SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ___________ to ____________
Commission file number 0-10701
PHYMED, INC.
(Name of small business issuer in its charter)
Oklahoma, USA 73-1457920
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
9603 White Rock Trail, Suite 100, Dallas, Texas 75238
(Address of principal executive offices)
(214) 340-9912
(Issuer's telephone number)
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 No X
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 8,783,697 shares of Common
Stock, $.01 par value, as of December 1, 1999.
Transitional Small Business Disclosure Format (check one): Yes No X
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INDEX
PART I - FINANCIAL INFORMATION Page
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets at June 30, 1999 (unaudited) 1
Consolidated Statements of Operations for the three and six months 3
ended June 30, 1999 and 1998 (unaudited)
Consolidated Statement of Changes in Shareholders' Deficit for the 4
six months ended June 30, 1999 (unaudited)
Consolidated Statements of Cash Flows for the six months ended 5
June 30, 1999 and 1998(unaudited)
Item 2. Management's Discussion and Analysis of Financial Condition 8
or Plan of Operation
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities and Use of Proceeds 10
Item 3. Defaults Upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
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PHYMED, INC. and Subsidiary
CONSOLIDATED BALANCE SHEETS
June 30
1999
-----------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash $ 57,256
Accounts receivable-trade, less allowance for
doubtful accounts and contractual allowances 1,528,977
Receivable - related party 48,575
-----------
Total Current Assets 1,634,808
PROPERTY AND EQUIPMENT
Clinical Equipment 3,566,940
Computer Equipment 403,450
Office Furniture & Fixtures 96,178
Leasehold Improvements 400,112
-----------
4,466,680
Less: Accumulated Depreciation (3,645,145)
-----------
Total Fixed Assets 821,535
OTHER ASSETS
Deferred Tax Asset
Other 17,322
-----------
Total Other Assets 17,322
-----------
TOTAL ASSETS $ 2,473,665
===========
3
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PHYMED, INC. and Subsidiary
CONSOLIDATED BALANCE SHEETS-CONTINUED
LIABILITIES AND SHAREHOLDERS EQUITY
June 30
1999
-----------
(Unaudited)
CURRENT LIABILITIES
Current muturities of long-term debt $ 1,987,933
Accounts payable trade 880,489
Accounts payable - related parties 47,344
Payable to factor 58,650
Accrued expenses 191,326
Deferred income tax liability 95,145
-----------
Total current liabilities 3,260,887
LONG-TERM LIABILITIES
Long-term debt, less current maturities 440,775
Deferred rent 34,383
-----------
Total Liabilities 3,736,045
SHAREHOLDERS' EQUITY
Common stock - $.01 par value per share post reverse split;
authorized, 50,000,000 shares; issued and outstanding
8,783,697 following reverse stock split 87,837
Series "A" nonvoting convertible preferred
stock, $1 par value per share; issued and
outstanding, 135139 shares 135,139
Additional paid-in capital 327,593
Unearned ESOP compensation (220,449)
Retained earnings (1,592,500)
-----------
Total shareholders' equity (1,262,380)
-----------
$ 2,473,665
===========
4
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PHYMED INC. and Subsidiary
CONSOLIDATED STATEMENT OF REVENUES AND EXPENSES
Three Months Ended June 30 Six Months Ended June 30
Revised Revised
1999 1998 1999 1998
--------------------------- --------------------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
Net Patient Revenue $ 1,208,895 $ 891,098 $ 2,112,034 $ 1,608,901
Operating expenses (889,884) (936,562) (1,564,545) (1,563,905)
----------- ----------- ----------- -----------
Operating profit 319,011 (45,464) 547,489 44,996
Other income (expenses)
Depreciation (112,129) (116,958) (212,129) (231,070)
Interest expense (30,926) (53,729) (68,894) (128,844)
Factoring fees 0 (17,465) 0 (34,161)
Miscellaneous income 0 (4,445) 0 (4,378)
----------- ----------- ----------- -----------
(143,055) (192,597) (281,023) (398,453)
Net earnings before
income taxes 175,956 (238,061) 266,466 (353,457)
Deferred income tax expense (benefit) (61,585) 23,806 (93,263) 36,000
----------- ----------- ----------- -----------
NET EARNINGS $ 114,371 ($ 214,255) $ 173,203 ($ 317,457)
=========== =========== =========== ===========
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PHYMED, INC. and Subsidiary
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' DEFICIT
(Unaudited)
Retained
Common Stock Additional Unearned Earnings
------------------------- Preferred Paid-in ESOP (Accumulated
Shares Amount Stock Capital Compensation Deficit) Total
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1999 7,843,097 $ 78,431 $ 135,139 $ 999 $ (220,449) $(1,765,703) $(1,771,583)
Shares issued for services
rendered 940,600 9,406 326,594 $ 336,000
Net income 173,203 173,203
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at June 30, 1999 8,783,697 $ 87,837 $ 135,139 $ 327,593 ($ 220,449) ($1,592,500) ($1,262,380)
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PHYMED INC. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months ended June 30
-------------------------
1999 Revised 1998
----------- ------------
OPERATING ACTIVITIES: (Unaudited) (unaudited)
<S> <C> <C>
Net Income $ 173,203 $(317,457)
Adjustments to reconcile Net Income to
net cash provided by operating activities:
Depreciation & Amortization 212,129 231,070
Amoritization of unearned ESOP compensation 67,668
Deferred income tax 93,263 (36,000)
Changes in operating assets and liabilities:
Receivables (417,571) 204,472
Prepaid expenses and other current assets (125,987)
Other assets (3,788)
Accounts payable and other current liabilities 149,344 401,123
--------- ---------
Net Cash provided by Operating Activities 103,072 547,088
INVESTING ACTIVITIES:
Purchase of property assets 20,079 (19,284)
Merger 116
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Net Cash provided by Investing Activities 20,079 (19,168)
FINANCING ACTIVITIES:
Issuance of common stock for services rendered 336,000
Proceeds from (payments to) Factoring Company (223,269) (197,351)
Proceeds from (repayments of) Debt (140,502) (367,686)
--------- ---------
Net Cash Used by Financing Activities (27,771) (565,037)
--------- ---------
Net cash increase (decrease) for period 95,380 (37,117)
Cash at Beginning of Period (19,433) 37,233
--------- ---------
Cash at End of Period $ 57,256 $ 116
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Item 2. Management's Discussion and Analysis of Financial Condition or Plan of
Operation
(a) Plan of Operation.
Not applicable.
(b) Management's Discussion and Analysis of Financial Condition and
Results of Operations.
RESULTS OF OPERATIONS
Three Months Ended June 30, 1999 compared with Three Months Ended June 30, 1998
Net patient revenue increased by $317,797or 35% to $1,208,895 for the
three months ended June 30, 1999 from $891,098 for the same period in 1998 (the
net revenues for this period 1998 have been reduced by $124,058 to reflect
additional contractual allowances determined by the annual audit). This increase
in net patient revenue was due primarily to the new radiological professional
services contract effective December 1, 1998 and to the newly formed capitated
services subsidiary's net revenue.
Operating expenses decreased by ($46,678) or 5.0% to $889,884 for the
three months ended June 30, 1999 from $936,562 for the same period in 1998. This
decrease was the result of one time 1998 expenses related to the merger and
installation expenses in conjunction with the installation of a new radiology
information system.
Operating profit was $319,011 for the three months ended June 30, 1999
as compared to a loss of ($45,464) for the same period in 1998.
Other expenses decreased by $47,542 or 24.6% to $145,055 for the three
months ended June 30, 1999 from $192,597 for the same period in 1998 due
primarily to decreased interest and elimination of factoring costs.
The Registrant had a net profit of $114,371 for the three months ended
June 30, 1999 as compared to a net loss ($214,255) for the same period in 1998.
Six Months Ended June 30, 1999 compared with Six Months Ended June 30, 1998
8
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Net patient revenue increased by $503,133 or 31% to $2,112,034 for the
six months ended June 30, 1999 from $1,608,901 for the same period in 1998 (the
net revenues for this period 1998 have been reduced by $252,237 to reflect
additional contractual allowances determined by the annual audit). This increase
in net patient revenue was due primarily to the new radiological professional
services contract effective December 1, 1998 and to the newly formed capitated
services subsidiary's net revenue.
Operating expenses increased by $640 to $1,564,545 for the six months
ended June 30, 1999 from $1,563,905 for the same period in 1998.
Operating profit increased by $502,493 to $547,489 for the six months
ended June 30, 1999 from $44,996 for the same period in 1998.
Other expenses decreased by $117,430 or 29% to $281,023 for the six
months ended June 30, 1999 from $398,453 for the same period in 1998 due
primarily to decreased interest and elimination of factoring costs.
The Registrant had a net profit of $173,203 for the six months ended
June 30, 1999 as compared to a net loss ($317,457) for the same period in 1998.
LIQUIDITY AND CAPITAL RESOURCES
In September 1999 the Registrant borrowed $335,000 from an individual
for one year with the accounts receivable of its subsidiaries pledged as
collateral. The proceeds were used to open the PHYMED - Hillcrest imaging center
(see Item1.Form 10KSB for fiscal year ended December 31, 1998), retire the
remaining balance of due the factoring organization and reduce accounts payable.
The Registrant is currently negotiating with another financial
institution to arrange new financing of accounts receivable on terms more
favorable to the Registrant. There is no assurance that any refinancing will
take place or that it will be on terms favorable to the Registrant
In July 1999 the Registrant formed PHYMED PRIVATE PARTNERS L.L.C. (A
Nevada limited liability corporation) for the purpose of raising $220,000 in the
form of eleven $20,000 units consisting a five-year note and a 5,000 warrant to
purchase PHYMED, INC. common stock for $0.50 per share. The placement was fully
subscribed. The net proceeds were used to purchase certificates of deposit,
which then was used to collateralize $198,000 in loans to the Registrant.
In December 1999 a joint venture formed by the Registrant and an
equipment leasing company repurchased the Siemens MRI from Siemens Credit
Corporation for $600,000. The MRI is to be operated for the joint venture by
PHYMED Contracted Services Corporation in the White Rock imaging center. The
purchase price is a direct offset to the balance due Siemens Credit Corporation
as described in the paragraph above.
9
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The real estate lease related to the premises occupied by the
Registrant and its subsidiary PHYMED - Dallas on White Rock Trail is in default
and in arrears approximately $75,000 at December 31, 1998. In February 2000 the
Registrant and the landlord agreed to a new lease that made the Registrant
current on its rent payments for the White Rock offices effective April 1, 2000.
Management is developing a refinancing plan that it believes will allow
the Company to increase its financial strength; grow through acquisitions; and
increase same store sales. However, there is no assurance the Company will be
able to accomplish any of this, or do so profitably.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
At December 31, 1998, PHYMED Diagnostic Imaging Center - Dallas, Inc.
(a subsidiary of the Registrant) was a party to the following pending legal
proceeding.
On December 7, 1998 Siemens Credit Corporation through its attorney
demanded full payment on a delinquent equipment lease and a related promissory
note on which the majority shareholders of the Registrant are guarantors. On
January 20, 1999 both the lease and promissory notes were accelerated and
Siemens filed suit in the Federal Court in Northern District of Texas for
collection of both the lease and promissory note.
On July 30, 1999 Siemens gave notice to remove the MRI related to the
lease, which was accomplished in August 1999. In December 1999 a joint venture
between the Registrant and an equipment leasing company purchased the MRI from
Siemens Credit Corporation for $600,000.
Management is continuing to negotiate a settlement with Siemens that would be
satisfactory to both parties. The consolidated balance sheet reflects as a
current liability the amount due from the subsidiary under the lease agreement.
Item 2. Changes in Securities and Use of Proceeds
On June 25, 1999 Joe Love and Joe Foor were owed $36,000 in
conjunction with their existing consulting agreement with the Registrant. Mr.
Foor accepted 69,700 shares of common and Mr. Love (CCDC, Inc.) 13,900 shares of
common stock in lieu of cash.
10
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On June 30, 1999 George C. Barker Chairman of the Board, President and
chief executive officer exchanged his claim for $300,000 of his accrued but
unpaid salary for 857,000 shares of common stock of the Registrant.
In all three cases, the shares were issued in reliance upon the
exemption from registration contained in Section 4(2) of the Securities Act of
199 as a transaction not involving a public offering.
Item 3. Defaults Upon Senior Securities
The defaulted balance of the Siemens Credit Corporation (see Item 1.
Legal Proceedings) equipment lease and related promissory note was $1,664,246 at
June 30, 1999. As a result of the subsequent sale of the collateral, the
defaulted balance at December 31, 1999 was $1,056,871.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10.7 Equipment Lease Agreement, effective July 11, 1995, between
Siemens Credit Corporation and Phy.Med., Inc. (Exhibit
10.7)***
10.8 Promissory Note of Phy.Med., Inc. (undated) to Siemens
Credit Corporation in the principal amount of $175,000
(Exhibit 10.8)***
10.9 (Real Estate) Lease Agreement made and entered in as of
March 15, 1996, between Cocanougher Feed Co., Inc. d/b/a
Cocanougher Asset Management, ("Lessor"), and PhyMed, Inc.,
d/b/a PhyMed Diagnostic Imaging Center ("Lessee") (Exhibit
10.9)***
27 Financial Data Schedule
*** Incorporated by reference to the exhibit number set forth in
parentheses, which exhibit was filed by the Registrant's Form 10-QSB for the
quarter ended June 30, 1998. The Form 10-QSB was filed December 3, 1998
27 Financial Data Schedule
(b) Reports on Form 8-K
Not applicable
11
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SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
PHYMED, INC.
Registrant
Date: April 6, 2000 BY: /s/ George C. Barker
-----------------------
George C. Barker Chairman of the Board,
President and Chief Executive Officer
(Principal Executive Officer and
Principal Financial Officer)
12
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INDEX OF EXHIBITS
Exhibit No. Description
----------- -----------
27 Financial Data Schedule
13
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000353904
<NAME> PHYMED, INC.
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> APR-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 2,939,896
<ALLOWANCES> 1,410,919
<INVENTORY> 0
<CURRENT-ASSETS> 1,634,808
<PP&E> 4,466,680
<DEPRECIATION> 3,645,145
<TOTAL-ASSETS> 2,473,665
<CURRENT-LIABILITIES> 3,260,887
<BONDS> 440,775
0
135,139
<COMMON> 87,837
<OTHER-SE> (1,485,356)
<TOTAL-LIABILITY-AND-EQUITY> 2,223,761
<SALES> 1,208,895
<TOTAL-REVENUES> 1,208,895
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 889,884
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,926
<INCOME-PRETAX> 175,956
<INCOME-TAX> 61,585
<INCOME-CONTINUING> 114,371
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 114,371
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
