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 February 28, 1997
-----------------
[ ] 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)
U.S. Securities and Exchange Commission
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 April 4, 1997 was: 3,336,476
---------
<PAGE>
CANCER TREATMENT HOLDINGS, INC.
INDEX
Page
----
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
Consolidated Balance Sheets
as of February 28, 1997 and May 31, 1996 2
Consolidated Statements of Operations
for the Nine Months Ended
February 28, 1997 and February 29, 1996 3
Consolidated Statements of Cash Flows
for the Nine Months Ended
February 28, 1997 and February 29, 1996 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 9
SIGNATURES 10
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
_________
<TABLE>
<CAPTION>
February 28, May 31,
1997 1996
------------ ------------
(Unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 765,865 $ 865,265
Accounts receivable, net of allowance for doubtful
accounts of $113,400 and $124,300 4,923,946 3,054,893
Notes receivable net of discount of
$82,600 and $94,800, respectively 350,703 338,574
Receivables from related parties 333,135 127,931
Other current assets 316,281 351,221
------------ ------------
Total current assets 6,689,930 4,737,884
Long-term notes receivable, net of discount of
$109,700 and $169,800, respectively 1,309,727 1,574,684
Property and equipment, net 919,610 1,115,214
Investments in and advances to partnerships and ventures 929,475 880,858
Intangible assets, net 842,298 956,809
Other assets 169,900 131,464
------------ ------------
Total assets $ 10,860,940 $ 9,396,913
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt $ 220,705 $ 67,876
Accounts payable and accrued expenses 1,429,825 1,099,486
Income taxes payable -- 254,000
------------ ------------
Total current liabilities 1,650,530 1,421,362
Long-term debt, net of current portion 2,513,955 1,155,400
Deferred income taxes 211,400 211,400
Minority interest 21,753 21,753
------------ ------------
Total liabilities 4,397,638 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 1,569,791 1,693,487
------------ ------------
6,693,383 6,867,079
Treasury stock; 159,284 shares, at cost (280,081) (280,081)
------------ ------------
Total stockholders' equity 6,413,302 6,586,998
------------ ------------
Total liabilities and stockholders' equity $ 10,860,940 $ 9,396,913
============ ============
</TABLE>
2
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Nine Months Ended February 28, 1997 and February 29, 1996
1997 1996
------------ ------------
Net Patient Service Revenues $ 12,232,024 $ 7,199,366
Other revenues 1,077,566 1,171,180
------------ ------------
Total Revenues 13,309,590 8,370,546
Operating expenses:
Professional care of patients 12,119,232 6,626,327
Direct costs of clinical supplies 199,541 334,428
General and administrative 544,601 509,853
Interest expense 235,293 78,907
Depreciation and amortization 359,218 283,074
------------ ------------
Total Expenses 13,457,885 7,832,589
------------ ------------
Income (loss) before equity in loss of
unconsolidated partnerships, and income taxes (148,295) 537,957
Equity in loss of unconsolidated partnerships (25,401) (55,803)
------------ ------------
Income before provision for income taxes (173,696) 482,154
Provision (benefit) for income taxes 50,000 (197,000)
------------ ------------
Net income (loss) $ (123,696) $ 285,154
============ ============
Per share data:
Net income (loss) per share $ (.04) $ .08
============ ============
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 Nine months Ended February 28, 1997 and February 29, 1996
Unaudited
Decrease in Cash and Cash Equivalents
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ (123,696) $ 285,154
------------ ------------
Adjustments to reconcile net income to net cash
used in operating activities:
Accretion of discount on notes receivable (72,172) (81,570)
Depreciation and amortization 359,218 283,074
Equity in loss of unconsolidated partnerships 25,401 55,803
Change in operating assets and liabilities, net of
acquisitions and dispositions:
Accounts receivable (1,869,053) (492,901)
Other assets, net (20,941) 61,411
Accounts payable and accrued expenses 330,339 58,125
Income taxes payable (254,000) --
Due to Medicare -- (826,319)
------------ ------------
Total adjustments (1,501,208) (942,377)
------------ ------------
Net cash used in operating activities (1,624,904) (657,223)
------------ ------------
Cash flows from investing activities:
Collections of notes receivable 325,000 324,999
Net advances to related parties (205,204) (33,031)
Investments in Partnerships and ventures (74,018) (256,775)
Acquisition of property and equipment (31,658) (421,593)
------------ ------------
Net cash provided by (used in) investing activities 14,120 (386,400)
------------ ------------
Cash flows from financing activities
Repayments of long-term debt, including revolving
credit agreements (9,131,887) (385,653)
Borrowings from long-term debt, including revolving
credit agreements 10,643,271 912,844
------------ ------------
Net cash provided by financing activities 1,511,384 527,191
------------ ------------
Net decrease in cash $ (99,400) $ (516,432)
------------ ------------
Cash and cash equivalents at beginning of period $ 865,265 $ 1,366,141
------------ ------------
Cash and cash equivalents at end of period $ 765,865 $ 849,709
============ ============
Supplemental disclosures:
Interest paid $ 235,293 $ 63,212
Income taxes paid $ 259,469 $ 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 nine months ended February
28, 1997, 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
-------------
Certain wholly-owned subsidiaries of the Company are jointly and
severally liable (as general partners) for the obligations and
liabilities of Palm Beach Radiotherapy, Ltd. ("Palm Beach
Partnership"), Logan Oncology Care Associates, Ltd. ("Logan
Partnership") and Central Jersey Capital Funding, Inc. ("Lakewood
Partnership"), respectively; however, with regard to the latter two
partnerships, the principal creditor thereof has agreed to limit the
liability of each subsidiary to an amount based on its ownership in the
respective subject partnership. As a result, the collective liability
of these three subsidiaries, which also has been guaranteed by the
Company, is approximately $2,130,000.
The Company is involved in three legal proceedings arising from a
dispute between the Palm Beach Partnership and Good Samaritan Health
Corp. and its affiliates. These proceedings involve (a) an action by
the Company for declaratory decree to confirm the length of the
Partnership's lease at Good Samaritan Hospital is ten years, (b) an
action by the Company against Good Samaritan for breach of a
non-compete agreement, and an action by Good Samaritan to dissolve the
Partnership. In none of these actions is Good Samaritan seeking damages
against the Company or the Palm Beach Partnership. Therefore, in the
opinion of management, none of these legal actions will 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 nine-month period ended February 29, 1996, to conform to the
presentation in the financial statements for the nine-month period
ended February 28, 1997.
5
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE NINE MONTHS ENDED FEBRUARY
28,1997
1. Results Of Operations
---------------------
Comparison of the Nine Months Ended February 28, 1997, to the Nine
------------------------------------------------------------------------
Months Ended February 29, 1996
------------------------------
Revenues for the nine-month period ended February 28, 1997, increased
$4,939,000 over the nine-month period ended February 29, 1996, from $8,371,000
to $13,310,000. The increase is principally attributable to an increase in
revenues of Med Tech.
For the nine months ended February 28, 1997 and February 29, 1996,
revenues were derived from following payor sources:
<TABLE>
<CAPTION>
( 000's omitted)
---------------------------------------------
1997 1996
Amount % Amount %
------- ----- -------- ------
<S> <C> <C> <C> <C>
Medicare $11,490 86.3 $ 6,093 72.8
Commercial Insurance 579 4.4 654 7.8
Other (primarily Medicaid) 163 1.3 452 5.4
------- ----- -------- ------
Net patient service revenue 12,232 92.0 7,199 86.0
Billing/Collection and Management Fees 804 6.0 904 10.8
Other Miscellaneous Revenues 274 2.0 268 3.2
------- ----- ------- ------
$13,310 100.0 $ 8,371 100.0
======= ===== ======== =====
</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 through November 30, 1996.
Patient service revenues increased $5,033,000 from $7,199,000 in 1996 to
$12,232,000 in 1997. Revenues from the home health division increased
$5,104,000 from $7,044,000 in 1996 to $12,148,000 in 1997. The increase
in revenues is primarily the result of an increase in Medicare home
health visits from 71,497 in the first nine months of 1996 to 129,940 in
the first nine months of 1997. Revenues from Leader decreased $415,000
between 1996 and 1997 as a result of lower patient volume and a lower
reimbursement rate from the payor. 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 $100,000
from $904,000 in 1996 to $804,000 in 1997. 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.
6
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE NINE MONTHS ENDED FEBRUARY
28, 1997
1. Results Of Operations (continued)
---------------------------------
Operating expenses for the nine-month period ended February 28, 1997,
increased $5,625,000, over the nine-month period ended February 29, 1996, from
$7,833,000 in 1996 to $13,458,000 in 1997. This increase was primarily
attributable to the following:
Professional care of patients expense increased $5,493,000 from $6,626,000 in
1996 to $12,119,000 in 1997 and is the result of the increase in revenues of
Med Tech as discussed above. Of the total increase, $4,919,000 relates to
increases in direct expenses of Med Tech as a result of the increase in Med
Tech's revenues and $587,000 relates to the increase in the Company's
allocation of its general and administrative expenses as discussed below.
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. As a
result, $1,575,000 and $988,000 of such expenses are included in professional
care of patients expense for the nine-month period ended February 28, 1997 and
February 29, 1996, respectively.
General and administrative expenses increased $35,000 from $510,000 in
1996 to $545,000 in 1997. 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 $134,000 from $334,000 in
1996 to $200,000 in 1997. This decrease was the result of the decrease
in revenues from Leader as discussed above.
2. Liquidity and Capital Resources
-------------------------------
As of February 28, 1997, the Company had working capital of $5,039,000,
as compared to working capital of $3,317,000 at May 31, 1996. The increase was
primarily attributable to the increase in accounts receivable of $1,869,000
which is principally the result of the growth of Med Tech as discussed above.
During the nine months ended February 28, 1997, cash decreased $99,400.
Cash used in operating activities amounted to $1,625,000 in 1997, compared to
$657,000 in 1996. The principal components resulting in a use of cash in
operating activities in 1997, were an increase in accounts receivable of
$1,869,000; and the payment of income taxes of $254,000. The increase in
accounts receivable is the result of the significant increase in revenues from
Med Tech including receivables of approximately $920,000 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 4.05
to 1 for 1997 and 3.33 to 1 for 1996. Cash provided by investing activities was
$14,000 in 1997, compared to cash used in investing activities of $386,000 in
1996 and was primarily the result of collections under notes receivable reduced
by advances to related parties and investments in partnerships and ventures.
Cash provided by financing activities was $1,511,000 in 1997, compared to
$527,000 in 1996 and was the result of the net increase in borrowings of the
Company under the revolving credit facility during the nine-month period ended
February 28, 1997 over the nine-month period ended February 29, 1996. There was
no availability under this facility at February 28, 1997.
Under the terms related to the sale of the radiation centers, the
Company is receiving approximately $50,000 per month due under the
previously-mentioned notes from the buyer of two of the Company's radiation
therapy centers 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 eight years in consulting fees.
7
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE NINE MONTHS ENDED FEBRUARY
28, 1997
2. Liquidity and Capital Resources (continued)
-------------------------------------------
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.
8
<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 nine months ended
February 28, 1997.
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.
CANCER TREATMENT HOLDINGS, INC.
April 10, 1997 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)
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF CANCER TREATMENT HOLDINGS, INC. FOR THE NINE MONTH
PERIOD ENDED FEBRUARY 28, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> FEB-28-1997
<CASH> 766
<SECURITIES> 0
<RECEIVABLES> 5,721
<ALLOWANCES> 113
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<CURRENT-ASSETS> 6,690
<PP&E> 1,740
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<TOTAL-ASSETS> 10,861
<CURRENT-LIABILITIES> 1,651
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0
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<TOTAL-LIABILITY-AND-EQUITY> 10,861
<SALES> 13,310
<TOTAL-REVENUES> 13,310
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</TABLE>