SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended Commission file number
September 30, 1996 0-15586
GHS, INC.
(Exact name of Registrant as specified in its charter)
Delaware 52-1373960
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
1350 Piccard Drive Suite 360, Rockville, Maryland 20850
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (301) 417-9808
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at November 10, 1996
----- ---------------------------------
Common Stock, $.01 par value 6,447,828 Shares
1
PART I
FINANCIAL INFORMATION
GHS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS September 30, December 31,
1996 1995
---- ----
Current assets:
Cash $ 224,000 $ 198,000
Accounts receivable, net 1,340,000 1,451,000
Unbilled accounts receivable 143,000 576,000
Current contract installments receivable 165,000 15,000
Inventory 8,000 12,000
Refundable deposits -- 290,000
Other current assets 45,000 71,000
----------- -----------
Total current assets $ 1,925,000 $ 2,633,000
Furniture and equipment, net 79,000 56,000
Capitalized software, net 221,000 291,000
Other assets 351,000 98,000
Gamma Knife venture assets:
Gamma Knife 2,037,000 2,348,000
Progress Payment- Gamma Knife 1,160,000 1,160,000
Costs incurred in connection with
leasehold interest 691,000 661,000
Deposits 65,000 65,000
Cash held in escrow 82,000 27,000
TOTAL $ 6,611,000 $ 7,339,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts Payable $ 1,018,000 $ 1,337,000
Loans Payable- Officer -- 20,000
Notes Payable - Other -- 100,000
Loan Payable - Gamma Knife - current portion 55,000 55,000
Accrued cost to complete contracts 25,000 25,000
Obligation under capital lease
- current portion 564,000 512,000
Equipment 4,000 5,000
----------- -----------
Total current liabilities $ 1,666,000 $ 2,054,000
Obligation under capital lease:
Gamma Knife 1,295,000 1,724,000
Equipment 6,000 9,000
Loan Payable Gamma Knife 1,105,000 1,105,000
Minority Interest 16,000 18,000
Common Stock - par value $.01: 500,000
shares issued with put option 500,000 500,000
Stockholders' equity:
Common stock - $.01 par value -
10,000,000 shares authorized;
6,447,828 issued and outstanding
in 1996 and 1995 $ 65,000 $ 65,000
Additional paid-in capital 3,082,000 3,082,000
(Deficit) (1,124,000) (1,218,000)
----------- -----------
Total stockholders' equity $ 2,023,000 $ 1,929,000
----------- -----------
TOTAL $ 6,611,000 $ 7,339,000
=========== ===========
The accompanying notes to financial statements are an integral part hereof.
2
GHS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
September 30, 1996
--------------------
1996 1995
---- ----
Revenue:
Patient Revenue $ 343,000 $ 254,000
Software Systems 235,000 296,000
Maintenance/Facilities Management 298,000 309,000
Claims Processing 198,000 --
Other Income 146,000 --
---------- -----------
Total revenue $1,120,000 $ 859,000
Income from joint venture 100,000 --
---------- -----------
Total $1,220,000 $ 859,000
Expenses:
Patient Expenses $ 204,000 $ 173,000
Software Systems 251,000 267,000
Maintenance/Facilities Management 231,000 199,000
Claims Processing 58,000 --
Selling, General, Administrative 177,000 168,000
Interest Expense 178,000 134,000
---------- -----------
Total expense $1,099,000 $ 941,000
Income (loss) before minority interest $ 121,000 $ (82,000)
Minority Interest in Net Loss 4,000 28,000
---------- -----------
Income (loss) $ 125,000 $ (54,000)
========== ===========
Income (loss) per share $ .02 $ (.01)
========== ===========
Weighted average shares outstanding 6,447,828 6,447,828
========== ===========
The accompanying notes to financial statements are an integral part hereof.
3
GHS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months Ended
September 30,
--------------------
1996 1995
---- ----
Revenue:
Patient Revenue $1,056,000 $ 906,000
Software Systems 934,000 1,275,000
Maintenance/Facilities Management 950,000 800,000
Claims Processing 491,000 --
Other Income 146,000 --
---------- -----------
Total revenue $3,477,000 $ 2,981,000
Income from joint venture 100,000 --
---------- -----------
Total $3,577,000 $ 2,981,000
Expenses:
Patient Expenses $ 623,000 $ 617,000
Software Systems 985,000 1,047,000
Maintenance/Facilities Management 677,000 434,000
Claims Processing Expense 241,000 --
Selling, General, Administrative 541,000 530,000
Interest Expense 418,000 379,000
---------- -----------
Total expense $3,485,000 $ 3,007,000
Income (loss) before minority interest $ 92,000 $ (26,000)
Minority Interest 2,000 32,000
---------- -----------
Income (loss) $ 94,000 $ 6,000
========== ===========
Income (loss) per share $ .01 $ --
========== ===========
Weighted average shares outstanding 6,447,828 6,447,828
========== ===========
The accompanying notes to financial statements are an integral part hereof.
4
GHS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
September 30
------------
1996 1995
---- ----
Cash flows from operating activities:
Net income (loss) $ 94,000 $ 6,000
Adjustments to reconcile net income (loss)
to net cash provided by (used in) operating activities:
Minority interest in net gain (loss) of
consolidated subsidiaries 2,000 (32,000)
Depreciation and amortization 470,000 450,000
Income in joint venture (100,000) --
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable - net 111,000 (374,000)
(Increase) decrease in unbilled accounts receivable 433,000 (343,000)
(Increase) decrease in inventory 4,000 --
(Increase) decrease in contract installments receivable (150,000) 34,000
(Increase) decrease in other current assets 26,000 (17,000)
Increase (decrease) in other assets 53,000 (52,000)
Increase (decrease) in accounts payable, accrued
expenses and accrued costs to complete contracts (319,000) 467,000
--------- ---------
Net cash provided by (used in) operating activities $ 624,000 $ 139,000
--------- ---------
Cash flows from investing activities:
Software Development Costs $ (50,000) $ (50,000)
Equipment Purchases (32,000) (23,000)
Investment in Joint Venture (155,000) --
Return of Deposit on Gamma Knife 190,000 --
Cost Incurred with Leasehold improvements (50,000) --
--------- ---------
Net cash provided by (used in) investing activities $ (97,000) $ (73,000)
--------- ---------
Cash flows from financing activities:
Payment of lease obligations (381,000) (327,000)
Proceeds of notes payable -- 100,000
Payment of notes payable (100,000) --
Loan from officers -- 20,000
Payment of loan to officer (20,000) --
--------- ---------
Net cash (used in) financing activities $(501,000) $(207,000)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 26,000 (141,000)
Cash and cash equivalents - beginning of period 198,000 153,000
--------- ---------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 224,000 $ 12,000
--------- ---------
The accompanying notes to financial statements are an integral part hereof.
5
GHS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Note A - Basis of Preparation
The accompanying financial statements at September 30, 1996, for the three
months ended September 30, 1996 and 1995, are unaudited. However, in the opinion
of management, such statements include all adjustments necessary to a fair
statement of the information presented therein. The balance sheet at December
31, 1995 has been derived from the audited financial statements at that date
appearing in the Company's Annual report on Form 10-K.
Pursuant to accounting requirements of the Securities and Exchange
Commission applicable to quarterly reports on Form 10-Q, the accompanying
financial statements and these notes do not include all disclosures required by
generally accepted accounting principles for complete financial statements.
Accordingly, these statements should be read in conjunction with the Company's
most recent annual financial statements.
Results of operations for interim periods are not necessarily indicative of
those to be achieved for full fiscal years.
6
GHS, INC. AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND
ANALYSIS OF OPERATIONS
AND FINANCIAL CONDITION
Third Fiscal Quarter 1996 Compared to Third Fiscal Quarter 1995
Results of Operations
Total revenues increased 42% to $1,220,000 from $859,000 for the same period in
1995. System sales from Global Health Systems decreased to $235,000 from
$296,000 a year earlier. This decrease was due to longer than expected contract
negotiations with public municipalities. Maintenance revenue declined 4% to
$298,000 from $309,000 a year earlier. In the second half of 1995, the Company
began using the Global Health Information System, (GHiS) to process claims for
municipalities. In the quarter ended September 30, 1996 the Company generated
$198,000 in revenues from this segment. U.S. NeuroSurgical (USN) which develops
and manages stereotactic radiosurgery centers had a 35% increase in revenue for
the third quarter.
For the nine months ended September 30, 1996 revenues increased 20% to
$3,577,000 from $2,981,000. System sales declined 27% to $934,000 from
$1,275,000 for the same period in 1995. Maintenance revenue increased to
$950,000 from $800,000 a year earlier, as a result of the growth of the
Company's facilities maintenance services. Revenue from USN increased to
$1,056,00 from $906,000 for the same period in 1995.
Total expenses increased 17% to $1,099,000 from $941,000 for the three months
ended September 30, 1996. System costs declined to $251,000 from $267,000 for
the same period in 1995. Maintenance costs increased 15% to $231,000 from
$199,000 for the same period in 1995. Patient expenses increased to $204,000
from $173,000 a year earlier. Interest expenses rose to $178,000 from $134,000
in 1995. The company continues to make progress payments for its second Gamma
Knife, which will be located in New York and is scheduled to open in 1997. For
the nine months ended September 30, 1996 the Company had total expense of
$3,485,000 versus $3,007,000 in 1995. Maintenance/facilitates management expense
increased 56% to $677,000 from $434,000 in 1995. As a result of increased travel
costs. For the quarter ended September 30, the Company had net income of
$125,000, as compared to a loss of $54,000 for the same period in 1995. For the
nine months ended September 30, 1996 the Company had net income of $94,000 as
compared to $6,000 in 1995.
Liquidity and Capital Resources
For the nine months ended September 30, 1996, net cash provided by operating
activities was $624,000 as compared to $139,000 for the same period in 1995.
Depreciation and amortization expense of $470,000 was due to depreciation of the
Gamma Knife, as well as amortization of capitalized software. Billed accounts
receivable decreased by $111,000 and unbilled accounts receivable decreased by
$433,000 from December 31, 1995. There was an decrease of $319,000 in accounts
payable and accrued expenses.
7
The Company had net cash used in investing activities of $97,000 as compared to
$73,000 for the same period in 1995. Net cash used in financing activities was
$501,000 as compared to $207,000 for the same period a year earlier. The Company
repaid its line of credit in full.
For the period ended September 30, 1996, the Company had a increase of cash and
cash equivalents of $26,000 as compared to a decrease of $141,000 a year ago.
USN's current lease is a five year capital lease which has an annual payment of
$805,000.
8
PART II
OTHER INFORMATION
GHS, INC. AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K
(a) None
(b) No reports on Form 8-K were filed during the quarter ended September 30,
1996.
9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GHS, INC.
Date November 12,1996 By /s/ Alan Gold
--------------------- -------------------------
Alan Gold
Director and President
Chief Executive Officer
10