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, 2002 0-26575
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 changedsince 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 3, 2002
7,866,185 Shares Common Stock, $.01 par value
PART I
FINANCIAL INFORMATION
U.S. NEUROSURGICAL, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS June 30, December 31,
2002 2001
----------- -----------
Current assets:
Cash and cash equivalents $ 129,000 $ 311,000
Accounts receivable 639,000 431,000
Income tax receivable 40,000 --
Deferred tax asset 40,000 40,000
Other current assets 52,000 52,000
----------- -----------
Total current assets $ 900,000 $ 834,000
----------- -----------
Gamma Knife (net of accumulated depreciation of
$5,446,000 in 2002 and $5,192,000 in 2001) 1,019,000 1,273,000
Leasehold improvements (net of accumulated
amortization of $1,319,000 in 2002 and $1,136,000 in 2001) 1,367,000 1,550,000
Office furniture and computers (net of accumulated
Depreciation of $87,000 in 2002 and $74,000 in 2001) 20,000 33,000
----------- -----------
Total property and equipment 2,406,000 2,856,000
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Cash held in escrow 105,000 105,000
----------- -----------
TOTAL $ 3,411,000 $ 3,795,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 84,000 $ 52,000
Note payable - litigation settlement 100,000 100,000
Obligations under capital lease
and loans payable- current portion 1,065,000 1,000,000
Due to stockholder 300,000 300,000
Income tax payable 46,000 36,000
Other current liabilities 38,000 23,000
----------- -----------
Total current liabilities 1,633,000 1,511,000
Note payable-litigation settlement-net of current portion -- 100,000
Deferred tax liability 68,000 68,000
Obligations under capital lease and loans payable-net
of current portion 340,000 837,000
----------- -----------
2,041,000 2,516,000
----------- -----------
Commitments, litigation and other matters
Stockholders' equity:
Common stock 79,000 79,000
Additional paid-in capital 2,808,000 2,808,000
Accumulated deficit (1,509,000) (1,608,000)
Treasury stock, at cost (8,000) --
----------- -----------
Total stockholders' equity $ 1,370,000 $ 1,279,000
----------- -----------
TOTAL $ 3,411,000 $ 3,795,000
=========== ===========
The accompanying notes to financial statements are an integral part hereof.
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U.S. NEUROSURGICAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended
June 30,
2002 2001
--------- ---------
Revenue:
Patient Revenue $ 638,000 $ 705,000
--------- ---------
Expenses:
Patient Expenses 242,000 344,000
Selling, General and Administrative 327,000 274,000
--------- ---------
Total 569,000 618,000
--------- ---------
Income from operations 69,000 $ 87,000
Interest expense (49,000) (89,000)
Interest income -- 2,000
--------- ---------
Income from Continuing Operations before tax 20,000 --
Income tax provision 5,000 --
---------
Income from Continuing Operations 15,000 --
Income from Discontinued Operations (less applicable -- 67,000
---------
Income tax of $33,000 in 2001)
Net Income $ 15,000 $ 67,000
========= =========
Earnings per share from continuing operations $ -- $ --
========= =========
Earnings per share from discontinued operations $ -- $ .01
========= =========
Earnings per share $ -- $ .01
========= =========
The accompanying notes to financial statements are an integral part hereof.
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U.S. NEUROSURGICAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
Six Months Ended
June 30,
2002 2001
----------- -----------
Revenue:
Patient Revenue $ 1,384,000 $ 1,236,000
----------- -----------
Expenses:
Patient Expenses 456,000 671,000
Selling, General and Administrative 663,000 606,000
----------- -----------
Total 1,119,000 1,277,000
----------- -----------
Income (loss) income from operations 265,000 (41,000)
Interest expense (99,000) (153,000)
Interest income 1,000 6,000
----------- -----------
Income (loss) from Continuing Operations before tax 167,000 (188,000)
Income tax provision (benefit) 68,000 (62,000)
----------- -----------
Income (loss) from Continuing Operations 99,000 (126,000)
Income from Discontinued Operations (less applicable -- 67,000
----------- -----------
Income tax of $33,000 in 2001)
Net Income (loss) $ 99,000 $ (59,000)
=========== ===========
Earnings (loss) per share from continuing operations $ .01 $ (.02)
=========== ===========
Earnings per share from discontinued operations $.-- $ .01
=========== ===========
Earnings (loss) earnings per share $ .01 $ (.01)
=========== ===========
The accompanying notes to financial statements are an integral part hereof.
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U.S. NEUROSURGICAL, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30
2002 2001
--------- ---------
Cash flows from operating activities:
Net income (loss) $ 99,000 $ (59,000)
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization: 451,000 657,000
Changes in operating assets and liabilities:
Increase in accounts receivables (208,000) (186,000)
Increase in income tax receivable and other current assets (40,000) (33,000)
Increase (decrease) in payables and income tax payable 56,000 (135,000)
--------- ---------
Net cash provided by operating activities 358,000 244,000
Cash flows from investing activities :
Increase in cash held in escrow (3,000)
---------
Cash flows from financing activities:
Proceeds from loan -- 200,000
Repayment of note payable (100,000) (150,000)
Purchase of treasury stock (8,000) (4,000)
Payment of capital lease obligations (432,000) (414,000)
--------- ---------
Net cash used in financing activities (540,000) (368,000)
--------- ---------
Net decrease in cash and cash equivalents (182,000) (127,000)
Cash and cash equivalents - beginning of period 311,000 286,000
--------- ---------
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 129,000 $ 159,000
========= =========
Supplemental disclosures of cash flow information:
Cash paid for
Interest $ 99,000 $ 153,000
Income Taxes 102,000 135,000
The accompanying notes to financial statements are an integral part hereof.
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U.S. NEUROSURGICAL, INC. AND SUBSIDIARY
NOTES TO FINANCIAL STATEMENTS
Note A - Basis of Preparation
The accompanying financial statements at June 30 2002, and for the three
and six months ended June 30, 2002 and 2001, 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, 2001 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 - Treasury Stock
During 2002, the Company purchased as part of its buyback program, 94,500
shares of its own common stock at a cost of $8,000.
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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.
Second Quarter 2002 Compared to Second Quarter 2001 and Six Months Ended June
30, 2002 Compared to Six Months Ended June 30, 2001
Results of Operations
Patient revenue decreased approximately 10% to $638,000 in the quarter
ended June 30, 2002 from $705,000 for the quarter ended June 30, 2001. The
decrease was due to a decline in rate reimbursement from the centers. Patient
expenses decreased approximately 30% to $242,000 from $344,000 a year earlier.
The decrease was due to the completion of depreciation on our Kansas City gamma
knife. Selling, general and administrative expense "(S,G&A)" increased 19% to
$327,000 for the quarter as compared to $274,000 in the prior year. The increase
was due to higher insurance costs as well as increased salaries. Interest
expense decreased approximately 45% to $49,000 from $89,000 in the same period a
year earlier. The decrease was due to a reduction of our leases on the Gamma
Knife properties. For the quarter ended June 30, 2002, income from continuing
operations was $14,000 as compared to breakeven for the same period a year
earlier.
For the six months ended June 30, 2002 revenue increased approximately 12%
to $1,384,000 from $1,236,000 in the same period a year earlier. The increase is
due to increased procedures at the NYU Center. Patient expenses decreased 32% to
$456,000 in 2002 from $671,000 in the same period in 2001. The decrease is the
same as explained above. S,G & A increased 9% to $663,000 as compared to
$606,000 in the same period a year earlier. The increase was due to an increase
in salaries and increased insurance costs. Interest expense decreased
approximately 35% to $99,000 from $153,000 in the same period a year ago. The
reason for the decrease was due to a reduction of our leases on the Gamma Knife
properties. Income from operations was $99,000 for the six months ended June 30,
as compared to a loss of $126,000 for the six months ended June 30, 2001.
Liquidity and Capital Resources
At June 30, 2002 the Company had a working capital deficit of $733,000 as
compared to $677,000 at December 31, 2001. Cash and cash equivalents at June 30,
2002 were $129,000 as compared with $311,000 at December 31, 2001.
Net cash provided by operating activities was $358,000 as compared with
$244,000 for the same period, a year earlier. Depreciation and amortization was
$451,000 for the six months ended June 30, 2002 as compared to $657,000 in the
prior year period. The decrease was due to the completion of depreciation on our
Kansas City gamma knife. There was an increase in accounts receivables of
$208,000 during the six months ended June 30, 2002 as compared to an increase of
$186,000 in the previous year. Payables and accrued expenses increased $56,000
in 2002 as compared to a decrease of $135,000 in 2001.
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Net cash used in financing activities was $540,000 as compared to $368,000
for the same period in 2001. Notes payable decreased $100,000 in 2002. The
Company paid $432,000 towards its capital lease obligations as compared to
$414,000 in the same period in 2001.
The Company expects cash flow from operations and cash on hand to be
sufficient to finance the business for the next 12 months.
Forward Looking Statements
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) 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
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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 August 14, 2002 By /s/ Alan Gold
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Alan Gold
Director and President
Chief Executive Officer
Date August 14, 2002 By /s/ Howard Grunfeld
----------------------- -----------------------
Howard Grunfeld
Vice President of Finance
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