<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, 2000.
|_| 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, 2000 were $179,474.
The aggregate market value of the voting and non-voting stock held by
non-affiliates computed by reference to the average bid and asked price of such
stock on August 31, 2000, was $674,207. As of such date, the average high and
low sales price was $.40.
The number of shares outstanding of the Issuer's common stock, par value $.003
per share, as of August 31, 2000, 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.
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CANCER TREATMENT HOLDINGS, INC.
Form 10-KSB ANNUAL REPORT - 2000
TABLE OF CONTENTS
Page
PART I
Item 1. Description of Business 3
Item 2. Description of Property 5
Item 3. Legal Proceedings 5
Item 4. Submission of Matters to a Vote of Security Holders 5
PART II
Item 5. Market for Common Equity and Related Stockholder Matters 5
Item 6. Management's Discussion and Analysis of Plan of Operation 6
Item 7. Financial Statements 7
Item 8. Changes In and Disagreements with Accountants on Accounting
and Financial Disclosure 7
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act 8
Item 10. Executive Compensation 10
Item 11. Security Ownership of Certain Beneficial Owners and Management 11
Item 12. Certain Relationships and Related Transactions 12
Item 13. Exhibits and Reports on Form 8-K 12
SIGNATURES
2
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
Business Development
For the past year, Cancer Treatment Holdings, Inc. ("CTH"), a Nevada
corporation, through its subsidiaries (collectively, the "Company"), has been
engaged in structuring and commencing two new business ventures in the fields of
"IT-enabled" services (that is, providing services such as medical
transcriptions, billing and collecting, office bookkeeping, and claims
processing) aimed at healthcare providers and insurance carriers and the on-site
generation of chlorine gas and related compounds.
Until this past fiscal year, CTH had been considering proposals
presented to it regarding the net proceeds received as a result of the 1998 sale
of most of its operating subsidiaries and related assets. Until May 31, 1998,
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.
Business of the Issuer
During fiscal 2000, the Company's future business direction was
established. At May 31, 2000, the Company's business consisted of: (I) an
interest in MedClixx, Inc., which will provide IT Enabled Services, (2) Water
Treatment Technologies, Inc. and Global Patent Development Corp., which will
market a proprietary invention related to the on-site production of chlorine gas
and related compounds, (3) an interest in a radiation therapy center under
development located in Logan, West Virginia, (4) a subsidiary (CTI Management
Corp.) through which the Company's president provides management services, and
(5) an office condominium located in Hollywood, Florida which is currently under
contract for sale.
IT-Enabled Services
The Company has positioned itself to be able to offer high quality
services enabled by information technology (""IT-Enabled Services) to the
healthcare providers and insurance carriers. IT-Enabled Services include medical
transcriptions, billing and collecting, bookkeeping and claims processing
services. The Company has affiliated with a well-established, Indian-based
IT-Enabled Service provider and it is expected that MedClixx, Inc. ("MedClixx")
will offer the IT-Enabled Services worldwide during fiscal 2001. MedClixx was
formed as a subsidiary of Blue Gold USA, Inc., a wholly-owned subsidiary of the
Company.
Water Treatment
On February 25, 2000, the Company (through Global Patent Development
Corporation, "Global") applied for a patent in South Africa for an invention
relating to a method and device for on-site generation of chlorine and related
gases, and a provisional patent was issued.
Chlorine gas is considered a hazardous substance and its transport and
storage is strictly regulated to avoid accidental spills. The new device would
prevent this hazard by enabling users to manufacture chlorine on-site and when
needed at a competitive cost. The Company believes that there would be demand
for the new device from water utilities and industrial users of chlorine.
3
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A prototype of the device has been built. The Company intends to have
the device manufactured, either directly or indirectly by a licensee, and to
commence operations by offering it to the water treatment industry. The Company
expects a related revenue stream to materialize in fiscal 2002.
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 ("Logan") over the
past several years.
The Hospital, LRT's partner in the Logan venture, has sought relief
under Chapter 11 of the U.S. Bankruptcy laws. The Hospital has announced that
its expects a reorganization plan to become effective, in which event the
Hospital will be discharged from bankruptcy. The Hospital also announced that it
plans to affiliate with Genesis Affiliated Health Services, Inc., a West
Virginia hospital chain ("Genesis"). Following the Hospital's discharge from
bankruptcy, Genesis, the Hospital and LRT intend to form a new entity which will
acquire equal shares in Logan and the building which Logan currently occupies.
Subsequently, the Company intends to sell its share in LRT. As part of such
transaction, the Company would seek a release from its equipment lease guarantee
obligations with Copelco Capital, Inc. Each of the contemplated events described
in this paragraph are subject to several contingencies, and there can be no
assurance that any transactions will take place as currently planned.
The establishment and operation of the Logan venture 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.
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 Logan property (or the Company's interest in the property)
will be required .
The Company's monthly costs attributable to the property approximate
$10,000.
CTI Management Corp.
The Company, through CTI Management Corp., a wholly-owned subsidiary,
provides consulting services rendered by its President for which it is due to be
paid fees over the subsequent five years. The Company has not received any
payments since February 1999, but is pursuing recourse against a building and
other property which securitizes the payment obligation.
4
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Miscellaneous
The only remaining employees of CTH include Ullrich Klamm, Ph.D.,
President, and Carol B. O'Donnell, Secretary. The Company'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.
The Company's property consists of a vacant 3,500 square foot
commercial condominium unit located in Hollywood, Florida. CTH has agreed to
sell the condominium for $245,120 on or prior to September 28, 2000. The
commercial condominium is owned free and clear of any mortgages.
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, 2000 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.
The following table sets forth for the fiscal periods indicated the
high and low bid quotes on the OTC Bulletin Board.
Fiscal Years Ended May 31
2000 1999
--------------------------------------------------------------------------------
Quarter High Low High Low
--------------------------------------------------------------------------------
1st Quarter $ .38 $ .35 n/a N/a
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2nd Quarter $ .38 $ .35 $ .40 $ .00
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3rd Quarter $ .40 $ .35 $ .30 $ .17
--------------------------------------------------------------------------------
4th Quarter $ .45 $ .35 $ .40 $ .30
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5
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As of August 31, 2000, 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 2000, 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.
For the past year, the Company has been engaged in structuring and
commencing two new business ventures in the fields of IT-Enabled Services and
the on-site generation of chlorine and related gases. Until fiscal 2000, CTH had
been considering proposals presented to it regarding the net proceeds received
as a result of the fiscal 1998 sale of most of its operating subsidiaries and
related assets.
In connection with its proposed business in the field of IT-Enabled
Services, the Company has positioned itself to be able to offer high quality
medical transcription, billing and collecting, bookkeeping and claims processing
services by affiliating with a well-established, Indian-based IT-Enabled Service
provider. As a result, the start-up costs associated with this type of business
have been significantly minimized and the Company has initially capitalized the
enterprise with $500,000.
After spending approximately $127,000 towards the acquisition of the
on-site chlorine gas generation invention, the Company capitalized this segment
of its business with $750,000. The Company expects to initially market the
invention to the water treatment industry through worldwide marketing agents,
and has been exploring possible marketing alliances throughout the last two
fiscal quarters of 2000.
The Company did not conduct business operations which were revenue
producing during either of its last two fiscal years. It recorded a gain in its
second quarter of fiscal 1999 of $250,000 related to the deferred sale of
certain of its assets in November 1998. The Company does not expect material
revenues from business operations, which have been under development since
fiscal 2000, until fiscal 2002.
The Company has been entitled to receive payments for consulting
services rendered by its President. The payors for such services have been in
default with respect to the payments since February 1999. The Company is
pursuing recourse against a building and other property which securitizes the
payment obligation.
The Company expects to report revenues from the sale of its commercial
condominium in Hollywood, Florida during the second quarter of fiscal 2001. The
adjusted sales price is $245,120.
The Company reported a net operating loss carryforward of $1,386,000in
fiscal 2000.
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Liquidity and Capital Resources
The cash received by the Company associated with consummation of its
fiscal 1998 sale transaction has substantially been invested in its two new
business ventures. These ventures are in development, but the working capital
committed to the ventures is expected to be supplemented by alliances
established by the Company during fiscal 2001 and to satisfy all of their
working capital needs until they become revenue producing in fiscal 2002.
The Company has guaranteed certain liabilities of the Logan partnership
amounting to $660,000 at May 31, 2000.
Year 2000 issues did not affect the Company's business, results of
operations or financial condition.
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. became the Company's new accountant effective July
15, 1999. The sole principal of the firm was involved in a serious car
accident as a result of which she has been incapacitated since early
July 2000. Radin Glass & Co., LLP was engaged as the Company's new
accountants effective July 19, 2000. There were no disagreements with
DFSH, CPA P.C. on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure.
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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 will expire
(subject to stockholder vote) are set forth below.
<TABLE>
<CAPTION>
Director Term
Name Age Principal Occupation Since Expires
---- --- -------------------- ----- -------
<S> <C> <C> <C> <C>
Jack W. Buechner 60 Attorney at the Washington, D.C. law 1993 2001
firm of Manatt Phelps Phillips since
1995. Previously, General counsel to the
govern- mental consulting firm of
Linton, Mields, Reisler and Cottone in
Washington, D.C. and a partner in The
Hawthorn Group, L.L.C. in Arlington,
Virginia. From 1991 to 1993, President
of the International Republican
Institute, a founda- tion that promotes
democracy in foreign countries. From
1986 to 1991, a United States
Representative from the State of
Missouri.
Ullrich Klamm, Ph.D. 61 Chairman of the Board, Chief Executive 1993 2002
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, 70 Health care consultant in Boston, MA 1994 2003
Ph.D. since 1993. From 1974 until 1993,
Administrator of the Shriners Burns
Institute in Boston, MA, specializing in
children with severe burns.
</TABLE>
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Executive Officers of the Company and Company Subsidiary Who Are Not Directors
Carol B. O'Donnell 43 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.
Although the directorships of Mr. Buechner, Dr. Klamm and Dr. Russo
were to have expired in 1998, 1999 and 2000, respectively, no annual meeting of
stockholders was held for the election of directors since November 1997.
Accordingly, Mr. Buechner, Dr. Klamm and Dr. Russo still serve as directors.
During the fiscal year ended May 31, 2000, the Board of Directors held
no formal Board meetings. 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, 2000, 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, 2000, 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, 2000, no meetings of the executive committee were held.
To the best of the Company's knowledge, during the fiscal year ended
May 31, 2000 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.
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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, 2000, 1999 and
1998 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 $100,000 in the fiscal year ended May 31, 2000.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
-------------------------- ----------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Other Restricted Securities
Annual Stock Underlying LTIP All Other
Name Year Salary Bonus Compensation Award(s) Option/SARs Payouts Comp.
($) ($) ($) (#) (#) ($) ($)
--- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ullrich Klamm, Ph.D. 2000 130,000 - 26,600 - 500,000 - -
Chairman of the Board, 1999 130,000 - 26,600 - 500,000 - -
Chief Executive Officer, 1998 129,153 - 26,600 - 500,000 - -
President
</TABLE>
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 2000 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." Ms. 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.
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ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The following table sets forth, as of August 31, 2000, 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) 56.1%
Jack W. Buechner 2,500(4) *
Salvatore P. Russo, Ph.D 8,500(5) *
Mercury Capital Holdings, LLC 1,649,958(6) 49.5%
All officers and directors
as a group (4 persons) 2,160,958(7) 56.4%
* Represents less than 1% of the outstanding Company Common Stock.
----------
(1) A person is deemed to be the beneficial owner of securities that can be
acquired by such persons within 60 days from August 31, 2000, 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 31, 2000
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 2,500 shares subject to presently exercisable options.
(5) Includes 7,500 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 B. O'Donnell, Secretary of the Company.
11
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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)
21.1 Subsidiaries of the Registrant:
Blue Gold USA, Inc., a Delaware corporation
CTI Management Corp., a Delaware corporation
CTI of West Virginia, Inc., a Florida corporation
Global Patent Development Corp., a Delaware corporation
Water Treatment Technologies, Inc., a Delaware
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.
12
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(3) Incorporatedby 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,
2000.
There were no reports on Form 8-K filed during the three months
ended May 31, 2000.
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: September 11, 2000 CANCER TREATMENT HOLDINGS, INC.
By: /s/ Ullrich Klamm, Ph.D.
------------------------
Ullrich Klamm, Ph.D.
Chairman and Chief Executive Officer
13
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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 September 11, 2000
-------------------------- Chief Executive Officer
Ullrich Klamm, Ph.D
/s/ Carol B. O'Donnell Chief Financial Officer September 11, 2000
-------------------------- and Secretary
Carol B. O'Donnell
/s/ Salvatore Russo, Ph.D. Director September 11, 2000
--------------------------
Salvatore Russo, Ph.D.
/s/ Jack W. Buechner Director September 11, 2000
--------------------------
Jack W. Buechner
14
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CANCER TREATMENT HOLDINGS, INC.
AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED MAY 31, 2000 AND 1999
F-i
<PAGE>
Table of Contents
Pages
-----
Report of Independent Accountants F- 1
Consolidated Financial Statements:
Balance Sheets F- 3
Consolidated Statements of Operations F- 4
Consolidated Statements of Cash Flows F- 5
Consolidated Statements of Stockholders' Equity F- 6
Notes to Consolidated Financial Statements F- 7-11
F-ii
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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, 2000, and the related statements
of operations, stockholders' equity 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 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 amounts 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 that 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, 2000, and the results of operations and its cash
flows for the year then ended in conformity with generally accepted accounting
principles.
Radin, Glass & Co., LLP
New York, New York
September 8, 2000
F-1
<PAGE>
FORMER ACCOUNTANT INCAPACITATED AND IS UNABLE TO MANUALLY SIGN AN UPDATED AUDIT
OPINION.
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-2
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
May 31, 2000 and 1999
ASSETS
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,611,903 $ 2,042,810
Other receivables 139,416 50,000
Prepaid amounts 29,144 47,927
Assets held for sale 13,242
----------- -----------
TOTAL CURRENT ASSETS 1,780,463 2,153,979
Property and equipment, net 179,157 185,837
Intangibles 98,870 --
----------- -----------
TOTAL ASSETS $ 2,058,490 $ 2,339,816
=========== ===========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
<S> <C> <C>
Accounts payable & accrued liabilities $ 90,599 $ 152,267
Minority interest obligations 37,465 --
----------- -----------
TOTAL CURRENT LIABILITIES 128,064 152,267
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock, $.003 par value, 50,000,000 shares authorized,
3,495,760 issued and outstanding 10,487 10,487
Paid in capital 5,163,105 5,163,105
Accumulated deficit (2,963,084) (2,705,962)
----------- -----------
2,210,508 2,467,630
Treasury stock : 159,284 shares, at cost (280,081) (280,081)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 1,930,427 2,187,549
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 2,058,490 $ 2,339,816
=========== ===========
</TABLE>
F-3
See notes to financial statements.
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended May 31, 2000 and 1999
2000 1999
----------- -----------
Revenue:
Consulting fees & rental income $ 93,400 $ 196,244
Interest income 86,074 81,289
----------- -----------
Total revenue 179,474 277,533
Operating expenses:
General and administrative 379,210 571,792
Depreciation and amortization 6,680 4,453
----------- -----------
Total operating expenses 385,890 576,245
----------- -----------
Operating loss (206,416) (298,712)
Equity in loss of partnerships (50,707) (40,649)
Gain on sale of assets -- 250,000
----------- -----------
Net loss $ (257,122) $ (89,361)
=========== ===========
Per share data:
Net loss per share $ (0.08) $ (0.03)
=========== ===========
Weighted average number of shares outstanding 3,336,476 3,336,476
=========== ===========
F-4
See notes to financial statements.
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
For the years ended May 31, 2000 and 1999
<TABLE>
<CAPTION>
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (257,122) $ (89,361)
Adjustments to reconcile net loss to cash
used in operating activities:
Depreciation and amortization 6,680 4,453
Gain on sale of assets -- (250,000)
Equity in loss of unconsolidated partnerships 50,707 40,649
Change in operating assets and liabilities
Other receivables (89,416) (50,000)
Prepaid amounts 18,783
Other current assets -- (47,927)
Accounts payable, accrued payroll and related benefits (61,668) (107,733)
Assets held for sale -- 22,862
----------- -----------
Net cash used by operating activities (332,036) (477,057)
----------- -----------
Cash flows from investing activities:
Purchase of intangibles (98,870) --
Collection of notes receivable -- 2,160,000
Cash received from sale of business -- 250,000
Investments in and advances to partnerships and ventures -- (40,649)
----------- -----------
Net cash provided (used) by investing activities (98,870) 2,369,351
Cash flows from financing activities: -- --
Net (decrease) increase in cash and cash equivalents (430,907) 1,892,294
Cash and cash equivalents at beginning of year 2,042,810 150,516
----------- -----------
Cash and cash equivalents at end of year $ 1,611,903 $ 2,042,810
=========== ===========
</TABLE>
F-5
See notes to financial statements.
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
For the years ended May 31, 2000 and 1999
<TABLE>
<CAPTION>
Capital Total
Common stock in Excess Accumulated Treasury Stockholders'
Shares Amount of Par Value Deficit Stock Equity
------ ------ ------------ ------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
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
Net loss (257,122) (257,122)
---------------------------------------------------------------------------------
Balance May 31, 2000 3,495,760 $ 10,487 $ 5,163,105 $(2,963,084) $ (280,081) $ 1,930,427
=================================================================================
</TABLE>
F-6
See notes to financial statements.
<PAGE>
CANCER TREATMENT HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Business
Cancer Treatment Holdings, Inc. ("CTH"), a Nevada corporation, through its
wholly owned subsidiaries (collectively, the "Company"), consisted of :
(1) Blue Gold USA, Inc., which through its subsidiary MedClixx, Inc., will
provide medical transcription billing and collecting , office bookkeeping,
and other services to the healthcare industry, (2) Water Treatment
Technologies, Inc., and Global Patent Development Corp., both of which
were formed to commercially exploit an invention related to the on-site
production of chlorine gas and related compounds, (3) an interest in a
radiation therapy center under development located in Logan, West
Virginia, (4) CTI Management Corp., through which the Company's president
provides management services, and (5) an office condominium located in
Hollywood, Florida, which is currently under contract for sale.
2. Significant Accounting Policies:
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.
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.
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.
F-7
<PAGE>
Income Taxes
Deferred income taxes are provided based on the estimated future tax
effects or the difference 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. The Company granted no such options during the
years ended May 31, 2000 and 1999.
Per Share Data
Basic earnings per share are 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 1999 or 2000 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.
Reclassification
Certain prior year amounts have been reclassified to conform to current
year presentation.
3. Sale of Operations and Future Plans:
The Company closed on the sale of substantially all of its assets and
liabilities on May 29, 1998. 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. The Company sold one of its two remaining
interests in radiation therapy centers in West Virginia for $250,000 in
November 1998.
The Company is continuing its efforts to sell its interest in the Logan,
West Virginia center. The Company has classified the net value of its
interest in the Logan, West Virginia center as "Minority interest
obligations" at May 31, 2000 (See Note 7).
4. New Business of the Company
During the past two fiscal years, the Company has been considering
proposals and investigating business opportunities presented to the
Company regarding the proceeds received pursuant to the sale of its
operations. During fiscal 2000, the Company committed to pursuing two new
business opportunities detailed as follows:
F-8
<PAGE>
MedClixx, Inc. ("MedClixx") in which the Company (through a subsidiary)
has $500,000 invested as of May 31, 2000. MedClixx was formed to provide
services enabled by information technology ("IT-Enabled Services") to
healthcare providers and insurance carriers. IT-Enabled Services include
billing and collecting, medical transcriptions and claims processing
services.
Water Treatment Technologies, Inc., ("Water") in which the Company has
$750,000 invested as of May 31, 2000 for the commercial exploitation and
development of the invention for the on-site generation of chlorine gas
and related compounds. Global Patent Development Corp., ("Global") owns
the invention and has invested $127,000 for the acquisition and
development of the device. The device is expected to be marketed by Water
and/or Global to the water treatment industry during fiscal 2001.
5. Consulting and Options Agreements:
A) The Company's President is required to perform management services
pursuant to an agreement between the CTI Management Corp., a wholly
owned subsidiary of the Company and Oncology Services Corporation
("OSC"), Oncology Services Corporation of Tampa, Inc. ("OSC of
Tampa"), and Tampa Oncology Services, P.A. ( together "OSC"). As a
result, the Company is entitled to receive monthly payments 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 . At May 31,
2000, there were 59 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. The Company has not recorded any reserve for
the $124,000 in arrears at May 31, 2000, since OSC has been put on
notice of the default.
B) In February 2000, the Company entered into two consulting agreements
with individuals in the Republic of South Africa for the development
and assignment of certain rights and patents with respect to the
process of onsite generation of chlorine and ammonia. These
agreements required monthly fees to be paid approximating $13,000
per month through June 2000. Additionally, one agreement also
requires royalties in the amount of 3% of gross revenues derived
from the commercial exploitation onsite generation of chlorine and
ammonia process for a period of five years.
6. Property and Equipment:
Property and equipment consists of the following at May 31, 2000:
2000
----
Land $33,000
Buildings and leasehold improvements 631,707
-------
664,707
Less accumulated depreciation 485,550
-------
$179,157
The asset consists of an office condominium unit owned by the Company.
Rental income for the fiscal years 2000 and 1999 amounted to $15,200 and
$46,000, respectively. The Company incurred rental property expenses of
approximately $15,000 and $15,000 during fiscal years 2000 and 1999,
respectively, which includes annual depreciation expense of $4,453 and
$4,453.
F-9
<PAGE>
7. Minority interest obligations:
Minority interest obligations, in the amount of $37,465 at May 31, 2000,
consists 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, 2000, the assets and liabilities of the partnership consists of
the following:
2000
----
Cash $ 2,036
Other assets, including capitalized 187,290
leases
Equipment subject to capital leases 972,847
Capital lease obligations (1,307,668)
-----------
Net deficiency in partnership $ (145,495)
===========
8. Income Taxes:
There is no income tax provision (benefit) for the years ended May 31,
2000 and 1999, except for minimum franchise tax filing fees. The
reconciliation between the statutory charge for income taxes and the
actual income tax benefit for the years ended May 31, 2000 and 1999 is
shown in the following table:
2000 1999
---- ----
Computed expected tax expense: (85,000) $(18,600)
State income taxes (23,000) (8,000)
Change in valuation allowance 108,000 26,600
-------- --------
Effective income tax benefit $ -0- $ -0-
======== ========
The significant components of the deferred tax assets and liabilities as
of May 31, 2000 were as follows:
2000
----
Deferred tax assets:
NOL carryforward $(550,000)
Valuation allowance 550,000
---------
$ -0-
---------
As of May 31, 2000, the Company had a federal and state net operating loss
carryforward of $1,386,000 which expires in 2014 and 2015. 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.
9. 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 $660,000 as of May 31, 2000. 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.
F-10
<PAGE>
The Hospital has advised that it expects a reorganization plan to become
effective. The Hospital has also announced that it plans to affiliate with
Genesis Affiliated Health Services, Inc. ("Genesis"). Following the
Hospital's discharge from bankruptcy, Genesis, the Hospital and LRT intend
to form a new entity which will acquire equal shares in Logan and the
building which Logan currently occupies. The Company is also exploring the
sale of its interest in Logan. Copelco has not taken any action to proceed
against the Company's guarantee or served any notice of default. The
management of the Company believes that it is reasonably possible for
Copelco to make a claim for exercising their right for the Company to
fulfill its guarantee obligation. The Company has not recorded a provision
for any potential loss on the guarantee.
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.
A summary of the status of the Company's stock option plan as of May 31,
2000 and 1999, and changes during the years then ended is presented below:
<TABLE>
<CAPTION>
2000 1999
---- ----
Weighted Weighted
Average Average
Exercise Exercise
Shares Price Shares Price
------- -------- ----------- -----
<S> <C> <C> <C> <C>
Outstanding at beginning of year 530,000 $4.14 $ 1,152,500 $4.25
Granted -0- -0- -0- -0-
Expired (5,000) 2.38 (622,500) 4.37
------- ----- ----------- -----
Outstanding at the end of year 525,000 $4.15 $ 530,000 $4.14
======= ===== =========== =====
</TABLE>
At May 31, 2000, the Company has reserved 530,000 shares of its Common
Stock for issuance upon the exercise of all outstanding options and
exercise prices range from $1.69 to $ 5.00. The Company adopted the
disclosure provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation". For disclosures purposes, the fair value of options is
estimated on the date of grant using the Black-Scholes option pricing
model with the following weighted average assumptions used for stock
options granted during the years ended May 31, 2000 and 1999: annual
dividends of $0: expected volatility of 50%; risk free interest rate of 7%
and expected life of five years. Since the Company did not issue any
options during the past two years there is no additional compensation cost
to pro-forma in accordance with SFAS No. 123.
11. Subsequent Event:
On August 21, 2000, the Company signed a contract to sell its office
condominium in Florida with certain fixtures for $245,120, after
commissions, of which a $20,000 deposit has been received. The sale is
expected to close by September 29, 2000.
F-11
