<PAGE>
FORM 10-QSB
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For quarterly period from January 1, 1997 to March 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to _________________
Commission file number 0-27654-NY
Long Island Physician Holdings Corporation
(Exact name of small business issuer specified in its charter)
New York 11-3232989
(State of other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
One Huntington Quadrangle Suite 4C-01, Melville, NY 11747
(Address of principal executive offices) (Zip Code)
(516) 454-1900
(Issuer's telephone number)
NONE
(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the issuer (1) has filed all reports required to
be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Number of shares of Common Stock, $ .001 par value, outstanding as of March 31,
1997.
1,507 Class A and 4,334 Class B shares
Transitional Small Business Disclosure Format (Check One) Yes _____ No __X__
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INDEX
Page No.
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Part I. Financial Information
Consolidated Balance Sheets as of March 31, 1997 (unaudited)........ 3
Consolidated Statements of Operations for the three months
ended March 31, 1997 and March 31, 1996 (unaudited)................. 4
Consolidated Statements of Cash Flows for the three months
ended March 31, 1997 and March 31, 1996 (unaudited)................. 5
Notes to Consolidated Financial Statements......................... 6-7
Management's Discussion and Analysis of Financial
Condition and Results of Operations................................ 8-9
Part II. Other Information........................................... 10
Signatures.................................................. 10
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Long Island Physician Holdings Corporation
Consolidated Condensed Balance Sheets
March 31,
1997
(unaudited)
-------------
Assets
Current Assets
Cash $ 5,422,448
Accounts receivable 2,274,717
Advances to affiliates 374,668
Prepaid expenses 18,729
------------
Total current assets 8,090,562
Other Assets
Restricted cash and investments 1,844,044
Management fee retainer 648,657
Goodwill 245,247
------------
Total assets $ 10,828,510
============
Liabilities and Stockholders Equity
Current Liabilities
Medical claims payable $ 6,079,366
Accounts payable 153,048
Due to affiliates 16,791
Deferred revenue 38,524
------------
Total current liabilities 6,287,729
Minority Interest 1,143,524
Stockholders Equity
Class A common stock, $.001 par value; 10,000 shares 2
authorized, 1,507 issued and outstanding
Class B common stock, $.001 par value; 25,000 shares 4
authorized, 4,334 issued and outstanding
Additional paid in capital 11,478,536
Accumulated deficit (8,081,285)
------------
Total stockholders equity 3,397,257
------------
Total liabilities and stockholders equity $ 10,828,510
============
The accompanying notes are an integral part of the financial statements.
3
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Long Island Physician Holdings Corporation
Consolidated Condensed Statements of Operations and Accumulated Deficit
(unaudited)
For the three month period
ended March 31,
1997 1996
---- ----
Revenue $ 9,511,312 $ 2,665,692
------------ ------------
Total gross revenue 9,511,312 2,665,692
Operating Expenses
Medical expenses 7,609,114 2,212,524
Management fees 2,412,932 1,625,661
General and administrative expenses 189,271 148,072
------------ ------------
Total operating expenses 10,211,317 3,986,257
Interest income 65,511 108,109
------------ ------------
Loss from operations before minority interest (634,494) (1,212,456)
Minority interest in loss of subsidiary 137,746 379,172
------------ ------------
Net loss (496,748) (833,284)
Accumulated deficit, beginning of year (7,584,537) (2,938,432)
------------ ------------
Accumulated deficit, end of period ($ 8,081,285) ($ 3,771,716)
============ ============
Loss per share ($ 85.05) ($ 144.67)
============ ============
Weighted average shares 5,841 5,760
============ ============
The accompanying notes are an integral part of the financial statements.
4
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Long Island Physician Holdings Corporation
Consolidated Cash Flows Statements
(unaudited)
<TABLE>
<CAPTION>
For the three months
ended March 31,
1997 1996
============ ============
<S> <C> <C>
Cash flows from operating activities:
Net Loss ($ 496,748) ($ 833,284)
Adjustments to reconcile net loss to net cash flows
from operating activities:
Minority interest in loss of subsidiary 362,253 620,828
Amortization of goodwill 4,157
Changes in current assets and current liabilities:
(Increase) in accounts receivable (795,594) (778,029)
(Increase) in interest receivable (29,171)
(Increase) decrease in prepaid expenses 26,470 (155,950)
(Increase) decrease in advances to affiliates (311,240) 411,357
Increase in medical claims 856,949 1,534,870
Decrease in accounts payable (125,262)
Increase (decrease) in due to affiliates 16,791 (981,411)
Increase (decrease) in deferred revenue and other (386,530) 109,916
----------- -----------
Net cash used in operating activities (848,754) (100,874)
Cash flows from investing activities:
Net increase in restricted cash (217,122)
Net increase in other assets 32,982
----------- -----------
Net cash used in investing activities (217,122) 32,982
Cash flows from financing activities:
Proceeds from issuance of common stock 224,400
----------- -----------
Net cash used in financing activities 224,400
Net increase (decrease) in cash (1,065,876) 156,508
Cash beginning of period 6,488,324 7,566,472
----------- -----------
Cash and cash equivalents, end of period $ 5,422,448 $ 7,722,980
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Unaudited Statements:
The accompanying unaudited consolidated financial statements have been
prepared by the Company in accordance with generally accepted
accounting principles, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements have been
condensed or omitted pursuant to such rules and regulations although
management believes that the disclosures are adequate to make the
information presented not misleading. In the opinion of management, the
accompanying consolidated financial statements contain all adjustments
necessary to present a fair statement of the results for the interim
period presented. Operating results for the three month period ended
March 31, 1997, is not necessarily indicative of the results that may
be expected for the year ending December 31, 1997. These financial
statements should be read in conjunction with the consolidated
financial statements and notes thereto for the year ended December 31,
1996, included in the Company's Annual Report on Form 10-KSB.
2. Principles of Consolidation:
The consolidated financial statements include the accounts of Long
Island Physician Holdings Corporation (the "Company" or "LIPH"), a
holding company for purposes aimed at advancing the delivery of
healthcare on Long Island, and its majority owned subsidiary, MDNY
Healthcare, Inc. ("MDNY"), formally MDLI Healthcare, Inc., a health
maintenance organization ("HMO"). Intercompany balances and activities
are eliminated in consolidation.
3. Net Loss Per Share of Common Stock:
Net loss per share is based on the weighted average number of shares of
Class A common stock and Class B common stock outstanding during each
period. Such shares were authorized for issuance in connection with the
closing of the private placement offering on September 22, 1995 and,
accordingly, are deemed outstanding for the full period.
4. Impact of Recently Issued Pronouncements:
In February 1997, the Financial Accounting Standards Board issued
Statements of Financial Accounting Standards No. 128, "Earnings per
Share" ("SFAS No. 128"), which establishes standards for computing and
presenting Earnings per Share (EPS). SFAS No. 128 will be effective
for financial statements issued for periods ending after December 15,
1997. Earlier application is not permitted. There will not be a
significant difference in earnings per share.
In June 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 130, "Reporting Comprehensive
Income" ("SFAS 130"), which requires that changes in comprehensive
income be shown in a financial statement that is displayed with the
same prominence as other financial statements. SFAS 130 becomes
effective in fiscal 1999. Management has not yet evaluated the affects
of this
6
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change on the Company's financial statements.
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 131, "Disclosures About
Segments of an Enterprise and Related Information" ("SFAS 131"), which
changes the way public companies report information about segments.
SFAS 131, which is based on the management approach to segment
reporting, includes requirements to report selected segment information
quarterly and entity-wide disclosures about products and services,
major customers, and the material countries in which the entity holds
and reports revenue. SFAS 131 becomes effective in fiscal 1999.
Management has not yet evaluated the effect of this change on the
Company's financial statements.
5. Subsequent Events:
Effective April 15, 1997, the Company approved a restructuring which
will merge the Company into MDNY Holdings, Inc. ("Holdings"), a newly
formed entity, as a result of which the shareholders of the Company
will receive voting and non-voting interests in Holdings in the same
proportion as their ownership in MDNY. The merger is subject to the
satisfaction of certain conditions and is expected to take place just
prior to the time MDNY expects to complete a sale of equity securities
in one of its expansion areas. MDNY will then become a wholly-owned
subsidiary of Holdings.
6. Medicare
Effective January 1, 1997, MDNY began offering MDNY Medicare Plans to
Medicare eligible individuals. Under risk contracts with the Federal
Health Care Financing Administration ("HCFA"), MDNY is paid a fixed per
member per month capitation amount by the HCFA based upon a formula of
the projected medical expense of each Medicare member. MDNY bears the
risk that the actual costs of he healthcare services may exceed the per
member per month capitation amount received by MDNY.
7
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND
RESULTS OF OPERATIONS
Liquidity and Capital Resources
Current assets have increased approximately $10,000 to $8,335,809 at March 31,
1997 compared to $8,325,478 at December 31, 1996. Working capital at March 31,
1997 was approximately $2,048,000 as compared to approximately $2,400,000 at
December 31, 1996. The decrease in working capital of $352,000 is primarily due
to a combination of decreases in deferred revenue and cash of approximately
$386,000 and $1,066,000, respectively, and increases in accounts receivable and
medical claims payable of approximately $796,000 and $857,000, respectively.
Accounts receivable and medical claims payable both increased due to an increase
in enrollment of 2,647 from 18,830 at December 31, 1996 to 21,477 at March 31,
1997.
The Company believes that the anticipated future cash flow from operations,
along with its cash on hand and available, will be sufficient to meet working
capital requirements during 1997. There can be no assurance, however, that the
Company will not require additional working capital and, if it does require such
capital, that such capital will be available to the Company on acceptable terms,
if at all.
In addition, the Company had $1,844,044 of cash and investments on deposit in an
escrow account in accordance with New York State Insurance Department
regulations.
Inflation
The Company does not anticipate that inflation will have any significant effect
on its business particularly since the United States, the only market in which
the Company currently intends to operate, is presently experiencing a relatively
low rate of inflation.
RESULTS OF OPERATIONS
Revenues
Revenues for the three month period ended March 31, 1997 increased approximately
$6,845,000 or 257% to approximately $9,511,000 from revenues of approximately
$2,666,000 for the three month period ended March 31, 1996. The increase in
revenue is due primarily to a substantial increase in enrollment. The number of
enrollees increased from 7,265 at March 31, 1996 to 21,477 at March 31, 1997, or
196%.
Costs and Expenses
Total medical expenses increased by approximately $5,400,000, or 244%, from
approximately $2,213,000 for the three month period ended March 31, 1996 to
approximately $7,609,000 for the three month period ended March 31, 1997
primarily due to an increase in enrollment of 14,212 from March 31, 1996 to
March 31, 1997.
8
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Total management fees and general and administrative expenses increased by
approximately $821,000, or 46%, from approximately $1,774,000 for the three
month period ended March 31, 1996 to approximately $2,595,000 for the three
month period ended March 31, 1997. These expenses increased 46% primarily due to
the substantial increases in operations. These expenses did not increase at a
rate commensurate with the increases in revenue, since the Company had to incur
significant fixed costs in the prior year in order to commence operations.
Management fees and general and administrative expenses as a percent of revenue
are expected to continue to decline in future periods as enrollment increases.
Net Loss Applicable To Common Shareholders
Net loss applicable to common shareholders was a loss of approximately $489,000
or $84 per share for the three month period ended March 31, 1997 compared to a
net loss of $833,000 or $144 per share for the three month period ended March
31, 1996.
9
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PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings
None
ITEM 2 - Changes In Securities
None
ITEM 3 - Defaults Upon Senior Securities
None
<PAGE>
ITEM 4 - Submission Of Matters to a Vote of Security Holders
The following matters were submitted to a vote of security holders of
the Company by the solicitations of proxies and at the Annual Meeting of
Shareholders on February 11, 1997, as adjourned and reconvened on April 15,
1997:
1. A proposal to approve amendments to the Company's By-Laws to permit
each holder of Class B Common Stock who is a psychologist, general dentist,
specialty dentist (other than an oral or maxillofacial surgeons), podiatrist or
chiropractor to exchange one share of his or her Class B Common Stock for Class
A Common Stock, and to permit such practitioners, who are not doctors of
medicine, to hold up to twenty-percent (20%) of the seats on the Board of
Directors of the Company, was adopted by a vote of 1,002 shares of Class A
Common Stock in favor of such proposal, 169 shares against and 10 shares
abstaining.
2. A proposal was made to approve a restructuring and recapitalization
of the Company and MDNY Healthcare, Inc. ("MDNY"), pursuant to an Agreement and
Plan of Merger, and to make amendments to the Company's Certificate of
Incorporation and By-Laws necessary to consummate such transactions. Prior to
such restructuring, the Company owned all of the Class A common stock of MDNY
and the Catholic Healthcare Network of Long Island, Inc.,
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a New York not-for-profit corporation ("CHNLI"), owned all of the Class B common
stock of MDNY. Following the proposed restructuring and recapitalization, the
shares of MDNY would be transferred to MDNY Holdings, LLC, a newly-formed
limited liability company ("Holdings"), and the Company and CHNLI would each
receive both non-voting and voting interests in Holdings, which interests would
have the rights and obligations described in the Amended and Restated Operating
Agreement of Holdings, a copy of which was attached as an exhibit to the
Company's Proxy Statement. The proposal was adopted by the following vote: (a)
1,103 shares of Class A Common Stock in favor of such proposal, 63 shares
against and 100 shares abstaining, and (b) 2,845 shares of Class B Common Stock
in favor of such proposal, 91 shares against and 171 shares abstaining.
3. A proposal to approve an amendment to the Company's Certificate of
Incorporation to eliminate preemptive rights currently available to shareholders
was adopted by the following vote: (a) 1,005 shares of Class A Common Stock in
favor of such proposal, 82 shares against and 129 shares abstaining, and (b)
2,177 shares of Class B Common Stock in favor of such proposal, 128 shares
against and 202 shares abstaining.
<PAGE>
ITEM 5 - Other Information
None
ITEM 6 - Exhibits And Reports On Form 8-K
(b) There were no reports on Form 8-K for the three months ended
March 31, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized by
Long Island Physician Holdings Corporation
------------------------------------------
Date August 25, 1997 /s/ David Weissberg
---------------------------------------
David Weissberg, MD, President and CEO
Date August 25, 1997 /s/ Paul Kolker
---------------------------------------
Paul Kolker, MD, Treasurer
10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 5,422,448
<SECURITIES> 0
<RECEIVABLES> 2,274,717
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 8,090,562
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 10,828,510
<CURRENT-LIABILITIES> 6,287,729
<BONDS> 0
0
0
<COMMON> 6
<OTHER-SE> 3,397,251
<TOTAL-LIABILITY-AND-EQUITY> 10,828,510
<SALES> 9,511,312
<TOTAL-REVENUES> 9,511,312
<CGS> 0
<TOTAL-COSTS> 10,211,317
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (65,511)
<INCOME-PRETAX> (496,748)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (496,748)
<EPS-PRIMARY> (85.05)
<EPS-DILUTED> 0.000
</TABLE>
