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, 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 October 6, 1997 was: 3,336,476
---------------
Transitional Small Business Disclosure Format
(Check One): Yes No X
----- -----
<PAGE>
CANCER TREATMENT HOLDINGS, INC.
INDEX
Page
----
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
Consolidated Balance Sheets
as of August 31, 1997 and May 31, 1997 2
Consolidated Statements of Operations
for the Three Months Ended
August 31, 1997 and 1996 3
Consolidated Statements of Cash Flows
for the Three Months Ended
August 31, 1997 and 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>
August 31, May 31,
1997 1997
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 708,500 $ 1,324,745
Accounts receivable, net of allowance for doubtful accounts
of approximately $180,000 at August 31, 1997 and $101,000
at May 31, 1997 3,884,639 3,076,429
Current portion of long-term notes receivable, net of a discount
of $26,202 at August 31, 1997 and $27,857 at May 31, 1997 620,472 641,217
Income taxes receivable 227,369 227,369
Other current assets 389,777 296,602
----------- -----------
Total current assets 5,830,757 5,566,362
Long-term notes receivable, net of current portion and a
discount of $27,002 at August 31, 1997 and $33,415 at
May 31, 1997, 1997, respectively 867,040 948,378
Property and equipment, net 938,836 968,331
Investments in and advances to partnerships and ventures 1,308,336 1,072,944
Intangible assets, net 797,518 844,868
Other assets 137,290 133,148
----------- -----------
Total assets $ 9,879,777 $ 9,534,031
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt $ 203,832 $ 207,309
Accounts payable 675,790 387,251
Accrued payroll and related benefits 651,091 452,562
----------- -----------
Total current liabilities 1,530,713 1,047,122
Long-term debt, net of current portion 2,074,346 2,124,611
Deferred income taxes 107,400 107,400
----------- -----------
Total liabilities 3,712,459 3,279,133
----------- -----------
Commitments and contingencies
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 1,273,807 1,361,387
----------- -----------
6,447,399 6,534,979
Treasury stock: 159,284 shares, at cost (280,081) (280,081)
----------- -----------
Total stockholders' equity 6,167,318 6,254,898
----------- -----------
Total liabilities and stockholders' equity $ 9,879,777 $ 9,534,031
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED AUGUST 31, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
August 31, August 31,
1997 1996
----------- -----------
<S> <C> <C>
Net patient service revenues $ 4,371,913 $ 3,720,025
Other revenues 382,038 378,779
----------- -----------
Total revenues 4,753,951 4,098,804
----------- -----------
Operating expenses:
Direct cost of patient services 2,006,612 1,847,281
(primarily payroll and contracted medical services)
General and administrative 2,575,174 2,041,965
Interest expense 84,067 62,707
Depreciation and amortization 109,020 119,072
----------- -----------
Total operating expenses 4,774,873 4,071,025
----------- -----------
Income (loss) before loss in earnings of partnerships
and income taxes (20,922) 27,779
Equity in earnings (loss) of partnerships (66,658) 22,889
----------- -----------
Income (loss) before income taxes (87,580) 50,668
Provision for income taxes -- (20,000)
----------- -----------
Net income (loss) $ (87,580) $ 30,668
=========== ===========
Per share data:
Net income (loss) per share $ (.03) $ .01
=========== ===========
Weighted average number of shares outstanding 3,336,476 3,336,476
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED AUGUST 31, 1997 AND 1996
(UNAUDITED)
<TABLE>
<CAPTION>
August 31, August 31,
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (87,580) $ 30,668
Adjustments to reconcile net income (loss) cash
used in operating activities:
Accretion of discount on notes receivable (8,068) (25,895)
Depreciation and amortization 109,020 119,072
Equity in loss of unconsolidated partnerships 66,658 (22,889)
Change in operating assets and liabilities:
Accounts receivable (808,210) (1,143,621)
Other current and non-current assets (87,544) (41,535)
Accounts payable, accrued payroll and related benefits 487,068 (74,389)
Income taxes payable -- (155,000)
----------- -----------
Net cash used in operating activities (328,656) (1,313,589)
----------- -----------
Cash flows from investing activities:
Collections of notes receivable 100,151 108,333
Investments in and advances to Partnerships and ventures (303,883) (36,998)
Acquisitions of property and equipment (30,115) (11,809)
----------- -----------
Net cash provided by (used in) investing activities (233,847) 59,526
----------- -----------
Cash flows from financing activities:
Repayments of long-term debt, including revolving
credit agreements (1,960,804) (2,357,907)
Borrowings for long-term debt, including revolving
credit agreements 1,907,062 3,051,098
----------- -----------
Net cash provided by (used in) financing activities (53,742) 693,191
----------- -----------
Net decrease in cash and cash equivalents (616,245) (560,872)
Cash and cash equivalents at beginning of year 1,324,745 865,265
----------- -----------
Cash and cash equivalents at end of period $ 708,500 $ 304,393
=========== ===========
Supplemental disclosures:
Interest paid $ 83,323 $ 62,707
=========== ===========
Income taxes paid $ -- $ 155,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
_________
ITEM 1. 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, 1997. 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, 1997, are not necessarily indicative of the results which may be
expected for the entire fiscal year. The May 31, 1997, consolidated
balance sheet was derived from audited financial statements but does
not include all disclosures required by generally accepted accounting
principles.
2. Contingencies
-------------
In conjunction with the current regulatory scrutiny of the home health
industry and, in particular the industry in South Florida, the Company
was randomly selected for an on-site review of its Medicare policies,
procedures and medical records related to its Medicare certified home
health agency in District 10, Broward County, Florida. The review is
being conducted by representatives of the Health Care Finance
Administration, the Office of Audit of the Office of the Inspector
General for the Department of Health and Human Services and the Florida
Agency for Health Care Administration. The results of this review have
not been concluded. The ultimate outcome of this review and its impact,
if any, on the Company's financial condition, results of operations and
cash flows cannot be determined at this time.
As a general partner, the Company is jointly and severally liable for
liabilities concerning the actions of Palm Beach Radiotherapy
Associates, Ltd. ("Palm Beach"), Ocean Radiation Oncology Center, Inc.
("Ocean") and Logan Oncology Care Associates, Ltd. ("Logan") and has
guaranteed certain liabilities of these partnerships amounting to
$2,442,000 at August 31, 1997. Accordingly, the Company could be held
responsible for any and all liabilities arising from the actions of
such partnerships.
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
these 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, 1996, to conform to the
presentation in the financial statements for the three-month period
ended August 31, 1997.
5
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
1. Results Of Operations
---------------------
Comparison of the Three Months Ended August 31, 1997, to the Three
-----------------------------------------------------------------------
Months Ended August 31, 1996
----------------------------
Revenues for the three-month period ended August 31, 1997, increased
$655,000 or 16% over the three-month period ended August 31, 1996, from
$4,099,000 in 1996 to $4,754,000 in 1997. This increase was principally
attributable to the increase in revenues from home health and nursing services
as discussed below.
Patient service revenues are derived principally from the home health
and nursing service operations of Med Tech Services of South Florida,
Inc. ("Med Tech"), Leader Health Care Center, Inc. ("Leader") and
Southern Cross Home Health, Inc. ("Southern Cross"). Approximately 93%
of net patient service revenues for 1997 and 1996 were derived from Med
Tech for services provided to home healthcare patients who are Medicare
beneficiaries. Med Tech participates in the Medicare program under which
services rendered to Medicare program beneficiaries are reimbursed based
on cost-reimbursement principles. Such revenues increased $580,000 from
$3,476,000 in 1996 to $4,056,000 in 1997 primarily due to an increase in
visits performed by Med Tech from approximately 35,000 visits in 1996 to
approximately 37,500 visits in 1997 and an increase in the Medicare
reimbursement rate from approximately $88 per visit in 1996 to
approximately $98 per visit in 1997.
Other revenues, which consist principally of billing, collection,
management and consulting revenues and interest income, increased $3,000
from $379,000 in 1996 to $382,000 in 1997 as a result of an increase in
revenues from the Company's billing contracts offset by a decrease in
interest income due to the maturing of notes receivable.
The Company receives payment for its services from various sources. The
following summarizes the Company's revenues by payor sources:
<TABLE>
<CAPTION>
1997 1996
Amount % Amount %
---------- ----- ---------- -----
<S> <C> <C> <C> <C>
Medicare, on a cost reimbursement basis $4,056,000 92.8 $3,476,000 93.4
Commercial Insurance 173,000 3.9 183,000 4.9
Other 143,000 3.3 61,000 1.7
---------- ----- ---------- -----
Net patient service revenue 4,372,000 100 3,720,000 100
==== ===
Billing, collection, management and consulting fees 331,000 271,000
Other Miscellaneous Revenues 51,000 108,000
---------- ----------
$4,754,000 $4,099,000
=========== ===========
</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.
6
<PAGE>
Operating expenses for the three-month period ended August 31, 1997,
increased $704,000 or 17% over the three-month period ended August 31, 1996,
from $4,071,000 in 1996 to $4,775,000 in 1997. This increase was primarily
attributable to the following:
Direct cost of patient services, which includes primarily payroll costs
and contracted medical services, increased $160,000 or 9% from $1,847,000
in 1996 to $2,007,000 in 1997. The majority of these costs relate to the
Company's home health operations. On a per visit basis, these costs
increased from $50.89 per visit in 1996 to $51.85 in 1997. During the
latter part of fiscal 1997 and continuing through the first quarter ended
August 31, 1997, the Company, in anticipation of future growth,
significantly increased its base of clinical employees directly involved
in rendering patient services in anticipation of future growth and to
lessen the Company's reliance on contracting for such services. This has
resulted in a higher per visit cost for the quarter ended August 31, 1997
over the same period in 1996. The Company believes the average direct cost
per visit for patient services will decrease in the future as the Company
continues to increase the number of patients it services.
General and administrative expenses, which include the general and
administrative expenses of all of the Company's subsidiaries, increased
$533,000 or 26% from $2,042,000 in 1996 to $2,575,000 in 1997. The
majority of these costs are attributable to the Company's home health
operation. On a per visit basis, these costs increased from $32.71 per
visit in 1996 to $41.11 in 1997. During the latter part of fiscal 1997 and
continuing through the first quarter ended August 31, 1997, the Company,
in anticipation of future growth, significantly increased its base of
administrative clinical employees, to a level to support significantly
more visits than the Company performed during the current period. The
company believes the average cost per visit for general and administrative
expenses will decrease in the future as the Company continues to increase
the number of patients it services.
2. Liquidity and Capital Resources
-------------------------------
As of August 31, 1997, the Company had working capital of $4,300,000,
including cash of $708,500, as compared with working capital of $4,519,000 at
May 31, 1997. The decrease was primarily attributable to a decrease in cash of
$616,000, as discussed below, and increases in current liabilities of $484,000
offset by an increase in accounts receivable of $808,000.
During the quarter ended August 31, 1997, cash decreased $616,000. Cash
used in operating activities amounted to $329,000 in 1997, compared to
$1,314,000 in 1996. The principal components resulting in a use of cash in
operating activities in 1997, were an increase in accounts receivable of
$808,000 offset by an increase in accounts payable and accrued payroll and
related benefits of $487,000. The increase in accounts receivable, accounts
payable and accrued expenses is the result of the increase in revenues and
personnel of Med Tech as discussed above. The Company's current ratio (current
assets over current liabilities) was 3.81 for 1997 and 5.32 for 1996. Cash used
in investing activities was $234,000 in 1997, compared to cash provided by
investing activities of $60,000 in 1996 and was primarily the result of advances
to partnerships and ventures of $304,000 offset by collections under notes
receivable of $100,000. Cash used in financing activities was $54,000 in 1997,
compared to cash provided by financing activities of $693,000 in 1996 and was
primarily the result of payments against the Company's revolving credit
agreements.
7
<PAGE>
The Company guarantees certain financing agreements of Palm Beach, Ocean and
Logan. As a general partner, the Company is jointly and severally liable for
liabilities concerning the actions of Palm Beach, Ocean and Logan.
As of August 31, 1997, the Company has guaranteed the following amounts:
Partnership Amount Description
----------------------------------------------------------------------
Palm Beach $ 100,000 (1) Equipment leased and leasehold
improvements; (2) Term loan
Logan 1,028,000 Equipment leased
Ocean 1,314,000 Equipment leased and leasehold
----------- improvements
$ 2,442,000
===========
Except for those items discussed above, and in the Company's latest Form
10-KSB for the year ended May 31, 1997, 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 three months ended August 31, 1997.
9
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
CANCER TREATMENT HOLDINGS, INC.
October 14, 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 THREE MONTHS
ENDED AUGUST 31, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
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<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-START> JUN-01-1997
<PERIOD-END> AUG-31-1997
<CASH> 709
<SECURITIES> 0
<RECEIVABLES> 4,711
<ALLOWANCES> 206
<INVENTORY> 0
<CURRENT-ASSETS> 5,831
<PP&E> 1,837
<DEPRECIATION> 898
<TOTAL-ASSETS> 9,880
<CURRENT-LIABILITIES> 1,531
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0
0
<COMMON> 10
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<TOTAL-LIABILITY-AND-EQUITY> 9,880
<SALES> 4,372
<TOTAL-REVENUES> 4,754
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<EPS-PRIMARY> (.03)
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</TABLE>
