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, 1997 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 May 07, 1997
----- ---------------------------
Common Stock, $.01 par value 6,947,828 Shares
<PAGE>
PART I
FINANCIAL INFORMATION
GHS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31, December 31,
1997 1996
---- ----
Current assets:
Cash $ 136,000 $ 159,000
Accounts receivable, net of allowance 1,286,000 994,000
for doubtful accounts of $164,000 in
1997 and 1996
Unbilled accounts receivable 9,000 31,000
Other current assets 84,000 86,000
----------- -----------
Total current assets $ 1,515,000 $ 1,270,000
Furniture and equipment, net 78,000 77,000
Software development costs 139,000 180,000
Other assets 198,000 198,000
Deferred tax asset 463,000 463,000
Gamma Knife venture assets:
Gamma Knife 1,830,000 1,933,000
Progress payment- Gamma Knife 2,610,000 2,610,000
Costs incurred in connection with
unamortized leasehold interest 1,391,000 954,000
Deposits -- 43,000
Cash held in escrow 496,000 907,000
TOTAL $ 8,720,000 $ 8,635,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 877,000 $ 845,000
Loan payable-Gamma Knife-current portion 63,000 63,000
Obligation under capital lease -Gamma Knife-
current portion 565,000 592,000
Demand loan -- 525,000
Equipment 88,000 69,000
----------- -----------
Total current liabilities 1,593,000 2,094,000
Obligation under capital lease
Gamma Knife 1,707,000 1,132,000
Equipment 241,000 265,000
Loan payable - Gamma Knife 2,547,000 2,547,000
Common stock - par value $ 01: 500,000
shares issued with put option 500,000 500,000
Stockholders' equity:
Common stock - $ 01 par value -
25,000,000 shares authorized;
6,447,828 issued and outstanding
in 1997 and 1996 65,000 65,000
Additional paid-in capital 3,082,000 3,082,000
(Deficit) (1,015,000) (1,050,000)
----------- -----------
Total stockholders' equity $ 2,132,000 $ 2,097,000
----------- -----------
TOTAL $ 8,720,000 $ 8,635,000
=========== ===========
The accompanying notes to financial statements are an integral part hereof
2
<PAGE>
GHS, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
March 31,
---------
1997 1996
---- ----
Revenue:
Software Systems $ 258,000 $ 490,000
Maintenance 428,000 307,000
Claims Processing 134,000 167,000
Patient Revenue 388,000 314,000
----------- -----------
Total 1,208,000 1,278,000
Expenses:
Software Systems 368,000 384,000
Maintenance 242,000 211,000
Claims Processing 88,000 102,000
Patient Expenses 189,000 181,000
Selling, General and Administrative 198,000 187,000
----------- -----------
Total 1,085,000 1,065,000
Income before items listed below $ 123,000 $ 213,000
Interest expense (101,000) (128,000)
Interest income 13,000 --
Net Income 35,000 85,000
----------- -----------
Net Income per share $ .01 $ .01
=========== ===========
Weighted average shares outstanding 6,947,828 6,947,828
=========== ===========
The accompanying notes to financial statements are an integral part hereof.
3
<PAGE>
GHS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended
March 31,
---------
1997 1996
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 35,000 $ 85,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization: 161,000 156,000
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable - net (292,000) 299,000
Decrease in unbilled accounts receivable 22,000 50,000
Decrease in inventory -- 4,000
(Increase) decrease in other assets 2,000 (65,000)
Decrease in cash held in escrow 411,000 --
Decrease in deposits 43,000 --
(Decrease) in accounts payable and
accrued expenses (32,000) (352,000)
--------- ---------
Net cash provided by operating activities 350,000 177,000
Cash flows from investing activities :
Furniture and equipment purchases (8,000) (9,000)
Software development costs -- (50,000)
Cost incurred with leasehold improvements (383,000) (30,000)
--------- ---------
Net cash (used in) investing activities (391,000) ($ 89,000)
Cash flows from financing activities:
Payment of capital lease obligations (82,000) (122,000)
Lease payable - Gamma Knife 100,000 --
Payment of loan to officer -- (20,000)
--------- ---------
Net cash provided by (used in) financing activities 18,000 (142,000)
Net (decrease) in cash and cash equivalents (23,000) (54,000)
Cash and cash equivalents - beginning of period 159,000 198,000
--------- ---------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 136,000 $ 144,000
========= =========
Supplemental disclosures of noncash financing activities:
Loan payable - Gamma Knife (525,000) --
Lease payable - Gamma Knife 525,000 --
The accompanying notes to financial statements are an integral part hereof
</TABLE>
4
<PAGE>
GHS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Note A - Basis of Preparation
The accompanying financial statements at March 31, 1997, for the three
months ended March 31, 1997 and 1996, 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, 1996 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>
GHS, INC. AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND
ANALYSIS OF OPERATIONS
AND FINANCIAL CONDITION
First Fiscal Quarter 1997 Compared to First Fiscal Quarter 1996
Results of Operations
Total revenue declined 5% to $1,208,000 for the quarter ended March 31,
1997 as compared to $1,278,000 for the same period in 1996. System sales from
Global Health Systems, Inc. declined 47% to $258,000 from $490,000 a year ago.
The decline is due to two factors, which are a change in revenue strategy and
the consummation of the sale of the systems business. Maintenance revenue
increased 39% to $428,000 from $307,000 in the previous year. Claims processing
declined by 20% to $134,000 from $167,000 a year earlier. In the first quarter
the Company entered into a definitive asset purchase agreement with Health
Management Systems, Inc. pursuant to which Health Management Systems will
acquire substantially all of the assets of the Company's subsidiaries Global
Health Systems, Inc. and GHS Management Services for $2,100,000 in cash, subject
to certain closing adjustments.
US NeuroSurgical, Inc. (USN) which manages sterotactic radiosurgery centers
using the Gamma Knife, had an increase in revenue of 24% to $388,000 from
$314,000 for the same period in 1996. The increase is due to greater acceptance
by the medical community. USN is scheduled to open its second Gamma Knife Center
in New York City during the Spring of 1997.
Total expenses increased 2% to $1,085,000 from $1,065,000 for the same
period, a year earlier. System costs declined 4% to $368,000 from $384,000 in
the previous year, however as a percentage of revenues the costs were 143% in
1997 and 78% in 1996. This was caused by certain fixed costs that could not be
reduced despite a 47% decrease in systems revenue. Maintenance costs increased
to $242,000 from $211,000 in the previous year. Claims processing costs declined
to $88,000 from $102,000 a year earlier. Patient expenses increased to $189,000
from $181,000 in 1996. Maintenence and patient expenses decreased as a
percentage of revenue due to fixed costs being offset by increased revenues.
Selling, general and administrative expense increased to $198,000 from $187,000
a year earlier. Interest expense declined to $101,000 from $128,000 in the
previous year. The decrease was due to capitalization of $60,000 of interest
costs related to the New York Gamma Knife. As a result the Company had income of
$35,000 compared to $85,000 for the same period, a year earlier.
Liquidity and Capital Resources
For the three months ended March 31, 1997, net cash provided by operating
activities was $350,000 as compared to $177,000 in 1996. Depreciation and
amortization expense was $161,000 as compared to $156,000 for the same period in
1996. Accounts receivable increased by $292,000 as compared to a decrease of
$299,000 a year earlier.
The Company had net cash used in investing activities of $391,000 as
compared to $89,000 for the same period a year earlier. The Company is in the
process of completing the site for the NYU Gamma Knife. There were $383,000 of
leasehold improvements made during the quarter.
6
<PAGE>
Net cash provided by financing activities was $18,000 as compared to net cash
used of $142,000 in the same period in 1996. The Company refinanced the lease in
the Kansas City Gamma Knife. In the process the Company financed an additional
$625,000 to complete construction of the New York facility. The leasing company
for both projects is DVI Financial Services. The interest rate on the new lease
us 9.9% as compared to 131/2 % on the original lease. The term is 39 months and
the payments are $827,000 per annum.
7
<PAGE>
PART II
OTHER INFORMATION
GHS, INC. AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K
(a) None
(b) On March 10, 1997 the Company filed a form 8-K. GHS, Inc. announced
that it entered into a definitive asset purchase agreement with Health
Management Systems, Inc. (HMSY) pursuant to which HMSY will acquire
substantially all of the assets of GHSI's subsidiaries, Global Health
Systems, Inc. and GHS Management Services.
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.
GHS, INC.
Date May 07, 1997 By /s/ Alan Gold
---------------------------------
Alan Gold
Director and President
Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
GHS, Inc 10Q and is qualified in it's entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 136,000
<SECURITIES> 0
<RECEIVABLES> 1,295,000
<ALLOWANCES> 164,000
<INVENTORY> 0
<CURRENT-ASSETS> 1,515,000
<PP&E> 7,169,000
<DEPRECIATION> 1,256,000
<TOTAL-ASSETS> 8,720,000
<CURRENT-LIABILITIES> 1,593,000
<BONDS> 4,819,000
0
0
<COMMON> 65,000
<OTHER-SE> 2,132,000
<TOTAL-LIABILITY-AND-EQUITY> 8,720,000
<SALES> 1,208,000
<TOTAL-REVENUES> 1,208,000
<CGS> 1,085,000
<TOTAL-COSTS> 1,085,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 101,000
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 35,000
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
