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
September 30, 1998 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.)
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 October 20, 1998
----- --------------------------------
Common Stock, $.01 par value 6,979,160 Shares
<PAGE>
PART I
FINANCIAL INFORMATION
GHS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
September 30, December 31,
1998 1997
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,422,000 $ 3,466,000
Certificates of deposit-at cost which approximates market 1,961,000 400,000
Accounts receivable 164,000 209,000
Other current assets 310,000 51,000
Net current assets - discontinued operations 4,000 43,000
----------- -----------
Total current assets $ 3,861,000 $ 4,169,000
Furniture & Fixtures 27,000 --
Computers & Equipment 33,000 --
Gamma Knife (net of accumulated depreciation of 4,137,000 4,830,000
2,328,000 in 1998 and 1,636,000 in 1997)
Leasehold improvements (net of accumulated 1,497,000 1,624,000
amortization of 345,000 in 1998 and 198,000 in 1997)
Cash held in escrow 92,000 89,000
Other assets 3,000 --
TOTAL $ 9,650,000 $10,712,000
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 304,000 $ 149,000
Obligations under capital lease
and loans payable- current portion 1,383,000 1,195,000
----------- -----------
Total current liabilities 1,687,000 1,344,000
Deferred tax liability 450,000 450,000
Obligations under capital lease and loans payable
Net of current portion 3,061,000 4,217,000
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;
6,979,160 and 6,971,327
issued and outstanding
in 1998 and 1997 65,000 65,000
Additional paid-in capital 3,114,000 3,114,000
Retained Earnings 773,000 1,022,000
----------- -----------
Total stockholders' equity $ 3,952,000 $ 4,201,000
----------- -----------
TOTAL $ 9,650,000 $10,712,000
----------- -----------
</TABLE>
The accompanying notes to financial statements are an integral part hereof.
2
<PAGE>
GHS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
September 30,
-------------
1998 1997
---- ----
Revenue:
Patient Revenue $ 472,000 $ 501,000
Other Income 56,000 --
----------- -----------
Total 528,000 501,000
Expenses:
Patient Expenses $ 316,000 $ 256,000
Selling, General and Administrative 246,000 287,000
----------- -----------
Total 562,000 543,000
----------- -----------
Income (loss) before items listed below $ (34,000) $ (42,000)
Interest expense (135,000) (172,000)
Interest income 23,000 21,000
----------- -----------
Income (loss) from continuing operations (146,000) (193,000)
----------- -----------
Discontinued operations
Loss from operations -- (204,000)
Gain on disposal 1,460,000
-----------
Subtotal 1,256,000
-----------
Net Income (loss) (146,000) 1,063,000
Basic and diluted income (loss) per share $ (.02) $ .15
----------- -----------
Weighted average shares outstanding 6,979,160 6,971,327
----------- -----------
The accompanying notes to financial statements are an integral part hereof.
3
<PAGE>
GHS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months Ended
September 30,
-------------
1998 1997
---- ----
Revenue:
Patient Revenue $ 1,736,000 $ 1,267,000
Other Income 56,000 --
----------- -----------
Total 1,792,000 1,267,000
Expenses:
Patient Expenses $ 943,000 $ 625,000
Selling, General and Administrative 778,000 338,000
----------- -----------
Total 1,721,000 963,000
----------- -----------
Income (loss) before items listed below $ 71,000 $ 304,000
Interest expense (430,000) (338,000)
Interest income 110,000 39,000
----------- -----------
Income (loss) from continuing operations (249,000) 5,000
----------- -----------
Discontinued operations
Loss from operations -- (439,000)
Gain on disposal -- 1,460,000
----------- -----------
Subtotal -- 1,021,000
-----------
Net Income (loss) (249,000) 1,026,000
Basic and diluted income (loss) per share $ (.04) $ .15
----------- -----------
Weighted average shares outstanding 6,979,160 6,971,327
----------- -----------
The accompanying notes to financial statements are an integral part hereof.
4
<PAGE>
GHS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------
1998 1997
---- ----
<S> <C> <C>
Cash flows from operating activities:
Income (loss) from continuing operations $ (249,000) $ 5,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization: 845,000 494,000
Changes in operating assets and liabilities:
(Increase) decrease in cash held in escrow (3,000) 795,000
Increase to allowance for bad debts -- 116,000
(Increase) decrease in deposits (3,000) 43,000
(Increase) decrease in receivables 45,000 166,000
(Increase) decrease in other assets (259,000) --
(Decrease) increase in payables and accrued expenses 155,000 (35,000)
Cash provided by (used in) discontinued operations 39,000 (705,000)
----------- -----------
Net cash provided by operating activities 570,000 879,000
Cash flows from investing activities :
Furniture and Equipment Purchases (66,000) (24,000)
Purchase of certificates of deposit (1,561,000) --
Cost Incurred with Leasehold improvements (19,000) (1,127,000)
Proceeds received from sale of subsidiaries -- 2,146,000
----------- -----------
Net cash provided by (used in) investing activities (1,646,000) 995,000
Cash flows from financing activities:
Payment of capital lease obligations (968,000) (567,000)
Proceeds of equipment lease obligations -- 150,000
----------- -----------
Net cash provided by (used in) financing activities (968,000) (417,000)
Net Increase (decrease) in cash and cash equivalents (2,044,000) 1,457,000
Cash and cash equivalents - beginning of period 3,466,000 159,000
----------- -----------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 1,422,000 $ 1,616,000
----------- -----------
Supplemental disclosures of cash flow information:
Cash paid for
Interest 430,000 338,000
Taxes 171,000 --
</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 September 30 1998, for the three
months ended September 30, 1998 and 1997, 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, 1997 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>
GHS, INC. AND SUBSIDIARIES
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.
Third Quarter 1998 Compared to Third Quarter 1997 and Nine Months Ended
September 30, 1998 Compared to Nine Months Ended September 30, 1997
Results of Operations
Patient revenue decreased 6% to $472,000 for the quarter ended September 30,
1998 as compared to $501,000 for the same period in 1997. The Company also had
income of $56,000 from a prior client. Patient expenses increased 23% to
$316,000 from $256,000 a year earlier. Selling, general and administrative
expense decreased 14% to $246,000 from $287,000 for the quarter ended September
30. Interest expense decreased to $135,000 from $172,000 in the same period a
year earlier. Interest income was $23,000 for the quarter as compared to $21,000
in the previous year. For the quarter ended September 30, the loss from
continuing operations was $146,000 as compared to a loss of $193,000 for the
same period a year earlier.
For the nine months ended September 30, revenue increased 37% to $1,736,000 from
$1,267,000 in the same period a year earlier. The increase is attributable to
the procedures performed by the NYU Gamma Knife Center which opened in August
1997. Patient expenses increased 51% to $943,000 from $625,000 for the period.
This increase is a result of increased depreciation and amortization charges
generated by the NYU equipment and improvements. S,G & A increased to $778,000
as compared to $338,000 a year earlier. The increase was due to legal fees
incurred by the Company for its litigation with A. Hyman Kirshenbaum and Jerry
Brown. The amount of these fees were $230,000. Interest expense increased to
$430,000 from $338,000 in the same period a year ago. Interest income increased
to $110,000 from $39,000 for the nine months ended September 30. During the
third quarter of 1997 the Company sold substantially all of the assets of their
Systems' business. As a result the net income was $1,026,000 for the nine months
ended September 30, 1997, as compared to a loss of $249,000 for the nine months
ended September 30, 1998.
Liquidity and Capital Resources
At September 30, 1998 the Company had working capital of $2,174,000 as compared
to working capital of $2,825,000 at December 31, 1997. The decrease in working
capital is primarily from prepayment of state and federal income taxes. Cash and
cash equivalents at September 30, 1998 were $1,422,000 as compared with
$3,466,000 at December 31, 1997.
Net cash provided by operating activities was $570,000 as compared with $879,000
for the same period, a year earlier. Depreciation expense for the Gamma Knives
and
7
<PAGE>
amortization on the leasehold improvements have increased as a result of the
opening of the NYU Gamma Knife Center in August 1997. Depreciation and
amortization increased to $845,000 from $494,000 in the nine months ended
September 30. The increase was due to the NYU Gamma Knife. A decrease in cash
held in escrow of $795,000 for the completion of the NYU Center made up a large
portion of the 1997 activity.
The Company had net cash used in investing activities of $1,646,000 as compared
to net cash provided by investing activities of $995,000 at June 30, 1997. The
Company made purchases of $1,561,000 of certificates of deposit. In the previous
year the Company incurred $1,127,000 of leasehold improvements related to the
NYU Gamma Knife.
Net cash used in financing activities was $968,000 as compared to $417,000 for
the same period a year earlier. The Company paid $968,000 towards its lease
obligations as compared to $567,000 in the previous year.
Year 2000 Compliance
The Company relies significantly on computer technology throughout its
business to effectively carry out its day-to-day operations. As the millennium
approaches, the Company is assessing all of its computer systems to ensure that
they are "Year 2000" compliant. In this process the Company may replace or
upgrade certain systems which are not Year 2000 compliant, in order to meet its
internal needs and those of its customers. The Company expects its Year 2000
project to be completed on a timely basis. However, there can be no assurance
that the systems of other companies on which the Company may rely also will be
converted in a timely manner or that such failure to convert by another company
would not have an adverse effect on the Company's systems. The cost to the
Company of such changes is difficult to estimate but is not expected to have a
material financial impact. Actual results could differ materially from the
Company's expectations due to unanticipated technological difficulties, vendor
delays and vendor cost overruns.
This document contains forward-looking statements. 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 GHS's registration statements and periodic reports filed with the
Commission.
8
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) None
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 November 3, 1998 By /s/ Alan Gold
-----------------------
Alan Gold
Director and President
Chief Executive Officer
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from GHS 10Q
9/30/98 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,422,000
<SECURITIES> 1,961,000
<RECEIVABLES> 164,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 3,861,000
<PP&E> 6,465,000
<DEPRECIATION> 2,328,000
<TOTAL-ASSETS> 9,650,000
<CURRENT-LIABILITIES> 1,687,000
<BONDS> 4,444,000
0
0
<COMMON> 65,000
<OTHER-SE> 3,887,000
<TOTAL-LIABILITY-AND-EQUITY> 9,650,000
<SALES> 1,792,000
<TOTAL-REVENUES> 1,792,000
<CGS> 943,000
<TOTAL-COSTS> 943,000
<OTHER-EXPENSES> 778,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 430,000
<INCOME-PRETAX> (249,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (249,000)
<EPS-PRIMARY> (.04)
<EPS-DILUTED> (.04)
</TABLE>
