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, 1996 0-15586
GHS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 52-1373960
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
1350 Piccard Drive Suite 360, Rockville, Maryland 20850
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (301) 417-9808
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 10, 1996
----- ------------------------------
Common Stock, $.01 par value 6,447,828 Shares
<PAGE>
PART I
FINANCIAL INFORMATION
GHS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, December 31,
1996 1995
---- ----
Current assets:
Cash $ 57,000 $ 198,000
Accounts receivable, net 1,479,000 1,451,000
Unbilled accounts receivable 187,000 576,000
Current contract installments receivable 165,000 15,000
Inventory 8,000 12,000
Refundable deposits 290,000 290,000
Other current assets 94,000 71,000
----------- -----------
Total current assets $ 2,280,000 $ 2,633,000
Furniture and equipment, net 54,000 56,000
Capitalized software, net 263,000 291,000
Other assets 126,000 98,000
Gamma Knife venture assets:
Gamma Knife 2,140,000 2,348,000
Progress Payment- Gamma Knife 1,160,000 1,160,000
Costs incurred in connection with
leasehold interest 673,000 661,000
Deposits 65,000 65,000
Cash held in escrow 82,000 27,000
TOTAL $ 6,843,000 $ 7,339,000
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts Payable $ 1,068,000 $ 1,337,000
Loans Payable - Officer -- 20,000
Notes Payable - Other 100,000 100,000
Loan Payable - Gamma Knife - current portion 55,000 55,000
Accrued cost to complete contracts 95,000 25,000
Obligation under capital lease - current portion 551,000 512,000
Equipment 5,000 5,000
----------- -----------
Total current liabilities 1,874,000 2,054,000
Obligation under capital lease:
Gamma Knife 1,439,000 1,724,000
Equipment 7,000 9,000
Loan Payable Gamma Knife 1,105,000 1,105,000
Minority Interest 20,000 18,000
Common Stock - par value $.01: 500,000
shares issued with put option 500,000 500,000
Stockholders' equity:
Common stock - $.01 par value -
10,000,000 shares authorized;
6,447,828 issued and outstanding
in 1996 and 1995 $ 65,000 $ 65,000
Additional paid-in capital 3,082,000 3,082,000
(Deficit) (1,249,000) (1,218,000)
----------- -----------
Total stockholders' equity $ 1,898,000 $ 1,929,000
----------- -----------
TOTAL $ 6,843,000 $ 7,339,000
=========== ===========
The accompanying notes to financial statements are an integral part hereof.
2
<PAGE>
GHS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
June 30, 1996
-------------
1996 1995
---- ----
Revenue:
Software Systems 209,000 757,000
Maintenance 345,000 273,000
Claims Processing 126,000 --
Patient Revenue 399,000 244,000
----------- -----------
Total revenue 1,079,000 1,274,000
Expenses:
Software Systems 350,000 558,000
Maintenance 235,000 125,000
Patient Expenses 238,000 243,000
Claims Processing Expense 75,000 --
Selling, General, Administrative 177,000 191,000
Interest Expense 118,000 147,000
----------- -----------
Total 1,193,000 1,264,000
Income before minority interest $ (114,000) $ 10,000
Minority Interest (2,000) 26,000
----------- -----------
Net Income (116,000) $ 36,000
=========== ===========
Income (loss) per share $ (.02) $ --
=========== ===========
Weighted average shares outstanding 6,447,828 6,447,828
=========== ===========
The accompanying notes to financial statements are an integral part hereof.
3
<PAGE>
GHS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Six Months Ended
June 30, 1996
-------------
1996 1995
---- ----
Revenue:
Software Systems $ 699,000 $ 979,000
Maintenance 652,000 491,000
Claims Processing 293,000 --
Patient Revenue 713,000 652,000
----------- -----------
Total revenue 2,357,000 2,122,000
Expenses:
Software Systems 734,000 780,000
Maintenance 446,000 235,000
Patient Expenses 419,000 444,000
Claims Processing Expense 177,000 --
Selling, General, Administrative 364,000 362,000
Interest Expense 240,000 245,000
----------- -----------
Total 2,386,000 2,066,000
Income before minority interest $ (29,000) $ 56,000
Minority Interest (2,000) 4,000
----------- -----------
Net Income (31,000) $ 60,000
=========== ===========
Income per share $ -- $ .01
=========== ===========
Weighted average shares outstanding 6,447,828 6,447,828
=========== ===========
The accompanying notes to financial statements are an integral part hereof.
4
<PAGE>
GHS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six Months Ended
June 30, 1996
-------------
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (31,000) $ 60,000
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 316,000 299,000
Minority Interest in net gain of consolidated
subsidiary 2,000
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable - net (28,000) (370,000)
(Increase) decrease in unbilled accounts receivable 389,000 (348,000)
(Increase) decrease in inventory 4,000 3,000
(Increase) decrease in contract installments receivable (150,000) 34,000
(Increase) decrease in other assets (59,000) (60,000)
(Increase) decrease in accounts payable, accrued
expenses and accrued costs to complete contracts (198,000) 378,000
--------- ---------
Net cash provided by (used in) operating activities 245,000 (4,000)
Cash flows from investing activities :
Software Development Costs (50,000) --
Furniture and Equipment Purchases (10,000) (15,000)
Investment in Joint Venture (30,000) --
Deposit on Gamma Knife -- (55,000)
Cost Incurred with Leasehold improvements (30,000) --
--------- ---------
Net cash provided by (used in) investing activities (120,000) (70,000)
Cash flows from financing activities:
Payment of lease obligations (246,000) (212,000)
Proceeds of notes payable -- 167,000
Payment of loan to officer (20,000) --
--------- ---------
Net cash (used in) financing activities (266,000) (45,000)
NET (DECREASE) IN CASH AND CASH EQUIVALENTS (141,000) (119,000)
Cash and cash equivalents - beginning of period 198,000 153,000
---------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 57,000 $ 34,000
========= =========
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
5
<PAGE>
GHS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Note A - Basis of Preparation
The accompanying financial statements at June 30, 1996, for the three
months ended June 30, 1996 and 1995, are unaudited. However, in the opinion of
management, such statements include all adjustments necessary to a fair
statement of the information presented therein. The balance sheet at December
31, 1995 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.
Note B - Note Payable
The Company has entered into a promissory note with a finance company. The
Company has to make interest payments at a rate of 13.5% per annum.
6
<PAGE>
GHS, INC. AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND
ANALYSIS OF OPERATIONS
AND FINANCIAL CONDITION
Second Fiscal Quarter 1996 Compared to Second Fiscal Quarter 1995
Results of Operations
Total revenues decreased 15% to $1,079,000 for the quarter ended June 30,
1996 as compared to $1,274,000 for the same period in 1995. System sales from
Global Health Systems decreased 72% from a year ago. Declining sales were the
result of a slower than anticipated project completion and a slow sales cycle
usually associated with municipalities. Maintenance revenue increased by 26% to
$345,000 from $273,000 a year earlier. This increase is from the growth of the
company's facilities management services. In the second half of 1995, the
company began using the Global Health Information System (GHiS) to process
claims for municipalities. The company had $126,000 of revenue from this segment
in the second quarter. U.S. Neurosurgical (USN) which manages stereotactic
radiosurgery centers had a 64% increase in revenue for the second quarter.
For the six months ended June 30, 1996 revenues increased 11% to $2,357,000
from $2,122,000 a year earlier. System sales declined to $699,000 from $979,000
for the same period a year earlier. Maintenance revenue increased to $652,000
from $491,000 in 1995. Revenue from USN increased to $713,000 from $652,000 in
1995.
Total expenses decreased 6% to $1,193,000 from $1,264,000 for the three
months ended June 30,1995. System costs declined to $350,000 from $558,000 for
the same period a year earlier. This was due to a decrease in hardware sales.
Maintenance costs increased to $235,000 from $125,000 a year earlier. This was
due to increased travel costs. Patient expenses declined to $238,000 from
$243,000 a year earlier. Interest expense decreased to $118,000 from $147,000 in
1995. The company continues to make progress payments for its second Gamma
Knife, which will be located in New York and is scheduled to open in 1997. As a
result of the foregoing, the company had a net loss of $116,000 for the three
months ended June 30, 1996. For the six months ended June 30,1996, the company
had a net loss of $31,000.
Liquidity and Capital Resources
For the six months ended June 30,1996 net cash provided by operating
activities was $245,000 as compared to net cash used of 4,000 in 1995.
Depreciation and amortization expense was $316,000 as compared to $299,000 in
1995. Depreciation of the
7
<PAGE>
Gamma Knife as well of amortization of capitalized software are the major
components of this expense. Unbilled accounts receivable decreased $389,000 from
December 31, 1995.
The company had net cash used in investing activities of $120,000 as
compared to $70,000 a year earlier. The company capitalized $50,000 of software
development.
The company had net cash used in financing activities of $266,000 as
compared to $45,000 in 1995. The company continues to make payments on lease
obligations related to the Gamma Knife.
For the period ended June 30, 1996 the company had a decrease of cash and
cash equivalents of $141,000 as compared to $119,000 in 1995. USN's current
lease is a five year capital lease which has an annual payment of $805,000.
8
<PAGE>
PART II
OTHER INFORMATION
GHS, INC. AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K
(a) None
(b) No reports on Form 8-K were filed during the quarter ended June 30,
1996.
9
<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.
GHS, INC.
Date August 21, 1996 By /s/ Alan Gold
-------------------------- -------------------------------
Alan Gold
Director and President
Chief Executive Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summarty financial information extracted from its Form
10-Q for the quarter ended June 30, 1996 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 57,000
<SECURITIES> 0
<RECEIVABLES> 1,479,000
<ALLOWANCES> 14,000
<INVENTORY> 8,000
<CURRENT-ASSETS> 2,280,000
<PP&E> 4,985,000
<DEPRECIATION> 958,000
<TOTAL-ASSETS> 6,843,000
<CURRENT-LIABILITIES> 1,874,000
<BONDS> 3,150,000
0
0
<COMMON> 65,000
<OTHER-SE> 1,833,000
<TOTAL-LIABILITY-AND-EQUITY> 6,843,000
<SALES> 2,357,000
<TOTAL-REVENUES> 2,357,000
<CGS> 734,000
<TOTAL-COSTS> 2,146,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 240,000
<INCOME-PRETAX> (31,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (31,000)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
