<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 the quarterly period ended November 30, 1998
[ ] Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from to .
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Commission file number 0-16964
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CANCER TREATMENT HOLDINGS, INC.
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(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.)
c/o Carol O'Donnell, Esq., 540 Joan Drive, Fairfield, CT 06430-2207
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(Address of principal executive offices)
(212) 221-1340
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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 [ ] .
The number of shares outstanding of each of the issuer's classes of
common equity, as of January 13, 1998 was 3,336,476.
---------
Transitional Small Business Disclosure Format
(Check One): Yes [ ] No [ X ]
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CANCER TREATMENT HOLDINGS, INC.
INDEX
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Consolidated Balance Sheets as of November 30,
1998 and May 31, 1998 2
Consolidated Statements of Discontinued Operations
for the Six Months Ended November 30, 1998 and 1997 3
Consolidated Statements of Cash Flows for the
Six Months Ended November 30, 1998 and 1997 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Discontinued
Operations 6
PART II. OTHER INFORMATION
Item 5. Other Information 8
Item 6. Exhibits and Reports on Form 8-K 8
SIGNATURES 8
1
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CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
November May 31,
30, 1998 1998
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ASSETS (Unaudited)
<S> <C> <C>
Cash and cash equivalents $2,195,537 $ 150,516
Receivable from Greenstar Holdings, Inc. - 2,160,000
Prepaid amounts 17,568 -
Assets held for sale 27,568 36,104
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Total current assets 2,240,673 2,346,620
Property and equipment, net 188,063 190,290
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Total assets $2,428,736 $2,536,910
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 91,290 $ 260,000
Payroll and income taxes payable 1,530 -
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Total liabilities 92,820 260,000
========== ==========
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
Accumulated deficit (2,557,595) (2,616,601)
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2,615,997 2,556,991
Treasury stock: 159,284 shares, at cost (280,081) (280,081)
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Total stockholders' equity 2,335,916 2,276,910
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Total liabilities and stockholders' equity $2,428,736 $2,536,910
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</TABLE>
See accompanying notes to consolidated financial statements.
2
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CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF DISCONTINUED OPERATIONS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
November 30, November 30,
1998 1997
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<S> <C> <C>
Net patient service revenues $ - $ 8,002,109
Other revenues 127,784 847,786
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Total revenues 127,784 8,849,895
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Operating expenses:
Direct cost of patient services - 3,633,873
(primarily payroll and contracted medical services)
General and administrative 290,229 5,089,938
Depreciation and amortization 2,226 210,415
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Total operating expenses 292,455 8,934,226
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Operating loss (164,671) (84,331)
Interest expense - 152,525
Equity in loss of partnerships (26,323) (231,531)
Gain on sale of assets (250,000) -
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Income (loss) before taxes 59,006 (468,387)
Provision for income taxes - -
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Net income (loss) $ 59,006 $ (468,387)
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Per share data:
Net income (loss) per share $ 0.02 $ (0.14)
=========== ===========
Weighted average number of shares outstanding 3,336,476 3,336,476
=========== ===========
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED NOVEMBER 30, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
November 30, November 30,
1998 1997
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<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 59,006 $ (468,387)
Adjustments to reconcile net income (loss) to cash
used in operating activities:
Accretion of discount on notes receivable - (15,030)
Depreciation and amortization 2,226 210,415
Gain on sale of assets (250,000) -
Equity in loss of unconsolidated partnerships 26,323 231,531
Change in operating assets and liabilities:
Accounts receivable - (860,986)
Other current and non-current assets (17,567) (43,947)
Accounts payable, accrued payroll and related benefits (167,180) 317,687
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Net cash used by operating entities (347,192) (628,717)
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Cash flows from investing activities:
Collection of notes receivable - 470,034
Cash received from sale of business 2,410,000 -
Investments in and advances to partnerships and ventures (17,787) (407,856)
Acquisition of property and equipment - (38,553)
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Net cash provided by investing activities 2,392,213 23,625
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Cash flows from financing activities:
Repayments of long-term debt, including revolving
credit agreements - (3,862,077)
Borrowings for long-term debt, including revolving
credit agreements - 3,774,717
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Net cash used in financing activities - (87,360)
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Net increase (decrease) in cash and cash equivalents 2,045,021 (692,452)
Cash and cash equivalents at beginning of year 150,516 1,324,745
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Cash and cash equivalents at end of period $ 2,195,537 $ 632,293
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Supplemental disclosures:
Interest paid $ - $ 151,669
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Taxes paid $ - $ -
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</TABLE>
See accompanying notes to 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
discontinued 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, 1998. 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
discontinued operations for such interim periods presented. The
results of operations for the six months ended November 30, 1998 are
not necessarily indicative of the results which may be expected for
the entire fiscal year. The May 31, 1998 consolidated balance sheet
was derived from audited financial statements but does not include
all disclosures required by generally accepted accounting principles.
2. Contingencies
------------
On May 20, 1998, the Company entered into a purchase agreement (the
"Agreement") with Greenstar Holdings, Inc. and Homecare Holdings,
Inc. (together, the "Buyers") to sell most of the Company's assets
and liabilities to the Buyer or its assignee. Under the Agreement,
the Company has a contingent liability to the Buyer for a period of
one year from May 31, 1998 (the date of closing) for certain
representations, warranties and indemnities and covenants, as defined
in the Agreement. The Company's aggregate liability for the period
from the date of closing until May 31, 1999 shall be an amount not to
exceed $1,500,000. In connection with this contingent liability, the
Company is required to retain assets in the amount of $1.5 million,
of which $375,000 shall be in cash and cash equivalents until
May 31, 1999.
As a principal of Logan Radiation Therapy, Inc. ("LRT"), a partner of
the Southern West Virginia Cancer Treatment Center ("Logan"), the
Company has guaranteed certain Copelco Capital, Inc. ("Copelco")
lease liabilities of Logan amounting to $561,195 as of November 30,
1998. Logan General Hospital, Inc. (the "Hospital"), LRT's partner in
the Logan venture, has sought relief under
5
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2. Contingencies (continued):
-------------------------
Chapter 11 of the U.S. Bankruptcy laws and has ceased making required
capital contributions to Logan. Accordingly, Logan's lease payments
to Copelco are in default, but Copelco has waived Logan's obligations
to make all lease payments for an indefinite period of time.
The Company was involved in several legal proceedings arising from
disputes between the Company, its former subsidiaries and other
parties. Most of the legal proceedings have been settled. In the
opinion of management, the amount of ultimate liability with respect
to the remaining action cannot be determined at this time.
3. Sale of Martinsburg Property
----------------------------
Pursuant to the Agreement dated May 20, 1998 between the Company and
Greenstar Holdings, Inc., the Company agreed to sell, subject to
regulatory approval, its ownership interests in two radiation therapy
centers under development in Martinsburg and Logan, West Virginia for
an aggregate purchase price of $500,000, or $250,000 per center.
Greenstar Holdings, Inc. acquired the Martinsburg center on November
20, 1998. During the second fiscal quarter, Greenstar Holdings, Inc.
was released of its obligation to buy and the Company was released of
its obligation to sell the Logan center. The Company is continuing
its efforts to sell its interest in the Logan center.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL
CONDITION AND RESULTS OF DISCONTINUED OPERATIONS
1. Results of Operations
---------------------
As a result of the sale of most of the Company's assets and
liabilities on May 29, 1998 and November 20, 1998, the Company consists of a
corporate shell with four assets:
1. Approximately $2 million in cash.
2. A 50.5% interest in Logan Radiation Therapy, Inc. ("LRT"), which
has a 51% partnership interest in a radiation therapy center
under development located in Logan, West Virginia.
3. A subsidiary called CTI Management Corp. formed to provide
billing and management services.
4. A small office condominium located in Hollywood, Florida. The
property is currently rented and it is listed for sale.
6
<PAGE>
The Logan General Hospital, Inc. (the "Hospital"), LRT's partner in
the Logan venture, has sought relief under Chapter 11 of the U.S. Bankruptcy
laws. As a result of the bankruptcy, the Hospital is required to reaffirm its
contractual obligations, in which event the partners will proceed with the
development of Logan. If the Hospital does not reaffirm its obligations, LRT
intends to exercise its option to acquire the Hospital's interest in the
venture, which LRT may do on favorable terms. In either event, the Company
will continue its attempts to sell its interest in the Logan, West Virginia
property.
The Company's Board of Directors intends to consider proposals
presented to the Company regarding the proceeds received pursuant to the
Agreement. Such proposals may include future operations, liquidation and
distribution of such amounts received, subject to the contingent liability
under the Agreement described below, and other proposals that may come before
it regarding the use of proceeds of the sale.
The Company owns a commercial condominium in Hollywood, Florida. The
condominium is rented to a third party on a month to month basis, and the
Company currently generates gross rental income in the amount of $3,800 per
month. The Company may sell the condominium, which it values to be worth
approximately $200,000 to $300,000.
The Company, through a wholly-owned subsidiary, provides consulting
services rendered by its President for which it expects to receive $150,000
annually in fees over the subsequent seven years.
Liquidity and Capital Resources
- -------------------------------
As of November 30, 1998, the Company had cash of $2,195,537. The
Company's cash has been invested in the Nations Prime Money Market Fund
maintained at Nations Bank.
In order to protect the buyers of our business operations against
unknown or undisclosed liabilities, the Company agreed to collateralize its
representations and warranties by holding back (i.e. not distributing to
shareholders) $1.5 million of assets through May 31, 1999 (of which $375,000
shall be in cash and cash equivalents). If no material claims are raised, the
funds will be released from this contractual encumbrance on May 31, 1999.
The Company does not expect year 2000 issues to materially affect the
Company's business, results of operations or financial condition. None of the
Company's operations, which are minimal at this time, require the use of
computers. The Company's service providers have given assurances to the
Company that year 2000 issues will not materially affect the services provided
by them to the Company.
7
<PAGE>
Except for those items discussed above and in the Company's latest
Form 10-KSB for the year ended May 31, 1998, 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,
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.
PART II. OTHER INFORMATION
Item 5. OTHER INFORMATION
During November 1998, Mercury Capital Holdings, LLC, a Delaware
limited liability company of which Lucero Capital Holdings, LLC and Holding
Capital Management. LLC are members, acquired 1,649,958 shares of the
Company's common stock in open market transactions. Ullrich Klamm, Ph.D.,
Chairman, President and CEO of the Company, controls Lucero Capital Holdings,
LLC.
During November 1998, John P. Rosenthal and John Mull, M.D. resigned
as directors of the Company.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: 27. Financial Data Schedule (appears on page 9)
(b) No reports on Form 8-K were filed by the Company during the three
months ended November 30, 1998.
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.
January 13, 1999 By: /s/ Ullrich Klamm, Ph.D.
------------------------
Ullrich Klamm, Ph.D.,
Chairman and Chief Executive Officer
By:/s/ Carol Befanis O'Donnell
---------------------------
Carol Befanis O'Donnell
Secretary
8
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-END> NOV-30-1998
<CASH> 2,195,537
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,240,673
<PP&E> 188,063
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,428,736
<CURRENT-LIABILITIES> 92,820
<BONDS> 0
0
0
<COMMON> 10,487
<OTHER-SE> 2,335,916
<TOTAL-LIABILITY-AND-EQUITY> 2,428,736
<SALES> 0
<TOTAL-REVENUES> 127,784
<CGS> 0
<TOTAL-COSTS> 292,455
<OTHER-EXPENSES> 26,323
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 59,006
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 59,006
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
