<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 September 30, 1999
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)
c/o Pelino & Lentz, 1650 Market Street, 32nd Floor, Philadelphia, PA 19103
(Address of Principal Executive Offices)
Registrant's Telephone Number, including area code:
(215) 246-3168
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 September 30, 1999)
Transitional Small Business Disclosure Format:
Yes X No
--------- ------------
<PAGE>
PENNSYLVANIA PHYSICIAN HEALTHCARE PLAN, INC.
<TABLE>
<CAPTION>
Consolidated Statement of Net Liabilities (Liquidation Basis) as of September 30, 1999 and
Consolidated Balance Sheet (Going Concern Basis) as of December 31, 1998
- ---------------------------------------------------------------------------------------------------------------------------------
September 30, December 31,
Assets 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash and cash equivalents $ 427,689 $ 2,608,269
Short-term investment securities 597,908 400,750
Accrued interest income 31,413 145,654
Premiums receivable, net 356,024 171,766
Income taxes receivable - 28,853
Other assets 7,950 245,056
Long-term investment securities 2,884,882 6,860,624
Equipment (at net realizable value as of September 30, 1999 and net
of accumulated depreciation of $684,830 as of December 31, 1998) 327,922 571,911
- ---------------------------------------------------------------------------------------------------------------------------------
Total assets 4,633,788 11,032,883
- ---------------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
- ---------------------------------------------------------------------------------------------------------------------------------
Liabilities:
Medical claims liabilities 4,875,380 1,945,722
Accounts payable 126,847 152,558
Accrued expenses 155,800 44,350
Other liabilities 193,000 29,075
Reserve for estimated costs during the period of liquidation 600,000 -
- ---------------------------------------------------------------------------------------------------------------------------------
Total liabilities 5,951,027 2,171,705
- ---------------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Class A common voting stock, $.01 par value, 40,000 shares
authorized; 4,087 shares issued and outstanding - 41
Class B common non-voting stock, $.01 par value, 100,000 shares
authorized; 1,074 shares issued and outstanding - 11
Additional paid in capital - 21,220,777
Accumulated deficit - (12,364,727)
Net unrealized gain (loss) on investment securities, net of taxes - 5,076
- ---------------------------------------------------------------------------------------------------------------------------------
Total stockholders' equity - 8,861,178
- ---------------------------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 11,032,883
Net liabilities in liquidation $ (1,317,239)
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
PENNSYLVANIA PHYSICIAN HEALTHCARE PLAN, INC.
<TABLE>
<CAPTION>
Consolidated Statements of Loss and Changes in Net Assets (Liabilities) For the Three and Nine Months Ended
September 30, 1999 (Liquidation Basis) and September 30, 1998 (Going Concern Basis)
- ------------------------------------------------------------------------------------------------------------------------------------
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Premiums $ 7,107,488 $ 1,818,428 $ 17,841,417 $ 3,887,922
Consulting - - - 65,000
Investment income, net 64,153 157,232 297,533 494,781
- ------------------------------------------------------------------------------------------------------------------------------------
Total Revenue 7,171,641 1,975,660 18,138,950 4,447,703
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
Health care services 9,326,300 2,017,125 21,908,792 4,017,692
Salary and benefits 912,266 786,613 2,780,233 2,136,947
Operating expenses 561,574 453,874 1,766,766 1,300,288
Professional services 87,906 125,344 231,381 338,688
Other taxes 4,100 33,462 15,292 37,019
Depreciation 90,668 104,141 207,607 303,882
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses 10,982,814 3,520,559 26,910,071 8,134,516
- ------------------------------------------------------------------------------------------------------------------------------------
Net loss $(3,811,173) $ (1,544,899) $ (8,771,121) $ (3,686,813)
- ------------------------------------------------------------------------------------------------------------------------------------
Other comprehensive income, net of income taxes:
Unrealized gain (loss) on investments 1,963 21,504 (53,774) 21,504
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive Loss $(3,809,210) $ (1,523,395) $ (8,824,895) $ (3,665,309)
Net Assets, Beginning of Period 3,845,493 12,804,671 8,861,178 14,946,585
Adjustment to Liquidation Basis (1,353,522) - (1,353,522) -
Net Assets (Liabilities), End of Period $(1,317,239) $ 11,281,276 $ (1,317,239) $ 11,281,276
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
PENNSYLVANIA PHYSICIAN HEALTHCARE PLAN, INC.
<TABLE>
<CAPTION>
Consolidated Statements of Changes In Net Liabilities (Deficiency In Assets) For The Nine Months Ended September 30, 1999
(Liquidation Basis) and Consolidated Statement of Changes in Stockholders' Equity For The Year Ended December 31, 1998
(Going Concern Basis)
- ------------------------------------------------------------------------------------------------------------------------------------
Accumulated Net
Common Common Stock Additional Other Liabilities
Stock Shares Par Value Paid In Accumulated Comprehensive (Deficiency
Class A Class B Class A Class B Capital Deficit Income In Assets)
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 4,087 1,074 $ 41 $ 11 $21,220,777 $ (6,274,244) $ - $14,946,585
Comprehensive Loss
Net loss (6,090,483) (6,090,483)
Other Comprehensive Income
Unrealized gains on
investments 5,076 5,076
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 4,087 1,074 41 11 21,220,777 (12,364,727) 5,076 8,861,178
- ------------------------------------------------------------------------------------------------------------------------------------
Comprehensive Loss
Net loss (8,771,121) (8,771,121)
Other Comprehensive Income
Unrealized losses on
investments (53,774) (53,774)
Adjustment to liquidation
basis (1,353,522) (1,353,522)
- ------------------------------------------------------------------------------------------------------------------------------------
Balance, September 30, 1999 4,087 1,074 $ 41 $ 11 $21,220,777 $(21,135,848) $(1,402,220) $(1,317,239)
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
PENNSYLVANIA PHYSICIAN HEALTHCARE PLAN, INC.
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (3,811,173) $ (1,544,899) $ (8,771,121) $ (3,686,813)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation, amortization and accretion 83,509 106,389 207,607 306,130
Net loss on sale of invetment securities 19,070 - 19,290 -
Change in assets and liabilities:
Accrued interest income 72,178 (36,492) 114,241 (19,407)
Premiums receivable (287,110) (241,362) (184,258) (219,543)
Other assets 30,136 (25,241) (291,386) 231
Medical claims liabilities 1,029,896 921,351 2,929,658 1,352,582
Accounts payable 78,059 (98,081) (25,711) (23,913)
Accrued expenses (20,820) (2,470) 111,450 (10,025)
Other liabilities - 287,377 163,925 232,052
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (2,806,255) (633,428) (5,726,305) (2,068,706)
- ---------------------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of investment securities - (9,564,463) (3,711,902) (9,564,463)
Proceeds from maturities of investment securities - - 4,400,000 -
Proceeds from sale of investment securities 2,767,594 - 3,017,421 -
Purchases of equipment (57,399) (29,747) (159,794) (159,676)
- ---------------------------------------------------------------------------------------------------------------------------------
Net cash received from (used in) investing activities 2,710,195 (9,594,210) 3,545,725 (9,724,139)
- ---------------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (96,060) (10,227,638) (2,180,580) (11,792,845)
Cash and cash equivalents, beginning of period 523,749 12,685,433 2,608,269 14,250,640
- ---------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 427,689 $ 2,457,795 $ 427,689 $ 2,457,795
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
PENNSYLVANIA PHYSICIAN HEALTHCARE PLAN, INC.
Notes to Consolidated Financial Statements.
- --------------------------------------------------------------------------------
(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.
The Company received a third party administrator (TPA) license in March
1997 and a license to operate a preferred provider organization (PPO)
in April 1997. The Company received a license to operate a health
maintenance organization (HMO) on March 22, 1999.
Through June 30, 1997 the Company was in the developmental stage and
activities 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. In the third quarter of 1997, the Company became
operational and, accordingly, all developmental stage references in the
accompanying financial statements were removed.
During the second and third quarters of 1999, the Company's PPO
incurred significantly larger underwriting losses than anticipated.
Since September 30, 1999, the Company's financial condition has
continued to deteriorate and has required that the Company cease all
operations and begin the process of winding up its affairs, liquidating
its assets and dissolving. See Note 3, "Going Concern Matters", of
Notes to Consolidated Financial Statements and Item 2, "Management's
Discussion and Analysis or Plan of Operation." Accordingly, the Company
adopted the liquidation basis of accounting as of September 30, 1999,
and adjusted its remaining assets to estimated net realizable value and
its liabilities to include estimated costs of liquidating the Company
as follows:
-------------------------------------------------------------------
Write-down of tax receivable $ 28,853
--------------------------------------------------- ---------------
Write-down of other assets $ 528,492
--------------------------------------------------- ---------------
Write-down of equipment $ 196,177
--------------------------------------------------- ---------------
Liability for estimated cost of liquidation $ 600,000
--------------------------------------------------- ---------------
Adjustment to liquidation basis $1,353,522
-------------------------------------------------------------------
(2) 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, 1998 and reflect, in the opinion of management, all
adjustments necessary to fairly state the results of operations for
such periods.
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.
Investments
The investment securities portfolio is classified as
available-for-sale, and carried at fair value. Such fair value is based
upon values obtained from independent third parties or quoted market
prices of comparable instruments. Temporary changes in the fair value
of investments are reflected as a component of other comprehensive
income.
Premiums and discounts are amortized and accreted over the term of the
related securities using a method that approximates the interest
method, adjusted for prepayments. Realized gains and losses on the sale
of investment securities (determined by the specific identification
method) are shown separately in the consolidated statement of
operations. A decline in the fair value of any investment below cost
that is deemed other than temporary results in a reduction of the
carrying amount to fair value through a charge to income. Dividends and
interest income are recognized when earned.
Equipment
As of September 30, 1999, equipment, consisting of furniture and office
equipment, data processing equipment, capitalized software and
leasehold improvements, is carried at its estimated net realizable
value. As of December 31, 1998, equipment was 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.
When changes in business circumstances warrant, the Company reviews the
recoverability of long-lived assets to determine if there has been any
permanent impairment. This assessment is based on estimated future
undiscounted cash flows compared with the assets' carrying value. If
impairment is indicated, a write-down to fair value (normally measured
by discounting estimated cash flows) would be taken.
7
<PAGE>
Medical Claims Liability
Medical claims liabilities consist of actual claims reported but not
paid and estimates of health care services incurred but not reported.
The estimated claims incurred but not reported are based on historical
data, current enrollment, health service utilization statistics, and
other related information. These accruals are continually monitored and
reviewed, and, as settlements are made or accruals adjusted,
differences are reflected in current operations. Changes in assumptions
for medical costs caused by changes in actual experience could cause
these estimates to change in the near term.
Revenue Recognition
Premiums are recorded as revenue in the month in which members are
entitled to service. Premiums collected in advance are recorded as
deferred revenue. Interest income is recorded in the period it is
earned.
Reinsurance
Premiums paid to reinsurers are reported as health care services
expense and the related reinsurance recoveries, if any, are reported as
deductions from health care services expense.
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.
Effective January 1, 1997, the Company adopted Statement of Financial
Accounting Standards Number 128 "Earnings Per Share" (FASB No. 128).
FASB 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. FASB No. 128 requires the restatement of EPS
for all periods presented. The adoption of FASB No. 128 had no effect
on the Company's calculation of earnings per share in the accompanying
financial statements.
8
<PAGE>
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.
New Accounting Standard
In June 1997, the Financial Accounting Standards Board (FASB) issued
FASB No. 130 "Reporting Comprehensive Income". This statement, which
establishes standards for reporting and disclosure of comprehensive
income, is effective for annual periods beginning after December 15,
1997. The adoption of FASB No. 130 has not had any material impact on
the Company's financial position or results of operations.
In June 1997, the FASB issued Statement No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which became
effective in 1998. This statement establishes standards for reporting
selected information about operating segments in the Company's interim
and annual financial statements. Adoption of this statement did not
impact the presentation of the Company's financial information.
In June 1998, the FASB issued Statement No. 133, "Accounting for
Derivative Instruments and Hedging Activities," which is effective for
the Company's fiscal year ending December 31, 2001. This statement
establishes accounting and reporting standards for derivative
instruments, including those embedded in other contracts, and for
hedging activities. It requires recognizing derivatives as assets or
liabilities at fair value on the balance sheet. Management is currently
evaluating the effects of FASB No. 133 on the Company's financial
condition and results of operations.
Year 2000
Costs incurred by the Company to address Year 2000 issues, to include
costs for assessment, renovation, testing, verification, and
implementation, are charged to expense as incurred.
(3) Going Concern Matters
The accompanying financial statements have been prepared on a
liquidation basis as of September 30, 1999, and on a going concern
basis as of December 31, 1998. As shown in the financial statements for
the three month and nine month periods ended September 30, 1999, the
Company incurred comprehensive losses of $3,809,210 and $8,824,895,
respectively. Additionally, the adjustment to a liquidation basis
recognized reductions in asset values and increases in liabilities
related to liquidation. The Company's net liability (deficiency in
assets) in liquidation at September 30, 1999 was estimated to be
$1,317,239. Pennsylvania managed care laws require that the Company
possess a minimum net worth of $1,175,000 to operate a PPO and an
additional $1,500,000 for a HMO. These factors among others indicate
that the Company will be unable to continue as a going concern. Please
see Item 2. "Management's Discussion and Analysis or Plan of
Operation," for a more detailed discussion of this matter.
9
<PAGE>
(4) Reinsurance
The Company has a reinsurance agreement for portions of the risk that
it has underwritten through its products. PPO risk was reinsured to
$2,000,000 per member per lifetime in excess of maximum loss retention
of $75,000 per member per year and subject to certain per day maximums.
Coinsurance ranges from 50% to 90% depending on the type of service,
age of the member, and service facility.
There were no reinsurance recoveries for the nine month periods ended
September 30, 1999 and 1998.
(5) Income Taxes
The Company has Federal net operating losses available to offset future
income before taxes, which expire in the period from 2011 to 2019. In
light of the Company's current financial condition it is unlikely that
these operating losses will ever be utilized.
(6) Recapitalization
At a Special Meeting of Shareholders held on January 9, 1999, the
holders of the Company's Class A voting common stock and Class B
non-voting common stock approved a Plan of Recapitalization and Amended
and Restated Articles of Incorporation of the Company. The
recapitalization changed the voting rights of the Class A shares,
created new classes of both common and preferred stock, provided for
the conversion of the outstanding Class A shares and Class B shares to
shares of a new class of voting common stock and simplified the shares
of the Company by eliminating the Class C common stock and Class D
common stock of the Company (no shares of which had been outstanding).
The Class A shares and Class B shares were changed to permit the
voluntary conversion into a new class of voting common stock on or
after January 11, 1999 at the election of the holder and to require
conversion effective as of January 1, 2000. The conversion ratio is 400
shares of common stock for each Class A share and 100 shares of common
stock for each Class B share. The conversion ratio is subject to
adjustment in the event of a stock split, stock dividend, distribution
or other transaction affecting the common stock prior to conversion.
All Class A and Class B shares will also automatically convert to
shares of common stock on the day before the occurrence of any of the
following events:
10
<PAGE>
o a reclassification or change of the outstanding common stock
(except a stock split or a combination of shares);
o a consolidation or merger of the Company (except a merger in which
the Company survives without a reclassification or change of the
Company's common stock, except for a split or combination of
shares); or
o the sale or conveyance (except if the sale or conveyance is for
cash followed by the immediate distribution of such cash to the
shareholders of the Company) to another corporation of all or
substantially all of the Company's property.
Holders who elect to convert their Class A shares or Class B shares to
common stock must convert all of such shares. As of September 30, 1999,
no Class A shares or Class B shares had been converted by the holders
thereof into shares of common stock.
(7) Restrictions on Cash
The Company received a license to operate an HMO on March 22, 1999,
which eliminated certain restrictions on its use of cash proceeds from
its 1995-1996 stock offering. The Company returned its license to
operate an HMO in October, 1999 as discussed in Item 2. "Management's
Discussion and Analysis or Plan of Operation".
11
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.
As discussed in Item 2. "Management's Discussion and Analysis or Plan
of Operation," in the Company's Form 10-QSB for the fiscal quarter
ended June 30, 1999, and in the Company's Current Reports on Form 8-K
dated October 13, 1999 and October 24, 1999, incorporated herein by
reference, during the second and third quarter of 1999 Physicians Care
PPO, Inc., the Company's preferred provider organization, which is its
sole revenue generating subsidiary (the "PPO"), incurred significantly
larger underwriting losses than anticipated. These losses, which were
primarily the result of higher than expected utilization of health care
services by a select number of employer groups, continued in the third
quarter of 1999. As a result of these losses, the PPO's external cash
requirements materially exceeded its internally generated cash by an
amount in excess of its ability to borrow or to access the capital
markets. The Company was unable to enter into any definitive
arrangements to provide it with the additional capital it needed to
fund its internal cash requirements.
Pennsylvania managed care laws require that the PPO possess a minimum
net worth of at least $1,175,000 or its license may be revoked. The PPO
had a net deficit at September 30, 1999 of $2,952,000. Consequently,
the PPO's net worth declined below that required by Pennsylvania
managed care laws.
On October 13, 1999, the Company met with the Pennsylvania Department
of Insurance (the "Department") so that satisfactory arrangements could
be made to achieve a timely and orderly cessation of the PPO's
business, including the placing of subscribers with other insurance
providers. Although the Department had the authority to seek a
rehabilator to manage the PPO's day-to-day operations, it then advised
the Company that it had until October 25, 1999 to continue to remain in
control in order to wind up the PPO's affairs and also to seek
additional sources of funding. The Department indicated that after that
date if would assess the PPO's financial condition, and, if no
additional sources of funding were obtained, the Department would seek
an order from the Commonwealth Court of Pennsylvania (the "Court")
appointing a liquidator for the PPO.
The Company was attempting to obtain additional capital from the
Pennsylvania Medical Society ("PMS") by the October 25, 1999 deadline
set by the Department. However, the Company and PMS were unable to come
to a definitive arrangement regarding the provision of additional
capital.
Consequently, on October 24, 1999 the PPO consented to the entry of an
order of liquidation from the Court which placed the PPO under the
control of the Department and, among other things, revoked the PPO's
license, appointed a rehabilator and/or liquidator for the PPO,
discharged the PPO's employees, officers and directors, enjoined the
PPO from transacting any further business and ordered that the PPO be
dissolved. On October 26, 1999 the Court issued its order, which became
effective on November 1, 1999.
12
<PAGE>
The Company entered into an arrangement with certain of the Blue
Cross/Blue Shield plans doing business in the PPO's service area
whereby these plans agreed to offer coverage without medical
underwriting to all of the PPO's members effective November 1, 1999.
Also on October 24, 1999, the Company's health maintenance
organization, a subsidiary of the Company which had not yet commenced
operations (the "HMO"), agreed to return its license to the Department.
On November 3, 1999, the Department issued an order, amended November
8, 1999, which required the Company to transfer $1 million of the HMO's
$1.5 million statutory net worth to the PPO in order to provide for the
payment of outstanding claims.
The Company has settled the claims of most of its creditors, including
its landlord and equipment lessors, and its only remaining assets
consist of its cash balances and a small amount of computer equipment.
The Company's winding down activities are now conducted out of the
private residences of its remaining employees, its Chief Executive
Officer and Chief Financial Officer. Other than its remaining cash
balances, the Company's assets consist solely of a small amount of
computer equipment. The Company is currently developing a plan of
dissolution. The plan of dissolution will require the approval of the
Company's shareholders at a special meeting of shareholders to be held
for that purpose. The Company is hopeful that its liquidation can be
effectuated without the necessity of a bankruptcy filing. Nevertheless,
no assurance can be given that the Company will not have to seek
protection from its creditors under the bankruptcy laws. The Company
believes that any liquidating distribution to its shareholders would be
extremely unlikely.
13
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
In a Current Report on Form 8-K, dated October 13, 1999, the Company
reported under Item 5, "Other Events," its worsening financial
condition and the outcome of its meetings with the Pennsylvania
Department of Insurance.
In a Current Report on Form 8-K, dated October 24, 1999, the Company
reported under Item 5, "Other Events," the placement of its preferred
provider organization under the control of the Pennsylvania Department
of Insurance and the return of the Company's HMO license to the
Pennsylvania Department of Insurance.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be filed on its behalf be the undersigned, thereunto duly
authorized:
Pennsylvania Physician Healthcare Plan, Inc.
(Registrant)
Date: December 28, 1999 By:/s/ Richard A. Felice
----------------- ------------------------------------------
Richard A. Felice, President and Chief
Executive Officer
Date: December 28, 1999 By:/s/ T. Clark Phillip
----------------- ------------------------------------------
T. Clark Phillip, Treasurer and Chief
Financial Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATIN 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> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 427,689
<SECURITIES> 3,482,790
<RECEIVABLES> 356,024
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 1,220,358
<DEPRECIATION> 892,436
<TOTAL-ASSETS> 4,633,788
<CURRENT-LIABILITIES> 5,951,027
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> (1,317,239)
<SALES> 17,841,417
<TOTAL-REVENUES> 18,138,950
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 26,910,071
<LOSS-PROVISION> 53,774
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (8,824,895)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,824,895)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,824,895)
<EPS-BASIC> (1,699.50)
<EPS-DILUTED> 0
</TABLE>
