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 November 30, 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)
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 January 3, 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 November 30, 1996 and May 31, 1996 2
Consolidated Statements of Operations
for the Six Months Ended
November 30, 1996 and 1995 3
Consolidated Statements of Cash Flows
for the Six Months Ended
November 30, 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. SUBMISSION OF MATTERS TO A VOTE OF
SECURITY HOLDERS 9
ITEM 7. EXHIBITS AND REPORTS ON FORM 8-K 9
SIGNATURES 10
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
_______
<TABLE>
<CAPTION>
November 30, May 31,
1996 1996
------------ ------------
(Unaudited)
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 821,058 $ 865,265
Accounts receivable, net of allowance for doubtful
accounts of $86,930 and $124,338 4,157,353 3,054,893
Notes receivable net of discount of
$87,258 and $94,758, respectively 346,074 338,574
Receivables from related parties 118,144 127,931
Other current assets 326,664 351,221
------------ ------------
Total current assets 5,769,293 4,737,884
Long-term notes receivable, net of discount of
$127,678 and $169,764, respectively 1,400,105 1,574,684
Property and equipment, net 980,916 1,115,214
Investments in and advances to partnerships and ventures 929,995 880,858
Intangible assets, net 880,468 956,809
Other assets 172,436 131,464
------------ ------------
Total assets $ 10,133,213 $ 9,396,913
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current portion of long-term debt $ 73,625 $ 67,876
Accounts payable and accrued expenses 1,185,376 1,099,486
Income taxes payable 26,000 254,000
------------ ------------
Total current liabilities 1,285,001 1,421,362
Long-term debt, net of current portion 2,006,611 1,155,400
Deferred income taxes 211,400 211,400
Minority interest 21,753 21,753
------------ ------------
Total liabilities 3,524,765 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 1,714,937 1,693,487
------------ ------------
6,888,529 6,867,079
Treasury stock; 159,284 shares, at cost (280,081) (280,081)
------------ ------------
Total stockholders' equity 6,608,448 6,586,998
------------ ------------
Total liabilities and stockholders' equity $ 10,133,213 $ 9,396,913
============ ============
</TABLE>
2
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Six Months Ended November 30, 1996 and 1995
1996 1995
----------- -----------
Net Patient Service Revenues $ 7,790,049 $ 4,797,248
Other revenues 746,590 776,453
----------- -----------
Total Revenues 8,536,639 5,573,701
Operating expenses:
Professional care of patients 7,345,851 4,319,891
Direct costs of clinical supplies 127,846 237,712
General and administrative 663,759 473,774
Interest expense 134,593 53,129
Depreciation and amortization 239,008 173,224
----------- -----------
Total Expenses 8,511,057 5,257,730
----------- -----------
Income before equity in loss of
partnerships, and income taxes 25,582 315,971
Loss in earnings of partnerships (4,132) (42,201)
----------- -----------
Income before provision for income taxes 21,450 273,770
Provision for income taxes -- (115,000)
----------- -----------
Net income $ 21,450 $ 158,770
=========== ===========
Per share data:
Net income per share $ .01 $ .05
=========== ===========
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 Six months Ended November 30, 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 $ 21,450 $ 158,770
----------- -----------
Adjustments to reconcile net income to net cash
used in operating activities:
Accretion of discount on notes receivable (49,587) (55,672)
Depreciation and amortization 239,008 173,224
Loss in earnings of unconsolidated partnerships 4,132 42,201
Change in operating assets and liabilities, net of
acquisitions and dispositions:
Accounts receivable (1,102,460) (533,774)
Other assets, net (28,533) 6,338
Accounts payable and accrued expenses 85,889 (103,078)
Income taxes payable (228,000) 115,000
Due to Medicare -- (826,319)
----------- -----------
Total adjustments (1,079,551) (1,182,080)
----------- -----------
Net cash used in operating activities (1,058,101) (1,023,310)
----------- -----------
Cash flows from investing activities:
Collections of notes receivable 216,666 216,666
Advances to related parties 9,787 (115,389)
Investments in Partnerships and ventures (53,269) (369,147)
Acquisition of property and equipment (16,250) (226,723)
----------- -----------
Net cash provided by (used in) investing activities 156,934 (494,593)
----------- -----------
Cash flows from financing activities:
Repayments of long-term debt, including revolving
credit agreements (6,046,568) (379,765)
Borrowings from long-term debt, including revolving
credit agreements 6,903,528 740,000
----------- -----------
Net cash provided by financing activities 856,960 360,235
----------- -----------
Net decrease in cash (44,207) (1,157,668)
----------- -----------
Cash and cash equivalents at beginning of period 865,265 1,366,141
----------- -----------
Cash and cash equivalents at end of period $ 821,058 $ 208,473
=========== ===========
Supplemental disclosures:
Interest paid $ 134,593 $ 44,752
Income taxes paid 228,000 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 six months ended November
30, 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
-------------
Certain wholly-owned subsidiaries of the Company are jointly and
severally liable (as general partners) for the obligations and
liabilities of Palm Beach Radiotherapy Associates, 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 $876,500.
The Company is involved in three legal proceedings arising from a
dispute betwen 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
Partnerhsip'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 (c) 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 six-month period ended November 30, 1995, to conform to the
presentation in the financial statements for the six-month period ended
November 30, 1996.
5
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE SIX MONTHS ENDED NOVEMBER
30, 1996
1. Results Of Operations
---------------------
Comparison of the Six Months Ended November 30, 1996, to the Six Months
----------------------------------------------------- -----------------
Ended November 30, 1995
-----------------------
Revenues for the six-month period ended November 30, 1996, increased
$2,963,000 over the six-month period ended November 30, 1995, from $5,574,000 in
1995 to $8,537,000 1996. This increase was principally attributable to an
increase in revenues of Med Tech.
For the six months ended November 30, 1996 and 1995, revenues were
derived from the following payor sources:
<TABLE>
<CAPTION>
1996 1995
Amount % Amount %
---------- ----- ---------- -----
<S> <C> <C> <C> <C>
Medicare $7,321,000 85.8 $3,987,000 71.6
Commercial Insurance 359,000 4.2 483,000 8.6
Other (primarily Medicaid) 110,000 1.3 327,000 5.8
---------- ----- ---------- -----
Net patient service revenue 7,790,000 91.3 4,797,000 86.0
Billing/Collection and Management Fees 551,000 6.4 589,000 10.7
Other Miscellaneous Revenues 196,000 2.3 188,000 3.3
---------- ----- ---------- -----
$8,537,000 100.0 $5,574,000 100.0
========== ===== ========== =====
</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 $2,993,000 from $4,797,000 in 1995 to $7,790,000 in 1996.
Revenues from the home health division increased $3,019,000 from
$4,689,000 in 1995 to $7,708,000 in 1996. The increase in revenues is
primarily the result of an increase in Medicare home health visits from
45,828 in the first six months of 1995 to 79,342 in the first six months
of 1996. Revenues from Leader decreased $304,000 between 1995 and 1996
as a result of lower patient volume. 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 $30,000
from $777,000 in 1995 to $747,000 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.
6
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS FOR THE SIX MONTHS ENDED NOVEMBER
30, 1996
1. Results Of Operations (continued)
---------------------
Operating expenses for the six-month period ended November 30, 1996,
increased $3,253,000, over the six-month period ended November 30, 1995, from
$5,258,000 in 1995 to $8,511,000 in 1996. This increase was primarily
attributable to the following:
Professional care of patients expense increased $3,026,000 from
$4,320,000 in 1995 to $7,346,000 in 1996 primarily as a result of the
increase in revenues of Med Tech as discussed above. Of the total
increase, $2,726,000 relates to increases in direct expenses of Med Tech
as a result of the increase in Med Tech's revenues and $300,000 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. $800,000 and $500,000 of such expenses are included
in professional care of patients expense for the six-month period ended
November 30, 1996 and 1995, respectively.
General and administrative expenses increased $190,000 from $474,000 in
1995 to $664,000 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 $110,000 from $238,000 in
1995 to $128,000 in 1996. This decrease was the result of the decrease
in revenues from Leader as discussed above.
2. Liquidity and Capital Resources
-------------------------------
As of November 30, 1996, the Company had working capital, including cash
of $4,484,000, 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
$1,102,000.
During the six months ended November 30, 1996, cash decreased $44,000.
Cash used in operating activities amounted to $1,058,000 in 1996, compared to
$1,023,000 in 1995. The principal components resulting in a use of cash in
operating activities in 1996, were an increase in accounts receivable of
$1,102,000; and the payment of income taxes of $228,000. The increase in
accounts receivable is the result of the significant increase in revenues from
Med Tech including receivables of approximately $395,000 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 4.49
to 1 for 1996 and 3.33 to 1 for 1995. Cash provided by investing activities was
$157,000 in 1996, compared to cash used in investing activities of $495,000 in
1995 and was primarily the result of collections under notes receivable. Cash
provided by financing activities was $857,000 in 1996, compared to $360,000 in
1995 and was the result of the net borrowings of the Company under the revolving
credit facility during the six-month period ended November 30, 1996. There was
no availability under this facility at November 30, 1996.
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 SIX MONTHS ENDED NOVEMBER
30, 1996
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. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
a) The Annual Meeting of Shareholders of the Company was held on
November 14, 1996.
b) Ullrich Klamm, Ph.D. and John C. Mull, M.D were reelected as
directors at the Company's annual meeting. Jack W. Buechner,
John P. Rosenthal and Salvatore P. Russo, Ph.D. continue as
board members.
c) The following information is provided with respect to each
matter voted upon at the Annual Meeting of Shareholders:
(i) Election of Directors
<TABLE>
<CAPTION>
Votes Cast For Votes Withheld Abstentions
-------------- -------------- -----------
<S> <C> <C> <C>
Ullrich Klamm, Ph. 2,516,805 31,730
John C. Mull, M.D. 2,514,590 33,945
(ii) Reappointment of Coopers 2,516,458 20,390 11,687
& Lybrand as the Company's
independent auditors for the
fiscal year ending May 31,
1997
</TABLE>
d) Not applicable
Item 7. EXHIBITS AND REPORTS ON FORM 8-K
There were no reports on Form 8-K filed during the six months ended
November 30, 1996.
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.
January 13, 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 SIX MONTH PERIOD
ENDED NOVEMBER 30, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-START> JUN-01-1996
<PERIOD-END> NOV-30-1996
<CASH> 821
<SECURITIES> 0
<RECEIVABLES> 4,709
<ALLOWANCES> 87
<INVENTORY> 0
<CURRENT-ASSETS> 5,769
<PP&E> 1,724
<DEPRECIATION> 743
<TOTAL-ASSETS> 10,133
<CURRENT-LIABILITIES> 1,285
<BONDS> 0
0
0
<COMMON> 10
<OTHER-SE> 6,598
<TOTAL-LIABILITY-AND-EQUITY> 10,133
<SALES> 8,537
<TOTAL-REVENUES> 8,537
<CGS> 128
<TOTAL-COSTS> 8,511
<OTHER-EXPENSES> (4)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 135
<INCOME-PRETAX> 21
<INCOME-TAX> 0
<INCOME-CONTINUING> 21
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
