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 March 31, 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
--- ---
<PAGE>
INDEX
PART I - FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets at March 31, 1999 (unaudited) 3
Consolidated Statements of Operations for the three months ended 5
March 31, 1999 and 1998 (unaudited)
Consolidated Statement of Changes in Shareholders' Deficit for the 6
three months ended March 31, 1999 (unaudited)
Consolidated Statements of Cash Flows for the three months ended 7
March 31, 1999 (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 10
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 12
Signatures 13
2
<PAGE>
PHYMED, INC. and Subsidiary
CONSOLIDATED BALANCE SHEETS
March 31
1999
-----------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash
Accounts receivable-trade, less allowance for
doubtful accounts and contractual allowances
of $1,372,374 $ 1,258,051
Receivable - related party 26,110
-----------
Total Current Assets 1,284,161
PROPERTY AND EQUIPMENT
Clinical Equipment 3,566,691
Computer Equipment 403,450
Office Furniture & Fixtures 95,041
Leasehold Improvements 400,112
-----------
4,465,294
Less: Accumulated Depreciation (3,533,016)
-----------
Total Fixed Assets 932,278
OTHER ASSETS
Prepaid Expenses 17,322
-----------
Total Other Assets 17,322
-----------
TOTAL ASSETS $ 2,233,761
===========
3
<PAGE>
PHYMED, INC. and Subsidiary
CONSOLIDATED BALANCE SHEETS-CONTINUED
LIABILITIES AND SHAREHOLDERS DEFICIT
March 31
1999
------------
(Unaudited)
CURRENT LIABILITIES
Current muturities of long-term debt $ 1,987,933
Accounts payable - trade 815,399
Accounts payable - related parties 210,811
Payable to factor 138,810
Accrued expenses 209,374
Deferred income tax liability 31,679
-----------
Total current liabilities 3,394,006
LONG-TERM LIABILITIES
Long-term debt, less current maturities 518,123
Deferred rent 34,383
-----------
Total Liabilities 3,946,512
SHAREHOLDERS' DEFICIT
Common stock - $.01 par value per share post reverse split;
authorized, 50,000,000 shares; issued and outstanding
7,843,097 following reverse stock split 78,431
Series "A" nonvoting convertible preferred
stock, $1 par value per share; issued and
outstanding, 135139 shares 135,139
Additional paid-in capital 999
Unearned ESOP compensation (220,449)
Retained earnings (1,706,872)
-----------
Total shareholders' deficit (1,712,752)
-----------
$ 2,233,761
===========
4
<PAGE>
PHYMED INC. and Subsidiary
CONSOLIDATED STATEMENT OF REVENUES AND EXPENSES
Three Months Ended March 31
1999 1998
--------------------------
(Unaudited) (Unaudited)
Net Patient Revenue $ 903,139 $ 717,803
Operating expenses (674,661) (627,343)
--------------------------
Operating profit 228,478 90,460
Other income (expenses)
Depreciation (100,000) (114,112)
Interest expense (37,968) (75,115)
Factoring fees 0 (16,696)
Miscellaneous income 0 67
--------------------------
(137,968) (205,856)
Net earnings before
income taxes 90,510 (115,396)
Deferred income tax expense (benefit) (31,679) 12,194
--------------------------
NET EARNINGS $ 58,832 ($103,202)
==========================
5
<PAGE>
<TABLE>
<CAPTION>
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)
Net income 58,832 58,832
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance at March 31, 1999 $ 7,843,097 $ 78,431 $ 135,139 $ 999 ($ 220,449) ($1,706,872) ($1,712,752)
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
PHYMED INC. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months
Ended March 31
1999
---------
<S> <C>
OPERATING ACTIVITIES: (Unaudited)
Net Income $ 58,832
Adjustments to reconcile Net Income to
net cash provided by operating activities:
Depreciation & Amortization 100,000
Amoritization of unearned ESOP compensation
Deferred income taxes 31,679
Changes in operating assets and liabilities:
Receivables (111,554)
Prepaid expenses and other current assets (11,400)
Other assets 12,795
Accounts payable and other current liabilities 141,873
Other noncurrent liabilities --
---------
Net Cash provided by Operating Activities 222,225
INVESTING ACTIVITIES:
Purchase of property assets (18,692)
Merger --
---------
Net Cash provided by Investing Activities (18,692)
FINANCING ACTIVITIES:
Proceeds from (payments to) factoring company (143,109)
Repayment of debt (60,424)
Proceeds from debt --
---------
Net Cash Used by Financing Activities (203,533)
Net cash increase (decrease) for period --
Cash at Beginning of Period --
---------
Cash at End of Period $ --
=========
</TABLE>
7
<PAGE>
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 March 31, 1999 compared with three Months Ended March 31,
1998
Net patient revenue increased by $185,336 or 25% to $903,139 for the
three months ended March 31,1999 from $717,803 for the same period in 1998. This
increase was due primarily to the newly formed capitated services subsidiary's
net revenue ($85,394).
Operating expenses increased by $43,318 or 7.5% to $674,661 for the
three months ended March 31, 1999 from $627,343 for the same period in 1998.
This increase was the result of operating expenses ($65,482) of a subsidiary in
McAllen, Texas formed in the last quarter of 1999.
Operating profit increased by $137,746 to $228,478 for the three months
ended March 31,1999 from $90,460 for same period in 1998.
Other expenses decreased by $67,890 or 33% to $137,966 for the three
months ended March 31, 1999 from $205,856 for the same period in 1998 due
primarily to decreased interest and elimination of factoring costs.
The Company had a net profit of $58,832 for the three months ended
March 31, 1999 as compared to a net loss ($103,102) for the same period in 1998.
8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
In February 1998 the bank factoring the patient accounts receivable
decided to leave the asset lending business. In April it called the line of
credit PHYMED- Dallas had been using for its operating credit line. The balance
owed in the amount of $738,755 was repaid through a monthly payment plan that
reduced the funds available for operations. The balance outstanding at March 31,
1999 was $138,810. The unscheduled repayment of $143,109 to the factoring
organization during the quarter resulted in less cash available for operations
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.
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.
8
<PAGE>
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
The Registrant completed a 1-for-10 reverse stock split that became
effective shortly after the annual meeting of shareholders held February 19,
1999. Upon the effectiveness of such reverse split, Mr. Barker and the ESOP own
6,941,540 shares of the 7,843,097 shares, $.01 par value, outstanding (7,933,190
shares on a fully diluted basis). The Registrant will continue to have
50,000,000 shares of Common Stock authorized.
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
March 31, 1999. As a result of the subsequent sale of the collateral, the
defaulted balance at December 31, 1999 was $1,056,871.
9
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
On February 19, 1999 an annual meeting of shareholders approved the
following:
o Increased the number of Board of Directors from three to five
members. (Votes for 40,762,785 (83%), votes against 2015, no
abstentions.)
o Elected the following five Director to serve until the next
Annual Meeting and until his or her successor has been dully
elected:
George C. Barker
(Votes for 40,762,785 (83%), votes against 2,015, no abstentions.)
Joe R. Love
(Votes for 40,762,785 (83%), votes against 2,015, no abstentions.)
Joe P. Foor
(Votes for 40,762,785 (83%), votes against 2,015, no abstentions.)
Judith F. Barker
(Votes for 40,762,785 (83%), votes
against 2,015, no abstentions.) Marilyn Moss
(Votes for 40,764,800 (83%), votes against 0, no abstentions.)
o Changed the registrants name to "PHYMED, INC."
(Votes for 40,764,800 (83%), votes against 0, no abstentions.)
o Approved an amendment to the Certificate of Incorporation to
approve a 1 for 10 reverse stock split of the Common Stock.
(Votes for 40,762,580 (83%), votes against 2,220, no
abstentions.)
o Granted the Board of Director authority to issue additional
series Preferred Stock (Votes for 40,762,207 (83%), votes against
1,220, 1,373 abstentions.)
o Ratified Grant Thornton LLP as the independent public accountants
for the Registrant for the fiscal year ended December 31, 1998.
(Votes for 40,763,580 (83%), votes against 1,220, no
abstentions.)
Item 5. Other Information
Not applicable.
10
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Amended Certificate of Incorporation of PHYMED, INC. filed with
the Secretary of State of Oklahoma on February 25, 1999 (Exhibit
3.1) **
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-KSB for the
year ended December 31, 1998. The Form 10-KSB was filed March 8, 2000.
*** 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
<PAGE>
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: March 25, 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
<PAGE>
INDEX OF EXHIBITS
Exhibit No. Description
27 Financial Data Schedule
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
</LEGEND>
<CIK> 0000353904
<NAME> PHYMED, INC.
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1998
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 2,630,425
<ALLOWANCES> 1,372,374
<INVENTORY> 0
<CURRENT-ASSETS> 1,284,161
<PP&E> 4,465,294
<DEPRECIATION> 3,533,016
<TOTAL-ASSETS> 2,233,761
<CURRENT-LIABILITIES> 3,394,006
<BONDS> 518,123
0
135,139
<COMMON> 78,431
<OTHER-SE> (1,926,322)
<TOTAL-LIABILITY-AND-EQUITY> 2,223,761
<SALES> 903,139
<TOTAL-REVENUES> 903,139
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 674,661
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 75,115
<INCOME-PRETAX> 90,510
<INCOME-TAX> 31,679
<INCOME-CONTINUING> 58,832
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 58,832
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
