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
June 30, 1997 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 August 11, 1997
----- ------------------------------
Common Stock, $.01 par value 6,947,828 Shares
PART I
FINANCIAL INFORMATION
GHS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30, December 31,
1997 1996
---- ----
Current assets:
Cash $ 71,000 $ 159,000
Accounts receivable, net of allowance 1,050,000 994,000
for doubtful accounts of $164,000 in
1997 and 1996
Unbilled accounts receivable -- 31,000
Other current assets 76,000 86,000
----------- -----------
Total current assets $ 1,197,000 $ 1,270,000
Furniture and equipment, net 98,000 77,000
Software development costs 105,000 180,000
Other assets 197,000 198,000
Deferred tax asset 463,000 463,000
Gamma Knife venture assets:
Gamma Knife 4,630,000 1,933,000
Progress payment- Gamma Knife -- 2,610,000
Costs incurred in connection with
unamortized leasehold interest 1,822,000 954,000
Deposits -- 43,000
Cash held in escrow 263,000 907,000
TOTAL $ 8,775,000 $ 8,635,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 729,000 $ 845,000
Loan payable-Gamma Knife-current portion -- 63,000
Obligation under capital lease -Gamma Knife-
current portion 860,000 592,000
Demand loan -- 525,000
Equipment 153,000 69,000
----------- -----------
Total current liabilities 1,742,000 2,094,000
Obligation under capital lease
Gamma Knife 4,164,000 1,132,000
Equipment 316,000 265,000
Loan payable - Gamma Knife -- 2,547,000
Common stock - par value $.01: 500,000
shares issued with put option 500,000 500,000
Stockholders' equity:
Common stock - $.01 par value -
25,000,000 shares authorized;
6,447,828 issued and outstanding
in 1997 and 1996 65,000 65,000
Additional paid-in capital 3,082,000 3,082,000
(Deficit) (1,094,000) (1,050,000)
----------- -----------
Total stockholders' equity $ 2,053,000 $ 2,097,000
----------- -----------
TOTAL $ 8,775,000 $ 8,635,000
=========== ===========
The accompanying notes to financial statements are an integral part hereof.
2
GHS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
June 30,
--------
1997 1996
---- ----
Revenue:
Software Systems $ 127,000 $ 209,000
Maintenance 407,000 345,000
Claims Processing 108,000 126,000
Patient Revenue 378,000 399,000
----------- -----------
Total 1,020,000 1,079,000
Expenses:
Software Systems 245,000 350,000
Maintenance 248,000 235,000
Claims Processing 85,000 75,000
Patient Expenses 180,000 167,000
Selling, General and Administrative 281,000 239,000
----------- -----------
Total 1,039,000 1,077,000
Income (loss) before items listed below $ (19,000) $ 2,000
Interest expense (65,000) (116,000)
Interest income 5,000 --
Net (Loss) (79,000) (116,000)
----------- -----------
Net (Loss) per share $ (.01) $ (.02)
=========== ===========
Weighted average shares outstanding 6,947,828 6,947,828
=========== ===========
The accompanying notes to financial statements are an integral part hereof.
3
GHS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Six Months Ended
June 30,
--------
1997 1996
---- ----
Revenue:
Software Systems $ 385,000 $ 699,000
Maintenance 835,000 652,000
Claims Processing 242,000 293,000
Patient Revenue 766,000 713,000
----------- -----------
Total 2,228,000 2,357,000
Expenses:
Software Systems 613,000 734,000
Maintenance 490,000 446,000
Claims Processing 173,000 177,000
Patient Expenses 369,000 419,000
Selling, General and Administrative 444,000 372,000
----------- -----------
Total 2,124,000 2,148,000
Income before items listed below $ 104,000 $ 209,000
Interest expense (166,000) (240,000)
Interest income 18,000 --
Net (Loss) (44,000) (31,000)
----------- -----------
Net (Loss) per share $ (.01) $--
=========== ===========
Weighted average shares outstanding 6,947,828 6,947,828
=========== ===========
The accompanying notes to financial statements are an integral part hereof.
4
GHS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30
-------
1997 1996
---- ----
Cash flows from operating activities:
Net (loss) $ (44,000) $ (31,000)
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization: 320,000 316,000
Minority Interest in net gain of consolidated
subsidiary 2,000
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable - net (56,000) (28,000)
Decrease in unbilled accounts receivable 31,000 389,000
Decrease in inventory -- 4,000
(Increase) decrease in contract installments
receivable -- (150,000)
(Increase) decrease in other assets 11,000 (59,000)
Decrease in cash held in escrow 644,000 --
Decrease in deposits 43,000 --
(Decrease) in accounts payable and
accrued expenses 116,000 (198,000)
----------- ---------
Net cash provided by operating activities 1,065,000 245,000
Cash flows from investing activities :
Furniture and Equipment Purchases (34,000) (10,000)
Software Development Costs -- (50,000)
Investment in Joint Venture (30,000)
Cost Incurred with Leasehold improvements (913,000) (30,000)
----------- ---------
Net cash (used in) investing activities (947,000) (120,000)
Cash flows from financing activities:
Payment of capital lease obligations (356,000) (246,000)
Proceeds of equipment lease obligations 150,000 --
Payment to loan officer -- (20,000)
----------- ---------
Net cash provided by (used in) financing activities (206,000) (266,000)
Net (decrease) in cash and cash equivalents (88,000) (141,000)
Cash and cash equivalents - beginning of period 159,000 198,000
----------- ---------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 71,000 $ 57,000
=========== =========
Supplemental disclosures of noncash financing
activities:
Loan payable - Gamma Knife (525,000) --
Lease payable - Gamma Knife 525,000 --
Progress Payment 290,000 --
Property acquired under capital lease 2,900,000 --
The accompanying notes to financial statements are an integral part hereof.
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GHS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Note A - Basis of Preparation
The accompanying financial statements at June 30, 1997, for the three
months ended June 30, 1997 and 1996, 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, 1996 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.
Note B - Subsequent Events
On July 15, 1997 the Company completed the sale of substantially all of
the assets of its' two subsidiaries Global Health Systems and GHS Management
Services, to Health Management Systems (HMS) for $2,146,000. These subsidiaries
provide computerized record-based processing systems for managed care, public
health and ambulatory care facilities. As a result the Company will be left with
assets related to US NeuroSurgical (USN), a wholly-owned subsidiary and a 20%
equity of interest in Florida Specialty Network, Ltd. a Florida limited
partnership (FSN) and the proceeds from the sale.
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GHS, INC. AND SUBSIDIARIES
MANAGEMENT DISCUSSION AND
ANALYSIS OF OPERATIONS
AND FINANCIAL CONDITION
Subsequent Events
On July 15, 1997 the Company completed the sale of substantially all of the
assets of its' two subsidiaries Global Health Systems and GHS Management
Services, to Health Management Systems (HMS) for $2,146,000. These subsidiaries
provide computerized record-based processing systems and services for managed
care, public health and ambulatory care facilities. As a result the Company will
be left primarily with assets related to US NeuroSurgical (USN), a wholly-owned
subsidiary and a 20% equity of interest in Florida Specialty Network, Ltd. a
Florida limited partnership (FSN) and the proceeds from the sale.
Second Fiscal Quarter 1997 Compared to Second Fiscal Quarter 1996
Results of Operations
Total revenue declined 5% to $1,020,000 for the quarter ended June 30, 1997 as
compared to $1,079,000 for the same period in 1996. System sales from Global
Health Systems, declined 39% to $127,000 from $209,000 a year ago. The decline
is due to a combination of a slow sales cycle and the re-engineering of the
systems design. Maintenance revenue increased 18% to $407,000 from $345,000 in
the previous year. This is a result of an increase in facilities management.
Patient revenue from the Company's other subsidiary, US NeuroSurgical (USN),
declined 5% to $378,000 from $399,000 for the same period in 1996.
Total expenses decreased from 4% to $1,039,000 for the quarter ended June 30,
1997 as compared to $1,077,000 from the same period a year earlier. System costs
declined to $245,000 from $350,000 a year ago. Maintenance costs increased 6% to
$248,000 from $235,000 in the previous year. Patient expenses increased 8% to
$180,000 from $167,000 in the previous year. Certain expenses were reclassified
for 1996 to conform to 1997 presentation. General and administrative costs rose
18% to $281,000 from $239,000 for the same period a year earlier. An increase of
$57,000 was due to expenses relating to the sale of Global Health Systems and
GHS Management Services. Interest expense declined to $65,000 from $116,000 a
year earlier. The Company has chosen to capitalize all interest costs relating
to the NYU Gamma Knife prior to opening. As a result of the foregoing, the
Company has a loss of $79,000 as compared to $116,000 in the previous year.
First Six Months 1997 Compared to First Six Months 1996
For the six months ended June 30, 1997 revenues declined 5% to $2,228,000 from
$2,357,000 a year earlier. System sales declined 45% to $385,000 from $699,000
in the
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previous year. Maintenance revenue increased 28% to $835,000 from $652,000 in
the same period a year earlier. Revenue from USN increased 7% to $766,000 from
$713,000 a year ago. USN opened its second Gamma Knife at the NYU Medical Center
in July 1997. Revenue is expected to increase during the third quarter of 1997.
For the six months ended June 30, 1997 system costs declined 16% from a year
ago. Maintenance costs increased 10%, which is not significant compared with the
gains in revenue. Patient expenses decreased 12% for the period. Selling,
general and administrative costs increased 19%. This was related to the sale of
Global Health Systems and GHS Management Services. For the six months ended June
30, 1997 the Company had a loss of $44,000 as compared to a loss of $31,000 a
year earlier.
Liquidity and Capital Resources
For the six months ended June 30, 1997 net cash provided by operating activities
was $1,065,000 as compared to $245,000 in 1996. Depreciation and amortization
expense was $320,000 as compared to $316,000 a year earlier. Depreciation of the
Gamma Knife as well as amortization of capitalized software are the major
components of this expense. A decrease in cash held in escrow of $644,000 was
for the completion of the NYU Gamma Knife facility.
The Company had net cash used in investing activities of $947,000 as compared to
$120,000 in 1996. The costs of the leasehold improvements related to the NYU
Gamma Knife were $913,000.
The Company had net cash used in financing activities of $206,000 at June 30,
1997. The Company paid $356,000 towards its lease obligations and received
proceeds of $150,000 to complete the NYU Gamma Knife Project.
Subsequent Events
On July 15, 1997 the Company received $2,146,000 in connection with the sale of
its subsidiaries.
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PART II
OTHER INFORMATION
GHS, INC. AND SUBSIDIARIES
Item 6. Exhibits and Reports on Form 8-K
(a) None
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 August 12, 1997 By /s/ Alan Gold
-----------------------------
Alan Gold
Director and President
Chief Executive
Officer
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