SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A (No. 1)
[x] Annual Report Under Section 13 or 15(d) of the
Securities Exchange Act of 1934
FOR THE FISCAL YEAR ENDED: DECEMBER 31, 1996
Commission File Number: 0-25064
HEALTH FITNESS PHYSICAL THERAPY, INC.
(Exact name of small business issuer as specified in its charter)
Minnesota 41-1580506
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
Number)
3500 W. 80th Street, Suite 130, Bloomington, Minnesota, 55431
(Address of principal executive offices) (Zip code)
Issuer's Telephone Number: 612-831-6830
Securities registered under Section 12(b) of the Exchange Act: None
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.01 par value
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 herein, 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. [ ]
State issuer's revenues for its most recent fiscal year: $28,514,000.
As of March 24, 1997, the aggregate market value of the voting stock held by
non-affiliates of the registrant, computed by reference to the last quoted price
at which such stock was sold on such date as reported by the Nasdaq SmallCap
Market, was $11,695,883.
As of March 24, 1997, there were outstanding 7,666,122 shares of the issuer's
common stock, $.01 par value.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
<PAGE>
Health Fitness Physical Therapy, Inc. (the "Company") hereby amends Part
III of its Form 10-KSB for the year ended December 31, 1996.
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
ACT
Directors and Executive Officers:
The names and ages of the executive officers and directors of the Company
and their positions and offices presently held are as follows:
Name Age Position
Loren S. Brink 41 President, Chief Executive Officer and
Chairman of the Board of Directors
Don Paul Cochran 42 Secretary, Treasurer and Chief
Financial Officer
Charles J. Pappas 47 Health and Fitness Services division President
Thomas H. Coplin 52 Health Fitness Rehab division
President
Patrick D. Regan 40 Pro Source Fitness division President
James A. Bernards 50 Director
Charles E. Bidwell 52 Director
George E. Kline 61 Director
William T. Simonet, M.D. 43 Director
Robert K. Spinner 54 Director
Loren S. Brink has been President, Chief Executive Officer and Chairman of
the Company since its inception in 1981. He holds a Masters Degree in Cardiac
Rehabilitation and Adult Fitness from the University of Wisconsin. He has an
extensive clinical background, has published numerous articles regarding
corporate fitness and speaks frequently at national conferences.
Don Paul Cochran has served as Secretary, Treasurer and Chief Financial
Officer of the Company since January 1997. Prior to joining the Company Mr.
Cochran served as a consultant to Practice Management Consultants, Inc., a
physical therapy consulting business of which Thomas H. Coplin is President and
one-half owner. From 1995 to 1996, Mr. Cochran served as Chief Financial Officer
of Access Management Corp., a document imaging company. From 1989 to 1995, Mr.
Cochran served as Vice President-Tax of E.W. Blanch Co., a reinsurance
brokerage.
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<PAGE>
Charles J. Pappas has served as President of the Company's Health and
Fitness Services division since March 10, 1997. Prior to joining the Company,
from 1995 to 1997 Mr. Pappas was General Manager of Bearpath Golf and Country
Club, a golf course, clubhouse, pool and tennis facility located in Eden
Prairie, Minnesota. From 1995 to 1996, Mr. Pappas was a retail business advisor
to the Shakopee Mdewakanton Dakota Community. From 1994 to 1995, Mr. Pappas was
General Manager of Dakotah! Sport and Fitness, an athletic club operated by the
Shakopee Mdewakanton Dakota Community located near Prior Lake, Minnesota. From
1985 to 1993, Mr. Pappas was Vice President/General Manager of Flagship Athletic
Club located in Eden Prairie, Minnesota.
Thomas H. Coplin has served as President of the Company's Health Fitness
Rehab division since January 1997 and was designated an executive officer of the
Company in March 1997. Since 1995, Mr. Coplin has been President of Practice
Management Consultants, Inc., a physical therapy consulting company. Since 1994,
Mr. Coplin has also served as President of Coplin Quarter Horses. From 1981 to
1993, Mr. Coplin was President of Coplin Physical Therapy Associates, Inc., a
physical therapy practice which was acquired by ReHab Clinics, Inc. in 1993 and
for whom Mr. Coplin served as Area Vice President for a portion of 1993.
Patrick D. Regan has served as the President of the Company's Pro Source
Fitness division since January 1996 when the Company acquired the assets of such
business. Prior to joining the Company, Mr. Regan was the President of Pro
Source since 1991.
James A. Bernards, a Director of the Company since 1993, is President of
Brightstone Capital, Ltd., a venture capital firm and has been President of
Facilitation Incorporated, a strategic planning firm he founded in July 1993.
Prior to that time he was President of Stirtz Bernards & Co., a CPA firm he
founded and with which he had been a partner for more than twelve years. He is
also a director of FSI International and Reality Interactive, Inc.
Charles E. Bidwell, a Director of the Company since 1988, was Chief
Financial Officer of Red Owl Stores, Inc., a Minneapolis-based food retailer,
from 1981 until April 1994. He has a 25-year history of starting and managing
new businesses, as well as significant corporate experience with Tonka, Inc. and
Red Owl Stores, Inc. He holds an MBA in Marketing and Finance from
Carnegie-Mellon University in Pittsburgh, Pennsylvania. ROS Stores, Inc.
(formerly Red Owl Stores, Inc.) was the subject of an involuntary Chapter 7
bankruptcy petition, filed on June 11, 1992. This involuntary proceeding was
converted to a Chapter 11 reorganization action on July 6, 1992. A plan of
reorganization was filed and confirmed as of February 18, 1993 in the United
States Bankruptcy Court, District of Minnesota (Case Number 3-92-3833) providing
for full payment to all creditors.
George E. Kline, a Director of the Company since March 1993, is an
executive officer of Brightstone Capital, Ltd., a venture capital firm and has
been President of Venture Management, a firm engaged in investing and providing
financial consulting services to corporations, since 1968. He is also a director
of Applied Biometrics, Inc., CyberOptics Corporation, Rimage Corporation,
Fieldworks, Inc. and Nutrition Medical, Inc.
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<PAGE>
William T. Simonet, M.D., a Director of the Company since March 1993, is an
independent practicing orthopedic surgeon. From 1985 until August, 1994, Dr.
Simonet practiced with Orthopedic Consultants, P.A. Dr. Simonet received his
Medical degree in 1980 from the University of Minnesota medical school. He also
received a Master of Science degree in orthopedic surgery from the Mayo Graduate
School of Medicine in 1985.
Robert K. Spinner, a Director of the Company since May 1995, has been
President of Abbott Northwestern Hospital in Minneapolis, Minnesota since 1988
and a member of the administrative staff at Abbott Northwestern since 1968. Mr.
Spinner graduated from St. John's University in Collegeville, Minnesota with a
Bachelor's degree in Economics and Accounting in 1964; he was awarded a Masters
degree in Hospital and Healthcare Administration from the University of
Minnesota in 1969. Mr. Spinner is a member of the Board of Directors of St.
John's University, the Newt C. Little Hospice and the Minnesota Hospital
Association.
There are no family relationships among any of the Company's directors or
executive officers. The term of office of each director is one year from the
date of the most recent annual meeting of shareholders or until his successor is
elected.
Compliance with Section 16(a) of the Exchange Act:
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive officers and directors, and persons who own more than ten percent of
the Company's Common Stock, to file with the Securities and Exchange Commission
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. Officers, directors and greater than
ten percent shareholders ("Insiders") are required by SEC regulation to furnish
the Company with copies of all Section 16(a) forms they file.
To the Company's knowledge, based on a review of the copies of such reports
furnished to the Company, during the fiscal year ended December 31, 1996, all
Section 16(a) filing requirements applicable to Insiders were complied with
except that Charles Bidwell was late filing a form reporting one transaction.
ITEM 10. EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth certain information regarding compensation
paid during each of the Company's last three fiscal years to the President and
Chief Executive Officer. No other executive officers received compensation in
excess of $100,000 during fiscal 1996.
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<PAGE>
<TABLE>
<CAPTION>
Long Term Compensation
------------------------------------
Annual Compensation Awards
------------------------------------------- ----------------
Securities
Underlying
Name and Fiscal Options All Other
Principal Position Year Salary ($) Bonus ($) Other /SARs (#) Compensation ($)
- ------------------ -------- --------------------------- -------------- ---------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Loren S. Brink, 1996 $137,700 $35,000 $ 22,436 (1) 100,000 $3,935 (2)
Chief Executive 1995 111,800 - 15,054 - 3,422 (2)
Officer and President 1994 111,800 - 16,268 - 3,097 (2)
</TABLE>
(1) Amount reflects automobile allowance and entertainment expense allowance.
(2) Amount reflects health insurance premiums and life insurance premiums not
available to employees generally.
Employment Agreements
In February 1992, the Company entered into a five-year Employment Agreement
with Loren S. Brink. The agreement, which expired on December 31, 1996, and has
been replaced with a new Employment Agreement described below, entitled Mr.
Brink to annual base compensation of $100,000 and discretionary annual base
adjustments of $10,000 up to a maximum annual base salary of $140,000. The
agreement also entitled Mr. Brink to an annual bonus based upon certain
specified goals and objectives set by the Company's Board of Directors. The
agreement prohibited Mr. Brink from directly or indirectly competing with the
Company in the in-house fitness or wellness center or program business for
hospitals, corporations or governmental entities in the United States for two
years after termination of his employment, provided the Company pays Mr. Brink
$100,000 for each year of such non-competition.
On April 8, 1997 the Board of Directors approved a new three-year
Employment Agreement with Mr. Brink, effective January 1, 1997 (the
"Agreement"), which will automatically extend for additional three-year terms,
unless either party gives written notice of termination. Pursuant to the
Agreement, Mr. Brink will continue to serve as the Company's President and Chief
Executive Officer at a minimum base salary of $160,000, $170,000 and $180,000
for the calendar years 1997, 1998 and 1999, respectively. Mr. Brink is eligible
to earn an annual year-end cash bonus ranging from 25% of base salary (if the
Company's actual pre-tax profits are at least 80% of the budgeted amount
therefor) to 75% of his base salary (if the Company's actual pre-tax profits are
120% or more of budget).
The Company granted Mr. Brink incentive stock options to purchase up to
100,000 shares of Company Common Stock at an exercise price of $3.00 per share.
Such options vest 25% immediately and 25% over on each of the first three
anniversaries of the effective date. Mr. Brink receives normal and customary
employee benefits and fringe benefits, including a $750 per month car allowance,
county club membership and $2,500 per year for professional, financial, legal
and tax planning counsel.
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<PAGE>
The Company may terminate the Agreement on 60 days' notice for "cause" or
upon twelve-months' notice "without cause." The Agreement terminates upon Mr.
Brink's death or permanent disability. If Mr. Brink is terminated for "cause,"
he will continue to receive his base salary for up to 60 days, and be entitled
to participate in certain benefit programs at his expense for up to eighteen
months. If Mr. Brink is terminated without "cause," he will continue to receive
his base salary for a period of up to 24 months following such termination. If
the Agreement is terminated due to Mr. Brink's death or disability, Mr. Brink's
base salary will continue to be paid for a period of 18 months. If Mr. Brink's
employment is terminated by reason of his death, disability, without "cause" or
in connection with a "change of control" of the Company, he will receive a pro
rated portion of any bonuses or incentive payment, and the immediate vesting and
acceleration of any unexpired and unvested stock options previously granted.
The Agreement gives Mr. Brink the option to terminate the Agreement upon a
change of control or business combination, including the sale or merger of the
Company. In such event, Mr. Brink can elect to receive his base salary for the
longer of the unexpired three year term of the Agreement or 24 months, or in
lieu thereof, a cash payment equal to 2.99 times Mr. Brink's base salary,
subject to reduction to prevent such payment (together with any other payments
considered contingent upon a change of control) from constituting an excess
parachute payment under applicable provisions of the Internal Revenue Code.
Option/SAR Grants During 1996 Fiscal Year
The following table sets forth information regarding stock options granted
to the Chief Executive Officer during the fiscal year ended December 31, 1996.
The Company has not granted stock appreciation rights.
<TABLE>
<CAPTION>
Number of
Securities % of Total
Underlying Options/SARs
Options/SARs Granted to Exercise or
Granted Employees in Base Price Expiration
Name (#) Fiscal Year ($/Sh) Date
--------------- ------------ ------------ ----------- ----------
<S> <C> <C> <C> <C>
Loren S. Brink 100,000(1) 27.8% $3.00 5/31/01
</TABLE>
- ------------------------
(1) Such option is exercisable as to 33,333 shares on June 1, 1997, 1998 and
1999.
Aggregated Option/SAR Exercises During 1996 Fiscal Year
and Fiscal Year End Option/SAR Values
No options were exercised by the Chief Executive Officer during fiscal
1996. The following table provides information related to the number and value
of options held at fiscal year end by the Chief Executive Officer:
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<PAGE>
<TABLE>
<CAPTION>
Number of Unexercised
Securities Underlying Value of Unexercised In-the-
Options at 12/31/96 Money Options at 12/31/96(1)
--------------------- -----------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Loren S. Brink.... 200,000 100,000 $470,500 $0
</TABLE>
(1) Value of exercisable/unexercisable in-the-money options is equal to the
difference between the market price of the Common Stock at fiscal year end
and the option exercise price per share multiplied by the number of shares
subject to options. The closing price as of December 31, 1996 on the Nasdaq
SmallCap Market was $3.00.
Directors Fees
Directors are not paid fees for attending Board or Committee meetings, but
are reimbursed for their out-of-pocket expenses incurred on the Company's
behalf. On April 8, 1997, the Company adopted a stock option program for
nonemployee directors whereby each nonemployee director (Messrs. Bernards,
Bidwell, Kline, Simonet and Spinner) was granted a nonqualified stock option
under the Company's 1995 Stock Option Plan (the "Plan") to purchase 50,000
shares of Company Common Stock at $3.00 per share. Such options expire April 8,
2007. In recognition of the directors' past service as directors without
compensation, such options were made immediately exercisable ("vested") to the
extent of 10,000 shares. Such options will vest to the extent of an additional
10,000 shares upon each re-election of such respective director to the Company's
Board of Directors, commencing with the May 1997 Annual Meeting of Shareholders.
If a optionee ceases to be a director, such options shall remain exercisable but
only to the extent vested at the date of termination, unless such optionee
ceases to be a director for cause, in which event the option shall immediately
terminate.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Principal Shareholders
The following table provides information concerning persons known to the
Company to be the beneficial owners of more than 5% of the Company's outstanding
Common Stock as of April 11, 1997. Unless otherwise indicated, the shareholders
listed in the table have sole voting and investment powers with respect to the
shares indicated.
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<PAGE>
Name and Address of Number of Shares Percent of
Beneficial Owner Beneficially Owned Class (1)
Perkins Capital Management, Inc. 1,119,000 (2) 14.2%
730 E. Lake Street
Wayzata, MN 55391
Loren S. Brink 927,333 (3) 11.9%
3500 W. 80th Street
Minneapolis, MN 55431
Heartland Advisors, Inc. 429,099 (4) 5.5%
790 N. Milwaukee Street
Milwaukee, WI 53202
Okabena Partnership K 424,656 (5) 5.3%
90 S. Seventh Street
Minneapolis, MN 55402
(1) Shares not outstanding but deemed beneficially owned by virtue of the right
of a person to acquire them as of April 11, 1997, or within sixty days of
such date are treated as outstanding only when determining the percent
owned by such individual and when determining the percent owned by a group.
(2) Ownership is as reported in Schedule 13G dated February 4, 1997, which
indicates sole power to vote or direct the vote of 592,000 shares and sole
power to dispose or direct the disposition of 1,119,000 shares. These
securities are beneficially owned by clients of Perkins Capital Management,
Inc., an investment advisor. Includes 125,000 shares issuable pursuant to a
currently exercisable warrant.
(3) Includes 58,333 shares which may be purchased upon exercise of options
which are exercisable as of April 11, 1997 or within 60 days of such date.
(4) Ownership is as reported in Schedule 13G dated February 12, 1997. These
securities are beneficially owned by investment advisory accounts of
Heartland Advisors, Inc., an investment adviser. Includes 33,333 shares
issuable pursuant to a currently exercisable warrant.
(5) Ownership is as reported in Amendment to Schedule 13D dated February 11,
1997. Includes 250,000 shares issuable pursuant to a currently exercisable
warrant.
Management Shareholdings
The following table sets forth the number of shares of Common Stock
beneficially owned as of April 11, 1997, by each executive officer of the
Company named in the Summary Compensation table, by each current director and
nominee for director of the Company and by all directors and executive officers
(including the named individuals) as a group. Unless otherwise indicated, the
shareholders listed in the table have sole voting and investment powers with
respect to the shares indicated.
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<PAGE>
<TABLE>
<CAPTION>
Name of Beneficial Owner Number of Shares Percent of
or Identity of Group Beneficially Owned Class (1)
---------------------------- ------------------ ---------
<S> <C> <C>
Loren S. Brink 927,333 (2) 11.9%
Charles E. Bidwell 327,596 (3)(4) 4.2%
James A. Bernards 277,002 (4)(5) 3.5%
George E. Kline 277,002 (4)(5) 3.5%
Robert K. Spinner 64,000 (4)(6) *
William T. Simonet, M.D. 54,000 (4)(7) *
All directors and executive officers
as a group (10 persons) 1,781,063 (8) 21.9%
</TABLE>
* Less than 1%
(1) See footnote (1) to preceding table.
(2) See footnote (3) to preceding table.
(3) Includes 45,000 shares which may be purchased upon exercise of options
which are exercisable as of April 11, 1997 or within 60 days of such date.
(4) Does not include 10,000 shares which will become purchasable upon vesting
of an option if such person is elected a director at the Annual Meeting.
(See "Election of Directors-Directors Fees.")
(5) Includes (i) 20,000 shares and a currently exercisable warrant to purchase
80,000 shares held by Brightstone Capital, Ltd., an investment firm
controlled by Mr. Bernards and Mr. Kline, (ii) 85,752 shares and a
currently exercisable warrant to purchase 50,000 shares held by Brightside
Fund and 31,250 shares held by Brightstone Fund V, both of which are
investment funds managed by Messrs. Bernards and Kline, and (iii) 10,000
shares which may be purchased upon exercise of an option which is
exercisable as of April 11, 1997 or within 60 days of such date. Neither
Mr. Bernards nor Mr. Kline holds any shares individually.
(6) Includes 55,000 shares which may be purchased upon exercise of options
which are exercisable as of April 11, 1997 or within 60 days of such date.
(7) Includes 22,000 shares which may be purchased upon exercise of options
which are exercisable as of April 11, 1997 or within 60 days of such date.
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<PAGE>
(8) Includes 387,265 shares which may be purchased upon exercise of options and
warrants which are exercisable as of April 11, 1997 or within 60 days of
such date.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Robert K. Spinner, a Director of the Company, is President of Abbott
Northwestern Hospital in Minneapolis, Minnesota. Abbott Northwestern contracted
with the Company to manage its fitness center. In 1995, the Company received
approximately $97,000 in management fees for management of this fitness center.
The revenues realized from this contract are similar to revenues realized by the
Company from comparable fitness center contracts that the Company has with other
non-affiliated customers. This contract expired on December 31, 1995.
Effective January 1, 1996, the Company and Charles E. Bidwell, a Director
of the Company, entered into a Consulting Agreement whereby Mr. Bidwell will
provide consulting services to the Company in the areas of strategic planning,
and exploration and negotiation of joint ventures and acquisitions. The
Consulting Agreement provided for monthly payments of $2,000 to Mr. Bidwell as
well as a grant to Mr. Bidwell, on April 1, 1996, of options to purchase 10,000
shares of the Company's Common Stock. These options are immediately exercisable
at $3.00 per share through March 2000. The Consulting Agreement was extended on
October 15, 1996 and Mr. Bidwell received an additional grant of options to
purchase 25,000 shares of the Company's Common Stock. These options are
immediately exercisable at $3.00 per share through October 15, 2000. The
Consulting Agreement was terminated effective March 31, 1997.
The President and Chief Executive Officer, Loren Brink, has received loans
and advances from the Company from time to time over the last two years. As of
December 31, 1996, the total of all such loans, including interest was $77,573.
Such loans carry an interest rate equal to the Company's cost of borrowing
funds.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibits are numbered in accordance with Item 601 of Regulation S-B.
See "Exhibit Index" immediately following the signature page of this
Form 10-KSB.
(b) Reports on Form 8-K
On January 7, 1997, the Registrant filed a Form 8-K reporting the
Registrant's acquisition on December 23, 1996 of all of the
outstanding capital stock of The Preferred Companies, Inc., an Arizona
corporation. No other reports on Form 8-K were filed during (or with
respect to events occurring in) the last fiscal quarter of the
Registrant's 1996 fiscal year.
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<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: April 30, 1997
HEALTH FITNESS PHYSICAL THERAPY, INC.
By /s/ Don Paul Cochran
Don Paul Cochran, Secretary,
Treasurer and Chief Financial Officer
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