U. S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-KSB
(Mark One)
[ x ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 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)
Tatonka Energy, Inc.
(former name), if changed since last report
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) (Zip Code)
Issuer's telephone number: (214) 340-9912
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
None
Securities registered under Section 12(g) of the Exchange Act:
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Common Stock, Par Value of $.001 per Share
(Title of class)
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 X No __
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
State issuer's revenues for its most recent fiscal year: $8,699,313.
State the aggregate market value of the voting and non-voting common
equity held by non-affiliates computed by reference to the price at which the
common equity was sold, or the average bid and asked price of such common equity
as of a specified date within the past 60 days: $4,619,314 based on the average
of the bid and asked price on April 18, 2000.
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 9,238,628 shares of Common
Stock, $.01 par value, as of March 31, 2000.
Transitional Small Business Disclosure Format (check one): Yes__ No X
<PAGE>
TABLE OF CONTENTS
PART I
Item 1. Description of Business 4
Item 2. Description of Property 6
Item 3. Legal Proceedings 7
Item 4. Submission of Matters to a Vote of Security Holders 7
PART II
Item 5. Market for Common Equity and Related Stockholder Matters 7
Item 6. Management's Discussion and Analysis or Plan of Operation 10
Item 7. Financial Statements 13
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; 14
Compliance with Section 16(a) of the Exchange Act
Item 10. Executive Compensation 16
Item 11. Security Ownership of Certain Beneficial Owners and Management 20
Item 12. Certain Relationships and Related Transactions 22
Item 13. Exhibits and Reports on Form 8-K
Signature Page
Index to Financial Statements
<PAGE>
PART I
Item 1. Description of Business
Business Development
The Registrant was organized under the laws of British Columbia,
Canada, on March 12, 1980, under the name of Sooner Energy Corp.
("Sooner-British Columbia"). On June 1, 1994, at an extraordinary general
meeting of members of Sooner-British Columbia, a special resolution was passed
for the continuance of the Registrant as a Wyoming corporation in the United
States. On such date, Sooner-British Columbia was then "continued" as a Wyoming
corporation with the same name ("Sooner-Wyoming") and was immediately merged
into a wholly owned subsidiary of Sooner-Wyoming, which had been incorporated in
Oklahoma under the name of Tatonka Energy, Inc. ("Tatonka"). Tatonka was the
surviving corporation in the merger and is referred to in this report as
"Tatonka" or the "Registrant."
On April 3, 1998, the Registrant acquired 80% of the outstanding common
shares of Phy.Med. Inc., a Texas corporation ("PHYMED - Dallas"), in a reverse
triangular merger. In connection with the merger the Registrant issued and
George C. Barker, individually, and as Trustee of the Phy.Med., Inc. Employee
Stock Ownership Plan (the "ESOP"), acquired from the Registrant, in the
aggregate, immediate ownership of and the right to receive an aggregate of
68,915,409 authorized but unissued shares of Common Stock, $.001 par value, of
the Registrant, as then constituted, which, if all such shares were outstanding,
would constitute 87.9% of the Registrant's then outstanding 78,430,965 shares of
Common Stock.
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. At the date of the merger Tatonka
had only nominal assets. Therefore, the merger has been accounted for as a
recapitalization of PHYMED - Dallas. Accordingly, the financial statements of
the Registrant included herein are those of PHYMED - Dallas.
The Registrant's registered office for service in Oklahoma is 1601 N.W.
Expressway, Suite 1910, Oklahoma City, Oklahoma 73118. The executive offices of
the Registrant are located in Dallas, Texas at 9603 White Rock Trail, Suite 100,
Dallas, Texas 75238. The main business telephone number of the Registrant at
such address is (214) 340-9912.
<PAGE>
Business of the Registrant
The Registrant formerly engaged in the exploration and development of
oil and gas products. As of December 31, 1996 the Registrant was no longer
actively engaged in the oil and gas industry.
In August 1996, Richard A. Green, Sr. acquired control of the
Registrant through Verde, Inc., a corporation he controlled. On September 11,
1996 the Registrant invested unsuccessfully in a new restaurant concept. On
November 6, 1996, the Registrant invested unsuccessfully in the establishment of
a wholly-owned subsidiary for the purpose of developing new lines of business in
the commercial construction industry. On or about July 21, 1997, Richard A.
Green, Sr., ceased to control the Registrant and sold controlling interest in
the Registrant to Richard Bowes and Joe R. Love.
In April 1998, the Registrant acquired 80% of the outstanding common
shares of PHYMED DIAGNOSTIC IMAGING CENTER Dallas, Inc. (formerly Phy.Med.
Inc.), a Texas corporation ("PHYMED - Dallas") in a reverse triangular merger.
PHYMED - Dallas is an eight-year-old privately held company in the operation of
medical diagnostic imaging centers, which provide a full scope of medical
diagnostic imaging services including magnetic resonance imaging (MRI), computer
tomography (CT) scans, x-rays and other radiological services to patients of
referring physicians. At the time of the merger PHYMED - Dallas owned and
operated a diagnostic imaging center (White Rock) in Dallas, Texas.
Additionally, PHYMED - Dallas at the time of the merger provided
management services to Medical Imaging of Plano, Inc. ("MIPI"), a newly
constructed diagnostic imaging center in Plano, Texas (a suburb of Dallas) under
a licensing and management agreement. The Plano center (located 10 miles from
the White Rock center) offers similar services to the White Rock center to
referring physicians in the Plano area. This licensing and management agreement
was terminated by mutual consent as of September 30, 1999 in anticipation of the
sale of the imaging center to a third party.
PHYMED - Dallas at that time had also established a wholly owned
capitated services subsidiary, PhyMed Contracted Services, Corp. ("PHYMED -
Contracted Services") to provide radiological services under an exclusive
risk-based system of reimbursement to independent physician associations (IPA)
and health maintenance organizations. In August 1998 Contracted Services entered
into such an arrangement with an IPA. In addition to capitated services, PHYMED
- - Dallas purchased the x-ray equipment located in two of the IPA's clinics,
which are operated for capitated and non-capitated patients of the clinics.
On December 12, 1997 PhyMed organized PhyMed Diagnostic Center McAllen,
L.L.C., a Texas limited liability corporation, for the purpose of establishing a
diagnostic imaging center in McAllen, Texas. In 1998, 43% of the ownership of
the L.L.C. was acquired by outside parties with the remaining 57% owned by
<PAGE>
PHYMED - Dallas. In March 1999, the center began operation in temporary
facilities with a portable MRI. The Registrant was unable to obtain financing
for the permanent structure and add additional services required for the
successful operation of the new center. Based upon the aforementioned management
decided to close the facility and the McAllen imaging center ceased operations
December 31, 1999 and the L.L.C. will be dissolved in 2000.
In September 1999 the Registrant formed PHYMED Diagnostic Imaging
Center Hillcrest, Inc., (PHYMED-Hillcrest) a wholly owned subsidiary for the
purpose of leasing an existing diagnostic imaging center located approximately 6
miles from the White Rock center. The Center provides MRI, CAT scan, radiology
and ultrasound services to referring physicians.
Also in September 1999 the Registrant formed PHYMED Diagnostic Imaging
Center Duncanville, Inc., (PHYMED-Duncanville) a wholly owned subsidiary for the
purpose of acquiring an existing diagnostic center located in the Dallas suburb
of Duncanville located approximately 20 miles from the White Rock Center. The
imaging center ceased operations in December 1999. The seller was unable to
provide an acceptable real estate lease acceptable and the Registrant terminated
the purchase agreement.
Employees
As of December 31, 1999, the Registrant had 40 full-time employees.
Item 2. Description of Property
At December 31, 1999, the Registrant occupied leased facilities
(approximately 15,000 square feet) at 9603 White Rock Trail, in Dallas, Texas.
The leased space has an annual lease obligation of $158,000 and is located in a
three-story masonry office building. The facility is in good repair and is
adequate for the current needs of the Registrant. The lease expires February 28,
2003. The Registrant's corporate offices occupy the space along with its
subsidiary, PHYMED Diagnostic Imaging Center Dallas, Inc., which provides a full
range of diagnostic imaging services. This lease was in default and in arrears
approximately $140,000 at December 31, 1999.
The Registrant's wholly owned subsidiary, PHYMED Contracted Services,
Corp., leases space (each approximately 500 square feet) at the medical clinics
of INOVA in Richardson and Mesquite, Texas with an annual lease obligation of
$6,600. The lease renews annually. Each site is equipped with x-ray and
developing equipment.
In September 1999 PHYMED, INC. entered into a five-year lease for
approximately 8,000 square feet of space on behalf of PHYMED Diagnostic Imaging
Center Hillcrest, Inc. with an annual lease obligation of $165,000. The leased
<PAGE>
space is located in a two-story masonry office building. The leased space had
previously been operated as a diagnostic imaging center at 12840 Hillcrest Road,
in Dallas, Texas and is in good repair and is adequate for the current needs of
the diagnostic imaging center.
In October 1999 PHYMED - Hillcrest entered into a 48-month equipment
lease on the previously installed 1.5 High-Field MRI Ultrasound and R&F x-ray.
The annual obligation under the terms of the lease is $415,872. The lease
provides for the purchase of the equipment at the end of the four-year term for
fair market value.
In February 2000 PHYMED - Hillcrest entered into a 48-month equipment
lease on a new Picker Ultra Z High Performance CT Scanner. The annual obligation
under terms of the lease is $160,380. The lease provides for the purchase of the
equipment at the end of the four-year term for fair market value.
Item 3. Legal Proceedings
At December 31, 1999, 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, which will reduce the amount of the
claim.
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 4. Submission of Matters to a Vote of Security Holders
Not applicable.
<PAGE>
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
The Registrant's Common Stock is quoted on the NASD's Electronic
Bulletin Board traded in the over-the-counter market under the symbol "TTKA"
prior to March 1999 when the symbol was changed to "PYMD". Trading is only
sporadic and there is no established trading market. The tables below list the
high and low bid prices in U.S. dollars for each quarter of the last two fiscal
years, as provided by NASDAQ.
Bid Quotations*
--------------------------
Low High
1998 (U.S. Dollars):
First Quarter .20 2.20
Second Quarter .40 2.1875
Third Quarter .3125 1.30
Fourth Quarter .30 .625
1999(U.S. Dollars):
First Quarter (TTKA) .05 .08
First Quarter (PYMD) .08 .75
Second Quarter .375 .75
Third Quarter .375 .625
Fourth Quarter .25 .8125
- -------------------
*These quotations reflect inter-dealer prices, without retail mark-up,
mark-down, or commission and thus may not represent actual
transactions.
The Registrant has not paid any dividends on its Common Stock and
anticipates that future earnings, if any, will be retained to finance future
growth. In addition, the 106,968 shares of Series "A" Preferred Stock have an
annual noncumulative dividend preference of $5,350. Accordingly, the Registrant
does not anticipate paying any dividends on Common Stock for the foreseeable
future.
Within the past fiscal year, the Registrant has sold the following
securities without registering under the Securities Act:
(a) On June 25, 1999, the Registrant issued 69,700 shares of
common stock to Joe Foor and 13,900 shares of common stock
CCDC, Inc., a company controlled by Joe Love, in lieu of a
$36,000 annual retainer for consulting services rendered under
an letter agreement dated March 31, 1998 (the letter agreement
was terminated by mutual agreement in February 1999).
(b) In June 1999 George Barker exchanged $300,000 in accrued and
unpaid salary for 857,000 shares of common stock.
<PAGE>
(c) In August 1999 28,717 shares of Series "A" Preferred Stock
converted into 19,193 shares of common stock.
(d) On November 12, 1999 the Registrant issued 49,000 shares of
common stock to six investors in PHYMED Private Partners,
L.L.C. in lieu of interest on their capital contribution to
the L.L.C.
(e) On November 16, 1999, the Registrant issued 96,875 shares in
common stock to Northeast Texas Co., Inc. in lieu of $52,500
for services rendered.
Within the past fiscal year, the Registrant has granted the following
warrants without registering under the Securities Act:
(i) The Registrant granted a two-year warrant for 105,000 shares
of common stock at $0.40 per share exercisable until December
31, 2000 to M Real Estate in conjunction with the Comerica
refinancing of the DVI note in December 1998.
(ii) The Registrant granted warrants for 50,000 shares of common
stock at $0.625 per share exercisable until July 1, 2001 to
Ann Foor in conjunction with an unsecured loan of $100,000 in
1998 and its subsequent six-month renewal. Further, in
conjunction with an additional six-month renewal in 1999 and
one in 2000, warrants were granted for an additional 70,000
shares of common stock at $0.50 per share exercisable January
2, 2002.
(iii) The Registrant granted a two-year warrant for 300,000 shares
of common stock at $0.75 per share exercisable until September
30, 2001 to Ballard Properties in conjunction with a $335,000
loan to the Registrant.
(iv) The Registrant granted a two-year warrant for 34,900 shares of
common stock at $0.48 per share exercisable until September
15, 1999 to North East Texas Consulting for services rendered.
(v) The Registrant granted a two-year warrant for 280,000 shares
of common stock at $0.50 per share exercisable until December
15, 2001 to investor and brokers participating in the PHYMED
Private Partners, L.L.C.
<PAGE>
Item 6. Management's Discussion and Analysis or Plan of Operation.
Overview
In April 2000 the Registrant began offering to qualified investors
through a private placement $2,000,000 in Preferred Stock Series "C". Under the
terms of the offering $100,000 is the minimum amount sold. Management believes
that this private placement will provide additional capital, however the minimum
has not been reached as of filing and there is no assurance the offering will be
successful. If the minimum amount is purchased the future annual dividend
expense will be $12,000 and will be $240,000 if the maximum is purchased.
The Registrant has a $1,000,000 commitment from a financial institution
to refinance the accounts receivable of its subsidiaries. Under the terms of the
commitment funds will be advanced under a formula that should initially provide
$435,000. As current accounts receivable increase the formula provides for
additional funding. The financial institution has also committed to an
additional term loan of $100,000 if the Registrant raises an additional $250,000
in capital (or a $150,000 term loan if $400,000 in capital is raised), there is
no assurance either of these financings will be funded.
Management believes that these financings, if funded, will provide
sufficient liquidity to enable the Registrant to meet its obligations and
continue in business. However, there is no assurance these financings, if
funded, will accomplish those goals.
On February 11, 2000 PHYMED - Hillcrest installed a new Picker Ultra Z
High Performance CT Scanner. The CT Scanner provides this subsidiary with new
diagnostic capabilities and providing services to new referring physicians and
their patients.
RESULTS OF OPERATIONS
Fiscal 1999 as compared to 1998
Net revenues increased by $1,088,014 or 32.7% to $4,418,425 for the
year ended December 31, 1999 from $3,330,411 for the year ended December 31,
1998. In December 1998 the Registrant negotiated a professional services
contract for radiological services following the retirement of the prior
radiologist. This new agreement provides for reimbursement based on a percentage
of "global" charges collected as opposed to the previous arrangement, which
provided for separate billing of technical and professional services and was the
primarily responsible for the increase in net revenue.
Operating expenses increased by $54,245, or 1.4% to $3,900,060 for the
year ended December 31, 1999 from $3,845,813 for the year ended December 31,
1998.
Operating profit was $518,365for the year ended December 31, 1999 as
compared to a operating loss of ($515,402) for the year ended December 31, 1998.
<PAGE>
Other income (expenses) was $344,503 for the year ended December 31,
1999 as compared to ($252,581) for the year ended December 31, 1998. This
improvement was the result of the gain on the sale in December of the Siemens
MRI and a decrease in interest expense.
The net income was $560,965 for the year ended December 31, 1999 as
compared to a net loss of ($679,983) for the year ended December 31, 1998.
Fiscal 1998 as compared to 1997
Net revenues increased by $31,917 or 0.1% to $3,330,411 for the year
ended December 31, 1998 from $3,298,494 for the year ended December 31, 1997.
This limited increase in net patient revenue was the result of: sales lost to a
"Registrant managed" imaging center opened in January 1998 in Plano, Texas (a
suburb of Dallas, Texas), increased contractual allowance on managed care
contracts, increased contracted services revenue related to a capitated contract
that commenced in August 1998.
Operating expenses increased by $452,231, or 13.3% to $3,845,813 for
the year ended December 31, 1998 from $3,393,582 for the year ended December 31,
1997. This increase was due primarily to the expenses resulting from the
reorganization between Tatonka Energy, Inc. and PHYMED - Dallas, Inc.
($157,000); the costs associated with the implementation of a new computer
system for clinical and image management; increased salary expense ($100,000).
Operating losses increased by $420,314, or 442% to ($515,402) for the
year ended December 31, 1998 from ($95,088) for the year ended December 31,
1997. The increased operating loss was primarily the result of little increase
in net patient revenue while operating expenses were increased by the cost of
the merger and installation of the computer system.
Other expenses decreased by $225,990, or 47.2% to $252,581 for the year
ended December 31, 1998 from $478,571 for the year ended December 31, 1997. This
decrease is primarily related to reduced interest expense ($150,686)
attributable to reduction of notes payable related to the purchase of treasury
stock and to the ESOP stock acquisition.
The net loss before income tax benefit increased $194,324 or 34% to
($767,983) for the year ended December 31,1998 from ($573,659) for the year
ended December 31, 1997.
<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 January
1, 1999 was $281,919. The balance was retired by September 1999.
In September 9, 1999 the Registrant borrowed $335,000 and payable on
April 9, 2000 from an individual with the accounts receivable of its
subsidiaries pledged as collateral. The proceeds were used to provide working
capital to open the PHYMED - Hillcrest imaging center and retire some accounts
payable.
The Registrant currently has a commitment from financial institution
for new financing of accounts receivable under an arrangement, which should
initially provide approximately $435,000 with the credit facility commitment of
up to $1,000,000. There is no assurance that any financing will take place or
that it will be on terms favorable to the Registrant.
In July 1998 DVI Finance Company (DVI) filed suit seeking payment on
its financing and in August 1998 obtained an injunction against PHYMED - Dallas
disbursing funds without consent of DVI. This suit was settled in December 1998
for $245,530 in principal and interest plus $21,130 in related expenses and the
injunction was dissolved. The funds to make the payment in settlement were
provided by refinancing the related equipment on thirty-six month installment
loan.
At December 31, 1999 PHYMED - Dallas, a subsidiary of the Registrant, was in
default on certain equipment financings Siemens Credit Corporation. Siemens
accelerated the financings and removed the equipment (an MRI) in July 1999. 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. This MRI is being held in storage for installation in a future
diagnostic imaging center.
The Siemens Credit corporation indebtedness was reclassified as a
current liability in the amount of $1,056,871 (the repurchase price by the joint
venture is a direct offset to the balance due). These financings constituted
$1,664,247 of the $1,989,104 current maturities of long-term debt at December
31, 1998. Litigation is pending in the United States District Court of the
Northern District of Texas.
On October 15, 1999 PHYMED - Hillcrest leased existing installed
diagnostic imaging equipment (including a high-field 1.5 MRI) in its facility at
12840 Hillcrest Road, Dallas, Texas. The lease provides for 48 monthly
installments of $34,656. In February 2000 PHYYMED - Hillcrest leased a new CT
Scanner at the same location. This lease provides for 48 monthly installments of
$13,365.
<PAGE>
In July 1999 the Registrant formed PHYMED PRIVATE PARTNERS L.L.C. (a
Nevada limited liability corporation) for the purpose of raising $240,000 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 $216,000 in loans to the Registrant.
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 $140,000 at December 31, 1999
Item 7. Financial Statements
The following unaudited financial statements are attached to this
report:
Balance Sheet - December 31, 1999
Statements of Operations -
Year ended December 31, 1999 and 1998
Statement of Stockholders' Equity -
Year ended December 31, 1999 and 1998
Statements of Cash Flows -
Year ended December 31, 1999 and 1998
Notes to Financial Statements
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act
Directors
The shareholders elected five Directors at the last Annual Meeting of
Shareholders on February 19, 1999. George C. Barker was elected as a director on
April 3, 1998, in connection with the Merger, to fill the existing vacancy. The
term of the present directors will expire concurrently with the election of
directors at the 2000 Annual Meeting of Shareholders.
Messrs. Barker, Love and Foor were re-elected as Directors for the year
at the 1999 Annual Meeting of Shareholders and that two additional Directors
were elected; namely, Marilyn Moss (resigned October 1999) and Judith F. Barker.
George C. Barker and Judith F. Barker are married.
<PAGE>
The Company's Certificate of Incorporation provides that the number of
Directors shall be as specified in the Bylaws, and the Bylaws provide that the
number of Directors shall be not less than one nor more than seven. The Bylaws
further provide that the shareholders may at any annual meeting determine the
number of Directors, and the number so determined shall remain fixed until
changed at a subsequent annual meeting.
Each Director elected at the 2000 Annual Meeting of Shareholders will
serve until the next Annual Meeting of Shareholders and until his or her
successor has been duly elected and qualified.
Information Concerning Directors
The Directors are listed below with brief statements setting forth
their principal occupations and other biographical information. Certain
information concerning the four members of the Board of Directors is set forth
in "Item 11. Security Ownership of Certain Beneficial Owners and Management."
George C. Barker
Joe R. Love
Joe P. Foor
Judith F. Barker
George C. Barker has a background in management and healthcare of more
than twenty-five years. He was appointed to the Board of Directors of the
Registrant in April 1998 after the acquisition of Phy.Med., Inc. At the same
time, he was also elected Chairman of the Board, President and Chief Executive
Officer. He co-founded Phy.Med., Inc. in 1990 and has been the President, Chief
Executive Officer and the Chairman of the Board of Directors of that company
since 1993. Mr. Barker's background includes financial and administrative
positions with large hospitals, division level management with national hospital
management companies and radiology center operations. His management duties have
included responsibilities for annual budgets exceeding $45 million and 1,100
employees. He earned his MBA at Suffolk University and his undergraduate degree
at New Hampshire College and is 57 years old.
Joe R. Love has been a Director since the Registrant's inception in the
early 1980's. In addition to being co-founder and Chairman of CCDC, Inc., he is
on the Board of Directors of First Cash, Inc., a public company which operates a
chain of pawn shops, for which Mr. Love has served as a Board member since 1991.
He is also a director of Western Country Clubs, Inc., a public company which
operates country and western night clubs. He has been instrumental in arranging
public offerings totaling approximately $52 million for a number of his
portfolio companies. Over the last ten years, Mr. Love has been involved in
several other public companies as well as being active in real estate and
restaurant ventures. His real estate activities include acting as general
partner of a $94 million joint venture with Metropolitan Life Insurance Company.
He has also been involved as a partner in several Hilton Hotels. Mr. Love is a
graduate of the University of Oklahoma with a BBA and is 61 years old.
<PAGE>
Joe P. Foor has been a Director of the Registrant since 1996. He is the
Chief Executive Officer of Featherstone Financial Services, representing such
clients as Greenbriar Corporation (a publicly-held company based in Dallas,
Texas), Qual-Med, Inc., Catalyst Energy Systems, and other businesses. Mr. Foor
holds a BA from The University of Oklahoma and a Masters Degree from Southern
Methodist University and is 61 years old.
Judith F. Barker has been a Director and has been Secretary and
Treasurer of the Registrant since April 1998. She has been the Secretary of
PHYMED - Dallas and the Business Office Manager for more than the last five
years. She has been involved in office management, health facility billing and
collections for over twenty years. Her experience has been gained at individual
physician and large group practice offices, hospitals and credit companies.
Since 1992, she has played a key role in the management of PhyMed's accounts
receivable. Mrs. Barker is 59 years old.
Board of Directors-Meetings and Committees
The Board of Directors held one meeting during calendar year 1999. The
Board of Directors had no Audit Committee, Compensation or Nomination Committees
during 1999 and does not currently have an Audit, Compensation, or Nomination
Committee.
Executive Officers
After the 1999 Annual Meeting of Shareholders, the newly elected
Directors re-elected the following officers for the ensuing year:
George C. Barker Chairman of the Board, President
and Chief Executive Officer
Marilyn Moss Executive Vice President - Operations
Judith F. Barker Secretary and Treasurer
Marilyn Moss resigned from the Board of Directors and as an officer of the
Registrant in October 1999
<PAGE>
Item 10. Executive Compensation
Executive Officers
Mr. Joe R. Foor served as president of the Registrant from January
1,1998 to April 3, 1998 with no compensation related to his service.
In 1993, PhyMed and Mr. Barker entered into a ten-year employment
agreement pursuant to which PHYMED - Dallas pays Mr. Barker $240,000 per annum.
In connection with the Merger, on April 3, 1998 Mr. Barker became an employee of
the Registrant and the Registrant assumed the obligations of PHYMED - Dallas
under the employment Merger.
During the fiscal year ended December 31, 1999, George C. Barker was
the Chief Executive Officer of the Registrant and the only executive officer of
the Registrant whose total compensation exceeded $100,000. The Registrant paid
or accrued $240,000 of salary to Mr. Barker during such period.
On May 4, 1998, the Board of Directors of the Registrant granted Mr.
Barker an option to purchase 500,000 shares of Common Stock, with vesting to be
contingent upon the attainment by the Registrant of certain financial
objectives. For additional information, see "Stock Option Grants" below.
Compensation of Directors
On May 4, 1998, the Board of Directors granted to each Mr. Love and Mr.
Foor an option to purchase 250,000 shares of Common Stock. The purpose of the
options granted to Mr. Love and Mr. Foor is to compensate them for serving as
Directors of the Registrant. For additional information, see "Stock Option
Grants" below.
1998 Stock Option Grants
Effective May 4, 1998, the Board of Directors granted stock options to
Messrs. Barker, Love and Foor, subject to the approval of the shareholders. Each
of the options is subject to a separate stock option agreement and is not part
of a plan. The three options are exercisable to purchase a total of 1,000,000
shares of the Registrant's Common Stock at $1.30 per share. The Board of
Directors contemplates that the shareholders will be asked to approve these
three stock options at the 2000 annual meeting of the shareholders.
Mr. Barker's option is exercisable to purchase 500,000 shares of Common
Stock. The option is not immediately exercisable. It vests and becomes
exercisable in full at the end of any quarter during any fiscal year when the
cumulative "Operating Profit Before Corporate Overhead" for such fiscal year to
date equals or exceeds $1,065,483.
<PAGE>
Mr. Barker's option has a term of 10 years and expires on May 4, 2008.
The purpose of Mr. Barker's stock option is to retain and incentivise him as
Chairman of the Board, President and Chief Executive Officer of the Registrant.
The options granted to Mr. Love and Mr. Foor is each exercisable to
purchase 250,000 shares. Each option is presently exercisable and has a term of
10 years that expires on May 4, 2008. The purpose of the options granted to Mr.
Love and Mr. Foor is to compensate them for serving as Directors of the
Registrant.
The number of shares subject to an option is subject to proportional
adjustment for any increase or decrease in the number of shares issued by the
Registrant without receipt of consideration by the Registrant, such as a stock
dividend or a stock split.
The options are non-qualified stock options under the Internal Revenue
Code of 1986. As a general rule, no tax is imposed on the optionee upon the
grant of an option, nor will the Registrant be entitled to a tax deduction by
reason of such grant. Generally, upon the exercise of an option, an optionee
will be treated as receiving compensation taxable as ordinary income in the year
of exercise in an amount equal to the excess of the fair market value of the
shares on the date of exercise over the exercise price. Thereafter, if the
holder holds the stock for a period of one year or less the sale will be treated
as subject to ordinary income tax rates. Stock held for a period exceeding one
year receives capital gain tax rate treatment. The Registrant will be entitled
to a tax deduction in an amount equal to the compensation recognized by the
optionee.
Set forth below is certain information with respect to the options
granted as of May 4, 1998, subject to approval of the options by the
shareholders.
New Plan Benefits
--------------------
1998 Stock Option Agreements
Name and Position Dollar Value Number of Shares
George C. Barker -0- (3) 500,000 (1)
Chairman of the Board, President
And Chief Executive Officer
Joe R. Love -0- (3) 250,000 (2)
Director
Joe P. Foor -0- (3) 250,000 (2)
Director
Executive Group -0- (3) 500,000 (1)
Non-Executive Director Group -0- (3) 500,000 (2)
Non-Executive Officer -0- -0-
Employee Group
- -------------------
(1) Mr. Barker's option vests and becomes exercisable in full at the end of
any quarter during any fiscal year when the cumulative "Operating
Profit Before Corporate Overhead" for such fiscal year to date equals
or exceeds $1,065.483.
(2) Vested immediately upon the date of grant, May 4, 1998, subject to
approval of the stock options by the shareholders of the Registrant at
the Annual Meeting.
(3) The option price is $1.30 per share, as the Common Stock is presently
constituted. The dollar value of the option is equal to (a) the value
of one share of Common Stock in excess of $1.30 per share, multiplied
by (b) the number of shares covered by the option. On December 31, 1999
the bid and asked prices on the common stock were approximately $0.50
to $0.75. Accordingly, the dollar value of the option is zero.
PhyMed Employee Stock Ownership Plan
In 1993, PhyMed established an employee stock ownership plan ("ESOP")
for its employees. Such plan is qualified under the provisions of the Internal
Revenue Code of 1986 as a defined contribution retirement plan designed to
invest primarily in qualifying employer securities. This provides a means for
employees to have an ownership interest in their employer. Upon establishment,
the ESOP purchased certain shares of PhyMed from a shareholder for a cash-down
payment and a promissory note payable in installments. PhyMed makes
contributions to the ESOP, which enable it to make timely payments of principal
and interest on its note to the former shareholder. Mr. and Mrs. Barker own in
the aggregate approximately 70% of the vested interests of participants in the
ESOP. See "Item 11. Security Ownership of Certain Beneficial Owners and
Management-Possible Change of Control."
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 and the rules
promulgated thereunder require that directors and executive officers of the
Registrant and beneficial owners of greater than 10% of the Registrant's Common
Stock file various reports with the Securities and Exchange Commission (the
"SEC"). The Registrant has reviewed its files and made inquiries by and on
behalf of the Registrant. Management believes that for the fiscal year ended
December 31, 1999, reports were filed timely.
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information, as of December 31,
1999, concerning the beneficial ownership of Common Stock by all Directors and
nominees, certain executive officers, all Directors and executive officers of
the Registrant, as a group, and each person who beneficially owns more than 5%
of the 8,948,628 outstanding shares of Common Stock, $.01 par value. Unless
otherwise indicated, each person named has sole voting and investment power over
the shares indicated.
Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership(1) of Class(1)
George C. Barker 7,748,541(2)(3)(4) 89.1%
9603 White Rock Trail, Suite 100
Dallas, Texas 75238
Joe R. Love 525,614(5) 6.4%
1601 N.W. Expressway, Suite 2101
Oklahoma City, Oklahoma
Joe P. Foor 525,108(6)(7) 6.4%
3535 Northwest Parkway
Dallas, Texas 75225
Judith F. Barker 7,748,541(2)(3)(4) 89.1%
9603 White Rock Trail, Suite 100
Dallas, Texas 75238
All directors and officers 8,799,253 94.7%
as a group (4 persons)
(1) In February 1999, the shareholders approved, a 1-for-10 reverse stock
split, which includes increasing the par value of the Common Stock from
$.001 to $.01. The change in the par value of common stock became
effective in March 1999.
(2) Includes 6,441,016 outstanding shares owned directly by Mr. Barker and
1,507,524 outstanding shares owned by Phy.Med., Inc. Employee Stock
Option Plan, as to which Mr. Barker is the sole trustee and has voting
power. Mr. and Mrs. Barker own in the aggregate approximately 70% of
the vested interests of participants in the ESOP.
(3) Does not include shares, which can be purchased upon the exercise of
stock option. On May 4, 1998, the Board of Directors granted Mr. Barker
an option subject to approval by the shareholders to purchase 500,000
shares of Common Stock with vesting to be contingent upon the
attainment by the Registrant of certain financial objectives.
Therefore, it is not presently exercisable and will not be exercisable
within the next 60 days. For additional information, see "Item 10.
Executive Compensation-1998 Stock Option Grants."
<PAGE>
(4) George C. Barker and Judith F. Barker are married. Mr. Barker is the
owner of record or has the power to vote all the outstanding shares
beneficially owned by him. Mrs. Barker is also deemed to be the
beneficial owner of the same shares. Mrs. Barker disclaims any
beneficial ownership of shares held by Mr. Barker as sole trustee of
the ESOP but allocated to the accounts of ESOP participants other than
Mr. or Mrs. Barker.
(5) Includes (a) holdings of family members of Mr. Love, (b) 6,828 shares
issuable upon conversion of Series A Preferred Stock held by a
corporation controlled by Mr. Love, and (c) 250,000 shares which can be
purchased upon the exercise of a recently granted stock option subject
to approval by the shareholders. See "Item 10. Executive
Compensation-1998 Stock Option Grants."
(6) Includes (a) 26,667 shares issuable upon conversion of Series A
Preferred Stock held by Mr. Foor's wife, Anne Foor, and (b) 250,000
shares which can be purchased upon the exercise of a recently granted
stock option subject to approval by the shareholders. See "Item 10.
Executive Compensation-1998 Stock Option Grants."
(7) Does not include warrants granting 120,000 shares of common stock to
Anne Foor [see Item 5 (iii)] .
By virtue of his beneficial ownership of Common Stock, Mr. Barker may be deemed
to be a "parent" of the Registrant as such term is defined in the rules and
regulations of the Securities and Exchange Commission.
Possible Change of Control
Prior to the Merger on April 3, 1998, there were 800 common shares of
PHYMED - Dallas outstanding, of which 500 were owned by Mr.Barker, individually,
and 300 were owned by the ESOP.
In the Merger, the 500 PHYMED - Dallas common shares owned by Barker
were converted into immediate ownership of and the right to receive 5,423,079
shares of Common Stock of the Registrant, and 140 of the 300 PHYMED - Dallas
common shares owned by the ESOP were converted in like manner into 1,518,462
shares of Common Stock of the Registrant. The remaining 160 PHYMED - Dallas
common shares held by the ESOP now constitute the 20% of PHYMED - Dallas common
shares not owned by the Registrant.
<PAGE>
The 800 shares of PHYMED - Dallas owned by Barker and the ESOP at the
time of the Merger were pledged to Patrick Alan Luckett ("Luckett") to secure
the payment of (a) two promissory notes payable to the order of Luckett, which
were issued to him as partial payment for shares of PhyMed purchased from him,
and (b) a guaranty of such notes.
On September 21, 1993, Barker and Luckett owned all the then
outstanding common shares of PhyMed, Inc., each of them owning of 500 common
shares. On such date Luckett sold 200 of his shares to PhyMed and 300 shares to
the ESOP. The sales were for cash and promissory notes. One note was issued by
PhyMed in the original principal amount of $800,000 pursuant to the terms of a
Loan and Security Merger dated September 21, 1993, and the second promissory
note was issued by the ESOP in the original principal amount of $800,000. Both
notes were guaranteed by Barker. The PhyMed note was secured by the 200 shares
repurchased from Luckett by PhyMed; the ESOP note was secured by the 300 shares
the ESOP purchased from Luckett; and the 500 shares already owned by Barker were
pledged to secure his guaranty of the two notes.
The aggregate of 6,891,541 shares of Common Stock of the Registrant
received by Barker and the ESOP as a result of the Merger have been substituted
in the pledge for the 640 PHYMED - Dallas shares which were released from the
pledge and converted into such shares of Common Stock of the Registrant. The 20%
of PHYMED - Dallas still owned by the ESOP remains pledged for such purpose.
As of April 18, 2000, the unpaid principal balance on the PhyMed note
was retired, and the ESOP note was $107,581.78.
Mr. and Mrs. Barker are guarantors on the Siemens Credit Corporation
lease that is currently in litigation. An adverse outcome in that litigation
could result in a possible change in control of the Registrant.
Item 12. Certain Relationships and Related Transactions
On March 31, 1998, the Registrant entered into a letter agreement with
Joe P. Foor and CCDC, Inc., a company controlled by Joe R. Love. Mr. Foor and
CCDC, Inc. (the "consultants") agreed to provide certain specified consulting
and advisory services of a corporate development nature, as the Registrant may
need. The Registrant will pay the consultants a $36,000 annual retainer, plus
out-of-pocket expenses. The consultants will also earn a transaction fee for
each acquisition or capital placement completed the Registrant. In conjunction
with agreement Mr. Foor was issued 69,700 shares of common stock and CCDC, Inc.
13,900 shares of common stock in lieu of cash for services rendered in 1998. The
letter agreement was terminated by mutual agreement in February 1999.
<PAGE>
George C. Barker owns a 50% interest in and is President of American
Medical Imaging Corporation ("AMIC"), which rented a mobile magnetic resonance
imaging ("MRI") machine to PHYMED Diagnostic Imaging - McAllen, LLC (ceased
operations December 1999) in McAllen, Texas. PHYMED - Dallas and AMIC have a
business relationship which is embodied in a Radiology Services Provider
Agreement - Contracted Services dated February 1, 1996. This agreement has a
one-year term, which renews automatically each year for one additional year
unless terminated by one of the parties. AMIC refers patients to PHYMED - Dallas
for MRI procedures AMIC is unable to perform on its own MRI machine. PHYMED -
Dallas invoices AMIC directly for such procedures at a discounted fee of $300.00
per procedure, and AMIC pays the invoices directly to PHYMED - Dallas upon
receipt. PHYMED - Dallas received revenues of $78,000 in 1999 and $149,000 in
1998 from AMIC. AMIC and PHYMED terminated their agreement December 31, 1999.
PHYMED - Dallas entered into a 10-year Management/Licensing Agreement
with Medical Imaging of Plano, Inc. ("MIPI") effective January 14, 1998 with
respect to the operation of a new full service radiology center in Plano, Texas,
a suburb of Dallas, under the name of "PhyMed Diagnostic Imaging Center Plano."
PHYMED - Dallas managed the new center until September 30, 1999 when the
agreement was terminated by mutual consent. Mr. Barker owned 12.5% and was
President of MIPI. As a part of the termination of the agreement Mr. Barker
transferred his 12.5% ownership in MIPI to MIPI as payment for indebtedness of
$102,153, owed MIPI by PHYMED Contracted Services for services rendered in
conjunction with its capitated contract between August 1998 and September 1999
(resulting in PHYMED - Contracted Services owing Mr. Barker the indebtedness).
Additionally, Mr. Barker resigned as both President and Director of MIPI. Mr.
Barker has personally guaranteed for three years $200,000 of MIPI's obligations
under equipment leases for equipment used at the new center.
George C. Barker d/b/a "A/G Partners" formerly managed for a monthly
fee a physician practice of The PRS Group, P.A., and Philip R. Shalen, M.D. is
the sole radiologist employed by it. PHYMED - Dallas does not have a direct
relationship with A/G Partners. This arrangement was cancelled by mutual consent
as of December 31, 1999.
On January 1, 1996, PhyMed and The PRS Group, P.A. entered into a
10-year Radiology Services Agreement which provided that The PRS Group, P.A.
would provide the professional service component and PhyMed would provide the
technical component of the diagnostic radiological services rendered by PhyMed
at its Center. PhyMed and The PRS Group, P.A. each bill patients separately for
their components of the diagnostic services. On September 1, 1997, the parties
entered into a new 10-year Radiology Services Agreement which contains
substantially the same provisions as the 1996 agreement. This Agreement was
canceled by mutual consent as of November 30, 1998.
<PAGE>
On July 18, 1998 Registrant borrowed $100,000 from Anne C. Foor, the wife of
Director Joe P. Foor. The 12 % note was due January 20, 1999 and included
warrants to purchase 20,000 shares of common stock at $0.625 per share expiring
July 20, 2001. The note was renewed on January 20, 1999 for five months and
included additional warrants for 30,000 shares on the same terms. On July 20,
1999 another renewal extended the maturity to January 20, 2000 and included
additional warrants for 50,000 at $0.50 per share expiring January 20, 2002.
That note was renewed on January 20, 2000 with a June 20, 2000 maturity and
included additional warrants to purchase 20,000 shares at $0.50 per share
expiring June 20, 2002.
Item 13. Exhibits and Reports on Form 8-K
(a) Exhibits
1.1 Agreement and Plan of Reorganization and Merger as of March 6,
1998 by and among Tatonka Energy, Inc. Tatonka Energy
Subsidiary Phy.Med., Inc. and the Stockholders of PhyMed, Inc.
(Exhibit 1)*
1.2 Amendment to Agreement and Plan of Reorganization and Merger
dated as of March 6, 1998, by and among Tatonka Energy, Inc.
Tatonka Energy Subsidiary, Inc. Phy.Med., Inc. and the
Shareholders of PhyMed, Inc. (Exhibit 1.2)****
3.1 Amended Certificate of Incorporation of PHYMED, INC. filed
with the Secretary of State of Oklahoma on February 25, 1999
(Exhibit 3.1)*****
3.2 Loan and Security Agreement by and between PhyMed Inc., as
Borrower, and Patrick A. Luckett, as Lender, and George C.
Barker, as Guarantor, dated September 21, 1993 (Exhibit
3.1)***
3.3 $800,000 Note Dated September 21, 1993 from PhyMed, Inc. to
Patrick A. Luckett (Exhibit 3.3)***
3.4 $800,000 Note dated September 21, 1993 from Phy.Med., Inc.
Employee Stock Ownership Plan of Phy.Med., Inc. (Exhibit
3.3)***
3.5 Note Purchase Agreement (undated but) executed September 21,
1993, by and between Patrick A. Luckett, Phy.Med., Inc. and
the Employee Stock Ownership Plan of Phy.Med., Inc. (Exhibit
3.4)***
3.6 Guaranty Agreement dated September 21, 1993, signed by George
C. Barker in favor of Patrick Alan Luckett (Exhibit 3.5)***
3.7 Limited waiver of Certain Rights and Remedies executed by
Patrick Alan Luckett on October 24, 1998 (Exhibit 3.6)***
<PAGE>
10.1 Employment Agreement dated October 1, 1993, between Phy.Med.,
Inc. and George C. Barker (assumed by Registrant on April 3,
1998) (Exhibit 10.5)**
10.2 Stock Option Agreement dated May 4, 1998, between the Company
and George C. Barker (Exhibit 10.6)**
10.3 Stock Option Agreement dated May 4, 1998, between the Company
and Joe R. Love (Exhibit 10.7)**
10.4 Stock Option Agreement dated May 4, 1998, between the Company
and Joe P. Foor (Exhibit 10.8)**
10.5 Letter Agreement dated March 31, 1998 by and among the
Registrant and CCDC, Inc. and Joe For (Exhibit 10.9)**
10.6 Loan and Security Agreement (undated) between Medical
Equipment Finance Company and Phy.Med., Inc. [This is the
"DVI" financing document. Medical Equipment Finance Company is
a subsidiary of DVI.] (Exhibit 10.6)***
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)***
10.10 Management/Licensing Agreement dated January 4, 1998 between
Phy.Med., Inc. and Medical Imaging of Plano, Inc.
(Exhibit 10.10)**
10.11 Radiology Service Provider Agreement - Contracted Services
dated February 1, 1996 between Phy.Med., Inc. and American
Medical Imaging Incorporated (Exhibit 10.11)**
10.12 Radiology Services Agreement dated September 1, 1997, between
Phy.Med., Inc. and the PRS Group, P.A. (Exhibit 10.13)**
10.13 Amendment dated February 23, 2000 to Stock Option Agreement
dated May 4, 1998 between Registrant and George C. Barker
(Exhibit 10.13)*****
<PAGE>
10.14 Amendment dated February 23, 2000 to Stock Option Agreement
dated May 4, 1998 between Registrant and Joe. R. Love (Exhibit
10.14)*****
10.15 Amendment dated February 23, 2000 to Stock Option Agreement
dated May 4, 1998 between Registrant and Joe. P. Foor (Exhibit
10.15)*****
10.16 Master Lease Agreement Number 11053 effective October 11, 1999
between Prime Leasing Company and PHYMED Diagnostic Imaging
Center - Hillcrest., Inc. (a wholly owned subsidiary of the
Registrant) (Exhibit 10.16)*****
10-17 Lease Schedule Number 1 to master Lease Agreement Number 11053
(Exhibit 10.17)*****
10.18 Amendment to Lease Schedule Number 1 to Master Leasse
Agreement Number 11053 (Exhibit 10.18)*****
10.19 Master Lease Agreement Number 11500 effective February 11,
2000 between Prime Leasing Company and PHYMED Diagnostic
Imaging Center - White Rock, Inc. (a wholly owned subsidiary
of the Registrant) (Exhibit 10.19)*****
10.20 Lease Schedule Number 1 to master Lease Agreement Number 11500
(Exhibit 10.20)*****
10.21 Agreement of Limited Parnership ( White Rock JV, Ltd.) between
LDE Ventures, Inc. and Registrant dated December 18, 1999
regarding the operation and use of the Siemens 1.5 MRI
(Exhibit 10.21)*****
10.22 Master Lease Agreement Number 11113 effective Feburary 11,
2000 between Prime Leasing Company and White Rock JV, Ltd.
(Exhibit 10.22)*****
10.23 10-23 Lease Schedule Number 1 to master Lease Agreement Number
11113 (Exhibit 10.23)*****
10.24 10.24 Management and Agreement dated December 11, 1999 between
White Rock JV, Ltd. and PHYMED Contracted Services Corporation
(a wholly owned subsidiary of the Registrant) (Exhibit
10.24)*****
10.25 Office Lease Agreement made and entered in as of September 8,
1999, between AETNA Life Insurance Company (Lessor) and
Registrant (Exhibit 10.25)*****
27 Financial Data Schedule
<PAGE>
* Incorporated by reference to the exhibit number set forth in
parentheses, which exhibit was filed with the Company's Form 8-K filed April 8,
1998
** 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, 1997. The Form 10-KSB was filed June 16, 1998.
*** 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
**** Incorporated by reference to the exhibit number set forth in
parentheses which exhibit was filed by the Registrant's Form 8-K/A filed
December 8, 1998
***** Incorporated by reference to the exhibit number set forth in
parentheses which exhibit was filed by the Registrant's Form 10-KSB filed March
8, 2000
(b) Reports on form 8-K
No report on Form 8-K was filed during the fourth (last) quarter of the
fiscal year ended December 31, 1999.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act
of 1934, the Registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
TATONKA ENERGY, INC.
Registrant
Date: April 18, 2000 BY: /s/ George C. Barker
-------------------------------------
George C. Barker
President and Chief Executive Officer
By: /s/ David L Moore
-------------------------------------
DAVID L. Moore
Chief Financial Officer
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the Registrant and in
the capacities and on the dates indicated.
Date: April 26, 2000 /s/ Judith F. Barker
-------------------------------------
Judith F. Barker, Director
Date: April 26, 2000 /s/ Joe P. Foor
-------------------------------------
Joe P. Foor, Director
-------------------------------------
Joe R. Love
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Pages
Financial Statements
Consolidated Balance Sheet at December 31, 1999 (unaudited) F-2
Consolidated Statement of Operations for the years ended
December 31, 1999 (unaudited) and December 31, 1998 F-4
Consolidated Statement of Changes in Shareholders' Deficit for
year ended December 31, 1999 (unaudited) F-5
Consolidated Statement of Cash Flows for the years ended
December 31, 1999 (unaudited) and December 31, 1998 F-6
Notes to Consolidated Financial Statements F-7
<PAGE>
<TABLE>
<CAPTION>
PHYMED, INC. and Subsidiary
CONSOLIDATED BALANCE SHEETS
December 31
1999
------------------
(Unaudited)
<S> <C>
ASSETS
CURRENT ASSETS
Cash $ 88,206
Accounts receivable-trade, less allowance for
doubtful accounts and contractual allowances
of $2,313,141 1,984,422
------------------
Total Current Assets 2,072,628
PROPERTY AND EQUIPMENT
Clinical Equipment 3,032,035
Computer Equipment 449,861
Office Furniture & Fixtures 152,691
Leasehold Improvements 400,112
------------------
4,034,699
Less: Accumulated Depreciation (2,185,145)
------------------
Total Fixed Assets 1,849,554
OTHER ASSETS
Deposits - real estate & equipment 188,944
Other 12,210
------------------
Total Other Assets 201,154
------------------
TOTAL ASSETS $ 4,123,336
==================
</TABLE>
F-1
<PAGE>
<TABLE>
<CAPTION>
PHYMED, INC. and Subsidiary
CONSOLIDATED BALANCE SHEETS-CONTINUED
LIABILITIES AND SHAREHOLDERS EQUITY
December 31
1999
--------------------
(Unaudited)
<S> <C>
CURRENT LIABILITIES
Current muturities of long-term debt $762,628
Accounts payable - trade 879,958
Accounts payable - related parties 38,294
Payable to factor 0
Notes Payable - Bank 180,000
Notes Payables - Others 335,000
Due to Siemens 1,056,871
Accrued expenses 180,597
Deferred income tax liability 302,058
--------------------
Total current liabilities 3,735,406
LONG-TERM LIABILITIES
Long-term debt, less current maturities 1,151,161
Deferred rent 34,387
--------------------
Total Liabilities 4,920,954
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 89,487
Series "A" nonvoting convertible preferred
stock, $1 par value per share; issued and
outstanding, 135,139 shares (1998) & 106,968 (1999) 106,968
Additional paid-in capital 431,114
Unearned ESOP compensation (220,449)
Retained earnings (1,204,738)
--------------------
Total shareholders' deficit (797,618)
--------------------
$4,123,336
====================
</TABLE>
F-2
<PAGE>
<TABLE>
<CAPTION>
PHYMED INC. and Subsidiary
CONSOLIDATED STATEMENT OF REVENUES AND EXPENSES
Year Ended December 31
-------------------------------------
1998 1999
-------------------------------------
Audited (Unaudited
<S> <C> <C>
Net patient revenue $3,330,411 $4,418,425
Operating expenses (3,845,813) (3,900,060)
-------------------------------------
Operating profit (515,402) 518,365
Other income (expenses)
Interest expense (228,884) (110,845)
Factoring fees (66,869)
Miscellaneous income 43,172 455,503
-------------------------------------
(252,581) 344,658
Net earnings before
income taxes (767,983) 863,023
Deferred income tax expense (benefit) 88,000 (302,058)
-------------------------------------
NET EARNINGS ($679,983) $560,965
=====================================
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
PHYMED, INC. and Subsidiary
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
Additional
Common Stock Preferred Paid-in
-------------------------------------
Shares Amount Stock Capital
----------------- ----------------- ---------------- -------------
<S> <C> <C> <C> <C>
Balance at January 1, 1999 7,843,010 $ 78,431 $ 135,139 $ 999
Shares issued for services rendered 1,037,475 10,375 378,125
Shares issued to Preferrred "A" shareholders 19,143 191 (28,171) 27,980
Shares issued in lieu of interest payable 49,000 490 24,010
Net gain (loss)
----------------- ----------------- ---------------- -------------
Balance at December 31, 1999 8,948,628 $ 89,487 $ 106,968 $431,114
Retained
Unearned Earnings
ESOP (Accumulated
Compensation Deficit) Total
----------------- ----------------- ----------------
Balance at January 1, 1999 ($220,449) ($1,765,703) ($1,771,583)
Shares issued for services rendered 388,500
Shares issued to Preferrred "A" shareholders 0
Shares issued in lieu of interest payable 24,500
Net gain (loss) 560,965 560,965
----------------- ----------------- ----------------
Balance at December 31, 1999 ($220,449) ($1,204,738) ($797,618)
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
PHYMED INC. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31
------------------------------------------
1998 1999
------------------- -----------------
Audited (Unaudited)
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income ($679,983) $560,965
Adjustments to reconcile Net Income to
net cash provided by operating
activities:
Depreciation & Amortization 543,827 365,201
Amoritization of unearned ESOP compensation 74,209
Deferred income tax (88,000) 302,058
Changes in operating assets and liabilities:
Receivables 448,655 (836,530)
Prepaid expenses and other current assets (3,789) 26,027
Other assets 32,243 (156,832)
Accounts payable and other current liabilities 722,098 522,925
Other noncurrent liabilities 485 0
------------------- -----------------
Net Cash provided by Operating Activities 1,049,745 783,814
INVESTING ACTIVITIES:
Purchase of property assets (32,417) (875,350)
Disposition of property assets 96,845
Merger 116
------------------- -----------------
Net Cash provided by(Used in) Investing Activities (32,301) (778,505)
FINANCING ACTIVITIES:
Issuance of common stock for services rendered 336,000
Proceeds from (payments to) Factoring Company (476,836) (281,919)
Proceeds of Debt 369,489 879,350
Repayment of Debt (947,330) (850,534)
------------------- -----------------
Net Cash Provided (Used) by Financing Activities (1,054,677) 82,897
------------------- -----------------
Net cash increase (decrease) for period (37,233) - 88,206
Cash at Beginning of Period 37,233 0
------------------- -----------------
Cash at End of Period $0 $88,206
=================== =================
</TABLE>
F-5
<PAGE>
PHYMED, INC. and Subsidiaries
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
At the annual meeting of shareholders held in February 1999, the shareholders
approved (1) the change of name to PHYMED, INC., and (2) a 1-for-10 reverse
split of the common stock. All share amounts herein have been restated to
give effect to the stock split.
NOTE B - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business
------------------
The Company is engaged in the business of operating diagnostic imaging
centers, located in Dallas, Texas and x-ray facilities in Richardson and
Mesquite. Texas.
A summary of the significant accounting policies applied in the preparation
of the accompanying financial statements follows.
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of PHYMED, INC.,
its wholly-owned subsidiaries, PHYMED Diagnostic Imaging Dallas, Inc. (PDID),
PHYMED Contracted Services, Inc. (PMCS), PHYMED Diagnostic Imaging Hillcrest,
Inc (PDIH), PHYMED Diagnostic Imaging Duncanville, Inc. (Duncanville) and
53%-owned PHYMED Diagnostic Center McAllen, LLC. (McAllen) (collectively "the
Company"). Significant inter-company accounts and transactions have been
eliminated in consolidation.
Revenue Recognition and Receivables
-----------------------------------
Net patient revenue is recorded as services are rendered, at the estimated
realizable amounts from patients, third-party payers and others based upon
contractual arrangements. Provisions are made for estimated uncollectible
accounts and are reflected in the financial statements as bad debts, included
in operating expenses.
F-6
<PAGE>
NOTE B - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES - Continued
Property and Equipment
----------------------
Property and equipment are stated at cost less accumulated depreciation and
amortization. Depreciation and amortization are provided for in amounts
sufficient to relate the cost of depreciable assets to operations over their
estimated service lives, which range from three to five years, by the
straight-line method. Leasehold improvements are amortized by the
straight-line method over the lives of the respective leases or the service
lives of the improvements, whichever is shorter.
Deferred Rent
-------------
The cost of the Company's lease for office space is accounted for by the
straight-line method. The difference between the net cash requirements of the
lease and straight-line method is reflected on the balance sheet as deferred
rent.
Use of Estimates
----------------
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that effect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements, the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
-------------------------
Cash equivalents consist of high liquid investments, which are readily
convertible into cash and have a maturity of three months or less.
Earnings (Loss) Per Share
-------------------------
Basic earnings (loss) per share is computed by dividing net loss by the
weighted average number of common shares outstanding. Diluted earnings per
share gives effect to the assumed conversion of preferred stock, when
dilutive.
Stock-based Compensation
------------------------
The Company accounts for stock-based compensation to employees using the
intrinsic value method. Accordingly, compensation cost for stock options to
employees is measured as the excess, if any, of the quoted market price of
the Company's common stock at the date of the grant over the amount an
employee must pay to acquire the stock.
Fair Value of Financial Instruments
-----------------------------------
The carrying amounts for cash, accounts receivable and accounts payable
approximate fair value because of the short-term nature of these financial
instruments. The carrying amount reported for long-term debt approximates
fair value, as interest rates are tied to market.
F-7
<PAGE>
<TABLE>
<CAPTION>
NOTE C - GOING CONCERN MATTERS
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principals, which contemplate continuation of the
Company as a going concern. The Company had an unaudited net profit of $560,965
in 1999 and a net loss of ($679,953) in 1998. The Company's current liabilities
exceeded its current assets by $1,662,778. Included in current liabilities is
$1,056,871 relating to a subsidiary's financings, which were in default at
December 31, 1999. The lender has filed a lawsuit to collect the unpaid balance.
NOTE D - PROPERTY AND EQUIPMENT
Property and equipment accounts include $1,748,272 of assets, which have
been financed under leases classified as capital leases. The amounts capitalized
are the lesser of the fair market values or the present values of the minimum
lease payments of the leased property.
NOTE E - LONG-TERM DEBT
December 31,
1999
-------------
<S> <C>
Note payable by the Company's Employee Stock Ownership Plan for the
purchase of common shares, payable in monthly installments through
2000, at an interest rate of 10.0%, collateralized by the common
shares acquired $145,187
Note payable to bank payable in monthly installments through 2001 at
prime plus 2% (9.75%) per annum, collateralized by accounts receivable
and equipment 191,171
Note payable to shareholder with monthly interest payments at 12% per
annum, due January 2000, collateralized by accounts receivable 100,000
Capitalized lease obligation, payable in monthly installments through
2004, collateralized by the related equipment 1,222,664
Capitalized lease obligation, payable in monthly installments through
2003, collateralized by the related equipment 79,351
Capitalized lease obligation, payable in monthly installments through
2001, collateralized by the related equipment 175,417
-----------
1,963,789
Less current maturities (762,628)
-----------
$ 1,201,161
===========
</TABLE>
All debt is guaranteed by the Company's principal shareholder.
F-8
<PAGE>
Aggregate maturities of long-term debt at December 31, 1999, are as follows:
Year ending
December 31,
2000 762,628
2001 570,626
2002 469,128
At December 31, 1999, a subsidiary was in default on certain equipment
financings, accounted for as capital leases, with Siemens Credit Corporation
(Siemens). Accordingly, these financings have been included in current
liabilities as of December 31, 1999. On December 7, 1998, Siemens accelerated
maturity and in August of 1999, repossessed the equipment. In December 1999 the
repossessed MRI was purchased by a joint venture jointly owned by the company
and an equipment leasing company for $600,000 which was applied against the
capital lease . See Note G regarding related litigation.
NOTE F - PREFERRED STOCK
The Series A preferred stock is nonvoting, and each share is convertible
into .6667 shares of common stock. Holders are entitled to a 5% dividend
when and if declared by the Board of Directors.
NOTE G - COMMITMENTS AND CONTINGENCIES
Future minimum rental commitments under the non-cancelable operating leases,
which relate primarily to office and medical center premises and diagnostic
equipment, are as follows:
Year ended December 31, Real
Estate Equipment Total
2000 313,012 643,346 956,358
2001 313,012 520,626 833,638
2002 313,012 449,128 762,410
2003 313,012 426,780 739,792
Total minimum payments required $3,292,198
Real estate rental expense totaled approximately $210,000 and $157,000 for
the years ended December 31, 1999 and 1998, respectively.
A subsidiary of PHYMED, INC. is defendant in a lawsuit brought by Siemens
Credit Corporation for payments of approximately $1,965,000 allegedly due
under a defaulted equipment lease and a defaulted promissory note with an
unpaid principal balance of approximately $85,000. In December 1999 a joint
venture comprised of the Company and an equipment leasing company purchased
the equipment. The outcome of this lawsuit is not determinable.
Several other legal actions arising in the ordinary course of business are
pending or in process against the Company. In the opinion of management, the
eventual disposition of these actions will not have a materially adverse
effect on the financial position, results of operations or liquidity of the
Company.
F-9
<PAGE>
NOTE H - EMPLOYEE STOCK OWNERSHIP PLAN
The Company sponsors a leveraged employee stock ownership plan (ESOP) that
covers all employees who have completed one year of service and who are at
least 18 years of age. The Company accounts for its ESOP in accordance with
Statement of Position 93-6, "Employers' Accounting for Employee Stock
Ownership Plans". Accordingly, the Company reports in its balance sheet the
debt of the ESOP and Unearned ESOP Compensation. The Company allocates the
shares purchased by the ESOP to qualifying employees as payments are made on
the debt of the ESOP. As shares are allocated to employees the Company
records compensation expense equal to the fair value of the shares, as
determined by an annual independent valuation. The difference in the fair
value of shares allocated to employees and the cost of the shares is charged
or credited to equity, net of related income taxes. All ESOP shares are
pledged as collateral for the ESOP debt.
The status of ESOP shares was as follows:
December 31, 1998
------------------------
PHYMED, INC. PMDIC
------------ -----
Allocated shares 1,507,525 79
Unallocated shares - 55
--------- ----
Total ESOP shares 1,507,525 134
========= ====
F-10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000353904
<NAME> PHYMED, INC.
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 88,206
<SECURITIES> 0
<RECEIVABLES> 4,297,563
<ALLOWANCES> 2,313,141
<INVENTORY> 0
<CURRENT-ASSETS> 2,072,628
<PP&E> 4,034,699
<DEPRECIATION> 2,185,145
<TOTAL-ASSETS> 4,123,336
<CURRENT-LIABILITIES> 3,735,406
<BONDS> 1,151,161
0
106,968
<COMMON> 89,487
<OTHER-SE> (994,073)
<TOTAL-LIABILITY-AND-EQUITY> 4,123,336
<SALES> 4,418,425
<TOTAL-REVENUES> 4,418,425
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,900,060
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 110,845
<INCOME-PRETAX> 863,023
<INCOME-TAX> (302,058)
<INCOME-CONTINUING> 562,965
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 560,965
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
