<PAGE>
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 February 29, 1996 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 April 5, 1996 was: 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 February 29, 1996 and May 31, 1995 2
Consolidated Statements of Operations
for the Three Month and Nine Month Periods
Ended February 29, 1996 and February 28, 1995 3
Consolidated Statements of Cash Flows
for the Nine Months Ended
February 29, 1996 and February 28, 1995 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>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
February 29, May 31,
1996 1995
(Unaudited)
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<S> <C> <C>
Cash $ 849,709 $1,366,141
Accounts receivable, net of allowance for doubtful
accounts of $165,419 and $145,604 2,422,686 1,929,785
Notes receivable net of discount of
$98,068 and $107,465 335,264 325,867
Receivables from related parties 478,609 445,578
Other current assets 311,710 525,483
---------- ----------
Total current assets 4,397,978 4,592,854
Long-term notes receivable, net of discount of
$192,350 and $264,522 1,360,432 1,613,258
Property and equipment, net 1,042,428 784,974
Investments in partnerships and ventures 843,764 586,989
Intangible assets, net 964,228 993,638
Other assets 130,877 123,132
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Total assets $8,739,707 $8,694,845
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt $ 599,763 $ 191,700
Accounts payable and accrued expenses 1,063,747 1,005,622
Due to Medicare - 826,319
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Total current liabilities 1,663,510 2,023,641
Long-term debt 299,213 180,085
Deferred income taxes 234,711 234,000
Minority interest 21,753 21,753
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Total liabilities 2,219,187 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 1,627,009 1,341,855
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6,800,601 6,515,447
Treasury stock; 159,284 shares, at cost (280,081) (280,081)
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Total stockholders' equity 6,520,520 6,235,366
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Total liabilities and stockholders' equity $8,739,707 $8,694,845
========== ==========
</TABLE>
2
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
February 29, February 28, February 29, February 28,
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Patient Service Revenues $2,402,118 $2,307,109 $7,199,366 $7,196,313
Other revenues 394,727 378,949 1,171,180 939,073
---------- ---------- ---------- ----------
Total Revenues 2,796,845 2,686,058 8,370,546 8,135,386
Operating expenses:
Professional care of patients 2,306,436 2,310,421 6,626,327 6,253,307
General and administrative 36,079 111,058 509,853 752,985
Direct costs of clinical supplies 96,716 96,042 334,428 250,180
Interest expense 25,778 31,746 78,907 47,800
Depreciation and amortization 109,850 48,330 283,074 207,963
---------- ---------- ---------- ----------
Total Expenses 2,574,859 2,597,597 7,832,589 7,512,235
---------- ---------- ---------- ----------
Income before loss in earnings of
partnerships, gain on sale of centers,
minority interest and income taxes 221,986 88,461 537,957 623,151
Equity in earnings of partnerships (13,602) 8,235 (55,803) 14,132
Gain on sale of centers - - - 349,207
Minority interest - 38,953 - (92,322)
---------- ---------- ---------- ----------
Income before provision for income taxes 208,384 135,649 482,154 894,168
Provision for income taxes (82,000) (35,000) (197,000) (271,000)
---------- ---------- ---------- ----------
Net income $ 126,384 $ 100,649 $ 285,154 $ 623,168
========== ========== ========== ==========
Per share data:
Net income per share $ .04 $ .03 $ .08 $ .18
========== ========== ========== ==========
Weighted average number of shares
outstanding 3,495,765 3,395,679 3,495,765 3,395,679
========== ========== ========== ==========
</TABLE>
3
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended February 29, 1996 and February 28, 1995
Unaudited
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<TABLE>
<CAPTION>
1996 1995
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 285,154 $ 623,168
Adjustments to reconcile net income to net cash
used in operating activities:
Accretion of discount on notes receivable (81,570) (48,010)
Gain on sale of assets - (349,206)
Depreciation and amortization 283,064 207,963
Equity in earnings of unconsolidated partnerships 55,803 (14,132)
Minority interest - (50,534)
Change in operating assets and liabilities, net of
acquisitions and dispositions:
Accounts receivable (492,901) (439,517)
Other assets, net 61,421 (430,274)
Accounts payable and accrued expenses 58,125 (776,204)
Due to Medicare (826,319) 1,266,643
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Total adjustments (942,377) (633,271)
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Net cash used in operating activities (657,223) (10,103)
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Cash flows from investing activities:
Proceeds from sale of centers, net of transaction costs - 838,264
Collections of notes receivable 324,999 180,555
Distributions received from partnerships - 59,378
Advances to related parties (33,031) -
Investments in Partnerships and ventures (256,775) (354,710)
Acquisition of property and equipment (421,593) (41,774)
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Net cash (used in) provided by investing activities (386,400) 681,713
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Cash flows from financing activities:
Proceeds from investment disposal - 37,500
Principal payments on debt (385,653) (336,437)
Short-term borrowings 912,844 348,000
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Net cash provided by financing activities 527,191 49,063
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Net (decrease) increase in cash (516,432) 720,673
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Cash at beginning of period 1,366,141 527,505
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Cash at end of period $ 849,709 $1,248,178
=========== ===========
Supplemental disclosures:
Interest paid $ 63,212 $ 29,206
Income taxes paid $ 50,000 -
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
</TABLE>
4
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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 nine months ended February 29, 1996, 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 approximately $420,000 at February 29, 1996. 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 nine 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.
In order to comply with the Physician Ownership of and Referrals to Health
Care Entities Act (the "Stark Law"), the Company took the following step at
one of its radiation centers: The Company, through a wholly-owned subsidiary,
CTI of Tampa, Inc., held a 21.26% general partnership interest in Tampa
Radiotherapy Associates, Ltd.("Tampa"). In December 1995, Tampa sold all of
its assets and provided a liquidating distribution of approximately $303,000
to the Company. The sale of Tampa's assets did not have a material impact on
the Company's statement of operations. Concurrent with the asset sale, the
Company entered into a ten-year consulting agreement with the buyer under
which the Company willreceive $150,000 per year for such services.
4. Reclassifications
Certain amounts have been reclassified in the financial statements for the
nine-month period ended February 28, 1995, to conform to the presentation in
the financial statements for the nine-month period ended February 29, 1996.
5
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE NINE MONTHS ENDED
FEBRUARY 29, 1996
1. Results Of Operations
Comparison of the Nine Months Ended February 29, 1996, to the Nine Months
Ended February 28, 1995
Revenues for the nine-month period ended February 29, 1996, increased
$236,000 over the nine-month period ended February 28, 1995, from
$8,135,000 in 1995 to $8,371,000 in 1996. 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.
For the nine months ended February 29, 1996 and February 28, 1995,
revenues were derived from the following payor sources:
<TABLE>
<CAPTION>
1996 1995
Amount % Amount %
---------- ---- ---------- ----
<S> <C> <C> <C> <C>
Medicare $6,093,000 72.8 $5,652,000 69.5
Health Maintenance Organizations - - 352,000 4.3
Commercial Insurance 654,000 7.8 948,000 11.6
Other (primarily Medicaid) 452,000 5.4 244,000 3.0
---------- ---- ---------- ----
Net patient service revenue 7,199,000 86.0 7,196,000 88.4
Billing/Collection and Management Fees 904,000 10.8 761,000 9.4
Other Miscellaneous Revenues 268,000 3.2 178,000 2.2
---------- ---- ---------- ----
$8,371,000 100.0 $8,135,000 100.0
========== ===== ========== =====
</TABLE>
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 increased
$3,000 from $7,196,000 in 1995 to $7,199,000 in 1996. Revenues from the
home health division which are included in patient service revenues
increased $810,000 from $6,237,000 in 1995 to $7,047,000 in 1996. Med
Tech Services of South Florida Inc. ("Med Tech"), a wholly-owned
subsidiary of the Company 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 of the home health division 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, which are also included in patient service revenues, decreased
$816,000 from $961,000 in 1995 to $145,000 in 1996. 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 $232,000
from $939,000 in 1995 to $1,171,000 in 1996. 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.
Operating expenses for the nine-month period ended February 29, 1996,
increased $321,000, or 4.3% over the nine-month period ended February 28,
1995, from $7,512,000 in 1995 to $7,833,000 in 1996. This increase was
primarily attributable to an increase in the operating expenses and allocated
overhead of Med Tech which are included in the Statement of Operations under
the caption "Professional Care of Patients".
6
<PAGE>
General and administrative expenses decreased $243,000 from $753,000 in
1995 to $510,000 in 1996. This decrease is primarily attributed to the
increase in revenues of Med Tech which resulted in the Company allocating
more general and administrative expenses to Med Tech. These allocated
expenses are included in "professional care of patients" expense in the
Company's Statement of Operations.
Direct costs of clinical supplies increased $84,000 from $250,000 in 1995
to $334,000 in 1996. This increase was the result of an increase in
revenues of Leader Health Care Center, Inc, a wholly-owned subsidiary of
the Company.
2. Liquidity and Capital Resources:
As of February 29, 1996, the Company had working capital, including cash of
$2,734,000, as compared to working capital of $2,569,000 at May 31, 1995.
During the nine-month period ended February 29, 1996, cash decreased $516,000.
The principal components of the decrease in cash are as follows:
Cash used in operating activities amounted to $657,000 in 1996, compared
to cash used in operating activities of $10,000 in 1995. 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 2.64 for 1996 and 2.27 for 1995.
Cash used in investing activities was $386,000 in 1996, compared to cash
provided by investing activities of $682,000 in 1995. In 1996, the
Company invested approximately $422,000 in the acquisition of property
and equipment. The 1995 amount included $838,000 in cash received from
the sale of the Centers.
Cash provided by financing activities was $527,000 in 1996, compared to
cash provided by financing activities of $49,000 in 1995. The 1996
amount included $527,000 in net short-term borrowings.
The Company has a revolving credit facility for $750,000 with a bank. The
facility is secured by certain assets of the Company and is subject to
renewal annually. At February 29, 1996, there was $540,000 outstanding under
this facility.
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 of the Coral
Springs and Boca Raton Radiation Centers 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.
There can be no assurance that the Company will actually receive this amount.
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 nine
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
<PAGE>
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
February 29, 1996.
b) Exhibit 27: Financial Data Schedule
8
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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)
April 15, 1996 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 NINE MONTHS
ENDED FEBRUARY 29, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-START> JUN-01-1995
<PERIOD-END> FEB-29-1996
<CASH> 850
<SECURITIES> 0
<RECEIVABLES> 3,237
<ALLOWANCES> 165
<INVENTORY> 0
<CURRENT-ASSETS> 4,398
<PP&E> 1,556
<DEPRECIATION> 514
<TOTAL-ASSETS> 8,740
<CURRENT-LIABILITIES> 1,664
<BONDS> 0
<COMMON> 10
0
0
<OTHER-SE> 6,510
<TOTAL-LIABILITY-AND-EQUITY> 8,740
<SALES> 8,371
<TOTAL-REVENUES> 8,371
<CGS> 334
<TOTAL-COSTS> 7,833
<OTHER-EXPENSES> 56
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 79
<INCOME-PRETAX> 482
<INCOME-TAX> 197
<INCOME-CONTINUING> 482
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 285
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
