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
March 31, 2000 0-15586
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 May 10, 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 March 31, December 31,
2000 1999
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 270,000 $ 464,000
Accounts receivable 297,000 300,000
Deferred tax asset 83,000 83,000
Other current assets 48,000 26,000
----------- -----------
Total current assets $ 698,000 $ 873,000
----------- -----------
Gamma Knife (net of accumulated depreciation of
$3,714,000 in 2000 and $3,483,000 in 1999) 2,752,000 2,983,000
Leasehold improvements (net of accumulated
amortization of $641,000 in 2000 and $592,000 in 1999) 1,200,000 1,249,000
Office furniture and computers (net of accumulated
Depreciation of $31,000 in 2000 and $24,000 in 1999) 75,000 82,000
----------- -----------
Total property and equipment 4,027,000 4,314,000
----------- -----------
Cash held in escrow 97,000 96,000
TOTAL $ 4,822,000 $ 5,283,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 62,000 $ 148,000
Note payable - litigation settlement 100,000 100,000
Obligations under capital lease
and loans payable- current portion 853,000 1,043,000
Due to Allen and Company 300,000 300,000
Other current liabilities 40,000 24,000
----------- -----------
Total current liabilities 1,355,000 1,615,000
Note payable-litigation settlement-net of current portion 350,000 350,000
Deferred tax liability 416,000 416,000
Obligations under capital lease and loans payable-net
of current portion 1,585,000 1,751,000
----------- -----------
3,706,000 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 (1,746,000) (1,711,000)
----------- -----------
Total stockholders' equity $ 1,116,000 $ 1,151,000
----------- -----------
TOTAL $ 4,822,000 $ 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
March 31,
---------
2000 1999
---- ----
Revenue:
Patient Revenue $ 588,000 $ 940,000
----------- -----------
Expenses:
Patient Expenses $ 281,000 $ 274,000
Selling, General and Administrative 270,000 392,000
----------- -----------
Total 551,000 666,000
----------- -----------
Operating Income $ 37,000 $ 274,000
Interest expense (76,000) (116,000)
Interest income 4,000 2,000
----------- -----------
Loss (income) before income taxes (35,000) 160,000
Income tax (benefit) provision (12,000) 62,000
----------- -----------
Net (Loss) income (23,000) 98,000
----------- -----------
Proforma basic and diluted income per share $ -- $ .01
=========== ===========
Proforma weighted average shares outstanding 7,316,685 6,979,160
The accompanying notes to financial statements are an integral part hereof.
3
<PAGE>
U.S. NEUROSURGICAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31
--------
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
(Loss) income from continuing operations $ (23,000) $ 98,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization: 287,000 280,000
Income tax (benefit) provision (12,000) 62,000
Changes in operating assets and liabilities:
Decrease (increase) in receivables 3,000 (161,000)
(Increase) in other current assets (22,000) --
(Decrease) increase in payables and accrued expenses (70,000) 68,000
Increase in due to GHS, Inc -- 204,000
Net cash provided by operating activities 163,000 551,000
--------- ---------
Cash flows from investing activities :
Increase in cash held in escrow (1,000) (1,000)
--------- ---------
Net cash used in investing activities (1,000) (1,000)
Cash flows from financing activities:
Payment of capital lease obligations (356,000) (348,000)
--------- ---------
Net cash used in financing activities (356,000) (348,000)
Net (decrease) increase in cash and cash equivalents (194,000) 202,000
Cash and cash equivalents - beginning of period 464,000 21,000
--------- ---------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 270,000 $ 223,000
========= =========
Supplemental disclosures of cash flow information:
Cash paid for
Interest 76,000 116,000
Taxes 2,000 2,000
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
4
<PAGE>
U.S. NEUROSURGICAL, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Note A - Basis of Preparation
The accompanying financial statements at March 31 2000, and for the three
months ended March 31, 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.
5
<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.
First Quarter 2000 Compared to First Quarter 1999
Results of Operations
Patient revenue decreased 38% to $588,000 in the quarter ended March 31,
2000 from $940,000 for the quarter ended March 31, 1999. The decrease was due
primarily to a decrease in the number of Gamma Knife procedures at Research
Medical Center in Kansas City. In Kansas City there has been a change in medical
staff that negatively affected revenues during the quarter. Patient expenses
increased 3% to $281,000 from $274,000 a year earlier. Selling, general and
administrative expense decreased 31% to $270,000 from $392,000 for the quarter
ended March 31 a year ago. The decrease was due a decrease in professional fees
as in the 1999 period the Company was in settlement discussions for litigation.
Interest expense decreased 34% to $76,000 from $116,000 in the same period a
year earlier. The decrease was due to increased principal payments on its Gamma
Knife properties. For the quarter ended March 31 2000, net loss was $23,000 as
compared to net income of $104,000 for the same period a year earlier.
Liquidity and Capital Resources
At March 31, 2000 the Company had a working capital deficit of $657,000 as
compared to $742,000 at December 31, 1999. Cash and cash equivalents at March
31, 2000 were $270,000 as compared with $464,000 at December 31, 1999.
Net cash provided by operating activities was $163,000 as compared with
$551,000 for the same period, a year earlier. Depreciation and amortization was
$287,000 for the quarter ended March 31, 2000 as compared to $280,000 in the
same period, one year earlier.
Net cash used in financing activities was $356,000 as compared to $348,000
for the same period a year earlier, as USN pays down the principal on its
capitalized leases.
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 USN to grow internally or by acquisition, (ii) the
success experienced in integrating acquired businesses into the USN 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.
6
<PAGE>
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) None
7
<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 May 12, 2000 By /s/ Alan Gold
------------------ ----------------------------------
Alan Gold
Director and President
Chief Executive Officer
Date May 12, 2000 By /s/ Howard Grunfeld
------------------ ----------------------------------
Howard Grunfeld
Vice President of Finance
8
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 270,000
<SECURITIES> 0
<RECEIVABLES> 297,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 698,000
<PP&E> 8,307,000
<DEPRECIATION> 4,355,000
<TOTAL-ASSETS> 4,822,000
<CURRENT-LIABILITIES> 1,355,000
<BONDS> 2,438,000
0
0
<COMMON> 73,000
<OTHER-SE> 1,043,000
<TOTAL-LIABILITY-AND-EQUITY> 4,822,000
<SALES> 588,000
<TOTAL-REVENUES> 588,000
<CGS> 281,000
<TOTAL-COSTS> 551,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 76,000
<INCOME-PRETAX> (35,000)
<INCOME-TAX> (12,000)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (23,000)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
