SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended Commission file number
June 30, 2000 0-26575
U.S. NEUROSURGICAL, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 52-1842411
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
2400 Research Blvd, Suite 325, Rockville, Maryland 20850
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (301) 208-8998
Not Applicable
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
------- ------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at August 3, 2000
----- ------------------------------
Common Stock, $.01 par value 7,316,685 Shares
<PAGE>
PART I
FINANCIAL INFORMATION
U.S. NEUROSURGICAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS June 30, December 31,
2000 1999
----------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 93,000 $ 464,000
Accounts receivable 573,000 300,000
Deferred tax asset 83,000 83,000
Other current assets 48,000 26,000
----------- -----------
Total current assets $ 797,000 $ 873,000
----------- -----------
Gamma Knife (net of accumulated depreciation of
$3,945,000 in 2000 and $3,483,000 in 1999) 2,521,000 2,983,000
Leasehold improvements (net of accumulated
amortization of $690,000 in 2000 and $592,000 in 1999) 1,151,000 1,249,000
Office furniture and computers (net of accumulated
Depreciation of $37,000 in 2000 and $24,000 in 1999) 69,000 82,000
----------- -----------
Total property and equipment 3,741,000 4,314,000
----------- -----------
Cash held in escrow 99,000 96,000
----------- -----------
TOTAL $ 4,637,000 $ 5,283,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 164,000 $ 148,000
Note payable - litigation settlement 100,000 100,000
Obligations under capital lease
and loans payable- current portion 698,000 1,043,000
Due to Allen and Company 300,000 300,000
Other current liabilities 78,000 24,000
----------- -----------
Total current liabilities 1,340,000 1,615,000
Note payable-litigation settlement-net of current portion 250,000 350,000
Deferred tax liability 416,000 416,000
Obligations under capital lease and loans payable-net
of current portion 1,402,000 1,751,000
----------- -----------
3,408,000 4,132,000
----------- -----------
Commitments, litigation and other matters
Stockholders' equity:
Common stock 73,000 73,000
Additional paid-in capital 2,789,000 2,789,000
Accumulated deficit (1,633,000) (1,711,000)
----------- -----------
Total stockholders' equity $ 1,229,000 $ 1,151,000
----------- -----------
TOTAL $ 4,637,000 $ 5,283,000
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
2
<PAGE>
U.S. NEUROSURGICAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
June 30,
-----------------------
2000 1999
--------- --------
Revenue:
Patient Revenue $ 683,000 $ 755,000
--------- ---------
Expenses:
Patient Expenses 275,000 286,000
Selling, General and Administrative 293,000 318,000
--------- ---------
Total 568,000 604,000
--------- ---------
Income (loss) before items listed below 115,000 $ 151,000
Interest expense (97,000) (107,000)
Interest income 4,000 4,000
--------- ---------
Income from Continuing Operations before tax 22,000 48,000
Income tax provision 12,000 19,000
--------- ---------
Income from Continuing Operations 10,000 29,000
Income from Discontinued Operations (less applicable 87,000 --
Income tax of $47,000) --------- ---------
Net Income $ 97,000 $ 29,000
========= =========
Earnings per share from continuing operations $ -- $ --
========= =========
Earnings per share from discontinued operations $ .01 $ --
========= =========
Earnings per share $ .01 $ --
========= =========
The accompanying notes to financial statements are an integral part hereof.
3
<PAGE>
U.S. NEUROSURGICAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Six Months Ended
June 30,
---------------------------
2000 1999
----------- -----------
<S> <C> <C>
Revenue:
Patient Revenue $ 1,271,000 $ 1,695,000
----------- -----------
Expenses:
Patient Expenses 556,000 559,000
Selling, General and Administrative 563,000 711,000
----------- -----------
Total 1,119,000 1,270,000
----------- -----------
Income (loss) before items listed below 152,000 425,000
Interest expense (173,000) (223,000)
Interest income 8,000 6,000
----------- -----------
(Loss) Income from Continuing Operations before tax (13,000) 208,000
Income tax provision (4,000) 81,000
----------- -----------
(Loss) Income from Continuing Operations (9,000) 208,000
Income from Discontinued Operations (less applicable 87,000 --
Income tax of $51,000) ----------- -----------
Net Income $ 78,000 $ 127,000
=========== ===========
Earnings per share from continuing operations $ -- $ .02
=========== ===========
Earnings per share from discontinued operations $ .01 $ --
=========== ===========
Earnings per share $ .01 $ .02
=========== ===========
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
4
<PAGE>
U.S. NEUROSURGICAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30
------------------------
2000 1999
--------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 78,000 $ 127,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization: 574,000 562,000
Changes in operating assets and liabilities:
(Increase) in receivables (273,000) (264,000)
(Increase) in other current assets (22,000) --
Increase in payables and other current liabilities 70,000 403,000
--------- ---------
Net cash provided by operating activities 427,000 828,000
Cash flows from investing activities:
Increase in cash held in escrow (3,000) (2,000)
Acquired Furniture & Equipment -- 51,000
--------- ---------
Net cash (used in) provided by investing activities (3,000) 49,000
Cash flows from financing activities:
Cash received from GHS, Inc. -- 374,000
Repayment of note payable (100,000) --
Payment of capital lease obligations (695,000) (687,000)
--------- ---------
Net cash (used in) financing activities (795,000) (313,000)
--------- ---------
Net (decrease) increase in cash and cash equivalents (371,000) 564,000
Cash and cash equivalents - beginning of period 464,000 21,000
--------- ---------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 93,000 $ 585,000
========= =========
Supplemental disclosures of cash flow information:
Cash paid for
Interest 173,000 223,000
Income Taxes 3,000 3,000
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
5
<PAGE>
U.S. NEUROSURGICAL, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
Note A - Basis of Preparation
The accompanying financial statements at June 30 2000, and for the three
months ended June 30, 2000 and 1999, are unaudited. However, in the opinion of
management, such statements include all adjustments necessary for a fair
statement of the information presented therein. The balance sheet at December
31, 1999 has been derived from the audited financial statements at that date
appearing in the Company's Annual Report on Form 10-K.
Pursuant to accounting requirements of the Securities and Exchange
Commission applicable to quarterly reports on Form 10-Q, the accompanying
financial statements and these notes do not include all disclosures required by
generally accepted accounting principles for complete financial statements.
Accordingly, these statements should be read in conjunction with the Company's
most recent annual financial statements.
Results of operations for interim periods are not necessarily indicative
of those to be achieved for full fiscal years.
6
<PAGE>
U.S. NEUROSURGICAL, INC. AND SUBSIDIARY
MANAGEMENT DISCUSSION AND
ANALYSIS OF OPERATIONS
AND FINANCIAL CONDITION
The following discussion and analysis provides information which the Company's
management believes is relevant to an assessment and understanding of the
Company's results of operations and financial condition. This discussion should
be read in conjunction with the consolidated financial statements and notes
thereto appearing elsewhere herein.
Second Quarter 2000 Compared to Second Quarter 1999 and Six Months Ended June
30, 2000 Compared to Six Months Ended June 30, 1999
Results of Operations
Patient revenue decreased approximately 10% to $683,000 in the quarter
ended June 30, 2000 from $755,000 for the quarter ended June 30, 1999. The
decrease was due primarily to a decrease in the number of Gamma Knife procedures
at Research Medical Center in Kansas City. In the quarter ended June 30, 2000
Kansas City's revenues decreased by approximately 20% from the prior year. In
Kansas City changes in the medical staff have negatively affected revenues since
the fourth quarter of 1999. Patient expenses decreased approximately 4% to
$275,000 from $286,000 a year earlier. Selling, general and administrative
expense decreased "(S,G & A )" decrease approximately 8% to $293,000 from
$318,000 for the quarter ended June 30 a year ago. The decrease was due to lower
professional fees, as the Company was in settlement discussions for litigation
in 1999. Interest expense decreased approximately 9% to $97,000 from $107,000 in
the same period a year earlier. The decrease was due to increased principal
payments on its Gamma Knife properties. For the quarter ended June 30, 2000,
Pretax income from continuing operations was $22,000 as compared to income of
$48,000 for the same period a year earlier. The Company received $134,000 from
collection on a sale from discontinued operations during this quarter.
For the six months ended June 30, 2000 revenue decreased approximately 25%
to $1,271,000 from $1,695,000 in the same period a year earlier. The reason for
the decrease is stated above. Patient expenses decreased to $556,000 in 2000
from $559,000 in the same period in 1999. S,G & A decreased approximately 21% to
$563,000 as compared to $711,000 in the same period a year earlier. The decrease
was the same as stated above. Interest expense decreased approximately 22% to
$173,000 from $223,000 in the same period a year ago. The reason for the
decrease is the same as in the previous section. Income from operations was
$78,000 for the six months ended June 30, as compared to income of $127,000 for
the six months ended June 30, 1999.
Liquidity and Capital Resources
At June 30, 2000 the Company had a working capital deficit of $537,000 as
compared to $742,000 at December 31, 1999. Cash and cash equivalents at June 30,
2000 were $93,000 as compared with $464,000 at December 31, 1999.
Net cash provided by operating activities was $427,000 as compared with
$828,000 for the same period, a year earlier. Depreciation and amortization was
$574,000 for the six months ended June 30, 2000 as compared to $562,000 in the
year ago period. There was an increase in receivables of $273,000 during the six
months ended June 30
7
<PAGE>
2000 as compared to an increase of $264,000 in the previous year. Payables and
accrued expenses increased $70,000 in 2000 as compared to of $403,000 in 1999.
Net cash used in financing activities was $795,000 as compared to $313,000
for the same period a year. Notes payable decreased $100,000 in 2000. The
Company paid $695,000 towards its capital lease obligations as compared to
$687,000 in the same period in 1999. USN received $374,000 from GHS in 1999.
This document contains forward-looking statements that are made pursuant
to the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Investors are cautioned that forward-looking statements are inherently
uncertain. Such statements by their nature entail various risks, reflecting the
dynamic, complex, and rapidly changing nature of the health care industry.
Results actually achieved may differ materially from those currently
anticipated. The various risks include but are not necessarily limited to: (i)
the continued ability of GHS to grow internally or by acquisition, (ii) the
success experienced in integrating acquired businesses into the GHS group of
companies, (iii) government regulatory and political pressures which could
reduce the rate of growth of health care expenditures, (iv) competitive actions
by other companies, and (v) other risks, as noted in USN's registration
statements and periodic reports filed with the Commission.
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) None
8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
U.S. Neurosurgical, Inc.
Date August 10, 2000 By /s/ Alan Gold
----------------------- -----------------------------
Alan Gold
Director and President
Chief Executive Officer
Date August 10, 2000 By /s/ Howard Grunfeld
----------------------- -----------------------------
Howard Grunfeld
Vice President of Finance
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