrants exercised  resulted  in the  Company  issuing  6,262,746
          shares  of  common  stock   for  net  proceeds  of  approximately
          $10,600,000.

               In 1993, a consultant  was engaged to assist the  Company in
          connection with the exercise of the above warrants.  In lieu of a
          cash payment, the consultant was granted 189,000 shares of common
          stock and an option to purchase 250,000 shares of common stock at
          a purchase price of $2.50 per  share.  The difference between the
          fair  market value of the common stock  and the amount to be paid
          therefore,  amounting to  $801,750,  was  recorded as  consulting
          expense in the financial statements  for the year ended  December
          31, 1993.  The Company canceled all of the options  and 63,000 of
          the  shares  previously  granted  resulting in  other  income  of
          approximately $392,000 during the nine months ended September 30,
          1995.

               During  1994,  in  connection   with  an  agreement  with  a
          financial  advisory firm,  the Company  issued a  warrant  to the
          advisory firm to purchase 350,000  shares of the Company's common
          stock.  The warrant is exercisable at $5.00 per share at any time
          up to the expiration date on March 6, 2005.  The number of shares
          under  the   warrant  and  the  exercise  price  are  subject  to
          adjustment  in the  event  of stock  dividends  or splits.    The
          warrant was sold to the investment  advisor for $200 and has been
          valued  at $35,200 in the accompanying  financial statements.  In
          addition to the  warrant, the advisory firm received  a quarterly
          retainer fee  of  $15,000  and received  an  additional  fee  for
          specific   financing,  merger  or   acquisition  services.    The
          agreement is cancelable by either party at any time.

               [3]  Related-party transactions:
                    ---------------------------
               One  of the Company's former directors who is the brother of
          the president and sole shareholder of the underwriting  firm used
          in the Company's initial  public offering in 1983 was  a director
          at the time  of the  offering.   The underwriting  firm has  also
          assisted the  Company in other  financing transactions, including
          the   public  offering   of  the   Company's  subsidiary.     The
          underwriting  firm has received substantial fees, commissions and
          expenses for  its services.   During 1993, the  underwriting firm
          exercised the remaining portion of a unit purchase option granted
          in connection with a private placement  of securities whereby the
          underwriter purchased 146,000 shares  of common stock and 146,000
          class  A warrants for $438,000.  The warrants were also exercised
          in 1993 as indicated in Note F [2].

               [4]  Stock options:
                    --------------
               The Company  has an Incentive and  Nonqualified Stock Option
          Plan which provides for  the granting of options to  purchase not
          more  than 1,000,000 shares of common stock.  Exercise prices for
          any incentive options are at prices not less than the fair market
          value   at  the  date   of  grant,  while   exercise  prices  for
          nonqualified options may be at any price in excess of $.01.  When
          fair market  value at the  date of issuance  is in excess  of the
          option  exercise price,  the excess  is recorded  as compensation
          expense.  The total  number of shares authorized for  grant under
          this  plan were reached during 1993 and no additional options can
          be granted.  During fiscal 1996 certain options were canceled and
          replaced with options exercisable at the then fair market value.

               Stock  option transactions under the above plan for the past
          three years are as follows:

                                        Number of     Option Price
                                         Shares         Per Share
                                       -----------  ----------------
           Balance, December 31, 1993       336,487        $.65 $4.38
           Exercised in 1994               (12,409)        $.65 $3.18
           Canceled in 1994                 (2,438)        $.65 $3.18
                                           --------
           Balance, December 31, 1994       321,640        $.65 $4.38
           Granted in 1995                    6,000             $3.18
           Exercised in 1995               (15,125)              $.65
           Canceled in 1995                (16,300)       $3.13 $3.18
                                          ---------
           Balance, September 30,           296,215        $.65 $4.38
           1995
           Exercised in 1996               (31,625)             $0.65
           Canceled in 1996               (112,500)       $2.63 $4.38
                                         ----------
           Balance, September 30,           152,090        $.65 $4.38
           1996                          ==========

               During 1993, the Company adopted a new employee stock option
          plan  and a  stock option  plan for  nonemployee directors.   The
          employee stock option plan  provides for the granting  of options
          to purchase not more  than 2,250,000 shares of common stock.  The
          options  issued under the  plan may be  incentive or nonqualified
          options.  The exercise price  for any incentive options cannot be
          less than  the fair market value of the stock  on the date of the
          grant, while the exercise price for nonqualified  options will be
          determined by the option committee.  The Directors' stock  option
          plan provides  for the granting  of options to purchase  not more
          than  625,000 shares  of common  stock.   The exercise  price for
          shares granted under the Directors'  plan cannot be less than the
          fair market value  of the stock on  the date of the grant.   Both
          plans expire May  25, 2003.  Stock option  transactions under the
          1993 plans are as follows:


          (NOTE F) Capital Transactions: Continued
          -----------------------------
               [4]  Stock options: Continued
                    -------------
                                        Number of     Option Price
                                         Shares         Per Share
                                       -----------    ------------
           Balance, December 31, 1993    960,000          $3.13 $3.25
           Granted in 1994               849,000          $2.38 $5.25
           Canceled in 1994             (100,000)               $5.25
                                     -----------
           Balance, December 31, 1994  1,709,000          $2.38 $5.25
           Granted in 1995               871,242           $.79 $3.94
           Canceled in 1995             (341,200)         $2.38 $3.13
                                    ------------
           Balance, September 30,      2,239,042           $.79 $5.25
           1995
           Granted in 1996               440,000           $.50 $2.19
           Exercised in 1996             (75,862)         $1.45 $2.56
           Canceled in 1996             (622,492)         $1.58 $5.25
                                      ----------
           Balance, September 30,      1,980,688           $.50 $5.25
           1996                       ==========

            Stock transactions not  covered under the option plans in 1996,
          1995 and 1994 are as follows:

                                        Number of     Option Price
                                         Shares         Per Share
                                       -----------

           Balance, December 31, 1993    573,750          $2.75 $3.38
           Granted in 1994                10,000                $2.75
           Exercised in 1994            (300,000)         $2.75 $3.18
           Canceled in 1994               (7,000)               $3.18
                                      ----------
           Balance, December 31, 1994    276,750          $3.18 $3.38
           Granted in 1995               860,318           $.79 $2.01
           Canceled in 1995             (261,750)          $.79 $3.38
                                     -----------
           Balance, September 30,        875,318           $.79 $3.38
           1995
           Granted in 1996               130,000           $.50 $1.41
           Canceled in 1996             (150,000)               $2.56
                                     -----------
           Balance, September 30,        855,318           $.79 $3.38
           1996                       ==========

               Under all  plan and nonplan  stock options, as  of September
          30, 1996, options to  purchase 894,312 shares were  available for
          grant  and options  to  purchase 2,988,096  shares at  a weighted
          average   price  of  $1.39  per  share  were  exercisable.    The
          outstanding options expire at various dates within ten years from
          the date of grant.


          (NOTE F) Capital Transactions: Continued
          -----------------------------
               [5]  Common stock reserved:
                    --------------------
               As  of   September  30,  1996,  the   Company  has  reserved
          approximately 2,725,000 shares of  common stock for issuance upon
          the  exercise  of  the   outstanding  stock  options  granted  in
          accordance with  the stock  option plans  and  stock options  not
          covered by stock option plans.


          [page break]
                     ADVANCED NMR SYSTEMS, INC. AND SUBSIDIARIES

                            NOTES TO FINANCIAL STATEMENTS
                                  SEPTEMBER 30, 1996
               [6]  Note receivable from stock sale:
                    --------------------------------
               During  1994, a  former  employee of  the Company  exercised
          stock options in exchange for a note.  The note was a nonrecourse
          promissory  note  bearing interest  at  the  prime  rate and  was
          collateralized by the stock issued upon the exercise of the stock
          option.   Interest was payable annually and the principal was due
          upon the sale of the shares by the former employee.  During 1995,
          the note was  canceled and the  stock issued was returned  to the
          Company.


          (NOTE G) Unconsolidated Subsidiary (AMS):
          ----------------------------------------
               AMS  completed its initial public  offering of stock in 1993
          which  generated  net  cash  proceeds  to  AMS  of  approximately
          $7,400,000.    As  a  result  of  the   offering,  the  Company's
          percentage ownership  of AMS was  reduced to  73%.  Prior  to the
          offering,  AMS  issued bridge  notes  with  warrants to  purchase
          shares of common stock at a price of one-half the public offering
          price.   In  connection with  the offering,  AMS also  granted an
          option to the underwriter to purchase  shares at a price of  130%
          of  the public  offering  price.   AMS  has also  established  an
          employee stock option  plan under which certain options have been
          granted.    As  the  warrants  and  options  are  exercised,  the
          Company's percentage  ownership of  AMS will be  further reduced.
          During 1994 and 1995, most of the above warrants and options were
          exercised whereby  the Company's percentage ownership  of AMS was
          reduced to approximately 61% at September 30, 1995.

               On  May 15, 1996, AMS  closed a private  placement (the "AMS
          Placement") of  $3 million principal  4% convertible  debentures.
          Net proceeds from the  AMS Placement was approximately $2,752,000
          after payment of fees and related  expenses.  As of September 30,
          1996,  an additional 1,748,364  shares of  common stock  had been
          issued  in connection  with  the conversion  of these  debentures
          whereby  the  Company's  percentage  ownership of  AMS  has  been
          reduced to approximately 48% at September 30, 1996.  Accordingly,
          the  Company has switched from consolidation of AMS to the equity
          method of accounting.

               Also in connection with the AMS public offering, the Company
          agreed  to place 2,750,000 of  its 4,000,000 shares  of AMS stock
          into escrow.   The escrow shares will be released  based upon AMS
          achieving certain levels of  pretax income or share price  in the
          future.   If and when  the shares are  released from  escrow, AMS
          will  incur an expense  based on the  fair market value  of AMS's
          stock  at the time they  are released.   For accounting purposes,
          the Company treats the escrow shares as if they were outstanding.
          If  the  shares are  not  ultimately  released  from escrow,  the
          Company's

          [page break]
                     ADVANCED NMR SYSTEMS, INC. AND SUBSIDIARIES

                            NOTES TO FINANCIAL STATEMENTS
                                  SEPTEMBER 30, 1996

          future interest in the earnings or losses of AMS will be reduced.
          The Company  does not  currently believe  that the escrow  shares
          will be released. 


          (NOTE H) Related Party Transactions
          -----------------------------------
               MDI  has   a  management   agreement  with   a  professional
          corporation  owned   by   an   officer/director   of   MDI   (the
          "Professional   Corporation").     Pursuant  to   the  management
          agreement, MDI manages all business and administrative aspects of
          the  Professional  Corporation,  excluding  medical  and  related
          services.  Management fees under  this contract totaled   $15,000
          and $5,000  for the year  ended September  30, 1996 and  the nine
          months ended September 30, 1995, respectively.

               Certain of  the consolidated  entities have entered  into an
          agreement   with  the   Professional   Corporation  whereby   the
          Professional   Corporation   provided  overall   supervision  and
          direction  of  medical  services  provided  by  the  consolidated
          entities.  Each of the agreements was for a five-year period, and
          required the payment  of an  annual fee and  an initial  training
          fee.  Currently, each agreement renews automatically for one-year
          periods  unless  terminated  by  either  party  with  appropriate
          advance notice.

          (NOTE I) Joint Venture
          -----------------------

               MDI  and an  unrelated party  (the "Joint  Venture Partner")
          formed a joint venture (the  "Joint Venture") under an  agreement
          dated  December   31,  1986,  as  amended   (the  "Joint  Venture
          Agreement").  The Joint  Venture was organized to license  an MRI
          unit  to an MDI operating entity (the "MDI Operating Entity") and
          to  manage the MDI Operating  Entity.  The  Joint Venture Partner
          was  entitled to 46%  of the  net earnings  of the  Joint Venture
          during the ten-year term of the Joint Venture Agreement. 

               The  Joint  Venture  Partner  purchased,  for  approximately
          $2,620,000,   the  necessary  MRI   equipment/van  and  leasehold
          improvements which it licenses  to the Joint Venture.   The Joint
          Venture Agreement  requires licensing fees  to be paid  as weekly
          priority payments to  the Joint Venture Partner.   Licensing fees
          have aggregated  approximately $530,000 and $44,000  for the year
          ended  September 30, 1996 and one month ended September 30, 1995,
          respectively.    The  Joint   Venture  in  turn  sublicenses  the
          equipment/van  and leasehold  improvements  to the  MDI Operating
          Entity on the  same terms  under a Restated  and Amended  Medical
          Imaging  Lease and Services  Agreement dated  August 6,  1990 and
          expiring  on   December  31,   1996  (the  "Lease   and  Services
          Agreement").

          [page break] 
                     ADVANCED NMR SYSTEMS, INC. AND SUBSIDIARIES

                            NOTES TO FINANCIAL STATEMENTS
                                  SEPTEMBER 30, 1996

          These  transactions have been accounted for as a capital lease in
          the   accompanying  consolidated  financial  statements  and  are
          included in the disclosures in Note C.

          (NOTE I) Joint Venture Continued
          ---------------------------------
               In 1990,  the parties  agreed to amend  and restate  various
          existing  agreements  and to  sign  a Medical  Imaging  Lease and
          Services  Agreement  effective  June  1,  1990  and  expiring  on
          December  31, 1996  between the  Joint Venture  and a  second MDI
          operating entity.  Also, the Joint Venture Partner agreed to loan
          MDI  up to  $487,500  which amount  was,  on December  20,  1990,
          converted to purchase from  MDI an additional 5% interest  in the
          earnings  of  the  Joint  Venture.     In  connection  with  this
          transaction,  MDI  deferred  a  $445,730  gain,  which  is  being
          amortized on a straight-line basis over the remaining term of the
          Joint  Venture Agreement  as an  offset to  minority  interest in
          consolidated  partnerships'   net  income  in   the  accompanying
          consolidated statements of income.

               The Company  filed a complaint in September 1992 against the
          Joint Venture  Partner and certain  of its affiliates,  seeking a
          declaration, damages, and equitable relief relating to an alleged
          breach  by the  Joint  Venture Partner  of certain  fiduciary and
          contractual  obligations  with respect  to  the  business of  the
          Company.  The  Joint Venture Partner filed a counterclaim against
          the  Company  also seeking  damages  and  equitable relief  while
          alleging breach  of fiduciary and contractual  obligations by the
          Company.   Although the outcome of this  litigation is uncertain,
          the  Company does not believe that the results of this litigation
          will  have  a  material  effect  on  the  consolidated  financial
          position or results of operations of the Company.

               Deferred gains,  including $60,000  per year related  to the
          Joint  Venture Agreement, of  approximately $134,000  and $11,000
          related to the above transactions  have been amortized during the
          year ended September 30,  1996 and the one month  ended September
          30, 1995, respectively.


          (NOTE J) Acquisition of Medical Diagnostics, Inc.
          -------------------------------------------------
               Effective August 31, 1995, Medical Diagnostics, Inc. ("MDI")
          merged  (the  "Merger") with  a  wholly-owned  subsidiary of  the
          Company.  In connection with the Merger, MDI entered into  a loan
          and security agreement with a bank to finance the cash portion of
          the merger (see  Note C).  The acquisition has been accounted for
          under the purchase method of accounting and the purchase price of
          $29,806,000,  exclusive of  related costs,  consisted of  cash of
          approximately $11,196,000 and stock valued at approximately

          [page break]
                     ADVANCED NMR SYSTEMS, INC. AND SUBSIDIARIES

                            NOTES TO FINANCIAL STATEMENTS
                                  SEPTEMBER 30, 1996

          $18,610,000.   In addition,  2,331,722 warrants to  purchase ANMR
          stock at $3.75  per share  were issued to  MDI shareholders  (see
          Note  F).   The  purchase price  and  costs associated  with  the
          acquisition exceeded the fair value of the net assets acquired by
          approximately $26,933,000 which has been assigned to goodwill and
          is being  amortized on a  straight-line basis over  thirty years.
          At  September  30, 1996  and 1995,  the  Company owed  former MDI
          shareholders approximately $46,000 and  $1,696,000, respectively,
          for MDI common stock not yet converted.


          (NOTE K) Discontinued Operations
          --------------------------------
               In  August 1996, the Company's  Board of Directors adopted a
          formal plan to discontinue  its Imaging Systems business segment.
          The segment has been accounted for as  discontinued operations in
          accordance with  APB 30,  which among other  provisions, requires
          the plan of disposal to be carried out within one year.

               Included in the loss  from disposal of the  Imaging Services
          business segment  totaling $3,511,000 is a  provision of $400,000
          for future  expenses  to  be  incurred  in  connection  with  the
          disposal of the  discontinued business.  The operating results of
          the discontinued operations are summarized as follows:


                                                       Year Ended
                                                     September 30,
                                              ---------------------------
          Revenues:                                1996         1995
                                                   ----         ----
                                                             (unaudited)
              Imaging systems sales and other
                revenue . . . . . . . . . . . $ 4,847,648   $ 6,706,480
          Operating expenses:
              Cost of goods sold  . . . . . .   3,914,329     4,581,864
              Research and development  . . .   1,320,044     1,735,022
              Selling, general and              3,541,981     2,911,174
                administrative  . . . . . . . -----------   -----------
              Total operating expenses  . . .   8,776,354     9,228,060
                                              -----------   -----------
          Loss from discontinued operations . $(3,928,706)  $(2,521,580)
                                              ===========   ===========


                                         Nine Months Ended         Year Ended
                                           September 30,          December 31,
                                    ---------------------------  --------------
          Revenues:                     1995           1994           1994
                                        ----           ----           ----
                                                    (unaudited)

              Imaging systems       $6,643,090    $ 5,224,810     $ 5,288,200
                sales and other
                revenue . . . . .
          Operating expenses:
              Cost of goods sold     4,124,354      1,956,611       2,414,121
              Research and           1,243,159      1,470,281       1,962,144
                development . . .
              Selling, general and   2,170,442      2,054,461       2,795,193
                administrative  .  -----------    -----------     -----------
              Total operating        7,537,955      5,481,353       7,171,458
                expenses  . . . .  -----------    -----------     -----------
          Loss from discontinued   $  (894,865)   $  (256,543)    $(1,883,258)
          operations  . . . . . .  ===========    ===========     ===========


               The net assets of  discontinued operations are summarized as
          follows:

                                                   September 30, September 30,
                                                       1996           1995
                                                       ----           ----
          Current assets  . . . . . . . . . . . .   $3,263,394     $7,908,105
          Equipment, building, furniture and
             leasehold improvements, net  . . . .      511,109        922,728
          Other assets  . . . . . . . . . . . . .    1,487,367        201,363
          Current liabilities . . . . . . . . . .   (1,000,000)    (2,097,436)
          Provision for estimated loss on
             disposal of discontinued
             operations . . . . . . . . . . . . .     (400,000)              
          Long-term debt  . . . . . . . . . . . .     (133,440)      (252,116)
                                                   -----------    -----------
          Net assets of discontinued operations .   $3,351,189     $6,682,644
                                                   ===========    ===========



          (NOTE L) Liquidity and Business Risks
          -------------------------------------
               Based on current estimates of cash flow, management does not
          believe  that it will have sufficient cash to make mandatory term
          loan payments.  Accordingly,  the entire amount outstanding under
          the  bank credit facility of $11,855,000 has been classified as a
          current  liability  in  the accompanying  consolidated  financial
          statements.  The Company is continuing to actively pursue various
          funding options, including  the sale of  certain portions of  the
          Imaging  and Rehabilitation  services business  segment.   If the
          sale  is successful,  it will  generate sufficient  cash to  meet
          obligations as they come due through fiscal 1997 (See Note C).

   <PAGE> 


				EXHIBIT INDEX
			       ---------------

	10.11*	    Shared Services Agreement between the Registrant and AMS 
                    dated August 29, 1996.                      


	10.47*	    Employment Agreement, dated December 20, 1995, between ANMR
                    and Jack Nelson. 

	10.48*	    Employment Agreement, dated December 1, 1995, between MDI
                    and David Gaynor.