10-Q 1 0001.txt FORM 10-Q 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 March 31, 2001 0-15586 U.S. NEUROSURGICAL, INC. (Exact name of Registrant as specified in its charter) Delaware 52-1842411 (State of other jurisdiction of (I.R.S. Employer incorporation or organization) identification No.) 2400 Research Blvd, Suite 325, Rockville, Maryland 20850 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (301) 208-8998 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 May 10, 2001 ----- --------------------------- Common Stock, $.01 par value 7,316,685 Shares PART I FINANCIAL INFORMATION U.S. NEUROSURGICAL, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS
ASSETS March 31, December 31, 2001 2000 ---- ---- Current assets: Cash and cash equivalents $ 78,000 $ 286,000 Accounts receivable, net of allowance of $150,000 400,000 397,000 Income tax receivable 51,000 -- Deferred tax asset 60,000 60,000 Other current assets 27,000 27,000 ----------- ----------- Total current assets $ 616,000 $ 770,000 ----------- ----------- Gamma Knife (net of accumulated depreciation of $4,638,000 in 2001 and $4,407,000 in 2000) 1,828,000 2,058,000 Leasehold improvements (net of accumulated amortization of $909,000 in 2001 and $818,000 in 2000) 1,776,000 1,868,000 Office furniture and computers (net of accumulated Depreciation of $55,000 in 2001 and $48,000 in 2000) 52,000 59,000 ----------- ----------- Total property and equipment 3,656,000 3,985,000 ----------- ----------- Cash held in escrow 103,000 101,000 ----------- ----------- TOTAL $ 4,375,000 $ 4,856,000 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses $ 123,000 $ 106,000 Note payable - litigation settlement 150,000 150,000 Obligations under capital lease and loans payable- current portion 865,000 841,000 Due to stockholder 300,000 300,000 Income tax payable -- 135,000 Other current liabilities 40,000 25,000 ----------- ----------- Total current liabilities 1,478,000 1,557,000 Note payable-litigation settlement-net of current portion 200,000 200,000 Deferred tax liability 250,000 250,000 Obligations under capital lease and loans payable-net of current portion 1,446,000 1,718,000 ----------- ----------- 3,374,000 3,725,000 ----------- ----------- Commitments, litigation and other matters Stockholders' equity: Common stock 73,000 73,000 Additional paid-in capital 2,789,000 2,789,000 Accumulated deficit (1,854,000) (1,728,000) Treasury stock, at cost (7,000) (3,000) ----------- ----------- Total stockholders' equity $ 1,001,000 $ 1,131,000 ----------- ----------- TOTAL $ 4,375,000 $ 4,856,000 =========== ===========
The accompanying notes to financial statements are an integral part hereof. 2 U.S. NEUROSURGICAL, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS Three Months Ended March 31, --------- 2000 2000 ---- ---- Revenue: Patient Revenue $ 531,000 $ 588,000 ----------- ----------- Expenses: Patient Expenses $ 327,000 $ 281,000 Selling, General and Administrative 332,000 270,000 ----------- ----------- Total 659,000 551,000 ----------- ----------- Operating (Loss) income $ (128,000) $ 37,000 Interest expense (64,000) (76,000) Interest income 4,000 4,000 ----------- ----------- Loss (income) before income taxes (188,000) (35,000) Income tax (benefit) provision (62,000) (12,000) ----------- ----------- Net (Loss) income (126,000) (23,000) ----------- ----------- Proforma basic and diluted loss per share $ (.02) $ -- ----------- ----------- Proforma weighted average shares outstanding 7,316,685 7,316,685 The accompanying notes to financial statements are an integral part hereof. 3 U.S. NEUROSURGICAL, INC. AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31 -------- 2001 2000 ---- ---- Cash flows from operating activities: (Loss) from continuing operations $(126,000) $ (23,000) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization: 327,000 287,000 Changes in operating assets and liabilities: (Increase) decrease in receivables (3,000) 3,000 (Increase) in income tax rec. and other current assets (51,000) (34,000) (Decrease) in payables and accrued expenses (103,000) (70,000) --------- --------- Net cash provided by operating activities 44,000 163,000 --------- --------- Cash flows from investing activities : Increase in cash held in escrow (2,000) (1,000) --------- --------- Net cash used in investing activities (2,000) (1,000) Cash flows from financing activities: Payment of capital lease obligations (250,000) (356,000) --------- --------- Net cash used in financing activities (250,000) (356,000) Net (decrease) increase in cash and cash equivalents (208,000) (194,000) Cash and cash equivalents - beginning of period 286,000 464,000 --------- --------- CASH AND CASH EQUIVALENTS - END OF PERIOD $ 78,000 $ 270,000 ========= ========= Supplemental disclosures of cash flow information: Cash paid for Interest 64,000 76,000 Taxes 125,000 2,000
The accompanying notes to financial statements are an integral part hereof. 4 U.S. NEUROSURGICAL, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS Note A - Basis of Preparation The accompanying financial statements at March 31 2001, and for the three months ended March 31, 2001 and 2000, are unaudited. However, in the opinion of management, such statements include all adjustments necessary for a fair statement of the information presented therein. The balance sheet at December 31, 2000 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. 5 U.S. NEUROSURGICAL, INC. AND SUBSIDIARY MANAGEMENT DISCUSSION AND ANALYSIS OF OPERATIONS AND FINANCIAL CONDITION 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. First Quarter 2001 Compared to First Quarter 2000 Results of Operations Patient revenue decreased 10% to $531,000 in the quarter ended March 31, 2001 from $588,000 for the quarter ended March 31, 2000. Revenues have been negatively affected due to the implementation of the Ambulatory Product Classifications Medicare outpatient payment system. Patient expenses increased 16% to $327,000 from $281,000 a year earlier. The increase was due to an increase in amortization expense as the cobalt source in Kansas City was reloaded in 2000. Selling, general and administrative expense increased 23% to $332,000 from $270,000 for the quarter ended March 31 a year ago. The increase was due to professional fees and there was a 5% increase in salaries and related benefits. Interest expense decreased 16% to $64,000 from $76,000 in the same period a year earlier. The decrease was due to increased principal payments on its Gamma Knife properties. For the quarter ended March 31 2001, net loss was $126,000 as compared to a loss of $23,000 for the same period a year earlier. Liquidity and Capital Resources At March 31, 2001 the Company had a working capital deficit of $832,000 as compared to $787,000 at December 31, 2000. Cash and cash equivalents at March 31, 2001 were $78,000 as compared with $286,000 at December 31, 2000. The company has had discussions with DVI, Inc. in order to borrow funds to meet its short term obligations. The Company has no assurance that it will be able to complete this financing. Net cash provided by operating activities was $44,000 as compared with $163,000 for the same period, a year earlier. Depreciation and amortization was $327,000 for the quarter ended March 31, 2001 as compared to $287,000 in the same period, one year earlier. Net cash used in financing activities was $250,000 as compared to $356,000 for the same period a year earlier, as USN pays down the principal on its capitalized leases. This document contains forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that forward-looking statements are inherently uncertain. Such statements by their nature entail various risks, reflecting the dynamic, complex, and rapidly changing nature of the health care industry. Results actually achieved may differ materially from those currently anticipated. The various risks include but are not necessarily limited to: (i) the continued ability of USN to grow internally or by acquisition, (ii) the success experienced in integrating acquired businesses into the USN group of companies, (iii) 6 government regulatory and political pressures which could reduce the rate of growth of health care expenditures, (iv) competitive actions by other companies, and (v) other risks, as noted in USN's registration statements and periodic reports filed with the Commission. PART II OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) None 7 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. U.S. Neurosurgical, Inc. Date May 17, 2001 By /s/ Alan Gold ------------ ------------------------------------- Alan Gold Director and President Chief Executive Officer Date May 17, 2001 By /s/ Howard Grunfeld ------------ ------------------------------------- Howard Grunfeld Vice President of Finance 8