<PAGE> 1
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Quarter ended August 31, 1995 Commission file No. 0-16964
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[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from to
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CANCER TREATMENT HOLDINGS, INC.
- - ----------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 87-0410907
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
4491 South State Road Seven, Suite 200, Fort Lauderdale, Florida, 33314
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(Address of principal executive offices)
(305) 321-9555
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(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 . ------
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The number of shares outstanding of each of the issuer's classes of common
equity, as of October 6, 1995: 3,495,765
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CANCER TREATMENT HOLDINGS, INC.
INDEX
<TABLE>
<CAPTION>
Page
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<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
Consolidated Balance Sheets
as of August 31, 1995 and May 31, 1995 2
Consolidated Statements of Operations
for the Three Months Ended
August 31, 1995 and 1994 3
Consolidated Statements of Cash Flows
for the Three Months Ended
August 31, 1995 and 1994 4
Notes to Consolidated Financial Statements 5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF CONSOLIDATED FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 6
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 8
SIGNATURES 9
</TABLE>
<PAGE> 3
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS August 31, May 31,
1995 1995
(Unaudited)
<S> <C> <C>
Cash $ 930,086 $1,366,141
Accounts receivable, net of allowance for doubtful
accounts of $123,186 and $145,604 2,303,509 1,929,785
Notes receivable net of discount of
$104,555 and $107,465, respectively 328,777 325,867
Receivables from related parties 485,721 445,578
Other current assets 345,508 525,483
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Total current assets 4,393,601 4,592,854
Long-term notes receivable, net of discount of
$238,626 and $264,522, respectively 1,530,821 1,613,258
Property and equipment, net 782,507 784,974
Investments in partnerships and ventures 599,813 586,989
Intangible assets, net 1,039,069 993,638
Other assets 259,334 123,132
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Total assets $8,605,145 $8,694,845
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt $ 913,457 $ 191,700
Accounts payable and accrued expenses 933,449 1,005,622
Due to Medicare - 826,319
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Total current liabilities 1,846,906 2,023,641
Long-term debt 173,874 180,085
Deferred income taxes 234,711 234,000
Minority interest 21,753 21,753
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Total liabilities 2,277,244 2,459,479
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Commitments and contingencies (note 2)
Stockholders' equity:
Common stock; $.003 par value, 50,000,000
shares authorized, 3,495,765 shares issued 10,487 10,487
Capital in excess of par value 5,163,105 5,163,105
Retained earnings 1,434,390 1,341,855
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6,607,982 6,515,447
Treasury stock; 159,284 shares, at cost (280,081) (280,081)
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Total stockholders' equity 6,327,901 6,235,366
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Total liabilities and stockholders' equity $8,605,145 $8,694,845
========== ==========
</TABLE>
2
<PAGE> 4
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended August 31, 1995 and 1994
Unaudited
<TABLE>
<CAPTION>
1995 1994
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<S> <C> <C>
Net Patient Service Revenues $2,457,620 $2,598,141
Other revenues 394,639 196,030
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Total Revenues 2,852,259 2,794,171
Operating expenses:
Professional care of patients 2,212,912 1,988,526
General and administrative 240,745 286,454
Direct costs of clinical supplies 123,936 82,562
Interest expense 25,291 29,848
Depreciation and amortization 79,082 111,194
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Total Expenses 2,681,966 2,498,584
Income before loss in earnings of
partnerships, gain on sale of centers,
minority interest and income taxes 170,293 295,587
Loss in earnings of partnerships (12,758) (9,796)
Gain on sale of centers - 349,207
Minority interest - (85,788)
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Income before provision for income taxes 157,535 549,210
Provision for income taxes (65,000) (166,000)
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Net income $ 92,535 $ 383,210
========== ===========
Per share data:
Net income per share $ .03 $ .11
========== ===========
Weighted average number of shares outstanding 3,495,765 3,395,679
========== ===========
</TABLE>
3
<PAGE> 5
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended August 31, 1995, and 1994
<TABLE>
<CAPTION> Unaudited
---------
Increase (Decrease) in Cash and Cash Equivalents
1995 1994
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 92,535 $ 383,210
Adjustments to reconcile net income to net cash ------------ -----------
used in operating activities:
Accretion of discount on notes receivable (28,806) -
Gain on sale of assets - (349,207)
Depreciation and amortization 79,082 111,194
Equity in earnings of unconsolidated partnerships 12,758 (16,361)
Minority interest - 117,941
Change in operating assets and liabilities, net
of acquisitions and dispositions:
Accounts receivable (373,724) (552,548)
Other assets, net (5,644) (37,978)
Accounts payable and accrued expenses (72,173) (426,389)
Income taxes payable 65,000 166,000
Due to Medicare (826,319) 558,416
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Total adjustments (1,149,826) (428,932)
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Net cash used in operating activities (1,057,291) (45,722)
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Cash flows from investing activities:
Proceeds from sale of centers, net of transaction
costs - 838,264
Collections of notes receivable 108,333 -
Advances to related parties (40,143) (86,869)
Investments in Partnerships and ventures (125,582) 8,188
Acquisition of property and equipment (36,918) (20,909)
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Net cash (used in) provided by investing
activities (94,310) 738,674
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Cash flows from financing activities:
Principal payments on debt (24,454) (84,214)
Short-term borrowings 740,000 -
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Net cash provided by (used in) financing
activities 715,546 (84,214)
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Net (decrease) increase in cash (436,055) 608,738
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Cash at beginning of period 1,366,141 527,505
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Cash at end of period $ 930,086 $ 1,136,243
============ ===========
Supplemental disclosures:
Interest paid $ 24,000 $ 27,431
Income taxes paid 50,000 -
</TABLE>
Non-cash financing and investing activities:
In August 1994, the Company completed the sale of substantially all of the
assets of two of its radiation therapy centers (CTI of West Broward, Inc.
and Boca Raton Radiotherapy Associates, Ltd.) to an unrelated third party.
The Company received $900,000 in cash and $2,600,000 in a subordinated
promissory note which bears interest at prime and which the Company has
recorded net of a discount of $448,803. The sale resulted in a gain of
$349,207. The remaining assets sold and liabilities assumed in the
transaction were as follows:
Property, plant and equipment $(2,406,027)
Intangible assets, net (847,800)
Other assets (33,470)
Minority interest 257,167
Long-term debt 758,312
4
<PAGE> 6
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
ITEM 1. FINANCIAL STATEMENTS (continued)
Notes to Consolidated Financial Statements
1. Preparation of Financial Statements:
The accompanying unaudited consolidated financial
statements for Cancer Treatment Holdings, Inc. and its
subsidiaries (the "Company") have been prepared in
accordance with the instructions of SEC Form 10-QSB and
therefore do not include all information and footnotes
necessary for a fair presentation of financial position,
results of operations, and cash flows in conformity with
generally accepted accounting principles. The financial
statements should be read in conjunction with the financial
statements and notes thereto included in the Company's
latest SEC Form 10-KSB for the year ended May 31, 1995. In
the opinion of management, the unaudited consolidated
financial statements contain all adjustments which are of
a normal, recurring nature for a fair statement of the
results of operations for such interim periods presented.
The results of operations for the three months ended August
31, 1995, are not necessarily indicative of the results
which may be expected for the entire fiscal year. The May
31, 1995, consolidated balance sheet was derived from
audited financial statements but does not include all
disclosures required by generally accepted accounting
principles.
2. Contingencies
As a general partner, the Company is jointly and severally
liable for the liabilities concerning the actions of Palm
Beach Radiotherapy Associates, Ltd. ("Palm Beach") and has
guaranteed certain liabilities of this Partnership
amounting to $634,000 at August 31, 1995. In this
connection, the Company could be held responsible for any
and all liabilities arising from the actions of Palm Beach.
The Company and the other partner of Palm Beach have
executed demand promissory notes payable to Palm Beach
which have been assigned as collateral to certain creditors
of those Partnerships.
3. Sale of Radiation Therapy Centers
On August 26, 1994, the Company sold substantially all of
the assets of CTI of West Broward, Inc. and Boca Raton
Radiotherapy Associates, Ltd. (the "Centers" ) for
$3,500,000 consisting of $900,000 cash and $2,600,000 in a
subordinated promissory note which bears interest at prime
and is payable in monthly installments over six years. The
Company recorded the note net of a discount of 14%, or
$448,803, based on, among other factors, the Company's
incremental borrowing rate and the credit risk of the
buyer. The net gain on the sale amounted to $349,207.
Concurrent with the sale, the Company entered into a 12-
year management and billing and collection agreement under
which the Company will receive 9.5% of annual net collected
revenues and a six-year consulting agreement whereby the
Company will receive $16,500 per month for consulting
services.
4. Reclassifications
Certain amounts have been reclassified in the financial
statements for the three-month period ended August 31,
1994, to conform to the presentation in the financial
statements for the three-month period ended August 31,
1995.
5
<PAGE> 7
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE MONTHS ENDED
AUGUST 31, 1995
1. Results Of Operations
Comparison of the Three Months Ended August 31, 1995, to the
Three Months Ended August 31, 1994
Revenues for the three-month period ended August 31, 1995,
increased $58,000 over the three-month period ended August
31, 1994, from $2,794,000 in 1994 to $2,852,000 in 1995.
This increase was principally attributable to an increase in
revenues from the billing and collection and management
contracts with the buyers of the Coral Springs, Boca and
Tampa centers and an increase in revenues from Leader and Med
Tech (collectively the "home health division") offset by the
reduction in revenues as a result of the sale of the Centers.
For the three months ended August 31, 1995 and 1994, revenues were
derived from the following payor sources:
<TABLE>
<CAPTION>
1995 1994
Amount % Amount %
---------- ----- ---------- ------
<S> <C> <C> <C> <C>
Medicare $2,015,000 70.6 $1,738,000 62.2
Health Maintenance Organizations - - 353,000 12.6
Commercial Insurance 283,000 9.9 429,000 15.4
Other (primarily Medicaid) 160,000 5.6 78,000 2.8
---------- ----- ---------- ------
Net patient service revenue 2,458,000 86.1 2,598,000 93.0
Billing/Collection and Management Fees 296,000 10.4 174,000 6.2
Other Miscellaneous Revenues 98,000 3.5 22,000 0.8
---------- ----- ---------- ------
$2,852,000 100.0 $2,794,000 100.0
========== ===== ========== ======
</TABLE>
Changes in the current mix of payors, specifically those which
would result in a decrease in the percentage of revenues from
Medicare or third-party payors, may adversely effect the Company's
future results of operations.
Patient service revenues are derived from the operations of
the home health division and the Company's radiation therapy
center in Mississippi and, for the first quarter of fiscal
1995, the Coral Springs and Boca radiation therapy centers,
which were sold at the end of the first quarter of fiscal
1995. Patient service revenues in total decreased $140,000
from $2,598,000 in 1994 to $2,458,000 in 1995. Revenues from
the home health division increased $637,000 from $1,768,000
in 1994 to $2,405,000 in 1995. Med Tech participates in the
Medicare program under which services are rendered to Medicare
program beneficiaries and are reimbursed based on cost-
reimbursement principles. The increase in revenues is
primarily the result of an increase in the reimbursement rate
of Med Tech. Over 90% of Med Tech's current business is with
Medicare beneficiaries. Radiation therapy revenues decreased
$778,000 from $830,000 in 1994 to $52,000 in 1995. The
decrease was attributable to the sale of the Centers.
Other revenues, which consist principally of
management/consulting and billing and collection revenues and
interest income, increased $198,000 from $196,000 in 1994 to
$394,000 in 1995. This increase is primarily attributed to
revenues from the management/consulting and billing and
collection contracts with the buyers of the Coral Springs, Boca
and Tampa centers. Interest income increased $72,000 during
1995 as a result of the interest income recognized from the
notes receivable from the buyers of the Centers.
Operating expenses for the three-month period ended August 31, 1995,
increased $183,000, or 7.3% over the three-month period ended August
31, 1994, from $2,499,000 in 1994 to $2,682,000 in 1995. This
increase was primarily attributable to the following:
Professional care of patients expenses increased $224,000 from
$1,989,000 in 1994 to $2,213,000 in 1995 as a result of the
increase in revenues in the home health division, offset by a
decrease in expenses related to the sale of the Centers.
6
<PAGE> 8
General and administrative expenses decreased $46,000 from
$287,000 in 1994 to $241,000 in 1995. This decrease is
primarily attributed to the growth of Med Tech which resulted in
the Company allocating more general and administrative expenses
to Med Tech which operates on a Medicare cost-reimbursement basis.
These allocated expenses are included in "professional care of
patients" expense in the Company's Statement of Operations.
Direct costs of clinical supplies increased $41,000 from $83,000 in
1994 to $124,000 in 1995. This increase was the result of the increase
in revenues from Leader.
2. Liquidity and Capital Resources:
As of August 31, 1995, the Company had working capital, including cash
of $2,547,000, as compared to working capital of $2,569,000 at May 31,
1995. The decrease was primarily attributable to an increase in short-
term borrowings offset by payments totaling $826,000 to Medicare during
the quarter.
During the three-month period ended August 31, 1995, cash decreased
$436,000. The principal components of the decrease in cash are as
follows:
Cash used in operating activities amounted to $1,057,000
in 1995, compared to cash used in operating activities of
$46,000 in 1994. The increase is primarily attributed to
payments to Medicare of $826,000 and an increase in
accounts receivable. The Company's current ratio (current
assets over current liabilities) was 2.38 for 1995 and
2.27 for 1994.
Cash used in investing activities was $94,000 in 1995,
compared to cash provided by investing activities of
$739,000 in 1994. The 1994 amount included $838,000 in
cash received from the sale of the centers.
Cash provided by financing activities was $716,000 in
1995, compared to cash used in financing activities of
$84,000 in 1994. The 1995 amount included $740,000 in
short-term borrowings.
Under the terms related to the sale of the Centers, the Company
will receive approximately $50,000 per month due under the note
from the buyer over the next six years, $16,500 per month in
consulting fees over the next six years, and payments of 9.5%
of the net monthly revenues collected by the buyer which the
Company believes will average approximately $25,000 to $30,000
per month over the next twelve years. As a result of the sale
of the Company's interest in the Tampa radiation therapy
center, the Company will receive $150,000 per year over the
next 10 years in consulting fees.
Except for those items discussed above, and in the Company's
latest Form 10-KSB for the year ended May 31, 1995, there are
no existing material sources of liquidity available to the
Company or material commitments for capital expenditures.
There are no material trends, favorable or unfavorable, in the
Company's capital resources. Management is unaware, except for
those items discussed above, of any trends, demands,
commitments, events or uncertainties that will result in or
that are reasonably likely to result in the Company's liquidity
increasing or decreasing in any material way.
7
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CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) There were no reports on Form 8-K filed during
the three months ended August 31, 1995.
(b) Exhibit 27: Financial Data Schedule
8
<PAGE> 10
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.
CANCER TREATMENT HOLDINGS, INC.
-------------------------------
(Registrant)
October 12, 1995 by: /s/ Louis W. Boisvert, III
---------------------------
Louis W. Boisvert, III
Vice President of Finance and
Chief Financial Officer
(Principal Accounting Officer and Duly
Authorized Officer)
9
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CANCER TREATMENT HOLDINGS, INC. FOR THE THREE MONTHS
ENDED AUGUST 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> AUG-31-1995
<CASH> 930
<SECURITIES> 0
<RECEIVABLES> 3118
<ALLOWANCES> 228
<INVENTORY> 0
<CURRENT-ASSETS> 4,394
<PP&E> 1,227
<DEPRECIATION> 444
<TOTAL-ASSETS> 8,605
<CURRENT-LIABILITIES> 1,847
<BONDS> 0
<COMMON> 10
0
0
<OTHER-SE> 6,317
<TOTAL-LIABILITY-AND-EQUITY> 8,605
<SALES> 2,852
<TOTAL-REVENUES> 2,852
<CGS> 124
<TOTAL-COSTS> 2,657
<OTHER-EXPENSES> 13
<LOSS-PROVISION> 0
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<EPS-DILUTED> .03
</TABLE>
