SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 10-KSB/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1998
Commission File Number: 0-28390
--------------------
PENNSYLVANIA PHYSICIAN HEALTHCARE PLAN, INC.
(Name of Small Business Issuer in Its Charter)
Pennsylvania 23-2795795
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
651 East Park Drive Harrisburg, Pennsylvania 17111
(Address of Principal Executive Offices) (Zip Code)
(717) 561-7890
(Issuer's Telephone Number, Including Area Code)
--------------------
Securities registered under Section 12(b) of the
Exchange Act: None Securities registered under Section
12(g) of the Exchange Act:
Class A Common Stock, $.01 par value per share
(Title of Class)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy of
information statements incorporated by reference in Part III of Form 10-KSB or
any amendments to this Form 10-KSB. [ ]
Issuer's revenues for its most recent fiscal year are $7,335,663.
The aggregate market value of Class A and Class B Common Stock, held by
non-affiliates, based upon the price at which the Class A Common Stock and Class
B Common Stock was sold, is $21,353,000.
As of March 15, 1999, 4,087 shares of Class A Common Stock, $.01 par
value per share, and 1,074 shares of Class B Common Stock, $.01 par value per
share, were outstanding.
Transitional Small Business Disclosure Format (check one): Yes X No
DOCUMENTS INCORPORATED BY REFERENCE
None.
<PAGE>
PART F/S
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders
Pennsylvania Physician Healthcare Plan, Inc.
Harrisburg, PA
We have audited the accompanying consolidated balance sheets of Pennsylvania
Physician Healthcare Plan, Inc. and its subsidiaries (the "Company") as of
December 31, 1998 and 1997, and the related consolidated statements of income
and comprehensive income, changes in stockholders' equity, and cash flows for
the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements present fairly, in all
material respects, the financial position of the Company at December 31, 1998
and 1997, and the results of its operations and its cash flows for the years
then ended, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
/s/ Deloitte & Touche LLP
- -------------------------
Philadelphia, Pennsylvania
March 17, 1999
2
<PAGE>
PENNSYLVANIA PHYSICIAN HEALTHCARE PLAN, INC. Consolidated Balance Sheets
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
December 31, December 31,
Assets 1998 1997
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 2,608,269 $ 14,250,640
Short-term investment securities 400,750 --
Accrued interest income 145,654 65,611
Premiums receivable, net 171,766 25,393
Income taxes receivable 28,853 28,853
Other assets 245,056 71,585
- -------------------------------------------------------------------------------------------------------------
Total current assets 3,600,348 14,442,082
- -------------------------------------------------------------------------------------------------------------
Long-term investment securities 6,860,624 --
Equipment (net of accumulated depreciation of $684,830
and $272,859, respectively) 571,911 789,589
- -------------------------------------------------------------------------------------------------------------
Total assets 11,032,883 15,231,671
=============================================================================================================
Liabilities and Stockholders' Equity
- -------------------------------------------------------------------------------------------------------------
Current liabilities:
Medical claims liabilities 1,945,722 63,458
Accounts payable 152,558 113,128
Accrued expenses 44,350 43,500
Other liabilities 29,075 65,000
- -------------------------------------------------------------------------------------------------------------
Total current liabilities 2,171,705 285,086
- -------------------------------------------------------------------------------------------------------------
Stockholders' Equity:
Class A common voting stock, $.01 par value, 40,000 shares
authorized; 4,087 shares issued and outstanding 41 41
Class B common non-voting stock, $.01 par value, 100,000 shares
authorized; 1,074 shares issued and outstanding 11 11
Additional paid in capital 21,220,777 21,220,777
Accumulated deficit (12,364,727) (6,274,244)
Accumulated other comprehensive income, net of taxes 5,076 --
- -------------------------------------------------------------------------------------------------------------
Total stockholders' equity 8,861,178 14,946,585
- -------------------------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $ 11,032,883 $ 15,231,671
=============================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements
3
<PAGE>
PENNSYLVANIA PHYSICIAN HEALTHCARE PLAN, INC.
Consolidated Statements of Income and Comprehensive Income
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Year-Ended Year-Ended
December 31, December 31,
1998 1997
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Premiums $ 6,622,311 $ 183,222
Consulting 65,000 --
Investment income, net 648,352 836,450
- -------------------------------------------------------------------------------------------------------------
Total Revenue 7,335,663 1,019,672
- -------------------------------------------------------------------------------------------------------------
Expenses:
Health care services 7,588,762 172,940
Salary and benefits 3,003,529 2,088,976
Operating expenses 1,953,429 1,124,602
Professional services 430,447 394,125
Other taxes 38,008 25,256
Depreciation 411,971 272,859
- -------------------------------------------------------------------------------------------------------------
Total expenses 13,426,146 4,078,758
- -------------------------------------------------------------------------------------------------------------
Net loss $ (6,090,483) $ (3,059,086)
=============================================================================================================
Other comprehensive income, net of income taxes:
Unrealized gain on investments 5,076 --
Comprehensive Loss (6,085,407) (3,059,086)
Net loss per common share $ (1,180.10) $ (592.73)
Weighted average common shares 5,161 5,161
=============================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
PENNSYLVANIA PHYSICIAN HEALTHCARE PLAN, INC.
Consolidated Statements of Changes in Stockholders' Equity
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Common Stock Shares Common Stock Par
Value Additional
Paid In
Class A Class B Class A Class B Capital
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance, January 1, 1997 4,087 1,074 $ 41 $ 11 $ 21,220,777
Comprehensive Loss
Net Loss
- -------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997 4,087 1,074 41 11 21,220,777
- -------------------------------------------------------------------------------------------------------------
Comprehensive Loss
Net loss
Other Comprehensive
Income
Unrealized gains on
investments
- -------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 4,087 1,074 $ 41 $ 11 $ 21,220,777
- -------------------------------------------------------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------------------
Accumulated Accumulated
Deficit Other Total
Comprehensive
Income
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, January 1, 1997 $ (3,215,158) $ -- $ 18,005,671
Comprehensive Loss
Net Loss (3,059,086) (3,059,086)
- ---------------------------------------------------------------------------
Balance, December 31, 1997 (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 $(12,364,727) $ 5,076 $ 8,861,178
- ---------------------------------------------------------------------------
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
PENNSYLVANIA PHYSICIAN HEALTHCARE PLAN, INC.
Consolidated Statement of Cash Flows
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Year-Ended Year-Ended
December 31, December 31,
1998 1997
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (6,090,483) $ (3,059,086)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation, amortization and accretion 419,966 272,859
Net loss on sale of investment securities 670 --
Change in assets and liabilities:
Accrued interest income (80,043) 12,030
Premiums receivable (146,373) (25,393)
Income tax receivable -- 137,147
Other assets (173,471) 18,231
Medical claims liabilities 1,882,264 63,458
Accounts payable 39,430 (221,978)
Accrued expenses 850 43,500
Other liabilities (35,925) (42,942)
- ----------------------------------------------------------------------------------------------------------------
Net cash used in operating activities (4,183,115) (2,716,290)
- ----------------------------------------------------------------------------------------------------------------
Cash flows from investing activities:
Purchases of investment securities (9,564,463) --
Proceeds from maturities of investment securities 1,350,000 --
Proceeds from sale of investment securities 949,500 --
Purchases of equipment (194,293) (414,677)
- ----------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (7,459,256) (414,677)
- ----------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (11,642,371) (3,130,967)
Cash and cash equivalents, beginning of period 14,250,640 17,381,607
- ----------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 2,608,269 $ 14,250,640
================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
PENNSYLVANIA PHYSICIAN HEALTHCARE PLAN, INC.
Notes to Consolidated Financial Statements for the Years Ended December 31, 1998
and 1997
(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.
(2) Summary of Significant Accounting Policies
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.
7
<PAGE>
PENNSYLVANIA PHYSICIAN HEALTHCARE PLAN, INC.
Notes to Consolidated Financial Statements for the Years Ended December 31, 1998
and 1997
Equipment
Equipment, consisting of furniture and office equipment, data processing
equipment, leasehold improvements and capitalized 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.
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.
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.
8
<PAGE>
PENNSYLVANIA PHYSICIAN HEALTHCARE PLAN, INC.
Notes to Consolidated Financial Statements for the Years Ended December 31, 1998
and 1997
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.
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 Standards
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 PPHP's interim and annual financial statements. Adoption
of this statement did not impact the presentation of PPHP's financial
information.
In June 1998, the FASB issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which is effective for PPHP's fiscal year
ending December 31, 2000. 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 PPHP'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.
9
<PAGE>
PENNSYLVANIA PHYSICIAN HEALTHCARE PLAN, INC.
Notes to Consolidated Financial Statements for the Years Ended December 31, 1998
and 1997
(3) 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 and investments as of December 31, 1998 could only be used
after an HMO license was obtained; otherwise, such funds, less claims of
creditors, were required to be distributed to the shareholders, unless holders
of a majority of the voting shares elected otherwise.
In February 1999 the Company, in accordance with the provisions of the
prospectus, requested and received shareholder approval for a reduction in the
restriction of offering proceeds from $9,691,000 to $5,000,000. The Company
received a license to operate an HMO on March 22, 1999.
(4) Investment Securities
The amortized cost, gross unrealized holding gains, gross unrealized holding
losses and estimated fair value of investments in debt securities by security
type at December 31, 1998 are as follows:
<TABLE>
<CAPTION>
Amortized Unrealized Unrealized Fair Value
Cost Gain Loss
------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. government agency
debt securities $7,256,298 6,858 1,782 $7,261,374
------------------------------------------------------------------
</TABLE>
The amortized cost and estimated fair value of short-term and long-term
investments by contractual maturity at December 31, 1998 are as follows:
<TABLE>
<CAPTION>
Amortized Cost Fair Value
----------------------------
<S> <C> <C>
Maturities:
Within 1 year $ 400,510 $ 400,750
1 to 3 years 6,855,788 6,860,624
--------------------------
Total short-term and long-term investment securities $7,256,298 $7,261,374
--------------------------
</TABLE>
The entire investment securities portfolio is classified as available-for-sale.
10
<PAGE>
PENNSYLVANIA PHYSICIAN HEALTHCARE PLAN, INC.
Notes to Consolidated Financial Statements for the Years Ended December 31, 1998
and 1997
(5) Equipment
Equipment owned at December 31, 1998 and 1997 consists of the following:
Useful lives 1998 1997
-------------------------------------------
Capitalized software 3 years $ 574,793 $ 551,893
Data processing equipment 5 years 272,077 216,947
Furniture and office equipment 5-7 years 395,182 280,235
Leasehold improvements 5 years 14,689 13,373
---------------------------
Total equipment 1,256,741 1,062,448
Accumulated depreciation (684,830) (272,859)
---------------------------
Equipment (net) $ 571,911 $ 789,589
---------------------------
Depreciation expense was $411,971 and $272,859 for the years ended December 31,
1998 and 1997, respectively.
(6) Medical Claims Liability
Activity in the medical claims liability consisted of the following for the
years ended December 31:
1998 1997
----------- -----------
Balance at beginning of year $ 63,458 $ --
Incurred related to:
Current year 7,589,230 172,941
Prior year (468) --
Net incurred 7,588,762 172,941
----------- -----------
Paid related to:
Current year 5,643,508 109,483
Prior year 62,990 --
Total paid 5,706,498 109,483
=========== ===========
Balance at end of year $ 1,945,722 $ 63,458
----------- -----------
11
<PAGE>
PENNSYLVANIA PHYSICIAN HEALTHCARE PLAN, INC.
Notes to Consolidated Financial Statements for the Years Ended December 31, 1998
and 1997
(7) 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. 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 years ended December 31, 1998 and
1997.
(8) Commitments
At December 31, 1998 the Company is obligated under non-cancelable operating
leases for office space and equipment expiring at various dates through December
2003. Rental expense for office space and equipment totaled approximately
$250,406 and $171,699 for the years ended December 31, 1998 and 1997,
respectively.
Future minimum rental payments under the terms of the operating leases at
December 31, 1998 are as follows:
1999 $ 258,076
2000 262,083
2001 269,597
2002 271,045
2003 46,084
-----------
Total $ 1,106,885
-----------
The Company's subsidiary, Pennsylvania Physicians Care Service Corp., has
entered into employment agreements with executive officers of the Company and
the Company's subsidiaries. With respect to these officers agreements, the total
minimum commitment level of the Company and its subsidiaries over the next two
years is approximately $340,000.
(9) Income Taxes
The net deferred amounts reported by the Company at December 31, 1998 and
December 31, 1997 are as follows:
12
<PAGE>
PENNSYLVANIA PHYSICIAN HEALTHCARE PLAN, INC.
Notes to Consolidated Financial Statements for the Years Ended December 31, 1998
and 1997
1998 1997
----------- -----------
Deferred tax assets:
Start up costs $ 879,794 $ 1,148,518
Net operating loss carryforward 4,073,697 1,394,145
Other assets 35,958 19,548
----------- -----------
Deferred tax asset 4,989,449 2,562,211
Valuation allowance (4,989,449) (2,562,211)
Net deferred tax asset $ -- $ --
----------- -----------
The Company has Federal net operating losses of approximately $10,035,000
available to offset future income before taxes, which expire in the period from
2011 to 2018. Management recorded the valuation allowance to reduce the deferred
income tax benefit to its estimated realizable value in light of the Company's
lack of profitable operating history.
(10) Service Agreement
The Company has contracted with the Pennsylvania Medical Society Liability
Insurance Company, to provide various accounting and administrative services.
(11) Concentrations of Credit Risk
The Company maintains cash accounts in excess of federally insured limits. These
amounts are not significant to the Company's financial statements. Money market
funds are invested in United States Treasury Securities that are guaranteed by
the full faith and credit of the United States Government. Investments in
marketable securities are managed within the guidelines established by the Board
of Directors which emphasize investment-grade fixed income securities and limits
the amount that may be invested in any one issuer. The fair value of the
Company's financial instruments is substantially equivalent to their carrying
value and, although there is some credit risk associated with these instruments,
the Company believes this risk to be minimal.
Substantially all of the Company's revenues were generated from member contracts
entered into in the Commonwealth of Pennsylvania. Such contracts are subject to
certain regulations and requirements as determined by the Commonwealth of
Pennsylvania Insurance Department.
(12) Benefit Plan
In October 1997 the Company adopted a qualified 401(k) deferred salary plan (the
"Plan") covering
13
<PAGE>
PENNSYLVANIA PHYSICIAN HEALTHCARE PLAN, INC.
Notes to Consolidated Financial Statements for the Years Ended December 31, 1998
and 1997
substantially all employees who meet certain requirements as to age and length
of service and who elect to participate in the Plan. Under the Plan, employees
may defer up to 15% of their compensation. The Company makes matching
contributions equal to 50% of employee contributions up to 6% of compensation.
Employees become fully vested in the Plan after 3 years of service. All costs of
the Plan are funded as incurred. Employer matching contributions were
approximately $51,000 and $13,000 for the years ended December 31, 1998 and
1997, respectively.
(13) Subsequent Events
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:
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 March 17, 1999, no Class A shares
or Class B shares had been converted by the holders thereof into shares of
common stock.
14
<PAGE>
S I G N A T U R E S
In accordance with Section 13 or 15(d) of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
PENNSYLVANIA PHYSICIAN
HEALTHCARE PLAN, INC.
Date: May 12, 1999 By: /s/ T. Clark Phillip
---------------------------
T. Clark Phillip, Treasurer
(Chief Financial Officer)
15
