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 the quarterly period ended August 31, 1996
---------------
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
EXCHANGE ACT
For the transition period from______ to___________
Commission file number 0-16964
-------------------------------
CANCER TREATMENT HOLDINGS, INC.
-------------------------------
(Exact name of small business issuer as
specified in its charter)
Nevada 87-0410907
- --------------------------------------------------------------------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
4491 South State Road Seven, Suite 200, Fort Lauderdale, Florida, 33314
- --------------------------------------------------------------------------------
(Address of principal executive offices)
(954) 321-9555
- --------------------------------------------------------------------------------
(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
--- ---
The number of shares outstanding of each of the issuer's classes of common
equity, as of October 6, 1996 was: 3,336,476
----------
<PAGE>
CANCER TREATMENT HOLDINGS, INC.
INDEX
Page
----
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
Consolidated Balance Sheets
as of August 31, 1996 and May 31, 1996 2
Consolidated Statements of Operations
for the Three Months Ended
August 31, 1996 and 1995 3
Consolidated Statements of Cash Flows
for the Three Months Ended
August 31, 1996 and 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
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
August 31, May 31,
1996 1996
----------- -----------
(Unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 304,393 $ 865,265
Accounts receivable, net of allowance for doubtful
accounts of $107,844 and $124,338 4,198,514 3,054,893
Notes receivable net of discount of
$91,448 and $94,758, respectively 341,883 338,574
Receivables from related parties 132,401 127,931
Other current assets 334,839 351,221
----------- -----------
Total current assets 5,312,030 4,737,884
Long-term notes receivable, net of discount of
$147,178 and $169,764, respectively 1,488,937 1,574,684
Property and equipment, net 1,052,031 1,115,214
Investments in and advances to partnerships and ventures 936,275 880,858
Intangible assets, net 918,638 956,809
Other assets 183,472 131,464
----------- -----------
Total assets $ 9,891,383 $ 9,396,913
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt $ 73,018 $ 67,876
Accounts payable and accrued expenses 1,025,097 1,099,486
Income taxes payable 99,000 254,000
----------- -----------
Total current liabilities 1,197,115 1,421,362
Long-term debt, net of current portion 1,843,449 1,155,400
Deferred income taxes 211,400 211,400
Minority interest 21,753 21,753
----------- -----------
Total liabilities 3,273,717 2,809,915
----------- -----------
Commitments and contingencies (note 2)
Stockholders' equity:
Common stock; $.003 par value, 50,000,000
shares authorized, 3,495,760 shares issued 10,487 10,487
Capital in excess of par value 5,163,105 5,163,105
Retained earnings 1,724,155 1,693,487
----------- -----------
6,897,747 6,867,079
Treasury stock; 159,284 shares, at cost (280,081) (280,081)
----------- -----------
Total stockholders' equity 6,617,666 6,586,998
----------- -----------
Total liabilities and stockholders' equity $ 9,891,383 $ 9,396,913
=========== ===========
</TABLE>
2
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended August 31, 1996 and 1995
1996 1995
----------- -----------
Net Patient Service Revenues $ 3,720,025 $ 2,457,620
Other revenues 378,779 394,639
----------- -----------
Total Revenues 4,098,804 2,852,259
Operating expenses:
Professional care of patients 3,512,850 2,212,912
Direct costs of clinical supplies 66,243 123,936
General and administrative 310,153 240,745
Interest expense 62,707 25,291
Depreciation and amortization 119,072 79,082
----------- -----------
Total Expenses 4,071,025 2,681,966
----------- -----------
Income before equity in earnings (loss) of
partnerships, and income taxes 27,779 170,293
Equity in earnings (loss) of partnerships 22,889 (12,758)
----------- -----------
Income before provision for income taxes 50,668 157,535
Provision for income taxes (20,000) (65,000)
----------- -----------
Net income $ 30,668 $ 92,535
=========== ===========
Per share data:
Net income per share $ .01 $ .03
=========== ===========
Weighted average number of shares outstanding 3,336,476 3,336,476
=========== ===========
3
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Three Months Ended August 31, 1996, and 1995
Unaudited
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
1996 1995
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 30,668 $ 92,535
----------- -----------
Adjustments to reconcile net income to net cash
used in operating activities:
Accretion of discount on notes receivable (25,895) (28,806)
Depreciation and amortization 119,072 79,082
Equity in (earnings) loss of unconsolidated partnerships (22,889) 12,758
Change in operating assets and liabilities, net of
acquisitions and dispositions:
Accounts receivable (1,143,621) (373,724)
Other assets, net (41,535) (5,644)
Accounts payable and accrued expenses (74,389) (72,173)
Income taxes payable (155,000) 65,000
Due to Medicare -- (826,319)
----------- -----------
Total adjustments (1,344,257) (1,149,826)
----------- -----------
Net cash used in operating activities (1,313,589) (1,057,291)
----------- -----------
Cash flows from investing activities:
Collections of notes receivable 108,333 108,333
Advances to related parties (4,470) (40,143)
Investments in Partnerships and ventures (32,528) (125,582)
Acquisition of property and equipment (11,809) (36,918)
----------- -----------
Net cash provided by (used in) investing activities 59,526 (94,310)
----------- -----------
Cash flows from financing activities:
Repayments of long-term debt, including revolving
credit agreements (2,357,907) (24,454)
Borrowings from long-term debt, including revolving
credit agreements 3,051,098 740,000
----------- -----------
Net cash provided by financing activities 693,191 715,546
----------- -----------
Net decrease in cash (560,872) (436,055)
----------- -----------
Cash and cash equivalents at beginning of period 865,265 1,366,141
----------- -----------
Cash and cash equivalents at end of period $ 304,393 $ 930,086
=========== ===========
Supplemental disclosures:
Interest paid $ 62,707 $ 24,000
Income taxes paid 155,000 50,000
</TABLE>
4
<PAGE>
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, 1996. 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, 1996, are not necessarily indicative of the results which may be
expected for the entire fiscal year. The May 31, 1996, 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 Logan Oncology Care Associates,
Ltd. ("Logan") and has guaranteed certain liabilities of these
partnerships amounting to $874,000 at August 31, 1996. In this
connection, the Company could be held responsible for any and all
liabilities arising from the actions of Palm Beach and Logan. The
Company along with the other general partner of Palm Beach have
executed demand promissory notes payable to Palm Beach which have been
assigned as collateral to certain creditors of that partnership.
The Company is involved in several legal proceedings arising from a
dispute between the Company, as managing general partner of the Palm
Beach Partnership, and the other general partner of the Palm Beach
Partnership. The dispute relates to the decision of the other general
partner to conduct its radiation therapy business through its own
affiliates rather than through the Palm Beach Partnership. In the
opinion of management, the amount of ultimate liability with respect to
those actions will not materially affect the financial position,
results of operations or cash flows of the Company.
3. Reclassifications
-----------------
Certain amounts have been reclassified in the financial statements for
the three-month period ended August 31, 1995, to conform to the
presentation in the financial statements for the three-month period
ended August 31, 1996.
5
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE THREE MONTHS ENDED AUGUST
31, 1996
1. Results Of Operations
---------------------
Comparison of the Three Months Ended August 31, 1996, to the Three
------------------------------------------------------------------------
Months Ended August 31, 1995
----------------------------
Revenues for the three-month period ended August 31, 1996, increased
$1,247,000 over the three-month period ended August 31, 1995, from $2,852,000 in
1995 to $4,099,000 in 1996. This increase was principally attributable to an
increase in revenues of Med Tech.
For the three months ended August 31, 1996 and 1995, revenues were
derived from the following payor sources:
<TABLE>
<CAPTION>
1996 1995
Amount % Amount %
---------- ----- ---------- -----
<S> <C> <C> <C> <C>
Medicare $3,476,000 84.8 $2,015,000 70.6
Commercial Insurance 183,000 4.5 283,000 9.9
Other (primarily Medicaid) 61,000 1.5 160,000 5.6
---------- ----- ---------- -----
Net patient service revenue 3,720,000 90.8 2,458,000 86.1
Billing/Collection and Management Fees 271,000 6.6 296,000 10.4
Other Miscellaneous Revenues 108,000 2.6 98,000 3.5
---------- ----- ---------- -----
$4,099,000 100.0 $2,852,000 100.0
========== ===== ========== =====
</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 Leader and
Med Tech (collectively the "home health division") and the Company's
radiation therapy center in Mississippi. Patient service revenues
increased $1,262,000 from $2,458,000 in 1995 to $3,720,000 in 1996.
Revenues from the home health division increased $1,281,000 from
$2,409,000 in 1995 to $3,690,000 in 1996. The increase in revenues is
primarily the result of an increase in Medicare home health visits from
22,790 in the first quarter of 1995 to 35,299 in the first quarter of
1996. Revenues from Leader decreased $171,000 between 1995 and 1996.
Currently, Med Tech has agreements to provide home health services to
patients by utilizing the nursing services of other home health
agencies. These agreements may be canceled with 10 days notice by either
party. If such agreements were canceled, this could adversely affect Med
Tech's ability to service its patients. If the certificate of need
requirements were to change, the number of home health agencies
competing in the market could increase significantly, thus having an
adverse effect on the Company. Med Tech participates in the Medicare
program under which services are rendered to Medicare program
beneficiaries and are reimbursed based on cost-reimbursement principles.
Other revenues, which consist principally of management/consulting and
billing and collection revenues and interest income, decreased $16,000
from $395,000 in 1995 to $379,000 in 1996. This decrease is attributed
to a decrease in revenues from the management/consulting and billing and
collection contracts entered into as part of the 1995 sales of radiation
facilities.
Operating expenses for the three-month period ended August 31, 1996,
increased $1,389,000, or 52% over the three-month period ended August 31, 1995,
from $2,682,000 in 1995 to $4,071,000 in 1996. This increase was primarily
attributable to the following:
Professional care of patients expenses increased $1,300,000 from
$2,213,000 in 1995 to $3,513,000 in 1996 primarily as a result of the
increase in revenues of Med Tech as discussed above. Of the total
increase, $1,025,000 relates to increases in direct expenses of Med Tech
as a result of the increase in Med Tech's revenues and $275,000 relates
to the increase in the Company's allocation of its general and
administrative expenses as discussed below.
6
<PAGE>
As a result of the Company's participation in the Medicare program, the
Company is able to allocate a part of its general and administrative
expense to its Medicare certified home health agency and be reimbursed
for such costs by the Medicare system.
Accordingly, the Company's policy is to treat the allocation of such
expenses as a decease in its general and administrative expenses and an
increase in its professional care of patients expenses. $525,000 and
$250,000 of such expenses are included in professional care of patients
expense for the quarters ended August 31, 1996 and 1995, respectively.
General and administrative expenses increased $69,000 from $241,000 in
1995 to $310,000 in 1996. This increase is primarily attributed to
increases in corporate salaries as a result of the growth of Med Tech.
Direct costs of clinical supplies decreased $58,000 from $124,000 in
1995 to $66,000 in 1996. This decrease was the result of the decrease in
revenues from Leader as discussed above.
2. Liquidity and Capital Resources
-------------------------------
As of August 31, 1996, the Company had working capital, including cash
of $4,115,000, as compared to working capital of $3,317,000 at May 31, 1996. The
increase was primarily attributable to an increase in accounts receivable of
$1,144,000 offset by a decrease in cash of $561,000.
During fiscal 1996, cash decreased $561,000. Cash used in operating
activities amounted to $1,314,000 in 1996, compared to $1,057,000 in 1995. The
principal components resulting in a use of cash in operating activities in 1996,
were an increase in accounts receivable of $1,144,000; and the payment of income
taxes of $155,000. The increase in accounts receivable is the result of the
significant increase in revenues from Med Tech including receivables of
approximately $200,000 related to the new home health operations in Florida's
District 9 which began operations in July 1996. The Company's current ratio
(current assets over current liabilities) was 4.44 for 1996 and 3.33 for 1995.
Cash provided by investing activities was $60,000 in 1996, compared to cash used
in investing activities of $94,000 in 1995 and was the result of collections
under notes receivable. Cash provided by financing activities was $693,000 in
1996, compared to $716,000 in 1995 and was the result of the net borrowings of
the Company under the revolving credit facility during the period. Unused
availability under this facility was $360,000 at August 31, 1996.
Under the terms related to the sale of the radiation centers, the
Company will receive approximately $50,000 per month due under the note from the
buyer over the next four years, $16,500 per month in consulting fees over the
next four 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 ten 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 nine years in consulting fees.
The Company guarantees certain financing agreements of the Palm Beach
and Logan partnerships.
As of August 31, 1996, the Company has guaranteed the following amounts:
Partnership Amount Description
-----------------------------------------------------------------------
Palm Beach $486,000 (1) Equipment leased and leasehold
improvements; (2) Term loan
Logan $388,000 Equipment leased
Except for those items discussed above, and in the Company's latest Form
10-KSB for the year ended May 31, 1996, 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
There were no reports on Form 8-K filed during the three months
ended August 31, 1996.
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.
CANCER TREATMENT HOLDINGS, INC.
October 14, 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>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CANCER TREATMENT HOLDINGS, INC. FOR THE QUARTERLY PERIOD
ENDED AUGUST 31, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> AUG-31-1996
<CASH> 304
<SECURITIES> 0
<RECEIVABLES> 4,307
<ALLOWANCES> 108
<INVENTORY> 0
<CURRENT-ASSETS> 5,312
<PP&E> 1,720
<DEPRECIATION> 668
<TOTAL-ASSETS> 9,891
<CURRENT-LIABILITIES> 1,197
<BONDS> 0
0
0
<COMMON> 10
<OTHER-SE> 6,608
<TOTAL-LIABILITY-AND-EQUITY> 9,891
<SALES> 4,099
<TOTAL-REVENUES> 4,099
<CGS> 66
<TOTAL-COSTS> 4,071
<OTHER-EXPENSES> (23)
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</TABLE>
