-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CBH0FeYjAQgswHJDXPXGdENuwcExAnKTf/DKHv17ZwO31X4zRUO2i5EPUE8dEc2S 8DBHwKysply3H6teCD3Pbw== 0000950144-95-003181.txt : 19951119 0000950144-95-003181.hdr.sgml : 19951119 ACCESSION NUMBER: 0000950144-95-003181 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: RESPONSE ONCOLOGY INC CENTRAL INDEX KEY: 0000763098 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SPECIALTY OUTPATIENT FACILITIES, NEC [8093] IRS NUMBER: 621212264 STATE OF INCORPORATION: TN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09922 FILM NUMBER: 95591392 BUSINESS ADDRESS: STREET 1: 1775 MORIAH WOODS BLVD CITY: MEMPHIS STATE: TN ZIP: 38117 BUSINESS PHONE: 9017617000 MAIL ADDRESS: STREET 1: 1775 MORIAH WOODS BLVD CITY: MEMPHIS STATE: TN ZIP: 38117 FORMER COMPANY: FORMER CONFORMED NAME: RESPONSE TECHNOLOGIES INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: BIOTHERAPEUTICS INC DATE OF NAME CHANGE: 19891221 10-Q 1 RESPONSE ONCOLOGY - 9/30/95 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) (X) Quarterly report pursuant to Section 13 or 15(d) of the - --- Securities Exchange Act of 1934 For the quarterly period ended September 30, 1995 or ( ) Transition report pursuant to Section 13 or 15(d) of the - --- Securities Exchange Act of 1934 For the transition period from to ---------- ---------- Commission file number 0-15416 -------------- RESPONSE ONCOLOGY, INC. ----------------------- (Exact name of registrant as specified in its charter) Response Technologies, Inc. - --------------------------- (Former Name if Applicable) Tennessee 62-1212264 - ----------------- ------------------ (State or Other Jurisdiction (I.R.S. Employer of Incorporation or Organization) Identification No.) 1775 Moriah Woods Blvd., Memphis, TN 38117 - ------------------------------------ ------------- (Address of principal executive offices) (Zip Code) (901) 761-7000 -------------- (Registrant's telephone number, including area code) 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 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. Common Stock, $.01 Par Value, approximately 6,986,923 shares as of November 7, 1995. This filing consists of 11 sequentially numbered pages. 2 INDEX
Page ---- PART I. FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Balance Sheets, September 30, 1995 and December 31, 1994 3 Condensed Consolidated Statements of Operations for the Three Months Ended September 30, 1995 and 1994 4 Condensed Consolidated Statements of Operations for the Nine Months Ended September 30, 1995 and 1994 5 Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1995 and 1994 6 Notes to Condensed Consolidated Financial Statements 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II. OTHER INFORMATION Item 2. Change in Securities 10 Item 6. Exhibits and Reports on Form 8-K 10 Signatures 11
2 3 PART I. - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS RESPONSE ONCOLOGY, INC. AND SUBSIDIARIES September 30, December 31, CONDENSED CONSOLIDATED BALANCE SHEETS 1995 1994 ------------- ------------ ASSETS (Unaudited) (Note) CURRENT ASSETS Cash and cash equivalents $ 3,271,075 $ 2,922,266 Short-term investments 350,000 100,000 Accounts receivable, less allowances for doubtful accounts of $2,253,886 and $3,934,794 14,634,358 12,399,569 Supplies 1,047,202 941,481 Prepaid Expenses 417,916 324,637 Other current assets 541,014 97,878 ------------ ----------- TOTAL CURRENT ASSETS 20,261,565 16,785,831 PROPERTY AND EQUIPMENT--at cost, less allowances for depreciation and amortization of $5,782,730 and $4,651,829 3,988,250 4,020,799 OTHER ASSETS Deferred charges, less allowances for amortization of $98,957 and $253,621 176,918 152,520 Other assets 142,869 77,565 ------------ ----------- 319,787 230,085 ------------ ----------- TOTAL ASSETS $24,569,602 $21,036,715 ============ =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $4,613,774 $3,249,147 Accrued expenses and other liabilities 1,139,233 1,023,163 Notes payable 0 71,558 Capital lease obligations 74,569 157,030 ------------ ----------- TOTAL CURRENT LIABILITIES 5,827,576 4,500,898 CAPITAL LEASE OBLIGATIONS 18,812 28,878 STOCKHOLDERS' EQUITY Series A Convertible Preferred Stock, $1.00 par value, authorized 3,000,000 shares; issued and outstanding 27,833 and 28,333 shares respectively; liquidating preference $11.00 per share 27,833 28,333 Common Stock, $.01 par value, authorized 30,000,000 shares; issued and outstanding 6,985,923 and 6,964,431 shares, respectively 69,859 69,644 Paid-in capital 59,090,897 59,036,487 Retained earnings (deficit) (40,465,375) (42,627,525) ------------ ----------- 18,723,214 16,506,939 ------------ ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $24,569,602 $21,036,715 ============ ===========
Note: The balance sheet at December 31, 1994 has been derived from the audited financial statements at that date. See accompanying notes. 3 4 RESPONSE ONCOLOGY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended September 30, 1995 September 30, 1994 ------------------ ------------------ NET REVENUE $11,221,751 $10,837,746 OTHER INCOME--principally interest 97,510 40,640 ----------- ----------- 11,319,261 10,878,386 COSTS AND EXPENSES Operating 8,327,012 8,746,915 General and administrative 1,442,268 1,056,193 Depreciation and amortization 387,530 524,579 Interest 4,734 18,649 Provision for doubtful accounts 552,914 624,505 Loss on disposal 0 45,966 ----------- ----------- 10,714,458 11,016,807 ----------- ----------- NET EARNINGS (LOSS) $604,803 ($138,421) ----------- ----------- EARNINGS (LOSS) PER COMMON SHARE $0.08 ($0.02) ----------- ----------- WEIGHTED AVERAGE NUMBER OF COMMON SHARES 7,618,730 6,964,020 ----------- -----------
Note: The weighted average number of common shares and earnings (loss) per common share results reflect a one-for-five reverse stock split. See accompanying notes. 4 5 RESPONSE ONCOLOGY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Nine Months Ended September 30, 1995 September 30, 1994 ------------------ ------------------ NET REVENUE $33,795,022 $28,629,547 OTHER INCOME--principally interest 207,899 142,944 ----------- ----------- 34,002,921 28,772,491 COSTS AND EXPENSES Operating 24,811,188 23,554,327 General and administrative 4,061,001 3,222,406 Depreciation and amortization 1,261,833 1,612,280 Interest 15,640 115,203 Provision for doubtful accounts 1,691,109 1,879,116 Loss on disposal 0 45,966 ----------- ----------- 31,840,771 30,429,298 ----------- ----------- NET EARNINGS (LOSS) $2,162,150 ($1,656,807) ----------- ----------- EARNINGS (LOSS) PER COMMON SHARE $0.28 ($0.24) ----------- ----------- WEIGHTED AVERAGE NUMBER OF COMMON SHARES 7,588,791 6,949,459 ----------- -----------
Note: The weighted average number of common shares and earnings (loss) per common share results reflect a one-for-five reverse stock split. See accompanying notes. 5 6 RESPONSE ONCOLOGY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Nine Months Ended September 30, 1995 September 30, 1994 ------------------ ------------------ NET CASH PROVIDED BY OPERATING ACTIVITIES $1,735,563 $1,440,077 INVESTING ACTIVITIES Purchase of property and equipment (1,043,315) (323,204) Purchase of short-term investments (250,000) 0 ---------- ---------- NET CASH USED IN INVESTING ACTIVITIES (1,293,315) (323,204) FINANCING ACTIVITIES Proceeds from exercise of stock options and warrants 54,125 73,938 Principal payments on capital leases (147,564) (291,573) Net payments on line of credit 0 (2,420,670) ---------- ---------- NET CASH USED IN FINANCING ACTIVITIES (93,439) (2,638,305) ---------- ---------- INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 348,809 (1,521,432) Cash and cash equivalents at beginning of period 2,922,266 3,100,631 ---------- ---------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $3,271,075 $1,579,199 ---------- ---------- Supplemental cash flow information: Cash paid during the period for interest was $15,640
See accompanying notes. 6 7 Response Oncology, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements Nine Months Ended September 30, 1995 (Unaudited) Note 1 - Basis of Presentation The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of Management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month and nine month periods ended September 30, 1995 are not necessarily indicative of the results that may be expected for the year ending December 31, 1995. For further information, refer to the consolidated financial statements and footnotes thereto included in Response Oncology, Inc. and Subsidiaries' annual report on Form 10-K for the year ended December 31, 1994. The Company, formerly known as Response Technologies, Inc., changed its name to Response Oncology, Inc. effective November 2, 1995. Net Earnings (Loss) Per Common Share: Net earnings per common share for the quarter and nine months ended September 30, 1995 have been computed by dividing net income by the weighted average number of shares of Common Stock and Common Stock equivalents outstanding during the year. For the quarter and nine months ended September 30, 1994, loss per common share has been computed by dividing net loss by the weighted average number of shares of Common Stock outstanding during the period as common stock equivalents were antidilutive. The weighted average number of common shares and earnings (loss) per common share results reflect a one-for-five reverse stock split. Note 2 - Parent Company Response Oncology, Inc. is a subsidiary of Seafield Capital Corporation. On February 10, 1995, Seafield announced its retention of Alex. Brown and Sons, Incorporated as financial advisor to evaluate and recommend steps to enhance the value of Seafield to its shareholders. Any transaction pursued by Seafield will be likely to result in a significant change in the Company's ownership. Note 3 - Line of Credit The Company has a $2,500,000 revolving bank line of credit, secured by eligible accounts receivable, bearing interest at the bank's prime rate plus one percent, or 9.75% at September 30, 1995. The line, which expires April 1, 1996, is expected to be renewed for additional one year terms. There were no borrowings outstanding under the line as of September 30, 1995. Note 4 - Commitments and Contingencies With respect to professional and general liability risks, the Company currently maintains an insurance policy that provides coverage during the policy period ending August 1, 1996, on a claims-made basis, for $1,000,000 per claim in excess of the Company retaining $25,000 per claim, and $3,000,000 in the aggregate. Costs of defending claims are in addition to the limit of liability. In addition, the Company maintains a $50,000,000 umbrella policy with respect to potential general liability claims. Since inception, the Company has incurred no professional or general liability losses and as of September 30, 1995, the Company was not aware of any pending professional or general liability claims. 7 8 Note 5 - Common Stock On November 2, 1995, the Company effected a one-for-five reverse split of its Common Stock. Information related to issued and outstanding shares and per share results of operations in the financial statements has been adjusted for the effect of the reverse stock split. ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The Company is a leading provider of advanced cancer treatments and related services, principally on an out-patient basis, through treatment centers owned or managed by the Company. The centers, known as IMPACT(R) (IMPlementing Advanced Cancer Treatments) Centers, are staffed by experienced oncology nurses, pharmacists, laboratory technologists, and other support personnel to deliver out-patient services under the direction of private practicing oncologists. The primary treatments provided by the Centers involve high-dose chemotherapy coupled with support of the patient's immune system through the use of autologous peripheral blood stem cell reinfusion. The Centers also provide home pharmacy and out-patient infusional services for its patients. Beginning in 1994, the Company began expanding its network of centers to include hospital-affiliated centers. These centers entail either a management agreement ("managed centers") or a jointly owned entity ("jointly owned centers"). For managed centers, the Company provides technical and administrative services, including treatment protocols and data management, employee training and reimbursement support. Patient care and laboratory services are provided and billed to third parties by the host hospital, with a management fee paid to the Company. For jointly owned centers, the Company and the host hospital contribute cash and other forms of capital to establish an entity to provide outpatient and inpatient services to its patients. These entities will purchase services from the hospital to deliver and manage complex cancer treatments. The Company contemplates that it will maintain management control of these jointly owned programs, and accordingly plans to include the results of operations on a consolidated basis. The Company plans to expand its operations to include the acquisition and management of oncology physician practices as discussed more fully hereinafter. As of September 30, 1995, the Company had twenty-seven IMPACT Centers, seven managed centers, and five jointly owned centers located in twenty-one states. The five jointly owned centers were not operational as of September 30, 1995. The Company anticipates continued nationwide expansion over the next few years, primarily through the establishment of jointly owned centers. Results of Operations The Company recorded net earnings of $605,000 and $2,162,000 for the quarter and nine months ended September 30, 1995 compared to net losses of ($138,000) and ($1,657,000) for the same periods last year. Net revenue for the quarter ended September 30, 1995 of $11,222,000 increased $384,000 or 4% when compared to the quarter ended September 30, 1994. Net revenue for the nine months ended September 30, 1995 of $33,795,000 increased $5,165,000 or 18% compared to the nine months ended September 30, 1994. The increase is primarily attributable to increased patient referrals. Net revenue for the quarter and nine months ended September 30, 1995 also included approximately $180,850 and $577,500 respectively, related to the Company's efforts to conduct pharmaceutical contract research in parallel with its clinical trials data management activities. Operating expenses for the quarter ended September 30, 1995 decreased $420,000 or 5% when compared to the quarter ended September 30, 1994. Operating expenses for the nine months ended September 30, 1995 increased $1,257,000 or 5% when compared to the nine months ended September 30, 1994. These expenses consist of payroll costs, pharmaceutical and laboratory expenses, rent expense and other operational expenses. Operating expenses display a high degree of variability in proportion to patient services revenue. Operating expenses as a percentage of net revenue were 74% and 81% for the quarters and 73% and 82% for the nine month periods ended September 30, 1995 and September 30, 1994, respectively. This decrease is primarily attributable to operating efficiencies at higher levels of center activity and certain fixed operating expenses being spread over a larger revenue base. 8 9 General and administrative costs for the quarter ended September 30, 1995 increased $386,000 or 37% when compared to the quarter ended September 30, 1994. These expenses increased $839,000 or 26% for the nine months ended September 30, 1995 when compared to the nine months ended September 30, 1994. The increase is primarily attributable to increases in administrative payroll and related costs. General and administrative costs as a percentage of net revenue were 13% and 10% for the quarters and 12% and 11% for the nine months ended September 30, 1995 and 1994, respectively. Depreciation and amortization expense for the quarter ended September 30, 1995 decreased $137,000 or 26% when compared to the quarter ended September 30, 1994. The expense decreased $350,000 or 22% between the nine months ended September 30, 1994 and 1995. The decrease is primarily attributable to the startup costs of many Centers being fully amortized after a two-year operational period. The provision for doubtful accounts decreased $72,000 or 11% and $188,000 or 10% between the quarters and nine months ended September 30, 1995 and 1994, respectively. The provision as a percentage of net revenue was 5% for the quarter and nine months ended September 30, 1995 and 6% and 7% for the quarter and nine months ended September 30, 1994. The decrease is attributable to a higher proportion of contracted patient accounts, improved collections performance and an increase in revenues from physician sales, hospital management fees, and contract research for which collection is more certain. Tax net operating loss carryforwards were utilized to fully offset current year taxable income. Liquidity and Capital Resources As of September 30, 1995, the Company's working capital was $14,434,000, with current assets of $20,262,000 and current liabilities of $5,828,000. Cash and cash equivalents and short-term investments represent $3,621,000 of the Company's current assets. The Company has a $2,500,000 revolving bank line of credit, secured by eligible accounts receivable bearing interest at the bank's prime rate plus one percent, or 9.75% at September 30, 1995. The line, which expires April 1, 1996, is expected to be renewed for additional one year terms. There were no borrowings outstanding under the line at September 30, 1995. Management believes that the Company's cash and capital resources, together with available credit facilities, will be sufficient to finance current operations and anticipated expansion of the Company's network of IMPACT Centers. Subsequent to September 30, 1995, the Company engaged Smith Barney, Inc. to assist in the development of a physician practice acquisition and management strategy, including the development of financing alternatives for such contemplated acquisitions. The Company has entered into a letter of intent to purchase and manage the assets of a leading oncology-hematology practice, and expects that further acquisitions will be forthcoming. However, there are no assurances that the Company will successfully consummate the acquisition of this or any additional practices. The Company is currently evaluating means of optimally financing these acquisitions, and it is contemplated that such acquisitions will be financed through combinations of cash, debt, and equity. Accordingly, the Company will evaluate possible offerings of its Common Stock in public or private markets as means of raising additional equity capital. No material commitments for capital expenditures existed as of September 30, 1995. 9 10 New Accounting Standards Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation" is required to be implemented for the year ending December 31, 1996. The adoption of this statement is not expected to have any significant impact on the Company's financial position or results of operations. No other recently issued accounting standards presently exist which will require adoption in the future periods by the Company. PART II. - OTHER INFORMATION Item 2. Changes in Securities On November 1, 1995, an amendment to the Company's charter was approved at a Special Meeting of Shareholders decreasing the number of authorized shares from 60,000,000 shares, $.002 par value, to 30,000,000 shares, $.01 par value, with a corresponding reclassification to which each issued and outstanding share will be reclassified, converted and changed into one-fifth (1/5) of an issued and outstanding share. The amendment became effective November 2, 1995. The number of shares of Common Stock outstanding prior to the one-for-five reverse split was 34,934,615. Item 4. Submission of Matters to a Vote of Security Holders A Special Meeting of Shareholders of the Company was held November 1, 1995 for the purpose of approving an amendment to the Company's charter (i) decreasing the number of shares of Common Stock that the Company is authorized to issue from 60,000,000 shares, par value $.002 per share, to 30,000,000 shares, par value $.01 per share, with a corresponding reclassification of the Company's Common Stock pursuant to which each share of issued and outstanding Common Stock of the Company held by each holder thereof will be reclassified, converted and changed into one-fifth (1/5) of an issued and outstanding share of Common Stock, with each fractional share resulting from such conversion being redeemed by the Company for cash; and (ii) changing the name of the Company to "Response Oncology, Inc." Holders of 34,927,615 shares were eligible to vote and 23,687,506 shares were represented at the meeting. The amendment was approved by 100% of the voting securities present. Item 6. Exhibits and Reports on Form 8-K a. Exhibits Exhibit 27 --- Financial Data Schedule for SEC use only. b. Reports on Form 8-K None 10 11 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 thereafter duly authorized. Response Oncology, Inc. Date: November 13, 1995 By: /s/ Daryl Johnson ----------------- ----------------------------- Daryl Johnson Chief Financial Officer (duly authorized officer) Date: November 13, 1995 By: /s/ Debbie Elliott ----------------- ------------------------------- Debbie Elliott Controller (principal accounting officer) 11 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10-Q. 1,000 9-MOS DEC-31-1995 JAN-01-1995 SEP-30-1995 3,271 350 16,888 2,254 1,047 20,262 9,770 5,783 24,570 5,828 0 70 0 28 18,626 24,570 0 34,003 0 30,134 0 1,691 16 2,162 0 0 0 0 0 2,162 .29 .28
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