As filed with the Securities and Exchange Commission on December 8, 2000
Registration No. 333-XXXXX
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
PARTNERS IN CARE, CORP..
(Exact name of registrant as specified in its charter)
NEW JERSEY 621399 ###-##-####
(State or other jurisdiction (Primary Standard Industrial (I.R.S. employer
of incorporation or Classification Code No.) Identification No.)
organization)
100 FRANKLIN SQUARE DRIVE, SUITE 300
SOMERSET, NJ 08873
(732) 805-0400
(Address, including zip code, and telephone number,
including area code, of registrant's principal
executive offices)
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Dennis G. Wilson
President and Chief Executive Officer
Partners In Care, Corp.
100 Franklin Square Drive, Suite 300
Somerset, NJ 08873
(732) 805-0400
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------
Copies of all communications to:
W. Raymond Felton, Esq.
Greenbaum, Rowe, Smith, Ravin, Davis & Himmel, LLP
P.O Box 5600
Woodbridge, New Jersey 07095
(732) 549-5600
Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date this Registration Statement.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, please check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
<PAGE>
CALCULATION OF REGISTRATION FEE
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Title of Each Class of Amount to Be Proposed Proposed Amount of
Securities to Be Registered Registered Maximum Offering Maximum Aggregate Registration Fee
Price per Unit(1) Offering Price(1)
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Class A Common Stock 15,000 shares $40.00 $600,000 $166.80
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(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(g) under the Securities Act of 1933.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
securities and exchange commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
SUBJECT TO COMPLETION, DATED DECEMBER 8, 2000
PROSPECTUS
15,000 Shares
PARTNERS IN CARE, CORP.
Common Stock
We are making a public offering of shares of our Class A common stock.
There has been and there will continue to be no public market for the common
stock. The public offering price has been determined solely in the discretion of
our management.
See "Risk Factors" beginning on page 4 for certain considerations relevant
to an investment in the common stock.
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Neither the Securities and Exchange Commission or any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
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Offering Price Proceeds to Company(1)
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Per Share......................... $ $
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Total .......................... $ $
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(1) Before deducting estimated expenses of $ .
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The shares are being offered by PIC, except for 7,500 shares held by
existing shareholders.
The date of this Prospectus is , 2000
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and our financial statements and the notes thereto included
elsewhere in this prospectus.
We are a private, for-profit corporation formed to improve the ability of
health care providers to work within the evolving managed care environment
through administrative support services, managed care expertise, and information
systems initiatives. Our current shareholders are certain physician members of
the United Medical Group, P.C. and St. Peter's University Hospital, New
Brunswick, New Jersey.
Health Plan Management Services currently provides support for risk
contracting with Health Maintenance Organizations and administrative services to
self-insured Employer Health Plans. We plan to increase our existing product
lines and expand into new product lines in this division. Physician Support
Services currently provides administrative services to physician's offices,
physician professional corporations and primary care centers.
The MSO or Management Services Organization is structured to ensure equal
physician representation on the Board and up to 50 percent ownership. Physicians
are full partners in planning, implementing and continuously improving corporate
performance. The shared governance is one of the key items for our success. In
keeping with this philosophy, we require a super-majority vote for certain
decisions, including the following: any change in our certification of
incorporation or by-laws, approval of managed care contracts or provider
agreements, a sale of the Company or any loan or guarantee arrangement for
purchase of physician practices.
We are also designed to provide high-caliber professional services, such as
management of risk, business development, medical management (including
utilization management and quality assurance), information systems,
credentialing, provider support services, network development and management.
Historically, we have also provided practice management services for physician
practices.
We were incorporated in New Jersey in 1995. Our executive office is located
at 100 Franklin Square Drive, Suite 300, Somerset, New Jersey 08873 and our
telephone number is (732) 805-0400.
<PAGE>
The Offering
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<CAPTION>
<S> <C>
Common Stock offered.................................................. 15,000 Shares, offered in 100 share
increments, which is the maximum number
of shares that may be purchased by any
physician
Common Stock to be outstanding after the Offering..................... 15,000 Shares of Class A and 177,500 Shares
of Class B, all of which Class B Shares
and 7,500 of which Class A Shares are
currently outstanding
Use of Proceeds....................................................... To maintain capital reserves and for
product development and marketing,
capital expenditures, working capital
and general corporate purposes
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Summary Financial Data
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Nine Months Ended
September 30 Year Ended
(Unaudited) December 31,
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2000 1999 1999 1998 1997 1996
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Statement of Operations Data:
Revenue $44,241 $21,244 $31,937 $16,103 $ 8,080 $ 1,830
Expenses 42,891 20,836 31,112 15,872 9,097 2,976
------ ------ ------ ------ ----- -----
Income from Operations 1,350 408 825 231 (1,017) (1,146)
Other (Expense) Income - Net 64 (61) (34) (62) -- --
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Net Income (Loss) $ 1,286 $ 347 $ 791 $ 169 $(1,017) $(1,146)
====== ===== ===== ====== ======= =======
Balance Sheet Data:
Cash and Cash Equivalents $ 1,326 $ 941 $ 549 $ 921 $ 385 $ 18
======= ====== ====== ====== ======= =======
Total Assets $47,936 $18,572 $22,421 $11,767 $ 6,899 $ 1,831
======= ====== ====== ====== ======= =======
Working Capital $ 4,916 $ 2,024 $ 2,996 $ 1,444 $ 1,368 $ (161)
======= ====== ====== ====== ======= =======
Total Liabilities $43,974 $16,346 $19,752 $ 9,997 $ 5,350 $ 790
======= ====== ====== ====== ======= =======
Total Stockholders' Equity $ 3,962 $ 2,226 $ 2,669 $ 1,770 $ 1,549 $ 1,041
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<PAGE>
RISK FACTORS
An investment in our common stock involves a high degree of risk. You
should carefully consider the following risk factors, as well as all other
information in this prospectus, before you decide to buy our common stock. If
any of the following risks occur, our business, results of operations and
financial condition could be harmed, the value of our common stock could decline
and you could lose all or part of your investment.
Our limited operating history makes it difficult to evaluate our business.
We were organized in January 1995 and have a short operating history since
1996. During this period our revenue has increased from $1.8 million in 1996 to
$31.9 million in 1999 and expenses increased from $3.0 million in 1996 to $31.1
million in 1999. You should be aware that difficulties are typically encountered
by a relatively young enterprise with growth rates of approximately 100% per
year. We cannot assure you that our development will be successful, that our
services will continue to be successfully marketed or that enough physicians
will be willing to provide services to us to enable us to operate effectively.
Further, we cannot assure you that other health care providers will enter into
provider agreements with us or that we will be successful in marketing our
services to payors, employer groups or individuals.
We are in a competitive industry which may inhibit our ability to continue to
expand market share to make our operations profitable.
The business of providing health care related services is characterized by
intense competition, evolving industry standards and new product introductions.
Many companies, including physician practice management companies like us have
been organized to employ clinical physicians or provide services to IPAs, or
individual practice associations. Large hospitals, other multi-specialty clinics
and health care companies, health maintenance organizations and insurance
companies are also involved in activities similar to ours. Our current and
prospective competitors include Osler Health, Inc. and PhyCor, Inc. as well as
other integrated delivery systems, physician hospital organizations, prepaid
medical plans and conventional health insurers generally. In addition, several
small provider groups may have the ability to aggregate their efforts,
particularly if supported by an entity who already has a local or national
presence in the market, which could cause increased competition for us. Many of
these competitors have been in existence for a substantial period of time and
have substantially greater financial, sales, marketing and other resources and
more extensive product development programs than those which we have
implemented. In addition, other firms with resources and capital greater than
ours may enter into competition with us in the future by providing, for example,
alternative health care delivery systems or by offering greater benefits for a
lower fee or charge. Increased competition may result in revenue reductions and
loss of market share, which could have a material adverse effect on our
business, operating results, cash flows and financial condition. We cannot
assure you that we will be able to compete successfully against current and
future competitors, or that the competitive factors we face will not have a
material adverse effect on our business, operating results, cash flows and
financial condition.
We may need to expand the number of participating health care providers with
whom we contract and there may not be sufficient providers to cover all of our
anticipated requirements.
We may be required to contract with other physicians, facilities or
providers if we determine that such contracts are necessary to provide adequate
coverage of patients. Nevertheless, we cannot assure you that such provider or
facility agreements will be executed by other health care providers to cover all
services which we propose to offer. Moreover, even if sufficient agreements are
initially entered into with hospitals, physicians and other health care
providers, those agreements will likely provide for annual renewal and we cannot
assure you that such agreements will continue to be renewed. The failure to
renew contracts could adversely affect our ability to market our products and
services and, therefore, could adversely affect our revenue and operating
results.
We rely substantially on the United Medical Group, P.C. for physician services
to enrollees.
United Medical Group provides physician services to us pursuant to a
contract. While we have the right to terminate the contract in the event that
UMG materially breaches its contractual obligations, we would still be
responsible for contracting with physicians groups to provide services to
enrollees. Thus, the likelihood that we would terminate the contract is remote.
Should UMG or we fail to properly monitor the performance of the physicians
performing services for the enrollees, it could have a material adverse effect
upon our ability to compete and, accordingly, our financial viability.
Our pursuit of a growth strategy places great pressure on our existing personnel
and presents a need for increased personnel, expanded information systems, and
additional financial and administrative control procedures. Our limited
resources may limit our ability to successfully manage expanding operations.
Our continued growth will be primarily dependent upon our ability to
achieve significant consolidation of our diverse operations. The process of
forming and managing an economically feasible physician network is lengthy and
complex. Physician network operations require intensive management in a dynamic
marketplace increasingly subject to cost containment pressures. We currently
have limited internal infrastructure and continued expansion will place a
substantial strain on our financial and management personnel as well as our
information systems and controls. Such growth will require us to implement new,
and enhance existing, financial and management information systems and controls
and to hire and train additional personnel. We may not be able to achieve or
sustain our anticipated growth rate. The success of our strategy to develop and
manage the MSO is largely dependent upon our ability to sustain networks of
physicians, to obtain favorable payor contracts, to manage and control costs and
to realize economies of scale. Many of our agreements with physicians currently
participating in our network are not exclusive arrangements. The physicians,
therefore, could join competing networks or terminate their relationships with
us. We cannot assure you that we will be successful in expanding our network or
maintaining relationships with affiliated physicians.
We face certain risks associated with our capital requirements.
Our long-term growth strategy including our development and expansion
programs will require substantial capital resources. We may incur debt or issue
additional debt or equity securities from time to time, including common stock
and convertible notes. We cannot assure you that sufficient financing will be
available, or that the terms will be satisfactory to us.
Our long-term growth strategy is dependent on continued increases in HMO
enrollees.
We are also largely dependent on the continued increase in the number of
HMO enrollees who participate in our physician networks. This growth may come
from affiliation with additional physicians, increased enrollment in HMO's
currently contracting with us and agreements with additional HMO's. We cannot
assure you that we will be successful in identifying and integrating additional
medical groups or in increasing the number of enrollees. A decline in enrollees
in HMO's could have a material adverse effect on our operating results and
financial condition. We are statutorily and contractually prohibited from
controlling any medical decisions made by a health care provider. Accordingly,
affiliated physicians may decline to enter into HMO agreements that we have
negotiated on their behalf or may enter into contracts to provide medical
services for our competitors which could have a material adverse effect on our
operating results and financial condition.
Our revenue is dependent on at-risk contracts.
The majority of our annual revenue is derived from risk contracting,
whereby we assume a portion of the financial risk associated with the provisions
of health care services for a fixed amount of revenue per enrollee. In the
future, HMOs may decide, for any number of reasons, that they will not continue
to pursue risk contracting arrangements with MSOs such as us. If such a decision
were to be made, our revenue stream would be significantly impacted.
Over-utilization of health care services may increase our expenses.
We have implemented a modified care manager system for management of
physician services. Supplementing the case management system are risk pools
(money set aside from payments to health care providers) which are distributed
on an incentive basis and tied to utilization of health care services. Our
experience under the risk pool model has been successful in that surpluses
before distributions were $1.8 million and $1.7 million for the years ended
December 31, 1999 and 1998, respectively. Notwithstanding the risk pools and
other efforts to reduce over utilization, such as oversight by our Medical
Directors and Medical Management Committee, we may suffer serious adverse
financial consequences as a result of over utilization of all health care
services.
<PAGE>
Providing medical services entails inherent risks, including possible
malpractice claims against our participating physicians.
The physicians and physician groups which participate in our networks
deliver medical services to the public and, therefore, are exposed to the risk
of professional liability claims. Claims of this nature, if successful, could
result in damage awards to the claimants which may exceed the limits of any
applicable insurance coverage. Insurance against losses related to claims of
this type can be expensive and varies widely from state to state. We do not
control the practice of medicine by affiliated physicians or monitor compliance
with certain regulatory and other requirements directly applicable to physicians
and physician groups. We maintain professional and general liability insurance
and other coverage as we consider necessary. Nevertheless, our insurance does
not cover certain types of risks and liabilities and there can be no assurance
that the limits of coverage which we maintain will be adequate to cover losses
in all instances. We are typically indemnified under our service agreements for
claims against the physicians and physician groups. However, successful
malpractice claims asserted against the physicians and physician groups, the
MSOs and/or PIC, could have a material adverse effect on our business.
We are in an industry subject to governmental regulation.
Health care providers, MSOs and PHOs are subject to extensive state and
federal government regulation. It is anticipated that there may be extensive
additional changes to state and federal regulation of health care providers,
MSOs, PHOs, insurers and HMOs over the next several years. The State of New
Jersey formerly regulated the rates that hospitals could charge for the services
they render. However, effective January 1, 1992, the establishment of hospital
rates in New Jersey was deregulated, and hospitals are free to set their own
charges and/or negotiate rates for their services. Deregulation has increased
competition among hospitals for business. Although this may enhance our ability
to negotiate favorable fee schedules with participating hospitals, the increased
competition may have a negative impact upon the financial viability of certain
hospitals with which we contract.
In 1997, the United States Congress passed the Health Insurance Portability
and Accountability Act which, when effective, will significantly effect the
rules for, the cost of and the fees paid for health care services.
In late 1998, HIP Health Plan of New Jersey (the state's fourth largest HMO
with approximately 8% of the New Jersey HMO market) and American Preferred
Provider Plan (an HMO that specialized in Medicaid patients) both collapsed. As
a result, the State Department of Banking and Insurance announced plans to
change regulations so that all New Jersey HMOs operate under stricter financial
control and tighter oversight by regulators. This may require HMOs in New Jersey
to increase reserve requirements and increase administration costs relative to
enhanced and more frequent financial reporting. These increased costs and
requirements could have a material adverse effect on our operating results and
financial condition.
In September 1999, the New Jersey Legislature introduced several bills
aimed at regulating managed care organizations' use of organized provider
networks. The legislation targets entities called organized delivery systems
that (ODS) provide, or arrange to provide, comprehensive or limited health care
services or benefits to enrollees or contract-holders of an insurance carrier.
An ODS that does not assume financial risk would be required to obtain
certification and become a certified ODS (CODS), and an ODS that does assume
financial risk would be required to obtain a license and become a licensed ODS
(LODS). The LODSs are subject to significant financial and reserve requirements,
while both CODSs and LODSs require extensive information submittals to the
State.
We have met with Legislative and State officials to discuss the potential
applicability of the proposed legislation and findings and we have determined
that it may not be necessary for us to pursue either certification or licensure.
However, it is possible that managed care organizations could attempt to
influence us to obtain a certification and/or license. In the event we are
required to become an LODS, we would require additional capital to meet the
additional reserve requirements, which could have a material adverse effect on
our operating results and financial condition.
Finally, it is impossible to predict whether national reforms will be
adopted or to forecast the impact that Federal legislation, if enacted, may have
on the health care delivery system.
We are subject to fraud and abuse laws.
We are subject to federal and state laws which govern financial
arrangements between health care providers. Federal law prohibits the offer,
payment, solicitation or receipt of any form of remuneration in return for, or
to induce the referral of, Medicare or Medicaid patients, or in return for, or
to induce, the purchase, lease or order of items or services that are covered by
Medicare and/or Medicaid. Violation of these laws can result in civil and
criminal penalties and exclusion from the Medicare and Medicaid programs.
We believe that we operate in full compliance with applicable law and
further believe that our structure and arrangements with providers do not
violate such fraud and abuse or anti-kickback laws. We cannot assure you,
however, that such laws will be interpreted in a manner consistent with our
interpretation. Furthermore, this area of law is constantly changing via
interpretations and the additions of restrictions related to arrangements with
physicians and other providers which may require us to change our relationships
in the future.
There are restrictions on patient referrals.
State and Federal laws, commonly known as the Stark laws, prohibit
physicians from referring Medicare or Medicaid patients to an entity for certain
designated health services if the physician has a prohibited financial
relationship with such an entity. We believe that we operate in full compliance
with the Stark laws and further believe that our structure and arrangements with
providers would not be found to violate such laws. We cannot assure you,
however, that such laws will be interpreted in a manner consistent with our
interpretation.
Maintaining competent management and other personnel is essential to the
continued success of our business and we may not be able to employ or retain
such personnel in the future.
Our business and projected expansion depends to a significant degree upon
the continuing contributions of our key personnel. We generally do not have
employment contracts with our key personnel. The loss of key management
personnel could have a material adverse effect on our business, operating
results, cash flows and financial condition. We believe that our prospects
depend, in a large part, upon our ability to attract and retain skilled
managerial, medical, sales, marketing and administrative personnel. Competition
for such personnel is intense, and we cannot assure you that we will be
successful in attracting and retaining such personnel. Failure to attract and
retain key personnel could have a material adverse effect on our business,
operating results, cash flows and financial condition.
We arbitrarily determined the offering price of the common stock in this
offering and it may not bear any relationship to the actual value of our stock.
Our Board of Directors arbitrarily determined the offering price of $30.00
per share for our common stock. Its decision was based in part on estimated
costs and expenses of operating an MSO, as well as costs of this offering and
upon a minority interest appraisal conducted by an outside business appraisal
firm. Accordingly, the offering price does not necessarily bear any relationship
to our present or future assets, earnings, book value or net worth and should
not be considered to be an indication of the present or future value of our
common stock.
Our certificate of incorporation and by-laws restrict ownership of our common
stock to certain persons meeting eligibility criteria, which will limit the
number of purchasers of our common stock.
There are certain eligibility criteria in order to purchase our class A
stock. To be an eligible purchaser, an individual must: (a) be a physician
licensed to practice medicine and/or surgery in New Jersey (an M.D. or D.O.);
(b) actually be practicing in New Jersey; (c) be fully credentialed as a member
of UMG and us; (d) be Board certified or Board eligible and within four (4)
years of completion of an accredited residency program; and (e) have executed a
membership agreement with UMG. Accordingly, the number of potential purchasers
is limited.
Our certificate of incorporation and by-laws restrict the transferability of our
common stock and, due to such restrictions, owners of our common stock will have
a very limited market in which to dispose of the stock.
Our common stock cannot be transferred by a shareholder to any
non-qualifying person or entity; however, we may redeem shares under certain
circumstances. As a result of this restriction, and because we have no present
intention of ever listing or including the common stock on a stock exchange or
quotation system: (i) there is no public or other trading market for our common
stock, and none is expected to develop; and (ii) our shareholders should be
prepared to hold their common stock for so long as they are a participating
physician with us. Moreover, prior to this offering there has been no public or
other trading market for our common stock. In the future, we may register
additional shares of certain of our securities, pursuant to the Securities Act
of 1933, as amended, or undertake a limited private offering of securities
exempt from the Securities Act's registration requirements.
<PAGE>
Because the book value per share of our common stock is substantially lower than
the offering price, purchasers of our common stock through this offering will
suffer an immediate and substantial dilution in the book value of their shares.
In addition, if we redeem common stock under certain circumstances it will not
result in a return of a shareholders' full investment.
The offering price of the common stock is substantially higher than the
book value per share of the currently outstanding common stock. Purchasers of
the common stock offered hereby will suffer immediate and substantial dilution
of $25.76 per share in the net tangible book value of the common stock from the
offering price (at an assumed offering price of $40.00 per share). Moreover, we
may, at any time in the future, sell additional securities and/or rights to
purchase such securities, grant warrants, stock options or other forms of
equity-based incentive compensation to management and/or employees to attract
and retain such personnel, or in connection with obtaining additional financing.
Any of these actions would have a dilutive effect upon the shareholders.
Under certain circumstances, we, or other shareholders, may redeem a
shareholder's common stock in exchange for the lesser of the purchase price or
the book value of such shares. You should be aware that the book value of our
common stock immediately following completion of this offering will be less than
the offering price. The purchasers in this offering will bear this dilution.
Thus, if we redeem a shareholder's common stock for "book value," the
shareholder should not expect to recover the offering price.
A substantial portion of the proceeds from this offering are to be used to
maintain capital reserves and the Board of Directors has complete discretion in
the application of the proceeds.
We intend to use the net proceeds from this offering to maintain possible
capital reserves which may be required by recently implemented rules and
regulations governing the industry in which we operate and for product
development and marketing, capital expenditures, working capital and general
corporate purposes. We have not specifically allocated approximately [$ ]
million of the net proceeds for any particular uses. Accordingly, the specific
uses for a substantial portion of the net proceeds will be at the complete
discretion of the Board of Directors and may be allocated from time to time
based upon a variety of circumstances. We cannot assure you that our Board of
Directors will deploy such funds in a manner that will enhance shareholder
value.
We have not declared or paid any dividends during our limited operating history
and the decision to declare and pay such dividends is at the discretion of the
Board of Directors.
To date, we have not paid any cash dividends on our common stock. One
reason for the limitation on dividends existed because unless the common stock
was registered with the New Jersey Bureau of Securities and the United States
Securities and Exchange Commission, the common stock was restricted as follows:
(a) we could not pay dividends, and (b) even if the book value of the common
stock increased, the price of the common stock could not exceed $30.00 per
share. We have filed a registration statement on Form S-2 with the New Jersey
Bureau of Securities and the United States Securities and Exchange Commission to
register the outstanding common stock and the common stock offered pursuant to
this offering. Therefore, the restrictions are now inapplicable; nevertheless,
we do not intend to pay dividends until the Company has established a consistent
earnings record.
USE OF PROCEEDS
We estimate that the net proceeds from the sale of the 7,500 shares of
Class common stock in this offering by us will be approximately [$ ] at an
assumed offering price of $40.00 per share after deducting estimated offering
expenses.
We intend to use the net proceeds from this offering to maintain possible
capital reserves which may be required by recently implemented rules and
regulations governing our industry. The remainder of the net proceeds will be
used for product development and marketing, capital expenditures, working
capital, and general corporate purposes. Other than the maintenance of
appropriate reserves, we have not made any determination regarding the amounts
or timing of the use of any proceeds from this offering. The amounts and the
timing of any such use may vary significantly depending upon a number of
factors, including our revenue growth, asset growth and cash flows. Pending such
uses, the net proceeds of this offering will be invested in short-term,
investment-grade, interest-bearing securities. We currently anticipate that the
net proceeds from this offering, cash generated from operations, existing cash
balances and available lines of credit, will be sufficient to satisfy our
operating cash needs for at least 12 months following the consummation of this
offering.
DIVIDEND POLICY
To date, we have not paid or declared any cash dividends on our common
stock. Our ability to do so was restricted by limitations imposed on the common
stock by the New Jersey Bureau of Securities in order to be able to issue such
stock without registration under the New Jersey Uniform Securities Act. Those
restrictions were that (a) we could not pay dividends, and (b) even if the book
value of the common stock increased, the price of the common stock could not
exceed $30.00 per share. We have filed a registration statement with the New
Jersey Bureau of Securities and the United States Securities and Exchange
Commission to register the outstanding common stock and the common stock to be
issued pursuant to this offering. Therefore, the restrictions are now
inapplicable. The payment of future dividends, if any, will depend, among other
things, on our results of operations, cash flows and financial condition and on
such other factors as the Board of Directors may, in its discretion, consider
relevant.
CAPITALIZATION
The following table sets forth our capitalization as of September 30,
2000 (i) on an actual basis, and (ii) as adjusted to reflect the sale of 7,500
shares of common stock offered (at $40.00 per share) and the application of
approximately [$____] in estimated minimum net proceeds therefrom. You should
read this table in conjunction with the financial statements and the notes
thereto and other financial information included elsewhere in this prospectus.
As of September 30, 2000
Actual As Adjusted(1)
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(Dollars in thousands,
except per share data)
Stockholders' Equity:
Class A common stock, no par value,
1,000,000 shares authorized, 7,500
shares issued and outstanding,
15,000 shares issued and outstanding
as adjusted $ 181
Class B common stock, no par value,
1,000,000 shares authorized, 177,500
issued and outstanding 5,325
Notes receivable - Class A common stock (19)
Accumulated deficit (2,818)
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Total stockholders' equity $ 2,669
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(1) Adjusted to give effect to the sale of 7,500 shares of class A common
stock and the application of approximately [$____] in net proceeds from this
offering, after deducting estimated offering expenses of $__________ .
<PAGE>
DILUTION
Our net tangible book value as of September 30, 2000, was $2,440,833,
or $13.19 per share of common stock shares outstanding as of September 30, 2000,
after giving effect to a 100-for-1 stock split in October 2000. Net tangible
book value per share of common stock represents the amount of tangible assets
less total liabilities, divided by the total number of shares of common stock
outstanding. Assuming the sale of 7,500 shares of class A common stock offered
hereby at an assumed offering price of $40.00 per share and receipt of the
estimated net proceeds, the pro forma adjusted net tangible book value as of
September 30, 2000 would have been approximately $2,740,833 or $114.24 per
share. This represents an immediate increase in such net tangible book value of
$1.05 per share to existing shareholders and an immediate dilution of $25.76 per
share to new investors. The following table illustrates this per share dilution
in net tangible book value to new investors:
Assumed offering price per share $ 40.00
Net tangible book value per share as of September 30, 2000
(split adjusted) $ 13.19
Increase per share attributable to new investors(1) 1.05
-----
Pro forma net tangible book value per share as of September 30, 2000 $ 14.24
Dilution per share to new investors $ 25.76
=======
-----------------------
(1) Reflects the sale of 7,500 shares of class A common stock and the
receipt of approximately [$ ] million in net proceeds from this offering, after
deducting the estimated offering expenses of $ .
<PAGE>
SELECTED FINANCIAL DATA
(In thousands, except per share data)
The selected financial data set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our financial statements and the notes thereto
included elsewhere in this prospectus. The statement of operations and balance
sheet data for the years ended December 31, 1999, 1998 and 1997 have been
derived from the financial statements of the Company which have been audited by
WithumSmith + Brown, a professional corporation, independent certified public
accountants. The statement of operations and balance sheet data for the year
ended December 31, 1996 and the nine month periods ended September 30, 1999 and
2000 have been derived from our unaudited financial statements.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Nine Months Ended Year Ended
September 30 December 31
(Unaudited)
----------------- -----------
2000 1999 1999 1998 1997 1996
---- ---- ---- ---- ---- ----
(Unaudited)
Statement of Operations Data:
Revenue $44,241 $21,244 $31,937 $16,103 $ 8,080 $ 1,830
Expenses 42,891 20,836 31,112 15,872 9,097 2,976
------- ------- ------- ------- ------- -------
Income from Operations 1,350 408 825 231 (1,017) (1,146)
Other (Expense) Income - Net 64 (61) (34) (62) -- --
------- ------- ------- ------- ------- -------
Net Income (Loss) $1,286 $ 347 $791 $ 169 $(1,017) $ (1,146)
======= ======= ======= ======= ======== ========
Balance Sheet Data:
Cash and Cash Equivalents $1,326 $ 941 $ 549 $ 921 $ 385 $ 18
======= ======= ======= ======= ======== ========
Total Assets $47,936 $18,572 $22,421 $11,767 $ 6,899 $1,831
======= ======= ======= ======= ======== ========
Working Capital $4,916 $ 2,024 $2,996 $1,444 $ 1,368 $ (161)
======= ======= ======= ======= ======== ========
Total Liabilities $43,974 $16,346 $19,752 $9,997 $ 5,350 $ 790
======= ======= ======= ======= ======== ========
Total Stockholders' Equity $3,962 $ 2,226 $2,669 $1,770 $ 1,549 $1,041
======= ======= ======= ======= ======== ========
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the information included elsewhere in this prospectus. Certain information
contained herein may include "forward-looking statements". All statements, other
than statements of historical facts included in this prospectus, are
forward-looking statements. Such statements are subject to certain risks and
uncertainties, which include but are not limited to those discussed in the
section entitled "Risk Factors." Should one or more of these risks or
uncertainties, among others as set forth in this prospectus, materialize, actual
results may vary materially from those estimated, anticipated or projected.
Although we believe that the expectations reflected by such forward-looking
statements are reasonable based on information currently available to us, no
assurance can be given that such expectations will prove to have been correct.
Cautionary statements identifying important factors that could cause actual
results to differ materially from our expectations are set forth in this
prospectus. All forward-looking statements included in this prospectus and all
subsequent oral forward-looking statements attributable to us or persons acting
on our behalf are expressly qualified in their entirety by these cautionary
statements.
Overview
We are a majority owned subsidiary of St. Peter's University Hospital. We
were formed in 1995 by SPUH and the UMG with operations commencing on January 1,
1996. Physician Support Services currently provides administrative services to
physician's offices, physician professional corporations and primary care
centers. We offer a full range of physician practice management services and
prior to March 1997, earned all of our revenues primarily from practice
management and information management fees. Health Plan Management Services
currently provides support for risk contracting with HMOs and management
services to self-insured Employer Health Plans in accordance with the Employee
Retirement and Income Security Act of 1974 (ERISA).
Beginning in March 1997, we activated the risk aspect of our provider
contract with Aetna U.S. Healthcare which had been signed in July 1995. The
contract sets reimbursement at fixed levels under certain risk-sharing
agreements, which requires adherence to AUSHC policies and procedures for
quality and cost effective treatment. We contracted with AUSHC to provide
medical care services to our members and we are compensated pursuant to a risk
sharing agreement. As part of a cost control incentive program, we retain a
percentage of the premiums received as a risk-sharing fund.
In January 2000, the ERISA Plan of SPUH converted to a full risk plan
whereby we collect PMPM revenue of $177 and are responsible for medical delivery
costs.
Medical delivery cost for health care services provided to enrollees are
estimated by management based upon data submitted by AUSHC, the SPUH ERISA Plan,
and provisions for incurred but not reported claims. We estimate the amount of
provisions for incurred but not reported claims using standard actuarial
methodologies based on historical data including the period between the date
services are rendered and the date claims are received and paid, expected
medical cost inflation, seasonality patterns and increases in membership. The
estimates for submitted claims and incurred but not reported claims are made on
an accrual basis and adjusted in future periods as required. We believe that our
reserves for medical delivery costs are adequate to satisfy our ultimate claim
liability.
We also earn revenue based upon a percentage of net monthly medical revenue
or net medical services collections, as applicable, of our physician practice
customers as a management services fee based upon contracted rates.
Nine Months Ended September 30, 2000 Compared to Nine Months Ended September 30,
1999
Total Revenue. Total revenue for the nine month period ended September 30,
2000 was $44,240,611, an increase of $22,996,106 compared to $21,244,505 for the
same period in 1999. The increase is attributable to an increase in enrollment
coupled with increased revenue per member per month under the AUSHC contract.
Personnel Costs. Personnel costs include costs for both employees and hired
personnel and were $2,957,727 for the nine month period ended September 30,
2000, an increase of $1,534,180 over the personnel costs of $1,423,547 for the
nine month period ended September 30, 1999. The net increase in costs was mainly
due to increased activities and the addition of medical directors during
September 2000.
Legal, Audit and Advisory Services. Legal, audit and advisory services for
the nine month period ended September 30, 2000 were approximately $571,824, an
increase of $110,877 over the legal, audit and advisory services of $460,947 for
the same period in 1999. The increase was mainly due to increased actuarial
services to accurately estimate incurred but not reported claims.
Provider Distributions. Provider distributions for the nine month period
ended September 30, 1000 was $866,422, an increase of $430,614 over the provider
distributions of $435,808, for the same period in 1999. The increase was due to
increased surplus in the AUSHC contract in the current period.
Interest Income. The interest income for the nine months period ended
September 30, 2000 was $71,327, an increase of $55,588 over the interest income
of $15,739 for the same period in 1999. The increase was a result of more
interest bearing cash and cash equivalents during the nine month period in 2000.
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Total Revenue. Total revenue for 1999 was $31,936,350 compared to
$16,103,283 in 1998. The increase was attributable to an increase in enrollment
under the AUSHC contract. In addition, we began to administer ERISA employee
health benefits for SPUH during 1998 which grew in 1999.
Personnel Costs. Personnel costs include costs for both employees and
contract personnel and were $2,177,693 for 1999, an increase of $1,154,938 over
personnel costs of $1,022,755 in 1998. The increase in costs was a result of
increased activities and increased personnel to support those activities.
Legal, Audit and Advisory Services. Legal, audit and advisory services for
the year ended December 31, 1999 were approximately $379,115, a decrease of
$93,521 compared to legal, audit and advisory services of $472,636 in 1998. The
decrease from 1998 to 1999 was mainly due to lower consulting fees as work was
shifted from consultants to Company personnel.
Provider Distributions. Provider distributions for 1999 were $1,034,724, an
increase of $438,267 over the provider distributions of $596,457 in 1998. The
increase was due to increased surplus in the USHC contract.
Marketing. Marketing expenses for 1999 were $-0-, a decrease of $93,070
compared to marketing expenses of $93,070 in 1998. The decrease was a result of
a shift in the marketing focus for recruiting PCPs.
Interest Expense. Interest expense for 1999 was $101,861, which was $57,720
more than interest expenses of $44,141 in 1998. The reason for the increase in
interest expense is the related party debt on the books for a full year in 1999.
The related party debt was reduced by $438,000 at December 31, 1999.
Year Ended December 31, 1998 Compared to Year Ended December 31, 1997
Total Revenue. Total revenue for 1998 was $16,103,283 compared to
$8,079,613 in 1997. The increase was attributable to an increase in enrollment
under the AUSHC contract.
Personnel Costs. Personnel costs include costs for both employees and
contract personnel and were $1,022,755 for 1998, an increase of $185,139 over
personnel costs of $837,616 in 1998. The increase in costs was a result of
increased activities and increased personnel to support those activities.
Legal, Audit and Advisory Services. Legal, audit and advisory services for
the year ended December 31, 1998 were approximately $472,636, a decrease of
$61,194 compared to legal, audit and advisory services of $533,830 in 1997. The
decrease from 1997 to 1998 was mainly due to actuarial fees in 1997 incurred
when the Company activated the AUSHC contract.
Provider Distributions. Provider distributions for 1998 were $596,457, a
decrease of $176,247 compared to provider distributions of $772,704 in 1997. The
decrease from 1997 to 1998 was due to managements' decision to retain a portion
of the excess in the USHC contract to develop the company infrastructure during
its growth period.
Marketing. Marketing expenses for 1998 were $93,070, an increase of $92,764
over the marketing expenses of $306 for 1997. The increase was a result of
increased spending to recruit additional PCPs.
Interest Expense. Interest expense for 1998 was $44,141 which was $44,141
over the interest expense of $-0- in 1997. The reason for the increase in
interest expense is due to certain interest bearing advances on related party
debt received during 1998.
Line of Credit
We secured a line of credit with Summit Bank in the amount of $500,000
which is subject to certain covenants.
Prior to 1998, we issued shares to SPUH for cash we required for working
capital needs. In 1996, 760 (76,000 split adjusted) shares of Class B stock were
issued to SPUH. In 1997 we issued an additional 1,015 (101,500 split adjusted)
shares of Class B stock, bringing the total shares of Class B stock owned by
SPUH to 177,500. To date, SPUH is the only shareholder of Class B voting stock.
We issued shares of Class A stock to physician providers in December 1997
in a private offering. This offering closed April 17, 1998, and 75 physicians
participated and acquired stock by paying either cash, issuing a promissory
note, assigning surplus funds in their risk pool or granting us a right of first
refusal to purchase their practices. To date, there are 7,500 shares of Class A
stock outstanding.
Effects of Inflation and Currency Exchange Rates
We believe that the relatively moderate rate of inflation in the United
States over the past few years has not had a significant impact on our operating
results or on the costs of services. We cannot assure you, however, that
inflation will not have a material adverse effect on our operating results in
the future.
All of our revenues are currently denominated in U.S. dollars and to date
our business has not been significantly affected by currency fluctuations.
Impact of Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standard Board issued Financial
Account Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities." SFAS 133 establishes new accounting and reporting standards for
derivative financial instruments and for hedging activities. SFAS 133 requires
the Company to measure all derivatives at fair value and to recognize them in
the balance sheet as an asset or liability, depending on the Company's rights or
obligations under the applicable derivative contract. Subsequent to the issuance
of SFAS 133, the FASB has received many requests to clarify certain issues
causing difficulties in implementation. In June 2000, the FASB issued SFAS 138,
which responds to those requests by amending certain provisions of SFAS 133.
These amendments include allowing foreign-currency denominated assets and
liabilities to qualify for hedge accounting, permitting the offsetting of
selected inter-entity foreign currency exposures that reduce the need for third
party derivatives and redefining the nature of interest rate risk to avoid
sources of ineffectiveness. The Company expects to adopt SFAS 133 and the
corresponding amendments of SFAS 138 in the first quarter of 2001. SFAS 133, as
amended by SFAS 138, is not expected to have a material impact on the Company's
combined results of operations, financial position and cash flows.
In December 1999, the Securities and Exchange Commission issued Staff
Accounting Bulletin 101, "Revenue Recognition in Financial Statements" (SAB101).
SAB 101 provides guidance on the recognition, presentation and disclosure of
revenue in financial statements and requires adoption no later than the fourth
quarter of 2001. The Company is currently evaluating the impact of SAB 101 to
determine what effect, if any, it may have on the Company's combined financial
position and results of operations.
<PAGE>
BUSINESS
Overview
In its Vision 2000 strategy, the Trustees of St. Peter's University
Hospital, with the support of the community physicians, concluded that we should
reposition our business to endeavor to provide the community with higher
quality, more cost-effective health care. The next generation of advanced
managed care plans requires providers to be capable of bearing and managing
greater levels of healthcare risk. Providers successful in this arena must
support:
Aligned incentives that support cost-effectiveness and improved quality;
A strong primary care physician base;
A vertically and horizontally integrated continuum of care;
Agreement upon and reasonable adherence to clinical protocols; and
An information system that supports contract management, member services,
clinical judgment and management, inter-clinician communications, and
sales activities.
Recognizing the need to build a new health care delivery program, the
Physician Hospital Organization Development Oversight Committee of St. Peter's
University Hospital recommended the development of such an organization.
Partners in Care, Corp. was the result of that recommendation. Partners in Care,
Corp. is based on a demanding set of physician eligibility criteria and greater
expectations from hospital services to ensure market leadership in clinical
quality, customer service, and efficiency. The success of this endeavor is based
upon the following assumption:
Greater cost efficiencies can be achieved with equivalent or measurably
better clinical outcomes and member satisfaction through aligned
incentives and clinician managed care.
Partners in Care, Corp. was created to be a for-profit, multiple
shareholder, New Jersey corporation, jointly owned and governed by St. Peter's
University Hospital and physician members of the United Medical Group, P.C. The
company is structured to ensure equal physician representation on the Board and
up to 50 percent ownership by physicians. Physicians are full partners in
planning, implementing and continuously improving corporate performance.
To provide the various products, participating physicians are organized
under the auspices of a New Jersey Professional Corporation, the United Medical
Group, P.C., a group practice without walls and other similar Physician
Organizational structures via the Large Network Partnership concept. The concept
of Large Network Partnerships permits currently organized physician groups and
networks (i.e. IPAs) to participate in risk contracts through Partners in Care,
Corp. while keeping risk pools segmented from the United Medical Group. The
existence of this flexible approach allows for the management of risk based
contracts, while preserving physician autonomy and sustaining small groups and
solo practice models.
A system like ours needs as many qualified primary care physicians as
possible in order to achieve a credible marketplace presence. Additionally, to
round out the provider network, Partners in Care has various strategic
relationships via its risk partners and its third party administrator to access
a broad network of providers nationwide.
Currently, PCP recruitment is in full effect through both recruiting
individual physicians as members of the United Medical Group, P.C. and
negotiation through ongoing negotiations with Large Network Partnerships that
will remain semi-autonomous.
Industry Background
In the mid-1990s, health care providers in the Greater New Brunswick, New
Jersey area from tertiary centers to primary care physicians, began to face
significant choices. Among them were whether to be an active organizer of a
managed care delivery system; to be a member of an integrated managed care
network; to be an independent vendor of services to a managed care plan or HMO;
to pursue the declining indemnity market; or some combination of the above.
During this transition, prices and revenues, especially for tertiary
hospitals and highly specialized physicians, have declined. Fees for procedures
have dropped by twenty-five to seventy-five percent locally as the region coped
with the full implementation of the RBRVS system for federal programs and the
adoption of RBRVS fee schedule by most commercial HMOs and PPOs. Coupled with
the growth of managed care and the consolidation of the HMO marketplace,
especially the growth of Aetna/U.S. HealthCare, the second half of the decade
was very difficult. The magnitude of this shift demands dramatic restructuring
of care delivery to eliminate unnecessary treatment, improve efficiency, and
increase market share. Concurrently, government, accrediting bodies, employers,
purchasing groups, health plans, and a more informed public demand data
documenting that lower prices and utilization levels are not compromising
outcomes. The only effective mechanism for provider groups to cope with this
type of change is to efficiently organize to both successfully bear and manage
healthcare risk.
PIC's business model achieves this through successfully managing the
delivery of care under system-wide PMPM funding. This is contrasted with other
Physician/Hospital Organization type structures whose focus remained one of
attempting to make up for lost unit prices in a fee for service marketplace by
increasing the units of service. There are too many pressures being brought to
bear against the increased units strategy for it to be effective over the long
term. This harsh lesson has been learned by many of PIC's former competitors.
Within the past 36 months, HIP Health Plan of New Jersey and American
Preferred Provider Plan both collapsed, sending shock waves through the New
Jersey health services marketplace and our local community. The New Jersey State
Department of Banking and Insurance has announced plans to amend its regulations
to require all New Jersey HMOs to operate under stricter financial control and
oversight by regulators. While lines of business other than HMO businesses, such
as PPO insurance plans and PHOs (i.e., IDSs and MSOs) are prevalent both in the
state and nationwide, in New Jersey only HMOs are obligated to provide the state
with detailed reports. Therefore, little information is available regarding the
other markets. Hence, the focus on the health care industry has been limited to
the HMO component of the business.
HMO enrollment increased 5.1% between 1995 and 1999. At year-end 1996, the
total HMO membership for the state of New Jersey was 2,142,188. By 1997,
enrollment had increased by approximately 10% to 2,369,325. During 1998, HMO
enrollment dropped 1.39% but rebounded in 1999 growing .94%.
In the New Jersey HMO market, there has been a tendency for a small number
of HMOs to continuously strengthen, while several others weaken, fall out of the
market, or become merged into larger plans. Aetna-U.S. Healthcare, possessing
38.4% of the 1999 market share, continues to dominate the marketplace. Other
market participants include Horizon Blue (a Blue Cross-Blue Shield subsidiary),
and Physicians Health Services (formerly First Option Health Plan) and Oxford,
possessing market shares of 16.99%, 10.3%, and 7.3% respectively. The three HMOs
with the largest market share all offer Medicare and Medicaid plans in New
Jersey. Oxford offers commercial and medicare only. Other smaller HMOs also
offer these plans in New Jersey.
A comparison of New Jersey HMO financial statistics from year end 1998 to
1999 shows a 2% increase in total health care related revenue to $4,547,274,845.
Medical and hospital expenses across the New Jersey HMO market decreased 1% in
1999, totaling $3,925,607,929 and yielding a Medical Loss Ratio of 86.33%. The
medical loss ratio increased to 89.82% through the first three quarters of 1999.
MSO Development
As previously discussed, we were developed as a response to the desire to
provide the community with higher quality, more cost-effective health care. With
the support of SPUH and community physicians, we believe that a health care
delivery system, managed by an MSO (Management Service Organization), will
provide the service needed for the next generation of HMOs and advanced managed
care plans.
To provide the various products, participating physicians are organized
under the auspices of a New Jersey professional corporation, United Medical
Group, P.C., a group practice without walls. The existence of this large
multi-specialty group practice allows for the management of risk based
contracts, while preserving small group and solo practice models. A system like
ours requires as many qualified primary care physicians as possible in order to
achieve a credible marketplace presence. Contrarily, the need for specialists is
based on a network need methodology that evaluates geographic accessibility
criteria, delivery system efficiency, the number of enrollees and primary care
physicians, and other criteria. The number of physicians participating is a
function of the credentialing criteria set by the Board of Directors of UMG/PIC
and the Network Management Committee.
Currently, PCP recruitment is in full effect through (i) recruiting
individual physicians as members of the United Medical Group, P.C. and (ii)
negotiating Large Network Partnerships that will remain semi-autonomous. The
concept of Large Network Partnerships permits currently organized physician
groups and networks (i.e. IPAs) to participate in risk contracts through our
organization while keeping risk pools segmented from the United Medical Group.
This allows us to acquire the greatest number of enrollees and allows for
variable levels of medical management, dependent upon the risk we undertake.
Business Strategy
Our overall strategic goal is to expand and strengthen our current position
in New Jersey's health care delivery market. To achieve this goal, we must:
Aggressively develop all key infrastructure components and
management expertise under a Healthcare Risk Management/All Products
Risk contracting strategy over a 60 month period;
Successfully negotiate and efficiently manage population based
"At Risk" Contracts;
Continue to improve our core management competencies and
managerial expertise;
Continue to foster existing strategic partnerships;
Recruit and retain primary care physicians throughout the
regional market;
Maintain and improve the clinical and operational information
feedback cycle time which has been reduced in the last year from
months to hours;
Successfully compete with best in region healthcare risk
management service vendors.
"At Risk" contracts with compensation based on age and sex adjusted
capitation rates and/or percentage of premium is currently our dominant business
line. We currently have in place such contracts with Aetna/USHC and Horizon. We
are also designed to provide high-caliber professional services, such as
management of risk, business development, medical management (including
utilization management and quality assurance), information systems,
credentialing, provider support services, network development and management.
Other services historically available for physician practices include practice
management services we offer. Expansion of the customer base for these services
will be pursued.
Major Business Lines
Our major business lines are the Health Plan Management Services and the
Physician Support Services.
1. Health Plan Management Services. Our main business is capturing covered
lives and then assisting the providers in managing the delivery of healthcare of
those lives. The main components to this business line include:
a) Negotiation/Management of "at risk" contracts
b) Negotiation/Management of Large Network Partnerships
c) PCP Recruitment
d) Managed Care Contracting/Administration
e) Network Management and Provider Relations
f) Claims and stop loss management
g) Medical management
h) Member services
Currently, we most aggressively pursue "at risk" contracts with
compensation based on age and sex adjusted capitation rates and/or percentage of
premium. We provide high-caliber professional services, such as management of
risk, business development, information systems, credentialing, provider support
services, network development and management, and medical management, including
utilization management and quality assurance. We believe that risk contract
negotiation and management currently has the ability to generate the greatest
revenue. The success of this area relies on the ability to negotiate contracts,
capture covered lives and assist the providers in managing those lives. Risk
contracting involves contracting with the major health plans, contracting with
primary care physicians, and persuading health plan enrollees to elect our
primary care physicians.
In 1995, we entered into our first full risk contract with Aetna-U.S.
Healthcare and pursuant to that agreement we are responsible for delivering and
medically managing the complete medical loss ratio, with the exception of
pharmacy, mental health, and services inconsistent with the Ethical and
Religious Directives for Catholic Healthcare Facilities. In August 1998, the
Medicare risk component was implemented with AUSHC. The AUSHC risk contract
presently covers commercial and Medicare lives with an option to integrate
Medicaid lives into the risk program. At year-end 1999, there were 22,900
at-risk lives, including 1,694 Medicare members.
During 2000, PIC and Horizon completed an arrangement whereby we will share
in reduction in medical costs from an established budget. Effective July 1st,
this is the first step in building a long-term full risk sharing relationship
that has been anticipated for some time. We will once again be the manager of
the risk related clinical and financial information, while our HMO partner
retains the responsibility for utilization management and claims processing.
However, our role will evolve to become increasingly involved in all aspects of
medical management. The agreement encompasses commercial HMO/POS, Medicare HMO,
and should lead into risk sharing for Horizon's self-insured population. The
commercial population should grow from 4,000 to 7,000 by the first quarter of
2001, while Medicare should remain around the 400 member level.
The key management areas for risk contracting are also essential in the
delivery of the Health Plan division's second source of business, administering
the ERISA employee health benefits plan for SPUH, d.b.a. Partners in Care Health
Plan. Direct contracting with SPUH, regarding this plan is through a
self-insured, ERISA health plan which we manage. This structure is necessary
because we are not currently licensed as either a health care insurance company
or an HMO within the State of New Jersey.
Physician Support Services
The current Delivery System division has been evaluated and restructured to
focus on Physician Support Services. As part of our restructuring, we eliminated
all unprofitable or non-complimentary lines of business. The Delivery System
division will thus be transitioned into the physicians support services area.
The main components and sub-business lines include the following:
a) Provider connectivity and e-health
- Electronic billing solution for HCFA 1500s
- Ease the interface with managed care organizations
- Reduce the paperwork burden on physician office staffs
- Improve the clinical information flow among PIC providers
b) Referral management
c) Information systems and services
d) Business office
e) Site operations management
f) General, administrative and management services
g) Operational assessments, evaluations and general counseling
h) Advocacy (Dispute resolution, issues management, Health Plan
Communications, etc.)
We cultivate four (4) core competencies:
1. Business Development and Contracting. Our success relies on our ability
to negotiate contracts and capture covered lives. Each covered life converts to
about a $1,500 annual revenue stream.
For Health Plan Risk Contracting, we must perform two functions to acquire
enrollees. First, we must contract with the major health plans. Second, we must
contract with primary care physicians who hold contracts with the Health Plan.
The first is a contracting and personal sales function of our executive
officers. The second is a large, coordinated effort between PIC and the health
plans.
For the ERISA line of business, we may contract directly with the
self-insured employee benefit plan or we may partner with our Health Plan risk
partners (HMO's) to convert existing membership to at-risk status. The first is
a direct, Administrative Services Only (ASO) Health Plan sales function in
partnership via contracted Third Party Administrators. The second is a direct,
ASO Health Plan sales function via our Health Plan risk partners. Both areas are
fundamental core competencies of ours that will be developed by harnessing the
untapped expertise within our organization and expanding our business
acquisition strategy.
The success of our marketing will require an educational component to
increase awareness of the advantages of a healthcare risk management company,
such as Partners in Care and, specifically, of risk contracting. More aggressive
marketing and services must be developed. Additional market research must be
undertaken at regular intervals to obtain the constant feedback of our customers
(Primary Care Physicians, Hospitals, Specialists, Health Plans and Enrollees)
and partner's needs and perceptions. Currently one of the greatest challenges
facing us in this area is the saturation of the existing PCP base due to the
influx of the HIP population into AUSHC.
2. Network Management and Physician Support Services(PS 2). We must be able
to provide services to providers which are perceived as value added (revenue
improvement, expense reduction, quality of care enhancement) in order to balance
our financial needs with market attractiveness to physicians. In conjunction
with our Strategic Partners, we are currently developing an array of these
services which will be supported through a fortified Network Management
department.
3. Information Management, Reporting and Transfer. The ability to gather,
store, analyze, report, and disseminate information (e.g. physician
connectivity) in a timely manner regardless of the geographical distribution of
providers is central to the success of a healthcare risk management company.
Through our initiatives and management's expertise in converting raw data into
management information, we are uniquely qualified to succeed. HIPPA (Health
Insurance Portability and Accountability Act) regulations will continue to make
this area ever more challenging but through an array of Strategic Partnerships
and creative e-health strategies, we are positioning ourselves to maintain our
unique position in the region with respect to information management. HIPPA is a
federal mandate requiring the health industry to implement a series of data and
transaction standards in an effort to increase the protection and
confidentiality of individually identifiable health information.
4. Medical Management. The Medical Management plan involves the following
existing lines of medical business:
- Health Plan Risk Partners
- Third Party Administrator Business Partners
The original template for Medical Management is based on the relationship
with Health Plans. Medical Management in this relationship is done in
conjunction with Health Plan and data is shared with us. The Health Plan and our
Medical Directors interact with attending physicians to ensure timeliness of
service, quality issues, and effective medical management. Our Medical Directors
will discuss medical cases and offer alternatives to care to the attending
physicians. Programs designed and offered by the Health Plan and the Health
Plan's case management and discharge planning departments augment this process.
Medical Management with Third Party Administrator Business Partners is an
expanded role. Our team obtains utilization and discharge planning information
directly. Our Medical Director and Medical Management team then interact with
the attending physicians as above regarding case management, discharge planning,
quality assessment and utilization of inpatient and outpatient services.
Programmatically, Medical Management is entering a substantial but focused
expansion phase. Current projects underway include initiatives aimed at
enhancing the delivery of services immediately following the acute care hospital
phase of care. These services, whether sub acute care, rehabilitation, skilled
nursing, or home care are frequently found to be extremely fragmented and not
well coordinated with the acute care facility. In many cases it is the family,
not the clinical community, who must serve as the care manager, coordinating and
reaching out to the various levels of care. We are committed to defragmenting
this service delivery and in the process substantial and measurable cost
reductions are anticipated.
A second area of focus will be the delivery of care in the continuum from
emergency services to acute hospitalization. Our research indicates substantial
improvement potential from both a quality care and cost perspective in
addressing and extending the services available in the Emergency Department of
participating facilities. Ranging from observation to short term treatment, it
is felt that there are ample opportunities for the improvement of the care
delivery process in this venue.
Credentialing Services
To date we have recruited 276 (122 UMG Specialists, and 104 UMG PCP's). We
have also credentialed 28 PCP's in Large Network Partnership 2054 Family
Practice Center Ferren Mall and 22 PCP's in Large Network Partnership CJPN)
primary care and specialist physicians in our core network. These physicians are
located at over 153 locations throughout Middlesex, Somerset, Hunterdon,
Monmouth and Mercer counties, making the United Medical Group, PC one of the
largest groups in the state of New Jersey.
The initial physician participation was based on the following criteria:
- Board certification or board eligibility (to be certified within 4 years)
- Cost per discharge
- Length of stay
- Quality and utilization outcome indicators
- Malpractice History
All criteria met or exceeded National Committee on Quality Assurance (NCQA)
standards in order to make us meet the market standard and be a more desirable
candidate for delegated credentialing in risk contracting.
The Network Development focus for 2000 is on Large Network Partnership
development in addition to primary care physician recruitment. Large Network
Partnerships are large physician groups that participate in our contracts.
Initially, twenty-two PCPs have been targeted for recruitment into our
organization via these two strategies. Ultimately, an additional 250 PCPs in
Central New Jersey are necessary to meet strategic targets.
Information Management and Performance Reporting
Although information management and performance reporting capabilities have
been a function of our operations since inception, our current reorganization
will include a substantial expansion of resources in this area by increasing the
number and capabilities of existing staff, focusing on products by simplifying
our operating system environment, and expanding corporate use and functionality
of the internet for research, data storage, dissemination, and e-commerce.
Marketing
We have not traditionally had a formal marketing and sales strategy. As a
result, we have dedicated only minimum levels of management focus and resources
to marketing and sales. Our health plan management services division has
approached the overall health care market as a "wholesaler" through its risk
agreement with AUSHC. More direct efforts have been employed for the Partners In
Care Health Plan which services the self-insured employee population of SPUH. In
early second quarter 1999, a concentrated sales initiative was launched which
utilized a newly developed provider relations staff and senior management
resources.
Developing and implementing a formal marketing strategy plan is a high
priority for us as we fortify and broaden our product portfolio for direct
"retail" distribution to specific market groups. We are currently focusing on
identifying specific target markets and market segments, designing marketing
plans to achieve acceptable penetration levels within each market, and
developing a communications and promotional strategy to establish brand
awareness (image) across all market segments. We intend to facilitate the
transition from a "wholesale" to a "retail" product/service distribution
approach and maximize opportunities for cross-divisional selling.
Service Area Demographic Overview
Middlesex County
Middlesex County's population continues to climb steadily. In 1990,
Middlesex County's population was 671,811. In the past ten years, the population
has grown 9%, and is projected to grow another 10% by 2010. The penetration of
HMOs in Middlesex County is 27%. This is slightly lower than the average state
HMO penetration of 29%.
Within the county there are six acute care hospitals, including Robert Wood
Johnson University Hospital and St. Peter's University Hospital in New
Brunswick, JFK Medical Center in Edison, Raritan Bay Medical Center in Old
Bridge and Perth Amboy, and the Memorial Medical Center at South Amboy. JFK
Medical Center also operates the Johnson Rehabilitation Institute, a
comprehensive rehabilitation facility in Edison, and the county government
operates Roosevelt Hospital, a chronic and long-term care hospital in Metuchen.
Somerset County
In 1990, Somerset County's population was 240,245. In the past ten years
the population has grown 22% and is projected to grow another 15% by 2010. HMO
penetration of Somerset County's population is 25%, slightly lower than the
state average of 29%.
Somerset Medical Center is the sole acute care hospital in the county. Two
specialized hospitals are also located within the county: Carrier Foundation,
Belle Mead, a mental health facility, and the Veterans Affairs Medical Center,
Lyons, a chronic and long-term care hospital for veterans.
Hunterdon County
In 1990, Hunterdon County's population was 107,802. In the past ten years
the population has grown 18%, and is projected to grow another 11% by 2010. HMO
penetration of Hunterdon County's population is 25%, slightly lower than the
state average of 29%.
<PAGE>
Burlington County
In 1990, Burlington County's population was 395,066. In the past ten years
the population has grown 9%, and is projected to grow another 8% by 2010. HMO
penetration of Burlington County's population is 32%, slightly higher than the
state average of 29%.
Monmouth County
In 1990, Monmouth County's population was 553,093. In the past ten years
the population has grown 11%, and is projected to grow another 7% by 2010. HMO
penetration of Monmouth County's population is 27%, slightly lower than the
state average of 29%.
Morris County
In 1990, Morris County's population was 421,361. In the past ten years the
population has grown 10%, and is projected to grow another 7% by 2010. HMO
penetration of Morris County's population is 23%, slightly lower than the state
average of 29%.
Ocean County
In 1990, Ocean County's population was 433,203. In the past ten years the
population has grown 14%, and is projected to grow another 9% by 2010. HMO
penetration of Ocean County's population is 26%, slightly lower than the state
average of 29%.
Union County
In 1990, Union County's population was 493,819. In the past ten years the
population has grown only 1%, and is projected to remain flat through 2010. HMO
penetration of Union County's population is 26%, slightly lower than the state
average of 29%.
Competition
In 1998 MedPartners and PhyCor presented some of our most serious national
competition. In first quarter 1999, MedPartners, Inc., an Alabama based
corporation, discontinued operations of its practice management and contract
services. Included in their physician clients was Summit Medical Group, a local
physician network comprising approximately 85 physicians. Termination of the
relationship between Summit Medical Group and MedPartners marked the return of
Summit Medical Group, P.A. to one of the largest independent multi-specialty
groups in the region and must now be recognized as our competitor.
PhyCor, a Tennessee based IDS/MSO, is a local competitor. PhyCor currently
operates clinics with physicians in 29 states and recently joined with Physician
Partners Company, Inc., L.C.C. to create and operate a regional managed care
contracting network, to include independent practice associations (IPAs) in New
York City, northern New Jersey, southern Connecticut, and Long Island. PhyCor is
larger than we are and has extensive experience throughout the country assisting
physicians in organizing networks and in managing risk contracts. One advantage
which we believe we have over PhyCor is that we are already established and
operating in the local community.
Intellectual Property, Trademarks and Proprietary Rights
We have filed both federal and state service mark applications for the mark
"Partners In Care". The service mark has been registered in the State of New
Jersey. The federal application has been rejected and we are currently amending
the application to submit it for reconsideration. We do not own any other
intellectual property, trademarks, servicemarks or proprietary rights.
Facilities
We lease approximately 9,100 square feet of office space in Somerset, New
Jersey, for our corporate headquarters. Activities at our Somerset headquarters
include administration, sales, product development and support. The lease
provides for base rent of approximately $13,000 per month and expires on June
30, 2004. We believe that our current facilities are adequate to meet our needs
for the foreseeable future.
Employees
As of June 30, 2000, we had approximately 60 full-time employees, 7
full-time temporary employees and 2 part-time employees. We believe our future
success will depend, in part, on continued ability to attract and retain highly
qualified personnel in a competitive market for sales and marketing personnel.
None of our employees are represented by a labor union or subject to a
collective bargaining agreement. We believe that our relations with employees
are good.
Legal Proceedings
There are currently no claims or actions pending against us.
<PAGE>
MANAGEMENT
The following table sets forth information with respect to each person who
serves as an executive officer or director of PIC and their ages as of September
30, 2000:
Name Age Position
Dennis G. Wilson 44 President and Chief Executive Officer
Kevin O'Brien 36 Executive Vice President and Chief
Operating Officer
Bruce Dees 43 Executive Vice President,
Business Development
Beverly Reinson 46 Vice President, Customer Relations
Charles Scaglione 36 Vice President, Administrative Services
Mauro Tucci, M.D. 40 Medical Management Consultant
Donald Wernsing, M.D. 57 Medical Management Consultant
BOARD OF DIRECTORS
Name Specialty or Corporate Affiliation
Bernard J. Kelley Chairman of the Board; President Merck
Manufacturing Division, Merck & Co., Inc.
Steven C. Goldberg, M.D. Vice Chairman of the Board; Obstetrics and
Gynecology
Frank J. Ryan Treasurer of the Board; Company Group
Chair J&J
Mauro Tucci, M.D. Secretary of the Board; Internal Medicine
Robert E. Campbell Former Vice Chairman of the Board of
Directors of Johnson and Johnson
The Rev. Msgr. William Capik Chairman, St. Peter's University Hospital
Board of Trustees;
Pastor, The Church of St. James
John E. Matuska President and CEO of St. Peter's University
Hospital
John J. Hoagland, Esq. Of Counsel, Hoagland, Longo, Moran, Dunst
and Doukas - Attorneys at Law
Roger Birnbaum President, Princeton HealthCare Group
Louis Diemer III, M.D. Pediatric Medicine
Steven Lenger, M.D. Gastroenterology
Marc Malberg, M.D. Orthopedic Surgery
John J. Nevins, III, D.O. Family Practice Medicine
Warren Sweberg, M.D. Pediatric Medicine
Each director will hold office until the next annual meeting of
shareholders or until his successor has been elected and qualified. Our officers
are elected by the Board of Directors and serve at the Board's discretion.
<PAGE>
Executive Officers and Directors
Bernard J. Kelley has served as Chairman of the Board of Directors of PIC
since December 1994. Mr. Kelley has served as the President of Manufacturing
Division of Merck & Co., Inc. since January 1994.
Steven C. Goldberg, M.D. has served as a Director of PIC since 1994. Dr.
Goldberg has practiced obstetrics and gynecology with Brunswick Associates since
June 1996. He also serves as president of Brunswick Associates. Dr. Goldberg was
Vice-President of Milton D. Schwartz, Steven C. Goldberg M.D., P.A. from June
1991 to June 1996 during which time he also practiced obstetrics and gynecology.
Frank J. Ryan has served as a Director of PIC since 1994. He has served as
Chairman of Johnson & Johnson since November 1998. From 1992 to 1998, Mr. Ryan
served as President of Ethicon, Inc.
Mauro Tucci, M.D. has served as a Director of PIC since January 1999. Since
February 1999 he has served as the Chief Executive Officer of Medical Associates
of New Brunswick, a "client" of PIC.
Robert E. Campbell has served as a Director of PIC since 1994. Since
retiring as Vice Chairman of the Board of Directors of Johnson & Johnson, in
which capacity he served from 1989 to 1995, Mr. Campbell has been involved with
various non-profit organizations, and served as Chairman of various entities,
including Robert Wood Johnson Foundation, the Cancer Institute of New Jersey and
Fordham University. Mr. Campbell also serves as a director of Hanover Capital.
Rev. Msgr. William J. Capik has served as a Director of PIC since 1994.
Msgr. Capik serves as the secretary and treasurer of the Diocese of Metuchen.
John E. Matuska has served as a Director of PIC since 1994 and from 1994 to
February 1999 he served as President and CEO of PIC. Since 1989, Mr. Matuska has
served as President and Chief Executive Officer of St. Peter's University
Hospital.
John J. Hoagland, Esq. has served as a Director of PIC since April 1999. He
has been a practicing attorney in the State of New Jersey with Hoagland, Longo,
Moran, Dunst & Doukas since 1958. He currently holds an Of Counsel position with
this firm.
Louis M. Diemer, III, M.D. has served as a Director of PIC since May 1999.
Dr. Diemer has been a practicing physician with the New Brunswick Pediatric
Group since 1994.
Steven Lenger, M.D. has served as a Director of PIC since 1999. Dr. Lenger
is the President of E. Steven Lenger, M.D., PA and has practiced as a physician
with this group since 1993.
Marc I. Malberg, M.D. has served as a Director of PIC since 1999. Since
1992, Dr. Malberg has been the President of Orthopedic Center of New Jersey and
has also practiced orthopedic medicine with this group since 1992. He has also
served as president of OMT, a company which leases office equipment, since 1992.
John J. Nevins, III, D.O. has served as a Director of PIC sine 1994. Dr.
Nevins has practiced as a physician with Central Jersey Family Physican since
1990.
Warren A. Sweberg, M.D. has served as a Director of PIC since 1994. Dr.
Sweberg has practiced as a pediatrician with East Brunswick Pediatric Associates
since June 1976. Roger Birnbaum has served as a Director of PIC since March
2000. Mr. Birnbaum is the Founder and President of Princeton Healthcare Group
since 1991.
Dennis G. Wilson has served as Chief Executive Officer and President since
February 1999. Prior to February 1999 he served as Vice President, Sales and
Marketing of PHS (Physicians Health Service) and Chief Marketing Officer at
First Option Health Plan from September 1995 to December 1998. From 1991 to
1995, he was a Senior Director at Independence Blue Cross and was involved with
sales systems management.
Kevin O'Brien has served as Executive Vice President and Chief Operating
Officer of PIC since 1995. Between 1989 and 1995, Mr. O'Brien served as the
Director of Strategic Planning and Marketing for St. Peter's University
Hospital.
Bruce Dees has served as Executive Vice President, Business Development
since March 1, 2000. Prior to this, he served Partners in Care as an independent
contractor as the Principal of Bruce Dees and Associates. From 1994 to 1999 he
worked for Aetna USHealthCare as both a Senior Network Manager for the states of
Connecticut and Rhode Island and before that as a Network Manager for Northern
New Jersey. Before joining the HMO he served in a variety of positions with
hospitals on the east and west coasts.
Beverly Reinson has served as Vice President, Customer Relations since
1996. From 1988 to 1996, Ms. Reinson served as the Administrative Director of
Family Practice Center and is currently Vice President of Customer Relations.
Charles Scaglione has served as Vice President of Administrative Services
and has worked for PIC since 1996. Mr. Scaglione served as the Administrative
Director of Hudson OBGYN Associates from 1991 to 1996 and as an Associate
Administrator Operations - Franciscan Health System of New Jersey from 1989 to
1991.
Donald H. Wernsing, MD, has served as Senior Medical Director since March
2000. For three years prior to joining Partners in Care, he served as President
and Chief Medical Officer of Health Resource Partners, an 850 physician MSO,
operated on behalf of the Atlantic Health System, Florham Park, New Jersey.
Committee Structure
In addition to our Board of Directors and executive management team,
several committees, originally created between 1992 and 1995, were restructured
in 1999 with specific responsibilities and goals.
The Medical Management Committee - The charge of the Medical Management
Committee is the comprehensive oversight of the policies and procedures related
to medical service delivery, quality assurance and improvement, utilization
management, clinical protocols, and critical paths. Monthly information review
includes results of the catastrophic case management process and general medical
delivery expense patterns across the multiple categories of our enrolled
populations. The committee membership is composed entirely of physicians.
<PAGE>
The Network Management Committee - The charge of the Network Management
Committee is the comprehensive oversight of the adequacy of the provider service
network across all categories of provider and benefits products. The committee
receives continuity of care referrals from both the Medical Management Committee
and executive staff for expansion and/or focus for the provider network. Network
Management is responsible for the credentialing/certificate of all non-physician
providers, including institutional and contracted ancillary providers. Overall
responsibility also includes maintaining an updated Strategic Provider Need
Analysis as well as the Primary Care Physician Recruitment Plan. The committee
membership is composed of physicians and board members.
The Physician Credentialing Committee - This committee is dedicated solely
to the credentialing and re-credentialing of physician providers. Committee
members are all physicians, and have staff support to provide a secure
atmosphere to perform potentially sensitive peer review as part of the
credentialing and re-credentialing process. The committee membership is composed
of physicians and Board members.
The Finance and Compensation Committee - The responsibilities of this
committee include the comprehensive oversight of the financial management
process including statutory compliance, IBNR reserve adequacy, and provider
distribution policy development and administration of the Executive Long Term
Incentive Stock Option Plan. The committee membership is composed of physicians
and board members.
Compensation of Directors
The Board of Directors serves without compensation at the present time. We
reimburse the out-of-pocket expenses incurred by directors for attendance at
Board or committee meetings.
Executive Compensation
The following table summarizes all compensation awarded to, earned by, or
paid to (i) all individuals who served or functioned as our Executive Officers
during the fiscal year ended December 31, 1999 and (ii) our four most highly
compensated executive officers who were serving at the end of the fiscal year
ended December 31, 1999 whose annual salary and bonus exceeded $100,000 the
"Named Executive Officers"), for services rendered in all capacities to us for
the fiscal year ended December 31, 1999.
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Long-Term
Compensation Compensation
------------ ------------
<S> <C> <C> <C> <C> <C>
Deferred
Compensation Restrictive
Incentive (Or Unpaid Stock
Fiscal Salary Compensation Incentive Award(s)
Year ($) ($) Compensation ($)
Name and Principal Position ------ ------ ------------ ------------ -----------
Dennis G. Wilson 1999 $173,000 $ 76,000 $ 25,000 -
Chief Executive Officer, President
Kevin O'Brien 1999 $135,000 $ 51,000 $ 17,000 -
Senior Vice President, 1998 $110,000 $ 17,000 0 0
Chief Operating Officer 1997 $110,000 0 0
Vice President, Operations 1996 $ 93,000 0 0
Charles Scaglione 1999 $109,000 $ 22,000 $ 5,088
Assistant Vice President, Delivery Systems 1998 $ 90,000 9,000 0
Director of Practice Management 1997 $ 90,000 0 0
Beverly Reinson 1999 $ 80,000 $ 14,000 $ 5,000 -
Assistant Vice President
Health Plan Management
</TABLE>
PIC did not grant any stock options during the year ended December 31, 1999 to
the Named Executive Officers.
Stock Option Plan
We have an Executive Long-Term Incentive Stock Option Plan that has been
approved by the Board of Directors and is awaiting shareholder approval. The
plan is designed to: (1) closely associate the interests of our management with
our shareholders by reinforcing the relationship between participants' rewards
and shareholder gains; (2) provide management with an equity ownership in us
commensurate with our performance, as reflected in increased shareholder value;
(3) maintain competitive compensation levels; and (4) provide an incentive to
management for continuous employment with us.
The Plan will be administered by our Finance and Compensation Committee,
which must be comprised of disinterested persons appointed by our Board of
Directors, as constituted from time to time. The Committee shall consist of at
least two members of the Board.
Participants in the Plan will be selected by the Committee from our
executive officers and other key employees who occupy responsible managerial or
professional positions and who have the capability of making a substantial
contribution to our success. In making this selection and in determining the
form and amount of Incentive Stock Option awards, the Committee will consider
any factors deemed relevant, including, but not limited to, the individual's
functions, responsibilities, value of services to us and past and potential
contributions to our profitability and sound growth.
Only Class C Non-Voting Common Stock will be used for Incentive Stock
Options. The initial number of shares allocated to the ISO Plan by the Board at
this time is limited to 15,000. In addition, no employee may receive more than
$100,000 in Incentive Stock Options in any 12 month period.
It is anticipated that the Plan will be effective for the calendar year
2000.
The purchase price for any Incentive Stock Option shall be 100% of the fair
market value of the shares as determined in the Annual Corporate Valuation
Report nearest in time to the date of the grant of the Incentive Stock Option.
Each Incentive Stock Option shall vest or be exercisable, at a rate of 25%
for every 12 months after the date of this grant. Each Incentive Stock Option
must be exercised within 10 years of the date of its granting.
Since there is no ready market for the sale of Class C Shares, and to
maintain control of our outstanding shares, all Class C Shareholders will be
required, as part of the grant of the Incentive Stock Option, to enter into a
shareholders agreement with us which places certain restrictions on the sale of
their shares and which requires us to repurchase the shares under certain
circumstances.
Employment Agreements
We have agreements with our President/Chief Executive Officer, Executive
Vice President/Chief Operating Officer and Executive Vice President, Business
Development which provide for severance payments ranging from six to nine months
pay upon involuntary termination of each officer.
Long-Term Incentive Plans
We have no long-term incentive plans other than the Stock Option Plan.
Compensation Committee Interlocks and Insider Participation
The members of the Finance and Compensation Committee are Steven C.
Goldberg, M.D., Frank J. Ryan, Mauro Tucci, M.D., John E. Matuska, Louis M.
Diemer, III, M.D., Steven Lenger, M.D., Marc I. Malberg, M.D., John J. Nevins,
III, D.O. and Warren A. Sweberg, M.D. There are currently no compensation
committee interlocks with other entities or insider participation on the Finance
and Compensation Committee.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the common stock as of the date of this prospectus and as adjusted
to reflect the sale of the shares offered thereby by (i) each person known to
own beneficially 5% or more of the outstanding shares of common stock; (ii) each
director of the PIC; (iii) each executive officer; and (iv) all executive
officers and directors as a group. Unless otherwise noted below, such
shareholders have sole voting and investment power as to shares shown.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Beneficial Ownership Number Beneficial Ownership
Prior to the Offering Of Shares After the Offering
Number Being Number
Name of Beneficial Holder of Shares Percentage Offered of Shares(1) Percentage
--------- ---------- --------- --------- ----------
Louis M. Diemer (Class A) 100 * -- 100
Steven C. Goldberg (Class A) 100 * -- 100 *
Steven Lenger (Class A) 100 * -- 100 *
Marc I. Malberg (Class A) 100 * -- 100 *
John J. Nevins (Class A) 100 * -- 100 *
Warren A. Sweberg (Class A) 100 * -- 100 *
Mauro Tucci (Class A) 100 * -- 100 *
St. Peter's University Hospital (Class B) 177,500 96% -- 177,500 96%
All Executive Officers and Directors as a Group
(18 persons) 700 * -- 700 *
</TABLE>
------------
* Less than 1%
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
SPUH and Medical Associates of New Brunswick and The Family Practice Center
of St. Peter's University Hospital, Inc. have independently entered into
management contracts with us. Under the terms of the agreements, the companies
are obligated to us for a fixed percentage of the company's net collections, in
exchange for practice management which includes business office, general
administration, managed care administration and/or information systems and
services.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of PIC consists of 4,000,000 shares of common
stock, without par value.
We have four (4) classes of common stock. Class A voting stock may only be
purchased by selected qualifying physicians. Class B voting stock may only be
purchased by hospitals. Class C and Class D stock are non-voting.
The ownership requirements and restrictions for Class C stock have not been
fully developed at this time, however, it is anticipated that up to 20% of the
Company's stock will be issued to existing stock holders as incentives or as a
conversion from Class A stock on retirement and/or issued to senior management
and other individuals not participating in the delivery of medical services.
The ownership requirements and restrictions for Class D stock have not been
fully developed at this time, however, it is anticipated that up to 20% of this
class of common stock will be made available for purchase by certain qualified
third party investors. Among those potential Class D investors may be persons or
entities which provide business services or consulting services to us and which,
as part of their compensation for said services, may be entitled to receive
Class D stock.
The sale of Class C or D stock as well as the sale of additional Class A or
B stock may dilute the interest of the purchasers of Class A stock who subscribe
to this offering.
As of the date of this prospectus, there were 7,500 shares of class A
common stock and 177,500 of class B common stock issued and outstanding.
Common Stock
Holders of Class A and Class B common stock are entitled to one (1) vote
for each 100 shares held of record on all matters to be voted on by the
shareholders and do not have cumulative voting rights. Holders of Class C and
Class D common stock are not entitled to vote on any matters submitted to the
shareholders. The election of directors is voted on in the following manner. The
holders of Class A common stock, voting as a class, have the right to elect
seven (7) directors, four of whom are primary care physicians and three of whom
are specialty physicians. The holders of Class B common stock, voting as a
class, have the right to elect seven directors. The holders of Class D common
stock, voting as a class, have the right to elect three (3) directors who are
non-voting directors and so do not have any right to vote on any matters before
the Board of any committees of the Board. The Class A and D directors and the
Class B directors are each elected by a plurality of the votes cast by those
voting as a class. All other matters are determined by a majority of the votes
cast in any class voting as a group. Our Certificate of Incorporation requires
that holders of Class A, Class B, Class C and Class D, if required by law, with
respect to a sale of PIC,will vote as individual classes. The holders of Common
Stock are entitled to receive dividends when declared by the Company's Board of
Directors out of funds legally available for the payment thereof. The shares of
Class A common stock that will be outstanding upon the consummation of the
offering will be, when issued and paid for, fully paid and nonassessable. The
rights, preferences and privileges of holders of Class A common stock are
subject to, and may be adversely affected by, the rights of the holders of
shares of any series of preferred stock which we may designate and issue in the
future.
Holders of Class A common stock must be physicians who meet all of the
following criteria: (a) licensed to practice medicine and surgery in New Jersey
(an M.D. or D.O.); (b) currently practicing medicine in the state of New Jersey;
(c) be Board certified or Board eligible and within four (4) years of completion
of an accredited residency program; (d) be fully credentialed as a member of the
UMG and us; and (e) have executed a Membership Agreement with UMG.
Holders of common stock of any class do not have any preemptive or
subscription rights, nor any redemption or conversion rights.
Limitation on Liability
Our Certificate of Incorporation limits or eliminates the liability of our
directors or officers to us and our stockholders for monetary damages to the
fullest extent permitted by the New Jersey Business Corporation Act, as amended.
The law provides that a director of a corporation shall not be personally liable
to the corporation or its stockholders for monetary damages for a breach of
fiduciary duty as a director, except for liability: (i) for any breach of such
person's duty of loyalty; (ii) for acts or omissions not in good faith or
involving intentional misconduct or a knowing violation of law; (iii) for the
payment of unlawful dividends and certain other actions prohibited by New Jersey
corporate law; and (iv) for any transaction resulting in receipt by such person
of an improper personal benefit.
We have directors' and officers' liability insurance to provide our
directors and officers with insurance coverage for losses arising from claims
based on breaches of duty, negligence, error and other wrongful acts. See
"Business -- Legal Proceedings" for a discussion of pending litigation.
Transfer Agent and Registrar
We serve as the transfer agent and registrar for our common stock.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering, we will have 15,000 shares of Class A
common stock outstanding. Of these shares, the common stock sold in this
offering, except for certain shares described below, will be freely tradeable
without restriction or further registration under the Act. The remaining 7,500
shares of common stock were sold by us in reliance on an exemption from the
registration requirements of the Act and are "restricted securities" as defined
in Rule 144 and may not be sold in the absence of registration under the Act
unless an exemption is available, including an exemption afforded by Rule 144 or
Rule 701.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for us by Greenbaum, Rowe, Smith, Ravin, Davis &Himmell LLP, Woodbridge,
New Jersey.
EXPERTS
Our financial statements as of December 31, 1999 and 1998 and for each of
the years then ended included in this prospectus have been audited by
WithumSmith + Brown, independent certified public accountants, in reliance on
their reports, given upon their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
This prospectus, which constitutes a part of a Registration Statement on
Form S-1 (including all amendments thereto, the "Registration Statement") filed
by us with the SEC under the Act, omits certain of the information set forth in
the Registration Statement. Reference is hereby made to the Registration
Statement and to the exhibits thereto for further information with respect to
PIC and the securities offered hereby. Copies of the Registration Statement and
the exhibits thereto are on file at the offices of the SEC and may be obtained
upon payment of the prescribed fee or may be examined without charge at the
public reference facilities of the SEC described below.
Statements contained herein concerning the provisions of documents are
necessarily summaries of such documents, and each statement is qualified in its
entirety by reference to the copy of the applicable document filed with the SEC.
PIC is subject to certain of the informational reporting requirements of
the Securities Exchange Act of 1934, as amended and, in accordance therewith,
files reports and other information with the SEC. Such reports and other
information can be inspected and copied at the public reference facility
maintained by the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549-1004 and at the regional offices of the SEC located at Seven World Trade
Center, New York, New York 10048 and 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such materials may also be obtained in person
from the Public Reference Section of the SEC at its principal office located at
450 Fifth Street, N.W., Washington, D.C. 20549-1004 at prescribed rates.
Additionally, such material may be obtained at the web site the SEC maintains at
http://www.sec.gov which contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC.
<PAGE>
PARTNERS IN CARE, CORP.
CONTENTS TO FINANCIAL STATEMENTS
PAGE
----
Independent Auditors' Report F-1
Balance Sheets
September 30, 2000 (Unaudited) and December 31, 1999, 1998
and 1997 F-2
Statements of Operations
For the Nine Months Ended September 30, 2000 and 1999 (Unaudited)
and For the Years Ended December 31, 1999, 1998 and 1997 F-3
Statements of Stockholders' Equity
For the Years Ended December 31, 1999, 1998 and 1997
and For the Nine Months Ended September 30, 2000 (Unaudited) F-4
Statements of Cash Flows
For the Nine Months Ended September 30, 2000 and 1999 (Unaudited)
and For the Years Ended December 31, 1999, 1998 and 1997 F-5
Notes to Financial Statements F-6 - F-14
INDEPENDENT AUDITORS' REPORT
To the Board of Directors,
Partners In Care, Corp.:
We have audited the accompanying balance sheets of Partners in Care, Corp. as of
December 31, 1999, 1998 and 1997, and the related statements of operations,
stockholders' equity and cash flows for the years then ended. These financial
statements are the responsibility of Partners in Care, Corp.'s management. Our
responsibility is to express an opinion on these 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 financial statements referred to above present fairly, in
all material respects, the financial position of Partners In Care, Corp. as of
December 31, 1999, 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.
WithumSmith+Brown
New Brunswick, New Jersey
March 2, 2000
<PAGE>
PARTNERS IN CARE, CORP.
BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
September 30, December 31
------------- -----------------------------------------------
2000 1999 1998 1997
------------- ----------- ---------- ----------
(Unaudited)
ASSETS
Current Assets:
Cash 1,326,093 $ 548,887 $ 921,227 $ 385,269
Accounts receivable, less allowance for doubtful
accounts of $98,500 in 2000, $108,507 in 1999,
$27,776 in 1998 and $-0- in 1997 918,164 1,061,430 716,898 436,074
Healthcare provider fees receivable 44,864,498 19,532,632 8,838,269 5,041,960
Stop-loss recoveries receivable 454,657 531,459 440,933 --
Other current assets 97,491 102,598 63,560 56,502
------------- ----------- ---------- ----------
Total Current Assets 47,660,903 21,777,006 10,980,887 5,919,805
Property and Equipment - Net 218,661 307,949 284,744 341,544
Intangible Assets - Net 28,050 228,195 428,899 637,493
Other Assets 28,352 108,218 72,163 --
------------- ----------- ---------- ----------
TOTAL ASSETS $ 47,935,966 $ 22,421,368 $ 11,766,693 $ 6,898,842
=============== ============== =============== =============
The Notes to Financial Statements are an integral part of these statements.
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Medical delivery costs and accounts payable $ 410,612 $ 801,997 $ 778,105 $ 681,069
Accrued expenses 1,134,358 788,751 865,312 178,964
Accrued payroll and benefits 1,077,609 585,047 217,079 134,470
Income taxes payable 48,801 9,200 -- --
Healthcare provider fees payable 39,566,540 15,617,653 6,429,876 3,539,634
Due to related party, net 119,491 301,743 614,347 --
Current portion of provider distributions payable 663,000 676,483 631,908 --
Current maturities of long-term debt -- -- -- 17,497
---------- ---------- --------- ---------
Total Current Liabilities 43,020,411 18,780,874 9,536,627 4,551,634
Long-Term Debt, Net of Current Maturities -- -- -- 26,246
Provider Distributions Payable, Net of Current Portion 953,670 971,466 459,874 772,704
Stockholders' Equity:
Class A common stock, no par value, 1,000,000 shares
authorized, 7,500 shares issued and outstanding 180,800 180,800 180,800 --
Class B common stock, no par value, 1,000,000 shares
authorized, 177,500 issued and outstanding 5,325,110 5,325,110 5,325,110 5,325,110
Notes receivable - Class A common stock (12,526) (19,059) (127,500) --
Accumulated deficit (1,531,499) (2,817,823) (3,608,218) (3,776,852)
--------------- ------------- ------------- -------------
Total Stockholders' Equity 3,961,885 2,669,028 1,770,192 1,548,258
--------------- ------------- ------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 47,935,966 $ 22,421,368 $ 11,766,693 $ 6,898,842
=============== ============= ============= ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PARTNERS IN CARE, CORP.
STATEMENTS OF OPERATIONS
<S> <C> <C> <C> <C> <C>
For the Nine Months Ended
September 30, For the Years Ended December 31,
2000 1999 1999 1998 1997
---- ---- ---- ---- ----
(Unaudited)
Revenue:
Healthcare provider fees $42,236,868 $18,557,902 $28,457,760 $12,891,930 $ 6,431,577
Practice management fees 1,756,243 2,439,103 3,148,600 2,881,353 1,318,036
Computer service contracts 247,500 247,500 330,000 330,000 330,000
----------- ------------ ------------ ----------- ----------
Total Revenue 44,240,611 21,244,505 31,936,360 16,103,283 8,079,613
Expenses:
Medical delivery expenses 35,578,273 15,070,431 22,072,587 9,264,302 4,844,237
Provider distributions 866,422 435,808 1,034,724 596,457 772,704
Computer service fees 356,229 378,419 532,415 460,949 472,684
General and administrative
expenses 6,089,541 4,951,314 7,472,069 5,550,929 3,007,464
----------- ------------ ------------ ----------- ----------
Total Expenses 42,890,465 20,835,972 31,111,795 15,872,637 9,097,089
----------- ------------ ------------ ----------- ----------
Income (Loss) From Operations 1,350,146 408,533 824,565 230,646 (1,017,476)
Other (Income) Expense:
Interest income (71,327) (15,739) (76,891) (24,123) --
Interest expense 74,894 76,571 101,861 44,141 --
----------- ------------ ------------ ----------- ----------
Total Other (Income)
Expense - Net 3,567 60,832 24,970 20,018 --
----------- ------------ ------------ ----------- ----------
Income (Loss) Before Income Taxes
and Cumulative Effect of Change
in Accounting Principle 1,346,579 347,701 799,595 210,628 (1,017,476)
Provision for Income Taxes 60,255 394 9,200 -- --
----------- ------------ ------------ ----------- ----------
Income (Loss) Before
Cumulative Effect of Change
in Accounting Principle 1,286,324 347,307 790,395 168,634 (1,017,476)
Cumulative Effect of Change
in Accounting Principle -- -- -- 41,994 --
----------- ------------ ------------ ----------- ----------
Net Income (Loss) $ 1,286,324 $ 347,307 $ 790,395 $ 168,634 $(1,017,476)
=========== ========== =========== ========== ===========
Basic Earnings (Loss)
Per Share $ 6.95 $ 1.88 $ 4.27 $ .92 $ (6.93)
=========== ========== =========== ========== ===========
Weighted Average Number of
Common Shares Outstanding 185,000 185,000 185,000 182,500 146,825
=========== ========== =========== ========== ===========
</TABLE>
<PAGE>
PARTNERS IN CARE, CORP.
STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE YEARS ENDED
DECEMBER 31, 1999, 1998 AND 1997 AND FOR THE NINE MONTHS
ENDED SEPTEMBER 30, 2000 (UNAUDITED)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Notes
Receivable
Class A Total
Common Stock Common Accumulated Stockholders'
Class A Class B Stock Deficit Equity
------- ------- --------- ----------- -----------
Balance, January 1, 1997 $ - $3,800,000 $ -- $(2,759,376) $1,040,624
50,800 Shares of Common Stock Issued
at $30 Per Share - 1,525,110 -- -- 1,525,110
Net Loss - -- -- (1,017,476) (1,017,476)
-------- ---------- ------- ---------- ---------
Balance, December 31, 1997 -- 5,325,110 -- (3,776,852) 1,548,258
7,500 Shares of Class A Common Stock
Issued at $30 Per Share 225,000 -- -- -- 225,000
Notes Receivable Issued for the
Purchase of Common Stock -- -- (127,500) -- (127,500)
Cost Related to the Issuance
of Common Stock (44,200) -- -- -- (44,200)
Net Income -- -- -- 168,634 168,634
-------- ---------- ------- ---------- ---------
Balance, December 31, 1998 180,800 5,325,110 (127,500) (3,608,218) 1,770,192
Repayment of Notes Receivable -
Class A Common Stock -- -- 108,441 -- 108,441
Net Income -- -- -- 790,395 790,395
-------- ---------- ------- ---------- ---------
Balance, December 31, 1999 180,800 5,325,110 (19,059) (2,817,823) 2,669,028
Repayment of Notes Receivable -
Class A Common Stock (Unaudited) -- -- 6,533 -- 6,533
Net Income (Unaudited) -- -- -- 1,286,324 1,286,324
-------- ---------- ------- ---------- ---------
Balance, September 30, 2000
(Unaudited) $180,800 $5,325,110 $(12,526) $(1,531,499) $3,961,885
======== ========== ======= ========== =========
The Notes to Financial Statements are an integral part of these statements.
</TABLE>
<PAGE>
PARTNERS IN CARE, CORP.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
For the Nine Months Ended For the Year Ended
September 30, December 31,
-------------------------- -------------------
2000 1999 1999 1998 1997
---- ---- ---- ---- ----
(Unaudited)
Cash Flows From Operating Activities:
Net income (loss) $ 1,286,324 $ 347,307 $ 790,395 $ 168,634 $(1,017,476)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
Operating activities:
Depreciation and amortization 128,706 238,477 324,434 303,782 300,257
Cumulative effect of change in
Accounting principle -- -- -- 41,994 --
Gain on disposal of intangibles (37,505) -- -- -- --
Common stock issued for services -- -- -- -- 306,150
Loss on disposal of property and
equipment 11,943 -- -- -- --
Non-cash litigation charge -- -- -- -- 52,492
Change in:
Accounts receivable 143,266 (41,828) (344,532) (290,484) 143,187
Healthcare provider fees receivable (25,331,866) (7,004,222) (10,694,363) (3,796,309) (5,041,960)
Stop-loss recoveries receivable 76,802 135,942 (90,526) (440,933) --
Other current assets 5,107 (18,114) (39,038) (7,058) (24,925)
Other assets 75,979 (3,321) (3,816) (72,163) --
Medical delivery costs and accounts
payable (391,385) (243,210) 23,892 97,036 108,698
Accrued expenses 581,607 (50,351) (76,561) 686,348 101,652
Accrued payroll and benefits 492,562 240,335 367,968 82,609 39,148
Income taxes payable 39,601 -- 9,200 -- --
Healthcare provider fees payable 23,948,887 6,291,429 9,187,777 2,890,242 3,539,634
Provider distributions payable (24,746) 65,692 664,608 319,078 772,704
Due to related party -- -- -- -- (45,139)
---------- --------- --------- --------- ---------
Net Cash Provided By (Used In)
Operating Activities 1,005,282 (41,864) 119,438 (17,224) (765,578)
Cash Flows From Investing Activities:
Purchases of property and equipment (55,711) (64,076) (146,935) (37,722) (77,863)
Proceeds from sale of property and
equipment 6,000 -- -- -- --
Change in security deposits 3,887 (28,234) (32,239) --
---------- --------- --------- --------- ---------
Net Cash Used in Investing
Activities (45,824) (92,310) (179,174) (37,722) (77,863)
Cash Flows From Financing Activities
Proceeds from issuance of common
stock - net of costs -- -- -- 20,300 1,218,960
Payments of long-term debt -- -- -- (43,743) (8,749)
Change in due to related party, net (182,252) 154,035 (312,604) 614,347 --
Net Cash Provided By (Used In) ---------- --------- --------- --------- ---------
Financing Activities (182,252) 154,035 (312,604) 590,904 1,210,211
---------- --------- --------- --------- ---------
Net (Decrease) Increase in Cash 777,206 19,861 (372,340) 535,958 366,770
Cash at Beginning of Period 548,887 921,227 921,227 385,269 18,499
---------- --------- --------- --------- ---------
Cash at End of Period 1,326,093 $ 941,088 $ 548,887 $ 921,227 $ 385,269
========== ========= ========= ========= =========
The Notes to Financial Statements are an integral part of these statements.
</TABLE>
<PAGE>
PARTNERS IN CARE, CORP.
NOTES TO FINANCIAL STATEMENTS
Note 1 - Summary of Significant Accounting Policies:
Significant accounting policies followed by Partners in Care, Corp.
(PIC) in the preparation of the accompanying financial statements are
summarized below:
Nature of Business Operations
PIC is a for-profit, majority owned subsidiary of St. Peter's
University Hospital (SPUH) located in Somerset, New Jersey with operations
commencing on January 1, 1996.
Pursuant to an agreement between PIC and Aetna US Health Care (AUSHC),
PIC provides a health care delivery system ("the network") for the benefit
of HMO members. The network consists of health care providers throughout
Central New Jersey who contract with PIC to provide medically necessary
primary care services and arrange for other health services to HMO members.
PIC is responsible to ensure that each health care provider in the network
provides the basic benefits and services as contained in AUSHC's agreement
for its state and federally approved pre- paid health care program. The
intention of the Company is to provide high quality, cost effective health
care by including participating physicians in the planning, implementation
and improvement of network performance and providing incentives for cost
efficiency and increased performance. In addition, PIC offers a full range
of management services to hospitals and physicians offices.
Health Care Services Cost Recognition
PIC contracted with AUSHC to provide certain medical care services to
its members and is compensated pursuant to a risk sharing agreement. As
part of a cost control incentive program, PIC retains a percentage of the
premiums under a risk-sharing formula.
Medical delivery costs for health care services provided to enrollees
are estimated by management based upon data submitted by AUSHC and
provisions for incurred but not reported claims. PIC estimates the amount
of the provision for incurred but not reported claims using standard
actuarial methodologies based upon historical data including the period
between the date services are rendered and the date claims are received and
paid, expected medical cost inflation, seasonality patterns and increases
in membership. The estimates for submitted claims and incurred but not
reported claims are made on an accrual basis and adjusted in future periods
as required. Management believes that PIC's reserves for medical delivery
costs are adequate to satisfy its ultimate claim liability.
Practice Management Fees
PIC earns a percentage of the net monthly revenue or net cash
collections, as applicable, of its management service customers as an
administrative fee based upon contractual rates. In addition, PIC earns a
fixed percentage of SPUH's payments to its physicians, which are processed
by PIC. Revenue is recognized upon processing of these payments.
<PAGE>
PARTNERS IN CARE, CORP.
NOTES TO FINANCIAL STATEMENTS
Property and Equipment
Property and equipment are stated at cost. Depreciation is provided
under the straight-line method based upon the following estimated useful
lives:
Description Years
----------- -----
Furniture and Fixtures 5-7
Computers 5
Leasehold Improvements *
*Estimated useful life of the asset or term of the lease, whichever is
shorter.
Note 1 - Summary of Significant Accounting Policies (Continued):
Property and Equipment (Continued)
Major replacements of, or improvements to, property and equipment are
capitalized. Minor replacements, repairs and maintenance are charged to
expense as incurred. Upon retirement or sale, the cost of the assets
disposed and the related accumulated depreciation are removed from the
accounts and any resulting gain or loss is recorded in operations.
Intangible Assets
Intangible assets consist of a software license agreement and Right of
First Refusal (ROFR) to purchase the practices of physicians participating
in the private placement offering of Class A stock. These intangible assets
are recorded at cost and are being amortized on the straight-line basis
over the following estimated useful lives:
Description Years
----------- -----
Organization Costs 5
Software License Agreement 5
ROFR 15
Start-Up Costs
The Company adopted statement of Position 98-5 "Reporting on the Costs
of Start-Up Activities," effective January 1, 1998. The Statement specifies
that one time costs associated with the start-up of new programs, including
costs incurred in connection with the organization of an entity, should be
expensed as incurred. The cumulative effect of the change was to decrease
net income for the year ended December 31, 1998 by $41,994, which has been
reported as a cumulative effect of a change in accounting principle.
Retirement Plan
PIC sponsors a discretionary contributory thrift and savings plan for
substantially all PIC's employees, which qualifies under Section 401 (k) of
the Internal Revenue Service Code. The Company's contributions to the plan
are based upon 4 percent of eligible employees salaries and amounted to
$59,605 and $35,178 for the nine months ended September 2000 (unaudited)
and 1999 (unaudited), respectively, and $58,619, $37,777 and $14,559 for
the years ended December 31, 1999, 1998 and 1997, respectively.
<PAGE>
PARTNERS IN CARE, CORP.
NOTES TO FINANCIAL STATEMENTS
Income Taxes
Deferred income tax assets and liabilities are recognized for the
differences between financial and income tax reporting basis of assets and
liabilities based on enacted tax rates and laws. The deferred income tax
provision or benefit generally reflects the net change in deferred income
tax assets and liabilities during the year. The current income tax
provision reflects the tax consequences of revenues and expenses currently
taxable or deductible on the Corporation's income tax returns for the year
reported.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Note 1 - Summary of Significant Accounting Policies (Continued):
New Accounting Standards
In June 1998, the Financial Accounting Standard Board issued Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and
Hedging Activities." SFAS 133 establishes new accounting and reporting
standards for derivative financial instruments and for hedging activities.
SFAS 133 requires the Company to measure all derivatives at fair value and
to recognize them in the balance sheet as an asset or liability, depending
on the Company's rights or obligations under the applicable derivative
contract. Subsequent to the issuance of SFAS 133, the FASB has received
many requests to clarify certain issues causing difficulties in
implementation. In June 2000, the FASB issued SFAS 138, which responds to
those requests by amending certain provisions of SFAS 133. These amendments
include allowing foreign-currency denominated assets and liabilities to
qualify for hedge accounting, permitting the offsetting of selected
inter-entity foreign currency exposures that reduce the need for third
party derivatives and redefining the nature of interest rate risk to avoid
sources of ineffectiveness. The Company expects to adopt SFAS 133 and the
corresponding amendments of SFAS 138 in the first quarter of 2001. SFAS
133, as amended by SFAS 138, is not expected to have a material impact on
the Company's combined results of operations, financial position and cash
flows.
In December 1999 the Securities and Exchange Commission issued Staff
Accounting Bulletin 101, "Revenue Recognition in Financial Statements" (SAB
101). SAB 101 provides guidance on the recognition, presentation and
disclosure of revenue in financial statements and requires adoption no
later than the fourth quarter of 2001. The Company is currently evaluating
the impact of SAB 101 to determine what effect, if any, it may have on the
company's combined financial position and results of operations.
Concentration of Credit Risk
PIC's concentration of credit risk with respect to accounts receivable
is concentrated with two customers. These two customers accounted for
approximately 53, 63 and 88 percent of PIC's outstanding accounts
receivable at December 31, 1999, 1998 and 1997, respectively.
For the years ended December 31, 1999, 1998 and 1997, respectively,
PIC generated approximately 89, 78 and 80 percent of its revenues from the
provider agreement with AUSHC. For the nine months ended September 30, 2000
(unaudited) and 1999 (unaudited), respectively, PIC generated approximately
<PAGE>
PARTNERS IN CARE, CORP.
NOTES TO FINANCIAL STATEMENTS
95 and 87 percent of its revenues from the provider agreement with
AUSHC. In addition, 100 percent of healthcare provider fees receivable
which are due from AUSHC may be offset by 100 percent of healthcare
provider fees payable. However, the deterioration of the financial
condition of this significant customer could have a material adverse effect
on PIC's operations.
Interim Financial Data (Unaudited)
The unaudited financial data as of and for the nine months ended
September 30, 2000 and 1999 have been prepared by management and include
all adjustments which, in management's opinion, are necessary to present
fairly the Company's financial condition, results of operations and cash
flows. The results of operations for the nine months ended September 30,
2000 and are not necessarily indicative of the operating results to be
expected for the year ended December 31, 2000.
Note 1 - Summary of Significant Accounting Policies (Continued):
Earnings (Loss) Per Common Share
The Company has adopted Statement of Financial Accounting Standards
No. 128, "Earnings per Share" (SFAS 128), which requires presentation of
basic earnings (loss) per share (Basic EPS) and diluted earnings (loss) per
share ("Diluted EPS") by all entities that have publicly traded common
stock or potential common stock (options, warrants, convertible securities
or contingent stock arrangements). SFAS 128 also requires presentation of
earnings per share by an entity that has made a filing or is in the process
of filing with a regulatory agency in preparation for the sale of
securities in a public market.
Basic EPS is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding
during the period. Diluted EPS gives effect to all dilutive potential
common shares outstanding during the period. The computation of Diluted EPS
does not assume conversion, exercise or contingent exercise of securities
that would have an antidilutive effect on earnings. Refer to Note 14 for
methodology for determining earnings per share.
Note 2 - Healthcare Provider Fees:
Effective March 1, 1997, PIC activated a contract with US Health
Care/The Health Maintenance Organization of New Jersey, Inc., a wholly
owned subsidiary of AUSHC. The purpose of this agreement is to establish a
health care delivery system to be provided by PIC for the benefit of US
Healthcare HMO members. The agreement expires on July 1, 2003.
In accordance with the agreement, PIC will arrange to provide complete
medical services through its own network of providers in conjunction with
AUSHC for US Health Care HMO members who elect primary care physician
offices designated for the US Health Care HMO system.
AUSHC, at its sole cost and expense, will market their HMO system,
enroll members, procure and maintain all regulatory approvals, process
claims, collect and process all premium payments made by and on behalf of
members, disburse payments to PIC and provide customary assistance in
administration of the program.
<PAGE>
PARTNERS IN CARE, CORP.
NOTES TO FINANCIAL STATEMENTS
Note 3 - Property and Equipment:
Property and equipment consists of the following at:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
September 30, December 31,
------------- ------------
2000 1999 1998 1997
------------- --------- ------------ ------------
(Unaudited)
Furniture and Fixtures $ 45,556 $ 60,990 $ 21,872 $ 3,565
Computers 644,127 597,936 516,067 486,992
Leasehold Improvement 25,948 25,948 -- --
---------- ---------- ---------- ---------
715,631 684,874 537,939 490,557
Less Accumulated Depreciation
and Amortization 496,970 376,925 253,195 149,013
---------- ---------- ---------- ---------
Property and Equipment - Net $218,661 $307,949 $284,744 $341,544
========== ========= ========= ========
Depreciation and amortization expense included as a charge to
operations amounted to $127,056 and $71,389 for the nine months ended
September 30, 2000 (unaudited) and 1999 (unaudited), respectively,
and $123,730, $104,182 and $85,738 for the years ended December 31,
1999, 1998 and 1997, respectively.
Note 4 - Intangible Assets:
</TABLE>
Intangible assets consist of the following at:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
September 30, December 31,
------------- ------------
2000 1999 1998 1997
------------- --------- ------------ ------------
(Unaudited)
Organizational Costs $ -- $ -- $ -- $ 80,095
Soft License Agreement -- 992,500 992,500 992,500
Right of first refusal 33,000 33,000 33,000 --
--------- ---------- ---------- -----------
33,000 1,025,500 1,025,500 1,072,595
Less Accumulated Amortization 4,950 797,305 596,601 435,102
--------- --------- --------- -----------
Intangible Assets - Net $28,050 $ 228,195 428,899 637,493
</TABLE>
Amortization expense included as a charge to operations amounted to
$1,650 and $167,088 for the nine months ended September 30, 2000
(unaudited) and 1999 (unaudited), respectively, and $200,704,
$199,600 and $214,519 for the years ended December 31, 1999, 1998 and
1997, respectively.
Note 5 - Note Receivable:
The Company accepted a note from one of its customers in
settlement of unpaid MSO fees. The terms of the note remain in
negotiation, therefore, the asset has been classified as long term. As
of December 31, 1999, 1998 and 1997, the Company is due $75,979,
$72,163 and $-0- respectively of which $6,740, $2,924 and $-0-
represents interest accrued at 5.5 percent. The note was fully repaid
during the nine months ended September 30, 2000.
Note 6 - Long-Term Debt:
<PAGE>
PARTNERS IN CARE, CORP.
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
September 30, December 31,
2000 1999 1998 1997
-------------- --------- -------- ---------
(Unaudited)
Note payable - Medical Associates
of New Brunswick, non-interest
bearing, due June 2000 $ - - $ - - $ - - $ 43,743
Less Current Maturities - - - - - - 17,497
----------- --------- --------- --------
Long-Term Debt, Net of Current
Maturities $ - - $ - - $ - - $ 26,246
=========== ========== ========== ========
</TABLE>
The Company paid the entire balance of long-term debt in January 1998.
Note 7 - Income Taxes:
The following table presents the principal reasons for the difference between
the effective tax rate and the U.S. federal statutory income tax rate:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
For the Nine
Months Ended
September 30, For the Years Ended December 31,
------------- --------------------------------
2000 1999 1999 1998 1997
---- ---- ---- ---- ----
(Unaudited)
U.S. Federal Statutory
Income Tax Rate 35.0% 35.0% 35.0% 35.0% 35.0%
Benefit of Net Operating
Loss Carryforwards (30.5) (35.0) (33.8) (35.9) (35.0)
Other Differences - Net -- -- (1.1) 0.9 --
-------- -------- ----- ------ -------
Effective Income Tax Rate 4.5% --% --% --% --%
======= ======== ====== ====== =======
</TABLE>
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
For the Nine
Months Ended
September 30, For the Years Ended December 31,
------------- --------------------------------
2000 1999 1999 1998 1997
---- ---- ---- ---- ----
(Unaudited)
Federal - Current $60,055 $ -- $9,000 $ -- $ --
State - Current 200 394 200 -- --
Benefit of Net Operating
Loss Carryforwards (410,700) (121,600) (354,400) (54,800) 217,000
Deferred 410,700 121,600 354,400 54,800 (217,000)
Total $ 60,255 $ 394 $ 9,200 $ -- $ --
========= ========== ======== ========== ==========
</TABLE>
The components of deferred tax assets and liabilities are summarized as follows
at:
<PAGE>
PARTNERS IN CARE, CORP.
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
September 30, December 31,
------------- ------------------------------------------
2000 1999 1998 1997
------------- -------- ------- ------
(Unaudited)
Deferred Income Tax Assets:
Provider distributions $390,700 $392,800 $436,800 $308,800
Start-up costs 206,400 206,400 309,600 412,800
Net operating loss/credit
carryforwards - 352,400 706,800 761,600
Accrued expenses 24,000 23,200 21,200 -
Allowance for bad debt 39,200 39,200 10,800 -
Valuation allowance (620,100) (973,800) (1,434,200) (1,444,000)
--------- --------- ----------- -----------
Total Deferred Tax Assets $ 40,200 $ 40,200 $ 51,000 $ 39,200
========= ========= ========= =========
Deferred Income Tax Liabilities:
Property and equipment $ 40,200 $ 40,200 $ 51,000 $ 39,200
========= ========= ========= =========
</TABLE>
The Company had available at December 31, 1999, $881,000 of unused net operating
loss carryforwards that expire in various years from 2002 to 2013.
Note 8- Line of Credit:
At September 30, 2000, the Company had $500,000 of unused lines of
credit with banks to be drawn upon as needed, with interest at 1 percent
above the bank's floating base rate. The line matures one year from the
date of the draw.
Note 9- Related Party Transactions:
PIC engages in certain transactions with its parent, SPUH. These
include computer software access fees, management services and direct and
indirect expenses, provided on terms agreed upon by the parties. PIC earned
approximately $373,911, $176,414 and $70,291 in practice service fees
rendered to SPUH in 1999, 1998 and 1997, respectively, and $330,000 in
computer software access fees from SPUH in 1999, 1998 and 1997.
Included in accounts receivable are practice management fees billed to
SPUH of $493,526, $183,989 and $-0- at December 31, 1999, 1998 and 1997.
Included in accounts payable are invoices from SPUH amounting to
$97,433, $18,213 and $-0- at December 31, 1999, 1998 and 1997.
The Company is obligated to SPUH for provider distributions amounting
to $917,959, $438,810 and $-0- at December 31, 1999, 1998 and 1997. During
1999, 1998 and 1997, the Company made provider distribution payments to
SPUH amounting to $-0-, $271,423 and $-0-respectively.
<PAGE>
PARTNERS IN CARE, CORP.
NOTES TO FINANCIAL STATEMENTS
During 1999, the Company received net advances from its parent, SPUH,
to fund certain expenses. As of December 31, 1999, 1998 and 1997, the net
indebtedness to SPUH was $301,743, $614,347 and $-0-, respectively, of
which $90,253, $43,260 and $-0-, respectively, represents net interest
accrued at 9 percent.
SPUH paid approximately $306,150 of routine operating expenses on
behalf of PIC for the year ended December 31, 1997, for which they were
issued 10,200 shares of common stock.
Note 10 - Commitments and Contingencies:
In November 1995, PIC purchased access to a computer interface system
to assist in the exchange of medical information for its customers. The
agreement provides for PIC to pay a minimum management fee of $40,833
monthly until the agreement expires in November 2000. In May 1998, the
contract terms were revised to reduce the minimum monthly management fee to
$15,000. Under the revised contract, the Company is liable for actual
network use at established rates for clinical messages, installations and
service calls. During 1999, the Company fulfilled its obligation to make
timely payments under the new agreement. The terms of the agreement require
the Company on January 1, 2000, to return the software license agreement
(see Note 1 - Intangible Assets) in exchange for forgiveness of $236,000 of
outstanding debt included in accrued expenses as of December 31, 1999, 1998
and 1997.
The Company is a party to a consulting agreement that provides for
payment of a retainer in the amount of $50,000 per year by issuing Class D
stock through May 1998. Thereafter, the agreement calls for the Company to
issue stock in exchange for 50 percent of actual consulting services billed
until August 1999, at which time the agreement calls for a retainer of
$2,500 per month until April 2000. PIC is obligated to this consultant to
issue Class D stock in the amount of $336,310 from retainer fees. The fees
have been accrued pending issuance of the stock.
A lawsuit between PIC and Medical Associates of New Brunswick, Inc. (a
customer) was settled in 1997 for a total amount of $52,492 payable by a
long-term debt note. The note was repaid in full during January 1998.
The principal types of property leased by PIC are office space,
equipment and furniture. The most significant obligations under the lease
terms are utilities and insurance. Total rent expense for the Company was
$175,921 and $66,873 for the nine months ended September 30, 2000
(unaudited) and 1999 (unaudited), respectively, and $104,943, $41,498 and
$26,390 for the years ended December 31, 1999, 1998 and 1997, respectively.
The approximate aggregate minimum rental commitment under all
noncancelable leases (excluding any related expenses) for the years ending
after December 31, 1999 are as follows:
Year Amount
---- ------
2000 $234,561
2001 234,561
2002 234,561
2003 234,561
2004 151,040
Thereafter --
---------
Total $1,089,284
==========
Note 11 - Provider Distributions Payable:
<PAGE>
PARTNERS IN CARE, CORP.
NOTES TO FINANCIAL STATEMENTS
The Company makes distributions to the health care providers in their
network, at the board's discretion, when there is a surplus of healthcare
provider fees over medical delivery costs for health care services.
Provider distributions payable amounted to $1,616,670 on September 30, 2000
(unaudited) and $1,647,949, $1,091,782 and $772,704 at December 31, 1999,
1998 and 1997, respectively. See Note 8 for amounts payable to related
party.
Note 12 - Significant Risks and Uncertainties:
Per the US Healthcare agreement, PIC assumes a percentage of the
financial risk of delivering health care services in excess of
pre-established fixed premiums. PIC mitigates this risk by purchasing stop-
loss insurance. PIC has a stop-loss insurance agreement with an insurance
company to limit its losses on individual and aggregate claims.
Note 13 - Common Stock:
PIC has four classes of stock. Class A, voting, stock may only be
purchased by selected qualifying physicians. Class B, voting, stock may
only be purchased by hospitals. Class C and D stock are non- voting.
PIC issued a private placement offering of Class A stock to physician
providers in December 1997. This offering closed on April 17, 1998, and 75
physicians participated and acquired stock by paying in either cash,
issuance of a promissory note, assigning surplus funds in their risk pool
or by granting PIC the right of first refusal (ROFR) to purchase their
practices.
On October 2, 2000 the Board of Directors authorized a 100 for 1 stock
split, thereby increasing the number of issued and outstanding shares to
185,000. All references in the accompanying financial statements to the
number of common shares and per share amounts for September 30, 2000 and
1999 and December 31, 1999, 1998 and 1997 have been restated to reflect the
stock split.
Note 14 - Earnings Per Share:
Basic EPS for the nine months ended September 30, 2000 (unaudited) and
1999 (unaudited) and for the years ended December 31, 1999, 1998 and 1997
have been computed by dividing the net income for each respective period by
the weighted average shares outstanding during that period. There are no
common stock options or warrants outstanding during these periods.
Note 15 - Supplemental Cash Flow Information:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
For the Nine
Months Ended For the Years Ended
September 30, December 31,
------------- --------------------
2000 1999 1999 1998 1997
---- ---- ---- ---- ----
(Unaudited)
Cash paid during the periods for:
Interest $ 2,871 $ 1,363 $ 1,689 $ 119 $ --
$ --
Income taxes $ 11,200 $ 200 $ 225 $ 225 $ --
Noncash Investing and Financing
Activities:
Provider distributions applied
to outstanding note receivable
for Class A common stock $ 6,533 $108,441 $108,441 $ -- $ --
Accrued expenses forgiven in
conjunction with the disposal
of intangible assets $236,000 $ -- $ -- $ -- $ --
Supplemental Schedule of Non-
Cash Investing and Financing
Activities:
The Company issued a credit
to one of its practice manage-
ment customers for furniture
and fixtures $ -- $ -- $-- $9,600 $ --
The Company capitalized
rights of first refusal as
intangible assets in exchange
for Class A common stock issued
to qualifying physicians
(see Note 13) $ -- $ -- $-- $33,000 $ --
The Company was issued notes
in exchange for class A stock
issued to qualifying physicians $ -- $ -- $-- $27,500 $ --
</TABLE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution
The estimated expenses payable in connection with this offering of the
shares of common stock offered hereby are as follows:
Amount
------
Securities and Exchange Commission registration fee $
Printing and engraving expenses
Legal fees and expenses
Accounting fees and expenses
Miscellaneous
----------
Total $
==========
Item 14. Indemnification of Directors and Officers
The Registrant's Certificate of Incorporation permits indemnification to
the fullest extent permitted by New Jersey law. The Registrant's By-laws require
the Registrant to indemnify any person who was or is an authorized
representative of the Registrant, and who was or is a party or is threatened to
be made a party to any corporate proceeding, by reason of the fact that such
person was or is an authorized representative of the Registrant, against
expenses, judgments, penalties, fines and amounts paid in settlement actually
and reasonably incurred by such person in connection with such third party
proceeding if such person acted in good faith and in a manner such person
reasonably believed to be in, or not opposed to, the best interests of the
Registrant and, with respect to any criminal third party proceeding (including
any action or investigation which could or does lead to a criminal third party
proceeding) had no reasonable cause to believe such conduct was unlawful. The
Registrant shall also indemnify any person who was or is an authorized
representative of the Registrant and who was or is a party or is threatened to
be made a party to any corporate proceeding by reason of the fact that such
person was or is an authorized representative of the Registrant, against
expenses actually and reasonably incurred by such person in connection with the
defense or settlement of such corporate action if such person acted in good
faith and in a manner reasonably believed to be in, or not opposed to, the best
interests of the Registrant, except that no indemnification shall be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the Registrant unless and only to the extent that the
New Jersey Superior Court or the court in which such corporate proceeding was
pending shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such authorized
representative is fairly and reasonably entitled to indemnity for such expenses
which the Superior Court or such other court shall deem proper. Such
indemnification is mandatory under the Registrant's By-laws as to expenses
actually and reasonably incurred to the extent that an authorized representative
of the Registrant has been successful on the merits or otherwise in defense of
any third party or corporate proceeding or in defense of any claim, issue or
matter therein.
The determination of whether an individual is entitled to indemnification
may be made by a majority of disinterested directors, independent legal counsel
in a written legal opinion or the shareholders. New Jersey law also permits
indemnification in connection with a proceeding brought by or in the right of
the Registrant to procure a judgment in its favor. Insofar as indemnification
for liabilities arising under the Act may be permitted to directors, officers or
persons controlling the Registrant pursuant to the foregoing provisions, the
Registrant has been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in that
Act and is therefore unenforceable. The Registrant expects to obtain a directors
and officers liability insurance policy prior to the effective date of this
Registration Statement.
Item 15. Recent Sales of Unregistered Securities
In December 1997, we commenced a private placement of our Class A common
stock to physicians who met the criteria for the purchase of such common stock.
The closing of the private placement took place on April 17, 1998 and one share
of Class A common stock was issued to each of seventy-five physicians who paid a
purchase price of $3,000 per share payable by cash, the issuance of a promissory
note to us, the assignment of surplus funds in the physician's risk pool, or by
granting us the right of first refusal to purchase the medical practice of the
physician.
Item 16. Exhibits and Financial Statement Schedules
(a) Exhibits:
Exhibit No. Description
* 3.1 -- Articles of Organization of the Company
* 3.2 -- By-laws of the Company
* 5.1 -- Opinion of Greenbaum, Rowe, Smith, Ravin, Davis
& Himmel LLP
* 10.1 -- Incentive and Nonqualified Stock Option Plan
23.1 -- Consent of WithumSmith + Brown, P.C. II-6
* 23.3 -- Consent of Greenbaum, Rowe, Smith, Ravin, Davis &
Himmel LLP (to be included in Exhibit 5.1)
24.1 -- Power of Attorney (included on signature page) II-3
27.1 -- Financial Data Schedule II-7
----------------------
*To be filed by amendment.
(b) Financial statement schedules
All schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are either included in the
financial statements or are not required under the related instructions or are
inapplicable, and therefore have been omitted.
Item 17. Undertakings
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3)
of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental change
in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume
of securities offered (if the total dollar value of securities
offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum
offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than 20 percent
change in the maximum aggregate offering price set forth in
"Calculation of Registration Fee" table in the effective
registration statement;
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in the
registration statement or any material change to such information
in the registration statement; and
(iv) To reflect the results of this offering.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof. (3) To
remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination
of the offering.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to provisions described in Item 14 above, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned registrant hereby undertakes (1) to provide to the
underwriters at the closing specified in the underwriting agreement certificates
in such denominations and registered in such names as required by the
underwriters to permit prompt delivery to each purchaser; (2) that for purposes
of determining any liability under the Act, the information omitted from the
form of prospectus filed as part of a registration statement in reliance upon
Rule 430A and contained in the form of prospectus filed by the registrant
pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act shall be deemed to be
part of this registration statement as of the time it was declared effective;
and (3) that for the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
The undersigned registrant hereby undertakes to supplement the prospectus,
after the expiration of the subscription period, to set forth the results of the
subscription offer, the transactions by the underwriters during the subscription
period, the amount of unsubscribed securities to be purchased by the
underwriters, and the terms of any subsequent reoffering thereof. If any public
offering by the underwriters is to be made on terms differing from those set
forth on the cover page of the prospectus, a post-effective amendment will be
filed to set forth the terms of such offering.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Somerset, New Jersey on November 6,
2000.
PARTNERS IN CARE, CORP.
By: /s/ Dennis G. Wilson
------------------------------
Dennis G. Wilson, President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Dennis G. Wilson his true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him and in his name, place and stead, in any and all capacities, to sign any
and all amendments (including post-effective amendments) to this Registration
Statement, and to file the same, with all exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission and any
other regulatory authority, granting unto said attorney-in-fact and agent full
power and authority to do and perform each and every act and thing requisite and
necessary to be one in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signatures Title(s) Date
---------- -------- ----
/s/ Bernard J. Kelly Chairman of the Board November 6, 2000
............................
Bernard J. Kelley
/s/ Steven C. Goldberg, M.D. Director November 6, 2000
............................
Steven C. Goldberg, M.D.
Director
............................
Frank J. Ryan
Director
............................
Mauro Tucci, M.D.
/s/ Robert E. Campbell Director November 6, 2000
............................
Robert E. Campbell
Director
............................
Rev. Mgr. William Capik
/s/ John E. Mastuska Director November 6, 2000
............................
John E. Mastuska
/s/ John J. Hoagland Director November 6, 2000
............................
John J. Hoagland, Esq.
/s/ Louis Diemer, M.D. Director November 6, 2000
............................
Louis Diemer, M.D.
Director
............................
Steven Lenger, M.D.
Director
............................
Marc Malberg, M.D.
/s/ John J. Nevins, III, D.O. Director November 6, 2000
............................
John J. Nevins, III, D.O.
/s/ Warren A. Sweberg, M.D. Director November 6, 2000
............................
Warren A. Sweberg, M.D.
Director
............................
Roger Birnbaum
/s/ Dennis G. Wilson President and Chief
Executive Officer November 6, 2000
............................ and Director
Dennis G. Wilson
/s/ Kevin S. O'Brien Executive Vice President,
Chief Operator Officer November 6, 2000
............................ Operating Officer
Kevin O'Brien
/s/ Bruce Dees Executive Vice President, November 6, 2000
............................ Business Development
Bruce Dees
<PAGE>
Exhibit 23
Consent of Independent Certified Public Accountants
Partners in Care, Corp.
We hereby consent to the incorporation by reference in the Prospectus
constituting a part of this Registration Statement on Form S-1 of our report
dated March 2, 2000, accompanying the financial statements of Partners in Care,
Corp. (the "Company") as of December 31, 1999, and for each of the years then
ended.
WithumSmith + Brown, P.C.
New Brunswick, New Jersey
December 4, 2000
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
---------- -----------
* 3.1 -- Articles of Organization of the Company
* 3.2 -- By-laws of the Company
* 5.1 -- Opinion of Greenbaum, Rowe, Smith, Ravin, Davis &
Himmel LLP
* 10.1 -- Incentive and Nonqualified Stock Option Plan
23.1 -- Consent of WithumSmith + Brown, P.C II-6
* 23.2 -- Consent of Greenbaum, Rowe, Smith, Ravin, Davis &
Himmel LLP (to be included in Exhibit 5.1)
24.1 -- Power of Attorney (included on signature page) II-3
27.1 -- Financial Data Schedule II-7
-----------------------
*To be filed by amendment.
