SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q/A
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the quarter ended April
30, 1996
[ ] 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 0-27568
PhyMatrix Corp.
(Exact name of registrant as specified in its charter)
Delaware 65-0617076
(State of incorporation) (I.R.S. Employer Identification No.)
Phillips Point, Suite 1000E
777 S. Flagler Drive, West Palm Beach, Florida 33401
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (407) 655-3500
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $ 0.01 per share
Indicate by check mark whether the registrant (1) has filed all reports
required 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 [ ]
On June 12, 1996, the number of outstanding shares of the registrant's
Common Stock, par value $0.01 per share, was 21,854,202.
<PAGE>
PHYMATRIX CORP.
QUARTERLY REPORT ON FORM 10-Q/A
INDEX
<TABLE>
<CAPTION>
PAGE
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PART I -- FINANCIAL INFORMATION
<S> <C> <C>
Item 1. Financial Statements.
Balance Sheets -- April 30, 1996 (unaudited), January 31, 1996
(unaudited) and December 31, 1995 3
Statements of Operations (unaudited) -- Three Months Ended April
30, 1996, One Month Ended January 31, 1996 and Three Months Ended
March 31, 1995 4
Statements of Cash Flows (unaudited) -- Three Months Ended April
30, 1996, One Month Ended January 31, 1996 and Three Months Ended
March 31, 1995 5
Notes to Financial Statements (unaudited) 6-8
PART II -- OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
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2
<PAGE>
PART I--FINANCIAL INFORMATION
Item 1. Financial Statements
PHYMATRIX CORP.
BALANCE SHEETS
<TABLE>
<CAPTION>
Consolidated Consolidated Combined
April 30, January 31, December 31,
1996 1996 1995
----------- ------------ -------------
(unaudited) (unaudited)
<S> <C> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $34,142,173 $46,113,619 $ 3,596,913
Receivables
Accounts receivable, net 24,447,358 21,562,477 20,710,846
Other receivables 179,513 678,411 569,923
Notes receivable -- -- 516,000
Prepaid expenses and other current assets 1,987,038 1,202,399 1,276,535
----------- ------------ -------------
Total current assets 60,756,082 69,556,906 26,670,217
Property, plant and equipment, net 39,087,961 38,719,086 39,359,328
Notes receivable 100,000 100,000 170,400
Goodwill, net 47,006,150 44,979,865 31,931,453
Management service agreements, net 16,574,707 15,816,042 16,376,636
Investment in affiliates 3,272,028 3,256,783 12,925,129
Other assets (including restricted cash) 7,623,278 7,578,791 4,753,710
----------- ------------ -------------
Total assets $174,420,206 $180,007,473 $132,186,873
=========== ============ =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of debt and capital leases $2,334,188 $ 2,552,306 $ 26,662,510
Current portion of related party debt 2,435,294 4,740,588 4,740,588
Due to shareholder--current 5,376,000 5,376,000 --
Accounts payable 4,293,252 5,333,791 5,353,210
Accrued compensation 824,288 1,151,268 1,124,316
Accrued liabilities 5,392,961 6,194,108 9,367,532
Accrued interest--shareholder 228,480 -- 1,708,174
----------- ----------- -------------
Total current liabilities 20,884,463 25,348,061 48,956,330
Due to shareholder, less current portion 6,310,882 10,147,287 36,690,180
Long-term debt and capital leases, less current portion 13,855,411 13,653,437 28,847,923
Other long term liabilities 2,127,632 2,314,544 2,511,122
Minority interest 1,730,630 1,335,167 2,502,970
----------- ----------- -------------
Total liabilities 44,909,018 52,798,496 119,508,525
Commitments and contingencies
Shareholders' equity:
Common Stock, par value $.01; 40,000,000 shares
authorized; 21,529,950 shares issued and outstanding
at April 30, 1996 and January 31, 1996 215,300 215,300 --
Additional paid in capital 140,502,110 140,491,557 25,000,000
Retained earnings (deficit) (11,206,222) (13,497,880) (12,321,652)
----------- ------------ -------------
Total shareholders' equity 129,511,188 127,208,977 12,678,348
----------- ------------ -------------
Total liabilities and shareholders' equity $174,420,206 $180,007,473 $132,186,873
=========== =========== =============
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
PHYMATRIX CORP.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Consolidated Consolidated Combined
Three Months One Month Three Months
Ended Ended Ended
------------ ------------ ------------
April 30, January 31, March 31,
1996 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Net revenue from services $20,052,278 $ 4,636,127 $ 6,669,100
Net revenue from management service agreements 17,154,816 6,079,109 --
----------- ----------- -----------
Total revenue 37,207,094 10,715,236 6,669,100
----------- ----------- -----------
Operating costs and administrative expenses
Cost of affiliated physician management services 8,533,111 2,796,623 --
Salaries, wages and benefits 11,659,915 3,636,973 4,510,135
Professional fees 901,598 287,095 447,336
Supplies 5,482,904 1,916,013 601,479
Utilities 584,605 175,653 135,654
Depreciation and amortization 1,592,711 535,300 338,057
Rent 1,706,075 565,106 326,396
Earn out payment -- -- 1,111,111
Provision for bad debts 580,248 256,989 34,621
Other 2,308,679 799,460 1,043,757
----------- ----------- -----------
Total operating costs and administrative expenses 33,349,846 10,969,212 8,548,546
Interest expense, net 40,991 551,607 287,480
Interest expense, shareholder 228,480 259,888 32,601
Minority interest 34,041 81,135 105,277
Income from investment in affiliates (141,947) 29,622 --
----------- ----------- -----------
Income (loss) before provision for income taxes 3,695,683 (1,176,228) (2,304,804)
Income tax expense 1,404,025 -- --
----------- ----------- -----------
Net income (loss) $ 2,291,658 $(1,176,228) $(2,304,804)
=========== =========== ===========
Net income (loss) per share $ 0.11 $ (0.08)
=========== ===========
Weighted average number of shares outstanding 21,529,950 14,204,305
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
PHYMATRIX CORP.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Consolidated Consolidated Combined
Three Months One Month Three Months
Ended Ended Ended
------------ ------------- --------------
April 30, January 31, March 31,
1996 1996 1995
----------- ------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income (loss) $ 2,291,658 $(1,176,228) $ (2,304,794)
Noncash items included in net income (loss):
Depreciation and amortization 1,592,711 535,300 338,057
Other (15,245) 430,334 (106,045)
Changes in receivables (3,214,260) (739,635) (836,249)
Changes in accounts payable and accrued liabilities (1,141,673) (796,011) 207,840
Changes in other assets (248,777) (19,072) (129,972)
--------- ------------ -----------
Net cash used by operating activities (735,586) (1,765,312) (2,831,163)
--------- ------------ -----------
Cash flows from investing activities
Capital expenditures (682,709) (184,460) (113,789)
Sale of assets -- 24,794 --
Repayment of notes receivable -- 686,400 --
Other assets (84,285) -- --
Acquisitions, net of cash acquired (2,738,114) 54,252 (16,601,955)
--------- ------------ -----------
Net cash used by investing activities (3,505,108) 580,986 (16,715,744)
--------- ------------ -----------
Cash flows from financing activities
Capital contributions -- -- 12,036,287
Advances from (repayment to) shareholder (3,836,405) (23,123,170) 9,482,556
Proceeds from issuance of common stock -- 114,563,221 --
Release of cash collateral -- 1,000,000 --
Cash collateralizing note payable -- (5,403,337) --
Offering costs (929,409) -- --
Other assets -- -- (222,500)
Repayment of debt (2,964,938) (43,335,682) (1,080,321)
--------- ------------ -----------
Net cash provided (used) by financing activities (7,730,752) 43,701,032 20,216,022
--------- ------------ -----------
Increase (decrease) in cash and cash equivalents (11,971,446) 42,516,706 669,115
Cash and cash equivalents, beginning of period 46,113,619 3,596,913 677,245
--------- ------------ -----------
Cash and cash equivalents, end of period $ 34,142,173 $46,113,619 $ 1,346,360
========= ============ ===========
Supplemental disclosure of cash flow information
Cash paid during period for: Interest $ 671,113 $2,876,636 $ 297,374
========= ============ ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
PHYMATRIX CORP.
NOTES TO FINANCIAL STATEMENTS
Three Months Ended April 30, 1996,
One Month Ended January 31, 1996
and Three Months Ended March 31, 1995
(Unaudited)
(1) ORGANIZATION AND BASIS OF PRESENTATION
The accompanying unaudited interim financial statements include the accounts
of PhyMatrix Corp. ("the Company") and the combination of business entities
which had been operated under common control. These interim financial statements
have been prepared in accordance with generally accepted accounting principles
and the requirements of the Securities and Exchange Commission. Accordingly,
certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is management's opinion that the accompanying
interim financial statements reflect all adjustments (which are normal and
recurring) necessary for a fair presentation of the results for the interim
periods. These interim financial statements should be read in conjunction with
the audited financial statements and notes thereto included in the Company's
Special Report on Form 10-K for the year ended December 31, 1995. Operating
results for the three months ended April 30, 1996 are not necessarily indicative
of results that may be expected for the year. In January 1996, the Company
changed its fiscal year end from December 31 to January 31 and the unaudited
financial statements as of and for the one month period ended January 31, 1996
are included herein.
(2) INITIAL PUBLIC OFFERING
The Company filed a Registration Statement on Form S-1 with the Securities
and Exchange Commission in connection with an initial public offering ("IPO")
which became effective January 23, 1996. In connection with the IPO, the Company
issued 8,222,500 shares of Common Stock. Net proceeds to the Company were
$111,685,681, which was net of underwriting commissions and expenses. The
Company used approximately $71,500,000 from the net proceeds of the IPO to repay
certain indebtedness and obligations that arose from certain acquisitions. The
remaining net proceeds have and will continue to be used for general corporate
purposes, including future acquisitions and working capital.
(3) ACQUISITIONS
During April 1996, the Company purchased a 50% interest in Central Georgia
Medical Management, LLC, a newly formed management services organization ("MSO")
that provides management services to an independent physician association
("IPA") composed of 45 physicians based in Georgia. The Company acquired this
interest in exchange for a payment of $550,000 to existing shareholders and a
capital contribution of $700,000 to the Company. The Company's balance sheet at
April 30, 1996 includes the 50% interest not owned by the Company as minority
interest. The owners of the other 50% interest in the MSO have a put option to
the Company to purchase their interests. This put option vests over a four year
period. The price to the Company to purchase these interests equals 40% of
the MSO's net operating income as of the most recent fiscal year multiplied by
the price earnings ratio of the Company. The minimum price earnings ratio used
in such calculation will be 4 and the maximum 10.
During April 1996, the Company purchased the assets of and entered into an
employment agreement with one physician in Florida. The total purchase price for
these assets was $1,631,699. The purchase price was allocated to these assets at
their fair market value including goodwill of $1,581,979. The resulting
intangible is being amortized over 20 years.
During the three months ended April 30, 1996 and March 31, 1995 the Company
acquired the assets and assumed certain liabilities of physician practices,
medical support service companies and management service organizations. The
transactions had the following non-cash impact on the balance sheets:
6
<PAGE>
PHYMATRIX CORP.
NOTES TO FINANCIAL STATEMENTS
Three Months Ended April 30, 1996,
One Month Ended January 31, 1996
and Three Months Ended March 31, 1995
(Unaudited)
<TABLE>
<CAPTION>
April
30, March 31,
1996 1995
-------- ----------
<S> <C> <C>
Current assets $ -- $3,548,797
Property, plant and
equipment 693,220 27,028,456
Intangibles 3,038,394 8,696,178
Other noncurrent assets -- 1,185,774
Current liabilities -- (2,597,623)
Debt (643,500) (19,470,992)
Noncurrent liabilities (350,000) (1,788,635)
</TABLE>
(4) LONG TERM DEBT
During January 1996, the Company used approximately $71,500,000 from the
proceeds of the IPO, to repay the following indebtedness and obligations of the
Company that arose from certain acquisitions: (i) a promissory note to Aegis
Health Systems, Inc. in the amount of $3,796,503 (including interest); (ii) a
contingent note to the shareholders of Nutrichem, Inc., net of a tax loan
receivable due from the shareholders, in the amount of $3,854,595 (including
interest); (iii) a note payable to a financing institution in connection with
the purchase of Oncology Therapies, Inc. in the amount of $15,585,023 (including
interest); (iv) a note payable to NationsBank of Florida, N.A. in the amount of
$19,586,531 (including interest); and (v) a partial payment of $28,676,743 on
the note payable to Abraham D. Gosman, the Company's President, Chief Executive
Officer, Chairman and principal stockholder.
During April 1996, the Company repaid $2,305,294 of related party
indebtedness to one of the shareholders of DASCO Development Corporation.
(5) RELATED PARTY TRANSACTIONS
During the three months ended April 30, 1996, the Company contracted with an
entity principally owned by the Company's Chairman of the Board, President and
Chief Executive Officer to provide construction management, development,
marketing and consulting services for a medical mall being constructed by such
entity. During the three months ended April 30, 1996 the Company recorded
revenues in the amount of $304,020 related to such services.
(6) SUBSEQUENT EVENTS
During May 1996, the Company received a commitment from PNC Bank, National
Association, for a $30 million revolving credit facility and anticipates closing
on this financing on or about June 30, 1996.
During May 1996, the Company purchased the stock of Atlanta Gastroenterology
Associates, P.C. pursuant to a tax free merger and entered into a 40-year
management agreement with the medical practice in exchange for 324,252 shares of
Common Stock of the Company having a value of approximately $6,100,000. The
transaction will be accounted for using the pooling-of-interests method of
accounting. Pursuant to the management agreement, the Company will receive a
base management fee, an incentive management fee, and a percentage of all net
ancillary service income.
During May 1996, the Company amended its existing management agreement with
Oncology Care Associates and extended the term of the agreement to 20 years.
Simultaneously, the Company expanded the Oncology Care Associates practice by
adding three oncologists the practices of whom the Company acquired for
$500,000. $200,000 of such purchase price was paid in cash and $300,000 was paid
in the form of a convertible note with a maturity in May 1997. The Company has
the option to make such $300,000 payment at its discretion in either cash or
Common Stock of the Company with such number of shares to be based upon the
average price of the stock during the five business days preceding such date.
The purchase price will be allocated to the assets at their fair
7
<PAGE>
PHYMATRIX CORP.
NOTES TO FINANCIAL STATEMENTS
Three Months Ended April 30, 1996,
One Month Ended January 31, 1996
and Three Months Ended March 31, 1995
(Unaudited)
market value, including management service agreements of approximately $500,000.
The Company will receive an annual base management fee and an incentive
management fee. The resulting intangible will be amortized over 20 years.
Subsequent to April 30, 1996, the Company has entered into agreements to
purchase the assets of and enter into 20-year management agreements with three
physician practices consisting of four physicians. Two of these agreements have
closed in escrow pending the satisfaction of certain conditions. These practices
are located in South Florida, Bethesda, Maryland and Washington, D.C. The total
purchase price for the assets of these practices was $1,520,530. Of this amount
$585,416 was paid in cash and $935,114 of such purchase price is payable in
Common Stock of the Company to be issued during May and June 1997. The number of
shares of Common Stock of the Company to be issued is based upon the average
price of the stock during the five business days prior to the issuance. The
purchase price will be allocated to the assets at their fair market value,
including management service agreements of approximately $1,155,871. The Company
will receive an annual base management fee and an incentive management fee for
each agreement. The resulting intangible will be amortized over 20 years.
During June 1996, the Company announced that it intends, subject to market
and other conditions, to raise $100 million through the sale of convertible
subordinated debentures to certain institutional investors and non-U.S.
investors and up to $15 million if an over-allotment option to be granted is
exercised in full. The debentures will be convertible into shares of the
Company's Common Stock. The securities to be offered will not be registered
under the Securities Act of 1933, as amended, or applicable state securities
laws, and may not be offered or sold absent registration under the Securities
Act and applicable state securities laws or available exemptions from
registrations.
8
<PAGE>
PART II--OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
- -------
27 Financial Data Schedule
(b) Reports on Form 8-K
PhyMatrix filed a Current Report on Form 8-K dated February 2, 1996 during the
period covered by this Quarterly Report on Form 10-Q reporting under Item 8 a
change in the Company's fiscal year end from December 31 to January 31.
9
<PAGE>
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, on the 17th day of July, 1996.
PHYMATRIX CORP.
By: /s/ Frederick R. Leathers
--------------------------
Chief Financial Officer, Treasurer
and Principal Accounting Officer
<PAGE>
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, on the 17th day of July, 1996.
PHYMATRIX CORP.
By:
--------------------------
Chief Financial Officer, Treasurer
and Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
PHYMATRIX CORP
EDGAR FILING - FINANCIAL DATA SCHEDULE
</LEGEND>
<CIK> 0001002022
<NAME> PhyMatrix Corp.
<MULTIPLIER> 1,000
<CURRENCY> USD
<S> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS 1-MO
<FISCAL-YEAR-END> Dec-31-1995 Jan-31-1997 Jan-31-1996
<PERIOD-START> Jan-1-1995 Feb-1-1996 Jan-1-1996
<PERIOD-END> Dec-31-1995 Apr-30-1996 Jan-31-1996
<EXCHANGE-RATE> 1 1 1
<CASH> 3,596,913 34,142,173 46,113,619
<SECURITIES> 0 0 0
<RECEIVABLES> 20,710,846 24,447,358 21,562,477
<ALLOWANCES> 0 0 0
<INVENTORY> 0 0 0
<CURRENT-ASSETS> 26,670,217 60,756,082 69,556,906
<PP&E> 42,000,711 43,152,291 41,691,429
<DEPRECIATION> (2,641,383) (4,064,330) (2,972,343)
<TOTAL-ASSETS> 132,186,873 174,420,206 180,007,473
<CURRENT-LIABILITIES> 48,956,330 20,884,463 25,348,061
<BONDS> 0 0 0
0 0 0
0 0 0
<COMMON> 0 215,300 215,300
<OTHER-SE> 12,678,348 129,295,888 126,993,677
<TOTAL-LIABILITY-AND-EQUITY> 12,678,348 129,511,188 127,208,977
<SALES> 70,733,282 37,207,094 10,715,236
<TOTAL-REVENUES> 70,733,282 37,207,093 10,715,236
<CGS> 0 0 0
<TOTAL-COSTS> 0 0 0
<OTHER-EXPENSES> 74,405,996 33,241,940 11,079,969
<LOSS-PROVISION> 2,500,000 0 0
<INTEREST-EXPENSE> 4,852,201 269,471 811,495
<INCOME-PRETAX> (11,024,915) 3,695,683 (1,176,228)
<INCOME-TAX> 0 1,404,025 0
<INCOME-CONTINUING> (11,024,915) 2,291,658 (1,176,228)
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> (11,024,915) 2,291,658 (1,176,228)
<EPS-PRIMARY> 0.00 0.11 (0.08)
<EPS-DILUTED> 0.00 0.11 (0.08)
</TABLE>
