<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 quarter ended September 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-27654-NY
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Long Island Physician Holdings Corporation
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(Exact name of small business issuer specified in its charter)
New York 11-3232989
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(State of other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
One Huntington Quadrangle Suite 4C-01, Melville, NY 11747
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(Address of principal executive offices) (Zip Code)
(516) 454-1900
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(Issuer's telephone number)
NONE
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(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
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Number of shares of Common Stock, $ .001 par value, outstanding as of September
30, 1997.
1,507 Class A and 4,334 Class B shares
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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 September 30, 1997 (unaudited)....... 3
Consolidated Statements of Operations for the nine months
ended September 30, 1997 and September 30, 1996 (unaudited)............ 4
Consolidated Statements of Cash Flows for the nine months
ended September 30, 1997 and September 30, 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
<TABLE>
<CAPTION>
Sept. 30, Dec 31,
1997 1996.
(unaudited) (audited)
---------------------------
Assets
Current Assets
<S> <C> <C>
Cash $4,413,874 $6,488,324
Accounts receivable 4,270,246 1,479,123
Advances to affiliates 488,245 63,428
Prepaid expenses and other assets 50,183 45,199
------------------------------
Total current assets 9,222,548 8,076,074
Other Assets
Restricted cash and investments 1,910,575 1,626,922
Management fee retainer 648,657 648,657
Goodwill 236,933 249,404
------------------------------
Total assets $12,018,713 $10,601,057
==============================
Liabilities and Stockholders Equity
Current Liabilities
Medical claims payable $8,229,582 $5,222,417
Accounts payable 1,124,062 278,310
Due to affiliates 0 0
Deferred revenue 16,892 425,054
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Total current liabilities 9,370,536 5,925,781
Minority Interest 679,261 781,271
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10,049,797 6,707,052
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Stockholders Equity
Class A common stock, $.001 par value; 10,000 shares 2 2
authorized, 1,507 issued and outstanding
Class B common stock, $.001 par value; 25,000 shares 4 4
authorized, 4,334 issued and outstanding
Additional paid in capital 11,478,536 11,478,536
Accumulated deficit (9,509,626) (7,584,537)
------------------------------
Total stockholders equity 1,968,916 3,894,005
------------------------------
Total liabilities and stockholders equity $12,018,713 $10,601,057
==============================
</TABLE>
3
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Long Island Physician Holdings Corporation
Consolidated Condensed Statements of Operations and Accumulated Deficit
(unaudited)
<TABLE>
<CAPTION>
For the three months For the nine month period
ended September 30, ended September 30,
1997 1996 1997 1996
------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Revenue 13,241,743 7,275,332 $33,881,950 $15,372,365
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Total gross revenue 13,241,743 7,275,332 33,881,950 15,372,365
------------- ------------- -------------- --------------
Operating Expenses
Medical expenses 11,227,188 6,033,857 27,455,255 12,731,012
Management fees 2,794,233 2,021,818 8,355,946 5,733,279
General and administrative expenses 269,668 375,390 864,430 1,033,241
------------- ------------- -------------- --------------
Total operating expenses 14,291,089 8,431,065 36,675,631 19,497,532
Interest income 70,942 111,185 266,583 326,755
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Loss from operations before minority interest (978,404) (1,044,548) (2,527,098) (3,798,412)
Income from equity investments (16,163) 32,243
Minority interest in loss of subsidiary 218,726 165,018 602,009 922,148
------------- ------------- -------------- --------------
Net loss (759,678) (895,693) (1,925,089) (2,844,021)
Accumulated deficit, beginning of period (8,749,948) (4,886,760) (7,584,537) (2,938,432)
Distribution to shareholders of spun-off entity
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Accumulated deficit, end of period ($9,509,626) ($5,782,453) ($9,509,626) ($5,782,453)
============= ============= ============== ==============
Loss per share ($130) ($156) ($330) ($492)
============= ============= ============== ==============
Weighted average shares 5,841 5,760 5,841 5,786
============= ============= ============== ==============
</TABLE>
4
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Long Island Physician Holdings Corporation
Consolidated Condensed Cash Flows Statements
(unaudited)
<TABLE>
<CAPTION>
For the nine months
ended September 30,
1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Net Loss ($1,925,089) ($2,844,021)
Adjustments to reconcile net loss to net cash flows
from operating activities:
Minority interest in loss of subsidiary (602,010) 577,852
Depreciation 2,537
Amortization of goodwill 12,471
Changes in current assets and current liabilities:
(Increase) in accounts receivable (2,791,123) (990,277)
(Increase) in interest receivable (29,255)
(Increase) in prepaid expenses and other assets (4,984) (228,404)
(Increase) decrease in advances to affiliates (424,817) 811,357
(Increase) in loans receivable (250,000)
Increase in accounts payable and medical claims 3,852,917 5,024,925
(Decrease) in due to affiliates (963,613)
Increase (decrease) in deferred revenue (408,162) 34,109
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Net cash (used in) provided by operating activities (2,290,797) 1,145,210
Cash flows from investing activities:
Net increase in restricted cash (283,653)
Net increase in other assets (153,377)
Purchase of fixed assets (26,940)
Investment in NextStage Healthcare (52,243)
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Net cash used in investing activities (283,653) (232,560)
Cash flows from financing activities:
Proceeds from issuance of common stock 211,399
Cash received by MDNY from Minority Shareholder 500,000
Payments from cash flow reserve (1,366,348)
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Net cash used in financing activities 500,000 (1,154,949)
Net (decrease) in cash (2,074,450) (242,299)
Cash beginning of period 6,488,324 7,566,472
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Cash and cash equivalents, end of period $4,413,874 $7,324,173
============== ===============
</TABLE>
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 nine month period ended
September 30, 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 Statement 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 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
6
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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. Restructuring:
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. MDNY will then became a
wholly-owned subsidiary of Holdings. 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. As of the date of this filing, the
merger has not been consummated since MDNY has not completed a sale of
securities in one of its expansion areas.
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 the healthcare services may exceed the
per member per month capitation amount received by MDNY.
7. MDNY Healthcare Inc.
During 1997, MDNY Healthcare Inc. received $500,000 from its minority
owner Catholic Healthcare Network of Long Island relating to the
payment of an outstanding subscription receivable.
7
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS
Liquidity and Capital Resources
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Current assets have increased by approximately $1,146,000 to approximately
$9,222,000 at September 30, 1997 compared to approximately $8,076,000 at
December 31, 1996. Working capital at September 30, 1997 was negative by
approximately $150,000 as compared to positive working capital of approximately
$2,150,000 at December 31, 1996. The decrease in working capital of $2,300,000
is primarily due to a decrease in the cash balance used in operations. Working
capital was also affected by a decrease in subscriptions receivable by $500,000
and increases in accounts receivable, medical claims payable and accounts
payable of approximately $2,800,000, $3,000,000 and $845,000, respectively.
Accounts receivable and medical claims payable both increased due to an increase
in enrollment of 10,460 from 18,830 at December 31, 1996 to 29,290 at September
30, 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 $1,911,000 of cash and investments on deposit in an
escrow account in accordance with New York State Insurance Department
regulations.
Inflation
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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
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Revenues
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Revenues for the nine month period ended September 30, 1997 increased
approximately $18,500,000 or 120% to approximately $33,900,000 from revenues of
approximately $15,400,000 for the nine month period ended September 30, 1996.
The increase in revenue is due primarily to a substantial increase in
enrollment. The number of enrollees increased from 17,479 at September 30, 1996
to 29,290 at September 30, 1997, or 67%.
Costs and Expenses
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Total medical expenses increased by approximately $14,700,000, or 116%, from
approximately $12,700,000 for the nine month period ended September 30, 1996 to
approximately $27,455,000 for the nine month period ended September 30, 1997
primarily due to an increase in enrollment of 11,811 from September 30, 1996 to
September 30, 1997.
8
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Total management fees and general and administrative expenses increased by
approximately $2,454,000, or 36%, from approximately $6,766,000 for the nine
month period ended September 30, 1996 to approximately $9,220,000 for the nine
month period ended September 30, 1997. These expenses increased 36% 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
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Net loss applicable to common shareholders was a loss of approximately
$1,925,000 or $330 per share for the nine month period ended September 30, 1997
compared to a net loss of $2,844,000 or $492 per share for the nine month period
ended September 30, 1996.
9
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PART II - OTHER INFORMATION
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ITEM 1 - Legal Proceedings
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None
ITEM 2 - Changes In Securities
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None
ITEM 3 - Defaults Upon Senior Securities
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None
ITEM 4 - Submission Of Matters To A Vote Of Security Holders
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None
ITEM 5 - Other Information
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None
ITEM 6 - Exhibits And Reports On Form 8-K
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(b) There were no reports on Form 8-K for the three months ended
September 30, 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 January 16, 1998 /s/ David Weissberg
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David Weissberg, MD, President and CEO
Date January 16, 1998 /s/ Paul Kolker
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Paul Kolker, MD, Treasurer
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10
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 4,414
<SECURITIES> 0
<RECEIVABLES> 4,854
<ALLOWANCES> 584
<INVENTORY> 0
<CURRENT-ASSETS> 9,223
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 12,019
<CURRENT-LIABILITIES> 9,371
<BONDS> 0
0
0
<COMMON> 11,479
<OTHER-SE> (9,510)
<TOTAL-LIABILITY-AND-EQUITY> 12,019
<SALES> 0
<TOTAL-REVENUES> 13,313
<CGS> 0
<TOTAL-COSTS> 14,291
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> (978)
<DISCONTINUED> 0
<EXTRAORDINARY> 218
<CHANGES> 0
<NET-INCOME> (760)
<EPS-PRIMARY> (130)
<EPS-DILUTED> (130)
</TABLE>
