<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
|X| ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934. For the fiscal year ended MAY 31, 1999.
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 . For the transition period
from.................to................
Commission File No. 1-11062
-------
CANCER TREATMENT HOLDINGS, INC.
-------------------------------
(Name of small business issuer in its charter)
Nevada 87-0410907
--------------- -------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
c/o Carol B. O'Donnell, Esq., 540 Joan Drive, Fairfield, CT 06430-2207
----------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: 212-221-1340
------------
Securities registered pursuant to
Section 12(b) of the Exchange Act: Common Stock, $.003 Par Value
-----------------------------
(Title of Each Class)
-------------------------------------------
(Name of Each Exchange on which Registered)
Securities Registered pursuant to Section 12(g) of the Exchange Act: None
----
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 [ ]
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to this
Form 10-KSB. [X]
Issuer's revenues for the fiscal year ended May 31, 1999 were
$277,533.
Trading of the Issuer's stock was suspended by AMEX .ECM in the fourth
quarter of fiscal 1998 and the Issuer's stock was delisted in the
first quarter of fiscal 1999. The aggregate market value of the voting
stock held by non-affiliates computed by reference to the average bid
and asked price of such stock on August 20, 1999, was $640,497. As of
such date, the average high and low sales price was $.38.
The number of shares outstanding of the Issuer's common stock, par
value $.003 per share, as of August 20, 1999, was 3,336,476.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
Documents incorporated by reference:
Certain exhibits listed in Part III, Item 14 of this Annual Report on
Form 10-KSB are incorporated by reference from the Registrant's
Registration Statement on Form S-18, its Annual Reports on Form 10-K
or 10-KSB for the 1992, 1995 and 1997 fiscal years, its Amendment No.
1 to Form S-3, and its Current Report on Form 8-K dated May 29, 1998.
<PAGE>
CANCER TREATMENT HOLDINGS, INC.
Form 10-KSB ANNUAL REPORT - 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
PART I
Item 1. Description of Business 3
Item 2. Description of Property 4
Item 3. Legal Proceedings 4
Item 4. Submission of Matters to a Vote of Security Holders 4
PART II
Item 5. Market for Common Equity and Related Stockholder Matters 4
Item 6. Management's Discussion and Analysis of Plan of Operation 5
Item 7. Financial Statements 6
Item 8. Changes In and Disagreements with Accountants on Accounting
and Financial Disclosure 6
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act 7
Item 10. Executive Compensation 8
Item 11. Security Ownership of Certain Beneficial Owners and Management 9
Item 12. Certain Relationships and Related Transactions 10
Item 13. Exhibits and Reports on Form 8-K 10
SIGNATURES
</TABLE>
2
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Business Development
Until May 31, 1998, Cancer Treatment Holdings, Inc. ("CTH"),
a Nevada corporation, through its subsidiaries (collectively, the
"Company"), was primarily engaged in (i) providing home health, home
infusion and nursing services, (ii) establishing and administering
businesses for the ambulatory treatment of cancer using a variety of
modalities, including radiation therapy and bone marrow
transplantation, and (iii) providing management, consulting and
billing and collection services for free standing radiation therapy
centers (the "Centers").
On May 31, 1998, CTH sold most of its operating subsidiaries
and related assets, including cash, to Greenstar Holdings, Inc.
("Greenstar") and Homecare Holdings, Inc. ("Homecare"). Homecare
purchased the home health operating companies, and Greenstar purchased
most of the CTH operating subsidiaries. The adjusted purchase price
paid to CTH was $2,310,000. The Buyers also assumed certain
liabilities and guarantees of CTH, including the payment of $500,000
owed by CTH to Ullrich Klamm, Ph.D., the Company's Chief Executive
Officer.
Business of the Issuer
As a result of the sale of most of the Company's assets and
liabilities in fiscal 1998, the Company consists of a corporate shell
with four assets: (I) approximately $2 million in cash, (ii) an
interest in a radiation therapy center under development located in
Logan, West Virginia, (iii) a subsidiary (CTI Management Corp.)
through which the Company's president provides management services,
and (iv) an office condominium located in Hollywood, Florida which is
currently rented and listed for sale. The business operations of CTH
have been limited to maintaining its properties and to considering
proposals presented to CTH regarding the use of the funds for items
that may include future operations, liquidation and distribution of
assets, and other proposals that may come before it regarding the use
of the proceeds of the sale.
Logan, West Virginia Property
CTI of West Virginia, Inc. is a wholly-owned subsidiary of
CTH. CTI of West Virginia, Inc. owns 51% of the equity of Logan
Radiation Therapy, Inc., a Delaware corporation ("LRT") . The other
49% is owned by Hospital Diagnostic Equipment Corp., in which Dr.
Klamm has an equity interest. LRT is a 50.5% partner with the Logan
Medical Foundation (a not-for-profit hospital; the "Hospital"). The
partners have been attempting to establish a radiation therapy center
for the treatment of cancer in Logan, West Virginia over the past
several years.
The Company believes that the center may become operational,
or that its interest may be sold, during fiscal 2000.
The Hospital has filed for bankruptcy pursuant to Chapter 11
of the U.S. Bankruptcy Laws, and this has limited the Hospital's
ability to make capital contributions to the partnership. As part of
the Hospital's reorganization, the Company believes that the Hospital
will be required to either (i) affirm its interest in the partnership
and bring current its partnership obligations or (ii) abandon its
partnership interest.
The establishment and operation of the Company's business is
subject to federal and state laws. These laws may include statutes and
regulations governing state Certificate of Need ("CON") Programs, the
licensure of health care facilities, services and equipment, and
physician investments and compensation arrangements in health care
entities to which they refer patients.
3
<PAGE>
CON programs most often control and regulate the construction
of health care facilities, the acquisition of health care facilities
and the purchasing of medical equipment. Although such programs vary
from state to state, generally an entity must obtain a CON before
constructing a health care facility, acquiring major medial equipment
or providing certain services. Normally, a grant of a CON is based on
various criteria relating to need, giving consideration to the extent
to which facilities, equipment or services are available to a
specified geographical area and the population of such area. The
Company has been granted a CON for the anticipated center in Logan.
Approval of the transfer of the CON to any buyer of the West Virginia
property will be required .
CTH's monthly costs attributable to the property approximate
$15,000. CTH believes that it will be able to sell its interest in the
project to another buyer or buyers.
Miscellaneous
The only remaining employees of CTH include Ullrich Klamm,
Ph.D., President, and Carol O'Donnell, Secretary. CTH's principal
office is maintained at c/o Carol B. O'Donnell, Esq., 540 Joan Drive,
Fairfield, CT 06320-2207, and the phone number of the Company is (212)
221-1340.
ITEM 2. DESCRIPTION OF PROPERTY.
CTH's property consists of cash, which is maintained on
deposit or invested at Nations Bank, and a 3,500 square foot
commercial condominium unit located in Hollywood, Florida. The
commercial condominium is owned free and clear of any mortgages and is
leased to a third party on a month to month basis.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted during the fourth quarter of the
fiscal year ended May 31, 1999 to a vote of security holders of the
Company through the solicitation of proxies or otherwise.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Common Stock
The Company's Common Stock commenced trading on the American
Stock Exchange Emerging Company Marketplace ("AMEX.ECM") on March 18,
1992, under the symbol "CTH.EC," and ceased trading on the Exchange
during the fourth quarter of fiscal 1998. Since October 1998, the
Company's shares have been traded in the Over-the-Counter Market
Bulletin Board. The quotations set forth below do not necessarily
represent actual transactions and do not reflect retail mark ups, mark
downs or commissions.
4
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The following table sets forth for the fiscal periods
indicated the high and low reported sales price for the Company's
Common Stock on the AMEX.ECM System (through May 31, 1998) and the
high and low bid quotes on the OTC Bulletin Board (following May 31,
1998).
Fiscal Years Ended May 31,
1999 1998
-------------- --------------
- - --------------------------------------------------------------------------------
Quarter High Low High Low
- - --------------------------------------------------------------------------------
1st Quarter n/a N/a $1.56 $1.56
- - --------------------------------------------------------------------------------
2nd Quarter $ .40 $ .00 $1.25 $1.13
- - --------------------------------------------------------------------------------
3rd Quarter $ .30 $ .17 $ .94 $ .81
- - --------------------------------------------------------------------------------
4th Quarter $ .40 $ .30 $ .44 $ .38
- - --------------------------------------------------------------------------------
As of August 17, 1999, the Company's Common Stock was held by
192 shareholders of record. In addition, the Company believes that
there are an additional 1,000 holders (approximately) of its Common
Stock who hold the shares in "street name."
In fiscal 1999, the Company paid no dividends on its Common
Stock nor does it anticipate paying cash dividends on its Common Stock
in the foreseeable future. In the event that the Company changes this
policy, future payment of dividends on its Common Stock would depend,
among other things, upon the operations and financial condition of the
Company.
The Company has not sold any of its securities within the
past three years.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
The following discussion and analysis provides information
which the Company's management believes is relevant to an assessment
and understanding of the Company's results of operations and financial
condition. This discussion should be read in conjunction with the
consolidated financial statements and notes thereto appearing
elsewhere herein.
On May 20, 1998, the Company entered into a purchase
agreement (the "Agreement") with Greenstar Holdings, Inc. (the
"Buyer") to sell most of the assets and liabilities of the Company to
the Buyer or its assignee. The Company sold most of the assets and
liabilities of the Company to the Buyer, for which it received
$2,310,000 in fiscal 1998. The Buyer's right to assert claims against
the Company under the Agreement expired on May 31, 1999. Since the
sale of most of the Company's assets and liabilities, each of the
Company's lawsuits which had been pending prior to fiscal 1999 were
settled or resolved in favor of the Company. The Company incurred
approximately $105,000 in connection with the divestiture of its
assets and the settlement or defense of its lawsuits during fiscal
1999.
The Company recorded a gain in its second quarter of fiscal
1999 of $250,000 related to the sale of Deferred Assets (as defined in
the Agreement). The Company reported a net operating loss carryforward
of $89,000 in 1999, compared to the $3,600,000 net operating loss
carryforward reported in fiscal 1998. The extent to which the
$3,600,000 net operating loss carryforward is available to the Company
is being determined by the Company's tax accountants.
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.
5
<PAGE>
The Company owns a 3,500 square foot commercial condominium
in Hollywood, Florida. The condominium is rented to a third party on a
month to month basis, and the Company currently generates net rental
income in the amount of $3,800 per month. The Company currently has
the condominium listed for sale at $325,000.
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 six years.
Liquidity and Capital Resources
The cash received by the Company associated with consummation
of the transaction contemplated by the Agreement and the Company's
rental and consulting fee income has been invested in the Nations
Prime Money Market maintained at Nations Bank.
As a partner, the Company is jointly and severally liable for
the liabilities concerning the actions of the Logan partnership and
has guaranteed certain liabilities of these partnerships amounting to
$595,000 at May 31, 1999. In this connection, the Company could be
held responsible for its shares of liabilities arising from the
actions of such partnership.
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.
Except for those items discussed above, 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.
ITEM 7. FINANCIAL STATEMENTS
The financial statements required by Item 7 are included in
this report beginning on page F-1.
PART II
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
On July 15, 1999, PricewaterhouseCoopers LLP was
dismissed as the Company's principal independent accountant.
The firm's report on the financial statements for either of
the past two years did not contain an adverse opinion or
disclaimer of opinion, nor was it modified as to uncertainty,
audit scope, or accounting principles. The decision to change
accountants was based on costs, and was approved by the Board
of Directors. There were no disagreements with the former
accountant on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope
or procedure.
DFSH, CPA P.C. is the Company's new accountant effective July
15, 1999.
6
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PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
The names of the directors, their principal occupations, the
years in which they became directors and the years in which their
terms expire are set forth below.
<TABLE>
<CAPTION>
Director Term
Name Age Principal Occupation Since Expires
- - ---- --- -------------------- ----- -------
<S> <C> <C> <C> <C>
Jack W. Buechner 59 Attorney at the Washington, 1993 1998
D.C. law firm of Manatt Phelps
Phillips. Previously, general
counsel to the governmental
consulting firm of Linton,
Mields, Reisler and Cottone in
Washington, D.C., a partner in
The Hawthorn Group, L.L.C. in
Arlington, Virginia, and
President of the International
Republican Institute, a founda-
tion that promotes democracy
in foreign countries. From 1986
to 1990, a United States
Representative from the
State of Missouri.
Ullrich Klamm, Ph.D. 60 Chairman of the Board, Chief 1993 1999
Executive Officer, President and
a Director. Since 1987,
President and a Director of
Hospital Diagnostic Equipment
Corp. ("HDEC"), a private
company that owns and
operates high technology
medical diagnostic equipment,
primarily in rural areas.
Salvatore P. Russo, 69 Health care consultant in 1994 2000
Ph.D. Boston, MA since 1993. From
1974 until 1993, Administrator
of the Shriners Burns
Institute in Boston, MA,
specializing in children with
severe burns.
Executive Officers of the Company and Company Subsidiary Who Are Not Directors
Carol B. O'Donnell 42 Secretary of the Company since November 1994. Ms.
O'Donnell has been self-employed as an attorney
specializing in the practice of corporate and securities
law for over ten years.
</TABLE>
7
<PAGE>
Although the directorship of Mr. Buechner was to have expired
in 1998, no annual meeting of stockholders was held for the election
of directors since November 1997. Accordingly, Mr. Buechner still
serves as a director.
During the fiscal year ended May 31, 1999, the Board of
Directors held one formal Board meeting. Each Director of the Company
attended more than 75 percent of the meetings of the Board of
Directors held during the period when such individual was a Director.
The Company does not have any standing nominating committee
of the Board of Directors.
The Company has an audit committee of the Board of Directors
of which Mr. Buechner is a member. The audit committee performs
various functions involving the supervision of the Company's financial
affairs, including reviewing the Company's annual audits and
overseeing its internal control procedures. During the fiscal year
ended May 31, 1999, no meetings of the audit committee were held.
The Company has a compensation committee of the Board of
Directors of which Dr. Russo is a member. During the fiscal year ended
May 31, 1999, no meetings of the compensation committee were held.
The Company also has an executive committee of the Board of
Directors of which Mr. Buechner and Dr. Klamm are currently members.
The executive committee is empowered to act on behalf of the Board
between Board meetings as well as serve as the compensation committee.
During the fiscal year ended May 31, 1999, no meetings of the
executive committee were held.
To the best of the Company's knowledge, during the fiscal
year ended May 31, 1999 or prior years, no person who was a director,
officer, or beneficial owner of more than 10% of any class of equity
securities of the registrant registered pursuant to Section 12, failed
to file on a timely basis reports required by Section 16(a) of the
Securities Exchange Act of 1934, as amended.
ITEM 10. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth information about the
compensation paid or accrued by the Company during the fiscal years
ended May 31, 1999, 1998, and 1997 to the Company's Chief Executive
Officer and to each of the other most highly compensated Executive
Officers of the Company whose aggregate compensation exceeded $100,000
in the fiscal year ended May 31, 1999.
Summary Compensation Table
--------------------------
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
------------------------------ ----------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Restricted Securities
Annual Stock Underlying LTIP All Other
Name Year Salary Bonus Compensation Award(s) Option/SARs Payouts Comp.
($) ($) ($) (#) (#) ($) ($)
--- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ullrich Klamm, Ph.D. 1999 130,000 - 26,600 - 500,000 - -
Chairman of the Board, 1998 129,153 - 26,600 - 500,000 - -
Chief Executive Officer, 1997 115,250 - 26,400 - 416,667 - -
President
</TABLE>
8
<PAGE>
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year End
Option Values
The following table sets forth information concerning the
value of unexercised stock options at the end of the 1999 fiscal year
for the persons named in the Summary Compensation Table.
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Number of Securities
Underlying Unexer- Value of Unexercised
Shares Value cised Options at In-The-Money Options at
Acquired Realized Fiscal Year End Fiscal Year End ($)
Name on Exercise(#) ($) Exercisable/Unexercisable Exercisable/Unexercisable
- - ---- -------------- --- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Ullrich
Klamm, Ph.D. 0 0 500,000/0 0/0
</TABLE>
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
Pursuant to an employment contract with the Company, Dr.
Klamm receives base compensation of $130,000 and may be terminated "at
will." Carol B. O'Donnell also serves as secretary of the Company on
an "at will" basis.
Compensation of Directors
All Directors, except Dr. Klamm, are paid directors' fees of
$500 per meeting attended and are reimbursed for all out-of-pocket
expenses incurred in connection with their duties as directors.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth, as of August 1, 1999, the
number of shares of the Company's Common Stock held of record or
beneficially by (i) each person who held of record or was known by the
Company to be the beneficial owner of more than 5 percent of the
Company's outstanding Common Stock; (ii) each of the Company's
directors; (iii) each of the Company's named executive officers,
directors and nominees for director and (iv) all executive officers
and directors of the Company as a group.
Number of Shares Percent of
Name of of Common Stock Shares
Beneficial Owner Beneficially Owned(1) Outstanding (2)
- - ---------------- --------------------- ---------------
Ullrich Klamm, Ph.D. 2,149,958(3) 56.0%
Jack W. Buechner 5,000(4) *
Salvatore P. Russo, Ph.D. 11,000(5) *
Mercury Capital Holdings, LLC 1,649,958(6) 49.5%
All officers and directors
as a group (4 persons) 2,165,958(7) 56.2%
* Represents less than 1% of the outstanding Company Common Stock.
9
<PAGE>
Footnotes from prior page
(1) A person is deemed to be the beneficial owner of securities
that can be acquired by such persons within 60 days from
August 1, 1999, upon the exercise of options or warrants.
Except as otherwise indicated, the nature of the beneficial
ownership is record and direct.
(2) Each beneficial owner's percentage ownership is determined by
assuming that options or warrants held by such person (but
not those held by any other persons) and which may be
exercised within 60 days from August 1, 1999 have been
exercised.
(3) Consists of 500,000 shares subject to presently exercisable
options, and 1,649,958 shares owned by Mercury Capital
Holdings, LLC, of which Lucero Capital Holdings, LLC
("Lucero") is a Member. Ullrich Klamm, Ph.D. beneficially
owns Lucero.
(4) Includes 5,000 shares subject to presently exercisable
options.
(5) Includes 10,000 shares subject to presently exercisable
options.
(6) Mercury Capital Holdings, LLC is a limited liability company
of which Lucero Capital Holdings, LLC and Holding Capital,
LLC are members. Lucero is beneificially owned by Ullrich
Klamm.
(7) Includes shares issuable upon exercise of presently
exercisable warrants and options, as described in the Notes
above. No securities are beneficially owned by Carol Befanis
O'Donnell, Secretary of the Company.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Financial Statements and Exhibits
Financial Statements
The consolidated financial statements of the Company and
its subsidiaries filed as a part of this Annual Report on
Form 10-KSB are listed in Item 7 of this Annual Report on
Form 10-KSB, which listing is hereby incorporated herein
by reference.
Exhibits
Exhibit No. Description of Items
----------- --------------------
3.1 Articles of Incorporation of the Company
(as amended) (1)
3.2 By-Laws (2)
10.1 Employment contract between CTH and
Ullrich Klamm, Ph.D (3)
10.2 Consulting Agreement between Oncology
Services Corporation and its affiliates,
and Cancer Treatment Holding, Inc.,
dated January 1, 1995 (4)
10.3 Loan and Security Agreement between Med
Tech Funding Corporation and
COPELCO/American Healthfund, Inc. (5)
10.4 Purchase Agreement among Greenstar
Holdings, Inc., Cancer Treatment
Holdings, Inc. and Advanced Oncology
Services, Inc. dated May 1998. (6)
10
<PAGE>
21.1 Subsidiaries of the Registrant:
CTI Management Corp., a Delaware
corporation
CTI of West Virginia, Inc., a
Florida corporation
27.1 Financial Data Schedule
(1) Incorporated by reference to Form S-18
as filed with the Securities and
Exchange Commission on April 14, 1988,
File No. 33-21269-A.
(2) Incorporated by reference to the
Registrant's Form 10-K for the fiscal
year ended May 31, 1992, as filed with
the Securities and Exchange Commission
on August 28, 1992.
(3) Incorporated by reference to the
Registrant's Form 10-K for the fiscal
year ended May 31, 1995, as filed with
the Securities and Exchange Commission
on August 25, 1995.
(4) Incorporated by reference to the
Registrant's Amendment No. 1 to Form S-3
as filed with the Securities and
Exchange Commission on February 13,
1995.
(5) Incorporated by reference to the
Registrant's Form10-KSB for the fiscal
year ended May 31, 1996, as filed with
the Securities and Exchange Commission
on August 28,1996.
(6) Incorporated by reference to the
Registrant's Form 8-K dated May 29,
1998, as filed with the Securities and
Exchange Commission on June 11, 1998.
(b) Reports on Form 8-K filed during the three months ended
May 31, 1999.
There were no reports on Form 8-K filed during the three
months ended May 31, 1999.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange
Act, the Registrant caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: August 27, 1999 CANCER TREATMENT HOLDINGS, INC.
By: /s/ Ullrich Klamm, Ph.d
---------------------------
Ullrich Klamm, Ph.D.
Chairman and Chief Executive
Officer
11
<PAGE>
SIGNATURES
In accordance with the Exchange Act, this report has been signed below
by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated:
Signatures Position Dated
- - ---------- -------- -----
/s/ Ullrich Klamm, Ph.d Chairman of the Board August 27, 1999
- - --------------------------
Ullrich Klamm, Ph.D Chief Executive Officer
/s/ Carol O'Donnell Chief Financial Officer August 27, 1999
- - -------------------------- and Secretary
Carol O'Donnell
/s/ Salvatore Russo, Ph.D. Director August 27, 1999
- - --------------------------
Salvatore Russo, Ph.D.
/s/ Jack W. Buechner Director August 27, 1999
- - --------------------------
Jack W. Buechner
12
<PAGE>
CANCER TREATMENT HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MAY 31, 1999 AND 1998
<PAGE>
Table of Contents
Pages
-----
Report of Independent Accountants F- 1
Consolidated Financial Statements:
Balance Sheets F- 3
Statements of Discontinued Operations F- 4
Consolidated Statements of Stockholders' Equity F- 5
Statements of Cash Flows F- 6-7
Notes to Consolidated Financial Statements F- 8-17
<PAGE>
DFSH, CPA P.C.
Denise F. Sugrue, CPA
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and
Stockholders of Cancer Treatment Holdings, Inc.
Fairfield, Connecticut
We have audited the accompanying consolidated balance sheet of Cancer
Treatment Holdings, Inc. and Subsidiaries as of May 31, 1999, and the
related consolidated statements of discontinued operations,
stockholders' equity and retained deficit and cash flows for the year
then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audit of these statements in accordance with
generally accepted auditing standards. Those standards require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amount and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
financial statement presentation. We believe our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Cancer
Treatment Holdings, Inc. and Subsidiaries as of May 31, 1999, and the
results of discontinued operations and its cash flows for the year
then ended in conformity with generally accepted accounting
principles.
On May 29, 1998, the Company sold most of its assets and liabilities.
As a result, the Board of Directors intends to consider proposals
presented to the Company with respect to future operations,
liquidation and distribution of such amounts received from the sale,
and other proposals that may come before it regarding the use of such
amounts.
DFSH, CPA P.C.
August 6, 1999
P.O. Box 668 Tannersville, N.Y. 12485 Tele (518)734-5167 Fax (518)734-5094
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors and
Stockholders of Cancer Treatment Holdings, Inc.
Fairfield, Connecticut
In our opinion, the accompanying consolidated balance sheet and the
related consolidated statements of discontinued operations and
stockholders' equity and of cash flows present fairly, in all material
respects, the financial position of Cancer Treatment Holdings, Inc.
and its subsidiaries at May 31, 1998, and the results of their
operations and their cash flows for the year then ended, in conformity
with generally accepted accounting principles. These financial
statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements
based on our audit. We conducted our audit of these statements in
accordance with generally accepted auditing standards which require
that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe our audit provides a reasonable basis for the
opinion expressed above.
On May 29, 1998, the Company sold most of its assets and liabilities.
As a result, the Board of Directors intends to consider proposals to
the Company with respect to future operations, liquidation and
distribution of such amounts received from the sale, subject to the
contingent liabilities under the Agreement, and other proposals that
may come before it regarding the use of such amounts.
PricewaterhouseCoopers LLP
September 4, 1998
F-2
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
May 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
--------------- ---------------
ASSETS
<S> <C> <C>
Cash and cash equivalents $ 2,042,810 $ 150,516
Receivable from Greenstar Holdings, Inc. (Note 2) - 2,160,000
Other receivables 50,000 -
Prepaid amounts 47,927 -
Assets held for sale, net (Note 6) 13,242 36,104
--------------- ---------------
Total current assets 2,153,979 2,346,620
--------------- ---------------
Property and equipment, net 185,837 190,290
--------------- ---------------
Total assets $ 2,339,816 $ 2,536,910
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 147,398 $ 260,000
Payroll taxes payable 1,069 -
Tenant security deposit 3,800 -
--------------- ---------------
Total liabilities 152,267 260,000
--------------- ---------------
Commitments and contingencies (Notes 2 and 8)
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 (2,705,962) (2,616,601)
--------------- ---------------
2,467,630 2,556,991
Treasury stock: 159,284 shares, at cost (280,081) (280,081)
--------------- ---------------
Total stockholders' equity 2,187,549 2,276,910
--------------- ---------------
Total liabilities and stockholders' equity $ 2,339,816 $ 2,536,910
=============== ===============
</TABLE>
F-3
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF DISCONTINUED OPERATIONS
for the years ended May 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
---------------- ----------------
<S> <C> <C>
Net patient service revenues $ - $ 14,405,601
Other revenues 277,533 1,510,130
---------------- ----------------
Total revenues 277,533 15,915,731
---------------- ----------------
Operating expenses:
Direct cost of patient services - 6,848,633
(primarily payroll and contracted medical services)
General and administrative 571,792 10,073,350
Depreciation and amortization 4,453 1,325,980
---------------- ----------------
Total operating expenses 576,245 18,247,963
---------------- ----------------
Operating loss (298,712) (2,332,232)
Interest expense - (518,597)
Equity in loss of partnerships (40,649) (450,466)
Minority Interest - 162,679
Gain (loss) on sale of assets 250,000 (932,972)
---------------- ----------------
Loss before taxes (89,361) (4,071,588)
Income tax benefit - 93,600
---------------- ----------------
Net loss $ (89,361) $ (3,977,988)
================ ================
Per share data:
Net loss per share $ (0.03) $ (1.19)
================ ================
Weighted average number of shares outstanding 3,336,476 3,336,476
================ ================
</TABLE>
F-4
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
for the years ended May 31, 1999 and 1998
<TABLE>
<CAPTION>
Retained
Capital Earnings Total
Common Stock in Excess (Accumulated Treasury Stockholders'
Shares Amount of Par Deficit) Stock Equity
------ ------ ------ -------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Balance May 31, 1997 3,495,760 $ 10,487 $5,163,105 $1,361,387 $ (280,081) $ 6,254,898
Net loss - - - (3,977,988) - (3,977,988)
-------------------------------------------------------------------------------------------------
Balance May 31, 1998 3,495,760 10,487 5,163,105 (2,616,601) (280,081) 2,276,910
Net loss - - - (89,361) - (89,361)
-------------------------------------------------------------------------------------------------
Balance May 31, 1999 3,495,760 $ 10,487 $5,163,105 $(2,705,962) $ (280,081) $ 2,187,549
=================================================================================================
</TABLE>
F-5
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended May 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
---------------- ----------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (89,361) $ (3,977,988)
Adjustments to reconcile net loss to cash
used in operating activities:
Accretion of discount on notes receivable - (27,857)
Depreciation and amortization 4,453 1,325,980
(Gain) loss on sale of assets (250,000) 932,972
Provision for uncollectible advances to partnerships - 200,000
Equity in loss of unconsolidated partnerships 40,649 450,466
Deferred tax expense - (107,400)
Change in operating assets and liabilities:
Accounts receivable - 25,360
Other receivables (50,000) -
Income taxes receivable - 227,369
Assets held for sale 22,862 (36,104)
Other current and non-current assets (47,927) 110,186
Accounts payable, accrued payroll and related benefits (107,733) 671,382
---------------- ----------------
Net cash used by operating activities (477,057) (205,634)
---------------- ----------------
Cash flows from investing activities:
Collection of notes receivable 2,160,000 720,002
Cash received from sale of business 250,000 170,000
Investments in and advances to partnerships and ventures (40,649) (159,395)
Acquisition of property and equipment - (45,757)
---------------- ----------------
Net cash provided by investing activities 2,369,351 684,850
---------------- ----------------
Cash flows from financing activities:
Repayments of long-term debt, including revolving
credit agreements - (11,125,263)
Borrowings for long-term debt, including revolving
credit agreements - 9,471,818
---------------- ----------------
Net cash used in financing activities - (1,653,445)
---------------- ----------------
Net increase (decrease) in cash and cash equivalents 1,892,294 (1,174,229)
Cash and cash equivalents at beginning of year 150,516 1,324,745
---------------- ----------------
Cash and cash equivalents at end of year $ 2,042,810 $ 150,516
================ ================
</TABLE>
F-6
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended May 31, 1999 and 1998
1999 1998
------------------ ------------------
Supplemental disclosures:
Interest paid $ - $ 518,500
================== ==================
Income taxes paid $ - $ -
================== ==================
Non-cash financing and investing activties:
In 1998, the Company sold substantially all of its assets and
liabilities. In connection with the transaction, the Company recorded
a receivable for a portion of the purchase price, in the amount of
$2,160,000 (see Note 2).
In 1998, the Company financed the acquisition of certain equipment
through a capital lease agreement, under which the Company recorded
capital lease obligations of $1,151,082.
F-7
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Business
Cancer Treatment Holdings, Inc. ("CTH"), a Nevada
corporation, through its subsidiaries (collectively, the
"Company"), was, until May 31, 1998 (See Note 2), engaged in
(i) providing home health, home infusion and nursing
services, (ii) establishing and administering businesses for
the ambulatory treatment of cancer using a variety of
modalities, including radiation therapy and bone marrow
transplantation, and (iii) providing management/consulting
and billing and collection services for free-standing
radiation therapy centers.
In home health and nursing services, the Company owned and
operated Leader Health Care Center, Inc. ("Leader"). Leader
owned 100% of the equity interest of both Med Tech Services
of South Florida, Inc. and Med Tech Services of Palm Beach,
Inc. (collectively, "Med Tech") and Southern Cross Home
Health, Inc. ("Southern Cross"). Leader, Med Tech and
Southern Cross are providers of home health and nursing
services in Southeastern Florida. Leader also provides home
infusion therapy and physical rehabilitation services (See
Note 2).
As a result of the sale of most of the Company's assets and
liabilities on May 29, 1998, the Company consists of a
corporate shell with four assets: (i) approximately $2
million in cash, (ii) a 50.5% interest in Logan Radiation
Therapy, Inc., which has a 51% partnership interest in a
radiation therapy center under development located in Logan,
West Virginia, (iii) a subsidiary called CTI Management Corp.
formed to provide management services performed by the
Company's President (See Note 4), and (iv) an office
condominium located in Hollywood, Florida which is currently
rented and listed for sale.
2. Sale of Operations and Future Plans:
On May 20, 1998, the Company entered into a purchase
agreement (the "Agreement") with Greenstar Holdings, Inc.
(the "Buyer") to sell substantially all of the assets and
liabilities of the Company to the Buyer or its assignee. The
Company agreed to sell most of its assets and liabilities to
the Buyer for a purchase price of $3,000,000. The Company and
the Buyer subsequently negotiated a reduction in the purchase
price in the amount of $190,000 and in return, the Company
retained ownership of a commercial condominium. In addition,
the Buyer agreed to allow the Company to retain ownership of
CTI Management Corp. without any further reduction of the
purchase price. The sale was broken into two components due
to the sale of certain assets of the Company being subject to
regulatory approval prior to closing. The assets requiring
regulatory approval prior to sale included certain ownership
interests in two centers under development that, upon
completion, will provide radiation therapy services
(collectively referred to as the "Deferred Assets"). The two
centers are located in Martinsburg and Logan, West Virginia.
The Company closed on the sale of substantially all of the
assets and liabilities not subject to regulatory approval on
May 29, 1998. The Company sold the home health operations to
Homecare Holdings, Inc., an assignee of the Buyer, and all
other operations were sold to the
F-8
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Sale of Operations and Future Plans, Continued:
Buyer. In connection with the transaction, the Company
recorded a receivable for a portion of the purchase price in
the amount of $2,160,000 as of May 31, 1998. This amount was
received by the Company on June 3, 1998.
Under the Agreement, the Company had a contingent liability
to the Buyer for a period of one year from the date of
closing for certain representations, warranties, 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 was not to exceed $1,500,000. In
connection with this contingent liability, the Company was
required to retain assets in the amount of $1.5 million until
May 31, 1999. At May 31, 1999, the Company's obligation to
continue to retain funds under the Agreement lapsed. The
Company has not been given notice of any open claims that
would cause it to continue to be contingently liable.
The purchase price attributable to the two West Virginia
centers was $500,000, or $250,000 per center. The Buyer
acquired the Martinsburg center on November 20, 1998. During
the second fiscal quarter of 1999, the Buyer 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. The Company has classified the net book value of its
interest in the Logan, West Virginia center as "Assets held
for sale, net" at May 31, 1999 and 1998 (See Note 6).
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, and any other proposals that may come
before it regarding the use of proceeds of the sale.
3. Significant Accounting Policies:
As a result of the sale of operations described in Note 2,
the Company will no longer be operating in the health care
business. Accordingly, the statement of operations for the
years ending May 31, 1999 and 1998 represent discontinued
operations.
Principles of Consolidation
The accompanying consolidated financial statements include
the accounts of all subsidiaries and partnerships in which
the Company owns more than 50%. All significant intercompany
investments, accounts and transactions have been eliminated.
Investments in partnerships in which the ownership interest
is 50% or less and the Company exercises significant
influence over operating and financial policies are accounted
for using the equity method.
F-9
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Significant Accounting Policies, Continued:
Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could
differ from those estimates.
Cash Equivalents
The Company considers all highly-liquid investments with a
maturity of three months or less when purchased to be cash
equivalents.
Revenue Recognition
Net patient service revenues were derived from home health
and nursing services.
Home health care services were provided to primarily Medicare
patients. Approximately 92% of net patient service revenues
for fiscal 1998 were derived from services provided to home
healthcare patients who are Medicare beneficiaries. The
Company participated in the Medicare program under which
services rendered to Medicare program beneficiaries are
reimbursed based on cost-reimbursement principles and are
subject to audit and retroactive adjustment by the respective
Medicare program fiscal intermediary. Differences between the
estimated settlements and final amounts are recognized as
increases or decreases in net patient service revenues in the
year of settlement.
Other revenues at May 31, 1998 included billing/collection,
management and consulting services for various radiation
therapy centers and management and/or consulting fees from
the centers which the Company managed or for which the
Company provided consulting services. Management fees were
principally based on a percentage of collections with annual
maximum fees. Consulting fees were recognized over the term
of the consulting agreement. The Company also provided
centralized billing and collection services for various
centers.
Other revenues at May 31, 1999 included management services
provided through CTI Management Corp., a wholly owned
subsidiary, and rent collected on the commercial condominium
in Florida. Other revenues also included interest and
dividend income of $81,289 and $187,488 in 1999 and 1998,
respectively.
F-10
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Significant Accounting Policies, Continued:
Property and Equipment
Property and equipment is stated at cost and depreciated over
its estimated useful lives ranging from five to forty years
using the straight-line method. Leasehold improvements and
assets held under capital leases are amortized on a
straight-line basis over the shorter of the estimated useful
life or the lease term. Upon disposition, the cost and
accumulated depreciation of property and equipment are
removed from the accounts and any gain or loss is reflected
in the statement of discontinued operations.
At each balance sheet date or whenever events or changes in
circumstances indicate that the carrying amount of an asset
may not be recoverable based on estimated future cash flows
expected to result from the use of the assets and its
eventual disposition, the Company reviews certain long-lived
assets, such as property and equipment and certain
identifiable intangible assets (including goodwill) for
impairment. In fiscal year 1998, as a result of the Company
anticipating entering into the Agreement (See Note 2), the
Company recorded a charge to operations of $739,000, included
in operating expenses. Such amount represents the estimated
impairment of property and equipment principally related to
an office condominium owned by the Company and certain
identifiable intangible assets.
Income Taxes
Deferred income taxes are provided based on the estimated
future tax effects or differences between financial statement
carrying amounts and the tax bases of existing assets and
liabilities. A valuation allowance is provided if, based on
the weight of available evidence, it is more likely than not
that some or all of the deferred tax assets will not be
realized.
Stock-Based Compensation
The Company accounts for stock-based compensation using the
intrinsic value method. Accordingly, compensation expense for
qualified and non-qualified stock options granted under the
Company's stock option plan is generally measured as the
difference between the quoted market price of the Company's
stock at the date of grant and the amount an employee must
pay to acquire the stock. No charge has been reflected in the
statement of discontinued operations at May 31, 1998 as a
result of the grant of stock options, as the exercise price
of the options equals or exceeds the market value of the
Company's stock on the date of options are granted. The
Company granted no other such options during the year ended
May 31, 1999.
F-11
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Significant Accounting Policies, Continued:
Per Share Data
Basic earnings per share is calculated based on the weighted
average number of common shares outstanding during the year.
Diluted earnings per share is based on the sum of the
weighted average number of common shares outstanding plus
common stock equivalents arising out of stock options and
warrants. The Company's outstanding options were not assumed
exercised for fiscal years 1998 or 1999 because such options
were anti-dilutive for such periods.
Concentrations
Financial instruments which potentially subject the Company
to credit risks are cash accounts with major financial
institutions in excess of FDIC insurance limits. This
financial institution has a strong credit rating and
management believes the credit risks related to the account
are minimal.
New Pronouncements
The Company does not expect the effect of the implementation
of any new pronouncements by the Financial Accounting
Standards Board (FASB) or other standard setting bodies will
have a material impact on the Company's financial statements
based on its current status of operations.
4. Consulting and Option Agreements:
The Company's President is required to perform management
services pursuant to an agreement between the Company and
Oncology Services Corporation ("OSC"), Oncology Service
Corporation of Tampa, Inc. ("OSC of Tampa"), and Tampa
Oncology Services, P.A. (together "OSC"), which the Company
subsequently assigned to CTI Management Corp., a wholly owned
subsidiary. As a result, the Company is entitled to receive
$150,000 per year. At May 31, 1999, there were 71 unpaid
installments for past and future services under the
agreement. Since February 28, 1999, OSC has been in default
in their payments under the agreement, but has acknowledged
that the Company's President has fully performed his
obligations under the agreement. Under the assignment,
monthly payments for the remainder of the obligation shall be
in the amount of $6,200 to $12,500 based on the number of
radiation therapy procedures performed at OSC's Tampa center.
The agreement further grants CTI Management Corp. a security
interest in all of the assets of the Tampa center as
collateral for the agreement. As such, the Company has not
created any reserve for the $50,000 in arrears at May 31,
1999.
In May 1996, the Company sold all of its interest in a
radiation therapy center under development in Yonkers, New
York (the "Yonkers Center") and entered into various
agreements related to the sale. No amounts were recorded into
income at the time of the transaction to the contingencies
related to the collectibility of such amounts. In fiscal year
1998, these agreements were
F-12
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. Consulting and Option Agreements, Continued:
restructured. As a result, the Company received $300,000 in
fiscal year 1998 as reimbursement for expenses incurred in
the development of the Yonkers Center. As a result of the
renegotiated agreements, the Company would receive $250,000
annually in fees over the next three years and $100,000
annually in fees over the subsequent two years.
In addition, in fiscal year 1998, the Company sold an option
to a third party for $550,000 to acquire the Company's 50%
interest in one of its radiation therapy centers for
$3,500,000 or eight times one half of the prior year's net
earnings, whichever is greater. The Company recorded income
under such option of $219,997 including interest income of
$55,617 during fiscal year 1998 in connection with such
option.
In fiscal year 1998, the Company also restructured other
management, consulting and billing, and collection agreements
related to two centers sold in fiscal year 1995 and an
interest in one center sold in fiscal year 1996. As a result
of the restructuring of such agreements, the Company was
entitled to receive $172,800 annually in consulting fees
through September 2006.
The residual obligations and future interests in the
agreements described in the above three paragraphs were
transferred in connection with the sale of the Company's
operations described in Note 2.
5. Property and Equipment:
Property and equipment consists of the following at May 31,
1999 and 1998:
1999 1998
---- ----
Land $ 33,000 $ 33,000
Buildings and leasehold improvements 631,707 631,707
------- -------
664,707 664,707
Less accumulated depreciation 478,870 474,417
------- -------
$185,837 $190,290
======= =======
The asset consists of an office condominium unit owned by the
Company which is leased under a month to month lease
agreement. Rental income for the fiscal years 1999 and 1998
amounted to $46,000 and $93,083, respectively. The Company
incurred rental property expense of $15,065 and $40,148
during fiscal years 1999 and 1998, respectively, which
includes annual depreciation expense of $4,453 and $16,667.
F-13
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. Assets Held for Sale, Net:
Assets held for sale, net, in the amount of $13,242 and
$36,104 at May 31, 1999 and 1998, respectively, consist of
the Company's interest in certain assets and liabilities
related to the Company's 25.75% general partnership interest
in the partnership developing the radiation center in Logan,
West Virginia. At May 31, 1999, the assets and liabilities of
the partnership consist of the following:
1999 1998
---- ----
Cash $ 88,167 $ 53,099
Other assets, including capitalized leases 168,410 165,344
Equipment subject to capital leases 972,847 1,072,847
Capital lease obligations (1,177,998) (1,151,082)
----------- -----------
Net equity in partnership $ 51,426 $ 140,208
=========== ===========
7. Income Taxes:
The income tax benefit for the years ended May 31, 1999 and
1998 consist of the following:
1999 1998
---- ----
Current:
Federal $ -0- $13,800
State -0- -0-
------ ----------
-0- 13,800
Deferred:
Federal -0- (83,400)
State -0- (24,000)
------ ----------
-0- (107,400)
Income tax benefit $ -0- $ (93,600)
====== ==========
F-14
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. Income Taxes, Continued:
The reconciliation between the statutory charge for income
taxes and the actual income tax benefit for the years ended
May 31, 1999 and 1998 is shown in the following table:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Computed expected tax expense: $ (18,600) $ (1,384,340)
State income taxes ( 8,000) (24,000)
Change in valuation allowance 26,600 1,267,600
Goodwill and other nondeductible expenses - 34,700
Other, net - 12,440
--------- ------------
Effective income tax benefit $( -0-) $ (93,600)
========= ============
</TABLE>
The significant components of the deferred tax assets and
liabilities as of May 31, 1999 and 1998, were as follows:
1999 1998
---- ----
Deferred tax assets:
NOL carryforward $(26,600) $(1,450,000)
Valuation allowance 26,600 (1,450,000)
------- ----------
$( -0- ) ( -0- )
------- ----------
As of May 31, 1999, the Company had a federal and state net
operating loss carryforward of $89,000 which expires in 2014.
The Company provides a valuation allowance, because in the
opinion of management, it is more likely than not that some
or all of the deferred tax assets will not be realized.
8. Commitments and Contingencies:
As a principal of Logan Radiation Therapy, Inc. ("LRT"), a
partner in the Southern West Virginia Cancer Treatment Center
("Logan"), the Company has guaranteed certain Copelco
Capital, Inc. ("Copelco") lease liabilities of Logan
amounting to $595,000 as of May 31, 1999. In this connection,
the Company could be held responsible for 50.5% of any and
all liabilities arising from the actions of the partnership.
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 and has ceased making required
capital contributions to Logan. Accordingly, Logan's lease
payments to Copelco are in default. Copelco has not taken any
action to proceed against the Company's guarantee or served
any notice of default.
F-15
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. Employee Benefit Plan:
The Company established an Employee Benefit Plan (the "Plan")
under Section 401(k) of the Internal Revenue Code. The Plan
was terminated by the Company upon the sale transaction with
Greenstar Holdings, Inc. as of May 31, 1998 (See Note 2). The
Plan allowed all full time employees to defer up to 15% of
their income on a pre-tax basis through contributions to the
Plan. Employer contributions were matched by the Company as
deemed advisable by the Executive Compensation Committee. For
fiscal year 1998, the Company's expense related to matching
contributions amounted to approximately $112,000.
10. Warrants, Stock Options and Treasury Stock:
The Company granted stock options to officers and directors
during fiscal years ending May 31, 1998 and prior. All
options were granted at or above prevailing market prices and
are exercisable over terms of up to six years. During fiscal
year ending May 31, 1999, no options were granted by the
Company.
A summary of the status of the Company's stock option plan as
of May 31, 1999 and 1998, and changes during the years then
ended is presented below:
<TABLE>
<CAPTION>
1999 1998
-------------------------- --------------------------
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
------ -------- ------ --------
<S> <C> <C> <C> <C>
Outstanding at beginning of year 1,152,500 $ 4.25 1,167,500 $ 4.25
Granted -0- -0- 55,000 3.28
Expired (622,500) 4.37 (70,000) 3.50
--------- ------ --------- ------
Outstanding at end of year 530,000 $ 4.14 1,152,500 $ 4.25
--------- ------ --------- ------
Weighted-average fair value of
options granted during the year $ -0- $ 1.14
========= =========
</TABLE>
At May 31, 1999, the Company had reserved 530,000 shares of
its Common Stock for issuance upon the exercise of all
outstanding options. Exercise prices range from $1.69 to
$5.00 at May 31, 1999.
F-16
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. Warrants, Stock Options and Treasury Stock, Continued:
Had compensation cost for awards under the Company's stock
option plan during the year ended May 31, 1998 been
determined based on the fair value at the grant dates rather
than utilizing the intrinsic value method, the Company's net
loss per share at May 31, 1999 and 1998 would have been
increased to the pro forma amounts indicated below:
1999 1998
---- ----
Pro forma net loss
As reported $( 89,361) $(3,977,988)
Pro forma $(134,162) $(4,078,778)
Pro forma net loss per share
As reported $ (.03) $ (1.19)
Pro forma $ (.03) $ (1.22)
The fair value of each option granted under the Company's
stock option plan is estimated on the date of grant using the
Black-Scholes option-pricing model with the following
weighted average assumptions used for grants in fiscal years
1998 and 1997: no dividend yield based on the Company's
current dividend policy; expected volatility of the
underlying stock of 119%; risk free interest rates of 5.8%
and expected lives of the options of 4.4 to 10 years based on
the related vesting periods.
F-17
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<PERIOD-END> May-31-1999
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0
0
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