<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No.: 0-28390
PENNSYLVANIA PHYSICIAN HEALTHCARE PLAN, INC.
(Exact name of registrant as specified in its Charter)
Pennsylvania 23-2795795
(State of incorporation (I.R.S. Employer
or organization) Identification Number)
651 East Park Drive, Harrisburg, PA 17111
(Address of Principal Executive Offices)
Registrant's Telephone Number, including area code:
(800) 671-7747
Indicate by check mark whether the Registrant (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 the filing
requirements for at least the past 90 days.
Yes [X] No [ ],
Indicate the number of shares outstanding of each of the Registrant's classes of
common stock, as of the latest practicable date:
4,087 shares of Class A common stock, $.01 par value per share
1,074 shares of Class B common stock, $.01 par value per share
(as of July 31, 1997)
Transitional Small Business Disclosure Format:
Yes X No
--- ---
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
--------------------
PENNSYLVANIA PHYSICIAN HEALTHCARE PLAN, INC.
(A Development Stage Company)
<TABLE>
<CAPTION>
Consolidated Balance Sheets (unaudited)
========================================================================================================================
June 30, December 31,
Assets 1997 1996
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 15,729,091 $ 17,381,607
Accrued interest income 69,389 77,641
Prepaid expenses 55,002 45,816
Income taxes receivable 166,000 166,000
Other assets 44,000 44,000
- ------------------------------------------------------------------------------------------------------------------------
Total current assets 16,063,482 17,715,064
- ------------------------------------------------------------------------------------------------------------------------
Equipment (net of accumulated depreciation of $84,000 and $0, respectively) 864,772 647,771
Total assets 16,928,254 18,362,835
========================================================================================================================
Liabilities and Stockholders' Equity
- ------------------------------------------------------------------------------------------------------------------------
Current liabilities:
Accounts payable 171,068 335,106
Other liabilities 22,410 22,058
- ------------------------------------------------------------------------------------------------------------------------
Total current liabilities 193,478 357,164
- ------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Class A common voting stock, $.01 par value, 40,000 shares authorized; 4,087 shares 41 41
issued and outstanding at June 30, 1997 and December 31, 1996
Class B common non-voting stock, $.01 par value, 100,000 shares authorized; 1,074 shares 11 11
issued and outstanding at June 30, 1997 and December 31, 1996
Additional paid in capital 21,220,777 21,220,777
Deficit accumulated during the development stage (4,486,053) (3,215,158)
- ------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity 16,734,776 18,005,671
- ------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 16,928,254 $ 18,362,835
========================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
PENNSYLVANIA PHYSICIAN HEALTHCARE PLAN, INC.
(A Development Stage Company)
<TABLE>
<CAPTION>
Consolidated Statements of Operations (unaudited)
===========================================================================================================================
Cumulative Period
Three Months Three Months Six Months Six Months From February
Ended Ended Ended Ended 15, 1995 (date
June 30, June 30, June 30, June 30, of inception) to
1997 1996 1997 1996 June 30, 1997
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues:
Interest income $ 214,739 $ 252,018 $ 430,258 $ 483,591 $ 1,558,561
Other income -- -- -- -- 34,412
- ---------------------------------------------------------------------------------------------------------------------------
Total Revenue 214,739 252,018 430,258 483,591 1,592,973
- ---------------------------------------------------------------------------------------------------------------------------
Expenses:
Legal fees 53,668 133,425 91,781 192,194 491,690
Consulting services 77,802 857,550 142,372 1,478,332 2,554,941
Operating expenses 271,836 59,621 481,567 117,926 1,420,219
Salary and benefits 557,498 9,133 967,809 15,032 1,534,344
Interest expense -- -- -- -- 49,838
Other taxes 7,468 48,000 17,624 53,000 27,994
- ---------------------------------------------------------------------------------------------------------------------------
Total expenses 968,272 1,107,729 1,701,153 1,856,484 6,079,026
- ---------------------------------------------------------------------------------------------------------------------------
Loss before income taxes (753,533) (855,711) (1,270,895) (1,372,893) (4,486,053)
- ---------------------------------------------------------------------------------------------------------------------------
Income taxes (benefit):
Current -- 9,450 -- 37,900 --
Deferred -- (9,450) -- (37,900) --
- ---------------------------------------------------------------------------------------------------------------------------
Net loss $ (753,533) $ (855,711) $(1,270,895) $(1,372,893) $(4,486,053)
===========================================================================================================================
Weighted average common shares 5,161 5,160 5,161 5,007
Weighted average loss per outstanding common share $ (146.01) $ (165.84) $ (246.25) $ (274.19)
===========================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
PENNSYLVANIA PHYSICIAN HEALTHCARE PLAN, INC.
(A Development Stage Company)
<TABLE>
<CAPTION>
Consolidated Statements of Changes In Stockholders' Equity (unaudited)
- ---------------------------------------------------------------------------------------------------------
Common Stock Shares Common Stock Par Value
Class A Class B Class C Class A Class B Class C
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, February 15, 1995
(date of inception) -- -- -- $-- $-- $--
Issuance of Class C common
stock in June, 1995 25 1
Redemption of Class C common
stock and liquidation of
subordinated notes payable
in December, 1995 (25) (1)
Issuance of Class A common
stock in December, 1995 25 1
Issuance of Class A common
stock in December, 1995 3,588 35
Issuance of Class B common
stock in December, 1995 918 9
Net loss
========================================================================================================
Balance, December 31, 1995 3,613 918 -- 36 9 --
Issuance of class A common
stock January - March, 1996 474 5
Issuance of class B common
stock January - March, 1996 156 2
Charge-off of deferred offering
costs - March 1, 1996
Net loss
========================================================================================================
Balance, December 31, 1996 4,087 1,074 -- 41 11 --
Net loss
========================================================================================================
Balance, June 30, 1997 4,087 1,074 -- $ 41 $ 11 $ --
========================================================================================================
</TABLE>
<PAGE>
[RESTUBBED TABLE]
PENNSYLVANIA PHYSICIAN HEALTHCARE PLAN, INC.
(A Development Stage Company)
<TABLE>
<CAPTION>
Consolidated Statements of Changes In Stockholders' Equity (unaudited)
- --------------------------------------------------------------------------------------------
Additional Accumulated
Paid In Deficit During The
Capital Development Stage Total
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, February 15, 1995
(date of inception) $ -- $ -- $ --
Issuance of Class C common
stock in June, 1995 2,499 2,500
Redemption of Class C common
stock and liquidation of
subordinated notes payable
in December, 1995 (2,499) (2,500)
Issuance of Class A common
stock in December, 1995 124,999 125,000
Issuance of Class A common
stock in December, 1995 17,939,965 17,940,000
Issuance of Class B common
stock in December, 1995 917,991 918,000
Net loss (666,830) (666,830)
======================================================================================
Balance, December 31, 1995 18,982,955 (666,830) 18,316,170
Issuance of class A common
stock January - March, 1996 2,369,995 2,370,000
Issuance of class B common
stock January - March, 1996 155,998 156,000
Charge-off of deferred offering
costs - March 1, 1996 (288,171) (288,171)
Net loss (2,548,328) (2,548,328)
======================================================================================
Balance, December 31, 1996 21,220,777 (3,215,158) 18,005,671
Net loss (1,270,895) (1,270,895)
======================================================================================
Balance, June 30, 1997 $ 21,220,777 $ (4,486,053) $ 16,734,776
======================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
PENNSYLVANIA PHYSICIAN HEALTHCARE PLAN, INC.
(A Development Stage Company)
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows (unaudited)
====================================================================================================================================
Cumulative Period
Three Months Three Months Six Months Six Months From February
Ended Ended Ended Ended 15, 1995 (date
June 30, June 30, June 30, June 30, of inception) to
1997 1996 1997 1996 June 30, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (753,533) $ (855,711) $ (1,270,895) $ (1,372,893) $ (4,486,053)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation 42,000 -- 84,000 -- 84,000
Change in assets and liabilities:
Accrued interest income 4,974 (1,623) 8,252 (6,205) (69,389)
Prepaid expenses 10,667 15,100 (9,186) 30,147 (55,002)
Income taxes receivable -- (99,529) -- (99,529) (166,000)
Other assets 1,600 -- -- 227,341 (44,000)
Deferred income tax benefit -- (9,450) -- (37,900) --
Accounts payable (49,187) (186,286) (164,038) 139,388 171,068
Accrued income taxes payable -- (57,021) -- (28,571) --
Other liabilities 22,410 (45,000) 352 (43,191) 22,410
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (721,069) (1,239,520) (1,351,515) (1,191,413) (4,542,966)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of equipment (192,665) -- (301,001) -- (948,772)
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Receipt of director cash advances -- -- -- -- 123,000
Return of director cash advances -- -- -- -- (123,000)
Borrowings under line of credit -- -- -- -- 717,500
Payments under line of credit -- -- -- -- (717,500)
Proceeds from issuance of subordinated notes payable -- -- -- -- 122,500
Proceeds from issuance of common stock -- -- -- 2,293,659 21,386,500
Deferred offering costs -- -- -- (60,830) (288,171)
- ------------------------------------------------------------------------------------------------------------------------------------
Net cash provided from financing activities -- -- -- 2,232,829 21,220,829
- ------------------------------------------------------------------------------------------------------------------------------------
Net (decrease) increase in cash and cash equivalents (913,734) (1,239,520) (1,652,516) 1,041,416 15,729,091
Cash and cash equivalents, beginning 16,642,825 20,423,884 17,381,607 18,142,948 --
- ------------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, ending $ 15,729,091 $ 19,184,364 $ 15,729,091 $ 19,184,364 $ 15,729,091
====================================================================================================================================
Supplemental disclosures:
Interest Paid $ -- $ -- $ -- $ -- $ 49,838
Income Taxes Paid $ -- $ 166,000 $ -- $ 166,000 $ 166,000
Non-cash investing and financing activity:
In December, 1995 25 shares of Class C common stock for a total of $2,500,
together with each of 25 subordinated notes payable for a total of $122,500
were redeemed in exchange for 25 shares of Class A common stock.
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
PENNSYLVANIA PHYSICIAN HEALTHCARE PLAN, INC.
(A Development Stage Company)
Notes to Consolidated Financial Statements for the Six Month Period Ended June
30, 1997 and 1996, and for the Cumulative Period from February 15, 1995 (date of
inception) to June 30, 1997 (unaudited
- --------------------------------------------------------------------------------
(1) Description of Business
Pennsylvania Physician Healthcare Plan, Inc. (the Company) was formed
as a Pennsylvania for-profit corporation on February 15, 1995, under
the direction of private practicing physicians to develop a physician
owned and controlled managed care organization in Pennsylvania.
(2) Development Stage
The Company is in its developmental stage as of June 30, 1997, and
activities have consisted primarily of raising capital through a public
stock offering, hiring a management team, applying for the necessary
licenses to operate as a managed care organization and developing a
business plan. The Company received a license to operate a preferred
provider organization (PPO) in April 1997 and a third party
administrator (TPA) license in March 1997. It expects to receive a
license to operate a health maintenance organization (HMO) in the third
or forth quarter of 1997.
Successful completion of the Company's development program and,
ultimately, the attainment of profitable operations are dependent upon
future events, including achieving a level of revenues adequate to
support the Company's cost structure.
(3) Summary of Significant Accounting Policies
UNAUDITED FINANCIAL STATEMENTS
The unaudited consolidated financial statements should be read in
conjunction with the audited consolidated financial statements as of
December 31, 1996 and reflect, in the opinion of management, all
adjustments necessary to fairly state the results of operations for
such periods.
The results of operations for the six month periods ended June 30, 1997
and 1996 are not necessarily indicative of the results of operations
expected for the full year.
The notes to the financial statements are condensed and may not include
all information that is required to be disclosed by generally accepted
accounting principles.
6
<PAGE>
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the financial statements
of Pennsylvania Physician Healthcare Plan, Inc. and its three
wholly-owned subsidiaries, Physicians Care HMO, Inc., Physicians Care
PPO, Inc., and Pennsylvania Physicians Care Service Corp. All
significant intercompany balances and transactions have been eliminated
in consolidation.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash and investments with maturities
of less than three months when purchased. The cost of these investments
approximates fair market value.
EQUIPMENT
Equipment, consisting principally of office equipment, computer
equipment and software, is carried at cost. Depreciation is calculated
on the accelerated cost recovery method for both financial reporting
and income taxes purposes over the estimated useful lives of the
assets. As of December 31, 1996, equipment was not placed into service.
Therefore, no depreciation expense was recorded for the year ending
December 31, 1996.
DEFERRED OFFERING COSTS
Through December 31, 1995, the Company deferred certain direct costs of
$227,341 incurred in connection with its public stock offering. As of
March 1, 1996, the Company had deferred an additional $60,830 of
similar costs. Upon completion of the initial stock offering on March
1, 1996, the Company charged $288,171 of deferred offering costs to
additional paid-in capital as a direct reduction of the proceeds of
such offering.
INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases and to operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the
enactment date.
EARNINGS PER COMMON SHARE
Earnings per common share have been computed based upon the weighted
average number of common shares outstanding during each period.
USE OF ESTIMATES
Management has made a number of estimates and assumptions relating to
the reporting of assets and liabilities to prepare these consolidated
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
7
<PAGE>
RECLASSIFICATIONS
Certain prior period amounts have been reclassified to facilitate
comparison with current period reporting presentation.
NEW ACCOUNTING STANDARD
In February 1997, the Financial Accounting Standards Board issued
Statement No. 128, "Earnings per Share" (SFAS No. 128). SFAS No. 128
requires the presentation of basic earnings per share (EPS), calculated
by dividing income available to common shareholders by the
weighted-average number of common shares outstanding during the period,
and diluted EPS, calculated the same as basic EPS except that the
denominator is increased to include the number of additional common
shares that would have been issued if all dilutive potential common
shares had been issued. SFAS No. 128 is effective for periods ending
after December 15, 1997, and requires the restatement of EPS for all
periods presented. On a pro forma basis, the adoption of SFAS No. 128
would not have a material effect on the Company's calculation of
primary or fully diluted earnings per share in the accompanying
financial statements.
(4) Restrictions on Cash
As specified in the prospectus for the public stock offering,
approximately $9,691,000 of offering proceeds which are included in the
Company's cash and cash equivalents as of June 30, 1997 may only be
used after licensure of the managed care business is attained;
otherwise, such funds, less claims of creditors, must be distributed to
the shareholders, unless holders of a majority of the voting shares
elect otherwise.
(5) Income Taxes
For federal and state income tax purposes, certain organizational
expenses incurred by the Company in its development stage are not
currently deductible as business expenses. Instead, these expenses
accumulate until the Company is actively in business, at which time the
expenses are deductible over a period of five years. For the period
February 15, 1995 (Date of Inception) to June 30, 1997, the Company
incurred expenses totaling approximately $3,028,000 that will, for
federal and state income tax purposes, be deferred until future years.
In order to recognize the income tax benefit of deducting these
expenses in the future, the Company has recorded a deferred income tax
benefit totaling $1,230,000, which was reduced by a valuation allowance
of $1,230,000. Management recorded the valuation allowance to reduce
the deferred income tax benefit to its estimated realizable value in
light of management's judgment about the Company's ability to realize
the deferred income tax benefit.
The Company has federal net operating loss carryforwards of $769,000
which will be available to offset future taxable income through
December 31, 2011.
8
<PAGE>
Item 2. Management's Discussion and Analysis on Plan of Operation.
---------------------------------------------------------
There have been no material changes in Registrant's plan of operations
as set forth in the December 31, 1996 form 10-KSB
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
--------------------------------
(a) Exhibits
27 Financial Data Schedule
99 New Business Address
(b) Reports on Form 8-K
None
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be filed on its behalf by the undersigned, thereunto duly
authorized:
Pennsylvania Physician Healthcare
Plan, Inc.
(Registrant)
Date: _________________________ By: ______________________________________
Richard A. Felice, President and Chief
Executive Officer
Date: _________________________ By: ______________________________________
T. Clark Phillip, Treasurer and Chief
Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE
SHEET AND STATEMENT OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SAID FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 15,729,091
<SECURITIES> 0
<RECEIVABLES> 235,389
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 16,063,482
<PP&E> 948,772
<DEPRECIATION> 84,000
<TOTAL-ASSETS> 16,928,254
<CURRENT-LIABILITIES> 193,478
<BONDS> 0
0
0
<COMMON> 52
<OTHER-SE> 16,734,724
<TOTAL-LIABILITY-AND-EQUITY> 16,734,776
<SALES> 0
<TOTAL-REVENUES> 214,739
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 968,272
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (753,533)
<INCOME-TAX> 0
<INCOME-CONTINUING> (753,533)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (753,533)
<EPS-PRIMARY> (146.01)
<EPS-DILUTED> 0
</TABLE>
<PAGE>
SUBMISSION
TYPE EX-99
DOCUMENT-COUNT
NOTIFY
SROS
SUBMISSION-CONTACT T. CLARK PHILLIP
NAME PENNSYLVANIA PHYSICIAN HEALTHCARE PLAN, INC.
FILER
CIK
CCC
/FILER
EQUITY 16,734,724
NEW-BUSINESS-ADDRESS
PHONE 717-561-7890
STREET1 651 EAST PARK DRIVE
CITY HARRISBURG
STATE PA
ZIP 17111
/NEW-BUSINESS-ADDRESS
