SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[x] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [Fee required]
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For the fiscal year ended December 31, 1995
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OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [No fee required]
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For the transition period from to
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Commission file number 0-14236
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HEALTHPLEX, INC.
----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 11-2714365
- ------------------------- ------------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
60 Charles Lindbergh Blvd., Uniondale, New York 11553
- ----------------------------------------------- -------
(Address of principal executive offices) (Zip Code)
(516) 794-3000
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(Issuer's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange
Act: None
Securities registered pursuant to Section 12(g) of the Exchange
Act:
Common Stock, par value $.001 per share
---------------------------------------
(Title of Class)
Check whether the registrant (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No
----- ---
Check if there is no disclosure of delinquent filers pursuant to
Item 405 of Regulation S-B contained in this form, and no
disclosure will be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [ ]
The registrant's revenues for the most recent fiscal year were
$11,356,640.
As at March 15, 1996, 3,586,682 shares of Common Stock of the
registrant were outstanding. The aggregate market value of the
1,890,164 shares of Common Stock held by non-affiliates as of
such date was $1,535,758.
PART I
ITEM 1. DESCRIPTION OF BUSINESS.
-----------------------
General
- -------
Healthplex, Inc. (the "Company" or "Healthplex") is a
Delaware corporation and the successor by merger of Dentshield,
Inc., a New York corporation organized on March 26, 1981. The
Company's address is Nassau West Corporate Center I, 60 Charles
Lindbergh Boulevard, Uniondale, New York 11553 and its telephone
number there is (516) 794-3000.
The Company renders marketing, claims processing, electronic
data processing, printing and related services to Dentcare
Delivery Systems, Inc. ("Dentcare"), a dental health company, and
operates a second plan through a wholly-owned subsidiary,
International Healthcare Services, Inc. ("IHS" and together with
Dentcare, the "Plans"). The Company also provides administrative
services to certain unaffiliated dental plans on an
"administrative services only" basis.
The Company's wholly-owned subsidiary, OASYS. Corporation,
develops document imaging systems, including hardware and
software components, and markets these systems to hospitals,
insurance companies and small businesses. O.A.SYS. derives
revenues from consulting fees, software development fees and from
dealer margins resulting from resales of imaging hardware
equipment manufactured by third-party vendors.
A significant portion of the Company's revenues are derived
from its service arrangement with Dentcare and from the Company's
operation of IHS. The Company renders consulting, data systems,
claims processing, marketing, printing and other services to the
Plans pursuant to Service Agreements between the Company and each
of the Plans. The Company's Service Agreement with Dentcare
provides for compensation to the Company based upon various fee
components designed to allocate reasonably the various costs of
providing services. The fee may not exceed that permitted by
applicable law. See "Government-Regulation - General." Service
fee income is generally determined as a percentage of premium
income of the related Plan. The Company is responsible for
collection of bills and accounts receivable, establishing and
maintaining records and books of accounts, processing and payment
of claims, marketing, preparation of annual budgets (including
setting forth major operating objectives, anticipated revenues,
expenses, cash flow and capital expenditures), management of all
purchases and leases of equipment (with delegated authority to
commit for purchases or leases of up to $5,000), obtaining
general liability insurance, review of employee benefit plans,
design and implementation of utilization programs and cost
control measures, professionalism and quality control systems,
2
banking, contract negotiations and overall responsibility for
administrative functions.
Each Service Agreement is for a term of three years and is
automatically renewable for additional one-year periods upon
notice given two years in advance. Dentcare may terminate the
Service Agreement by furnishing written notice thereof to the
Company on or before the anniversary date of the Service
Agreement. Such termination would be effective two years after
the applicable anniversary date. The Service Agreements may be
terminated by either party, among other reasons, for cause upon
60 days prior written notice.
The Service Agreement with Dentcare ends automatically if
Dentcare's authority to operate a dental health service program
is terminated and ends on 15 days' written notice if the parties
determine that their best interests cannot be served by
modifications to the Service Agreement required by the applicable
State Insurance Department.
The Company also derives premium revenues from the pre-paid
dental plan operations of its wholly-owned subsidiary, IHS.
The Company also provides administrative services, primarily
claims processing and related electronic data processing
services, to unaffiliated dental plans. The administrative
services only business enables the Company to utilize the excess
capacity of its electronic data processing capabilities. The
Company typically charges a per claim handling fee for processing
these claims. The administrative services only business is
attractive since the Company is not subject to the same risks
which exist in those instances where the Company's affiliates
undertake an underwriting risk in providing fee-for-service or
capitation programs.
ELECTRONIC DATA PROCESSING SERVICES
As an integral part of its services, the Company renders
information and image processing services to its Plans and to
unaffiliated businesses. The Company's EDP functions are
provided in-house with a Data General 6240 Series Computer with
128 megabytes of memory and over 16 billion bytes of disk space.
The Company has developed its own software using an SQL Fourth
Generation Language and an Oracle Database. Over 60 terminals
are in use with unlimited expansion capabilities. The Company
also utilizes an Oasys document imaging system with PC
workstations and a Hewlett-Packard 144 disk optical autochanger.
MARKETING
The Company markets its services through its own employees
and through marketing arrangements with third parties. The
Company's marketing efforts traditionally have entailed
convincing groups to switch from existing dental plans to those
3
of the Plans or convincing groups to join a dental plan. This
marketing effort involves a two-tier process in which the Company
must first convince a group to contract with a Plan to make plan
participation available to the members of the group and, if this
external marketing is achieved, the Company must then convince
potential subscribers and enrollees to participate in the Plan.
These marketing efforts typically involve significant marketing
costs incurred over a period of several months prior to
realization of revenues derived from such efforts.
THE PLANS - GENERAL
Dentcare is a New York not-for-profit corporation. Pursuant
to its charter and by-laws, Dentcare has no stockholders or
members as such. IHS is a New Jersey for profit business
corporation and is wholly-owned by Healthplex.
Dentcare is authorized to furnish health expense indemnity
under Article 43 of the New York Insurance Law, and provides
prepaid dental insurance programs and fee-for-service programs to
groups and to individuals in New York State. Under a prepaid
plan, the dentist is compensated on the basis of the number of
enrolled patients, regardless of the extent of services
performed. Under a fee-for-service, or indemnity program, the
dentist is paid fees for the performance of various dental
procedures. Dentcare's primary service area consists of New York
City and surrounding counties.
IHS is authorized by the New Jersey Department of Insurance
to act as a "dental plan organization" in the State of New
Jersey. IHS provides prepaid dental plans to groups and
individuals and is a wholly-owned subsidiary of the Company. As
such, the financial statements of the Company contained elsewhere
herein include the consolidated statements of IHS.
At March 15, 1996, Dentcare and IHS had 83,445 and 24,197
members, respectively, and the Company serviced 85,320 members on
an administrative service only basis.
PREPAID PLANS
Under the prepaid dental plans of both Dentcare and IHS,
monthly premiums are collected on behalf of Dentcare and IHS from
the groups and are paid to participating dentists, or providers,
after deduction of expenses paid by Dentcare or IHS or charged by
the Company in accordance with its Service Agreement. Such
payments to the provider are commonly referred to as capitation
fees. Under the Company's capitation fee program, the capitation
fee is a fixed monthly fee based only on the number of
subscribers enrolled with a particular provider without regard to
the number of patient visits or types of work performed. The
Company believes that the capitation fee concept provides
significant incentive for providers to practice preventive
dentistry. If the provider actively improves the dental health
4
of his patients, the provider's work load decreases, thereby
improving the provider's profitability and margins.
Specialized dental services, such as orthodontics,
endodontics, periodontics and oral surgery are provided through
specialists with whom the Company contracts on behalf of the
Plan.
Dentcare and IHS offer several different plans for
subscribers, principally groups such as unions, associations,
school systems, law enforcement agencies, municipalities and
pension benefit organizations. As of March 15, 1996, Dentcare
had 1,274 subscribing groups and IHS had 949 subscribing groups
for prepaid dental plan programs.
Under the prepaid plans of Dentcare and IHS there is no pre-
enrollment examination of the enrollee. The plans accept the
existing condition of each of the subscribers and their
dependents. There are no deductible amounts prior to coverage
under the plan, maximum limitations on coverage(s) provided under
the plan contract or pre-authorizations as commonly required by
indemnity insurance carriers for treatment. In addition, neither
the provider, group nor subscriber is burdened with submitting
insurance claim forms.
The Dentcare and IHS form of group dental agreements do not
cover fixed and removable prosthetic devices and orthodontic
services. However, Dentcare and IHS offer prosthetic and
orthodontic service options to groups through providers and
specialists with whom the applicable plan contracts, up to dollar
amounts specified in the individual plan. The standard
arrangement generally requires subscribers to share in the cost
of such services.
FEE-FOR-SERVICE PLAN
Dentcare is authorized to provide fee-for-service dental
plans in New York.
Under the fee-for-service dental plan operating in New York,
enrollees are entitled to reimbursement for certain dental
procedures performed based upon a specified schedule of fees for
services. Enrollees are entitled to select dentists of their
choice and are not restricted to providers participating in
Company managed plans.
Under its fee-for-service plans, Dentcare reimburses for all
types of dental services based upon specified schedules of fees
for services and the Company provides claims processing services
to facilitate reimbursement for services performed. Fee
schedules are provided to each subscriber with the subscriber's
plan contract. The schedules are filed with the New York
Insurance Department. Such schedules are subject to change at
such time as a subscriber's contract is renewed. The Company
undertakes all responsibility for claims processing and
professional review of claims presented for payment on behalf of
Dentcare and Garden State.
5
PROVIDERS
Neither the Company, Dentcare nor IHS engages in the
practice of dentistry, providing of professional dental services
or the operation of dental offices or facilities. Dental
services are provided by practicing dentists, providers, who
enter into participating dentist agreements with Dentcare or IHS.
Under the standard participation agreement, the participating
dentist represents that he or she is a duly licensed dentist, has
professional malpractice liability insurance, agrees to provide
necessary dental services to enrollees and agrees not to
differentiate or discriminate in treatment of patients by reason
of their status as enrollees. The providers are compensated on a
monthly basis by payment of a capitation fee per enrollee equal
to proceeds of dental premiums less administrative expenses and
costs for specialty dental services.
The providers furnish dental services to enrollees at their
own dental facilities and may continue to treat their own
patients on a fee-for-service basis. The providers are regulated
by the Boards of Dental Examiners of their respective states of
practice.
QUALITY ASSURANCE PROCEDURES
Dentcare and IHS each has a Professional Standards Committee
("Standards Committee"), which is responsible for reviewing the
quality, appropriateness and costs of dental care delivered by
the providers to the enrollees. Each Standards Committee is
composed of several participating providers. The Committee
reviews the adequacy of the physical facilities, staffing and
equipment of each provider office. Prior to entering into a
contractual relationship with any provider, the Company
determines whether the potential provider has adequate education,
appropriate board certification by the applicable Board of Dental
Examiners and proper licensing. See "Government Regulation." The
Plans do not accept providers who have had their licenses
suspended or revoked. The Committee also inspects the potential
provider facility to determine whether the facility, staffing and
equipment comply with minimum standards. A random sample of the
provider's dental records are reviewed to assure that records are
comprehensive and complete. The Committee performs periodic
dental audits and surveys of selected providers to determine the
quality and dollar value of care rendered by the provider to the
enrollees. The audits are based on review of patient dental
records and utilization and service reports. The results of the
dental audits are furnished to the provider in reports that
describe the scope of the review, problems and deficiencies,
suggestions for corrective actions and notification of reaudits
to determine the effectiveness of corrective actions which are to
be implemented by the Plan and/or the provider.
The Committee reviews the utilization of certain services by
the subscriber in relationship to the premium fees in order to
6
evaluate the adequacy of the capitation fees paid to the provider
and whether the services provided are being rendered in an
efficient and cost effective manner. The providers are required
to maintain utilization statistics of services rendered to the
Plans' enrollees which reports are collected on a monthly basis.
Rules and regulations under the applicable New York and New
Jersey statutes require internal review of dental care delivered
to the consumer. The procedures described above are believed by
Management to be adequate to insure the quality and control of
dental services. Management also believes that the quality
assurance procedures which are set forth hereinabove are in
compliance with the statutes, rules and regulations which will
govern the prepaid fee-for-service dental plans which are
intended to be affiliated with and organized by the Company in
the future.
GOVERNMENT REGULATION
Prepaid dental plans and fee-for-service dental plans are
subject to statutes, rules and regulations in each state in which
a plan operates.
The applicable rules and regulations of New York and New
Jersey provide specific limitations on the dollar amount of
expenditures which the Company may charge its Plans for service
and other fees. The balance of premiums must be remitted to the
provider, as capitation fees or fees for specific procedures.
Under Article 43 of the New York Insurance Law, a dental
expense indemnity corporation such as Dentcare may not disburse
for all expenses other than benefit payments more than 20% for
the first $1,000,000 of annual premiums, declining by 1% for each
additional $5,000,000 or fraction thereof of additional premiums
to 15%.
Under the New Jersey Dental Plan Organization Act, IHS may
expend up to 20% of its income for general expenses, acquisition
expenses and miscellaneous taxes, licenses and fees.
The marketing, management, advertising, legal, accounting
and general administrative expenses charged by Healthplex to its
Plans will be included in the various expense limitations
described above.
In addition to regulation of the Company's business and
proposed operations by statutes regulating prepaid dental plans
and fee-for-service dental plans, the practice of dentistry in
the United States is regulated by state statutes, rules and
regulations of state dental boards and voluntary associations. In
New York and New Jersey, respective Boards of Dental Examiners
regulate all dentists licensed to practice dentistry. Complaints
lodged against dentists regarding fitness to practice dentistry
7
are subject to review by the Board of Dental Examiners. These
Boards are authorized to withdraw a dentist's license if it deems
such action to be appropriate. Guidelines are also established
for dentists in connection with the manner in which they must
operate and advertise dental facilities.
Applicable regulations provide that a dentist can be denied
the right to act as a provider of dental services if the dentist
fails to meet the requisite standards pursuant to applicable
regulations and rules.
INSURANCE COVERAGE
Providers who contract with a Plan are required to maintain
malpractice insurance which provides coverage per individual
claim in an amount not less than $100,000 per person and $300,000
per year. In Management's opinion this insurance coverage will
be sufficient to cover potential claims in light of the nature of
the services performed. Directors and officers of the Company
are covered by directors' and officers' indemnification
insurance. The Company also maintains customary casualty and
liability insurance.
COMPETITION
Management believes that its largest competitors are
traditional insurance carriers, including Aetna Life Insurance
and Annuity Company, Metropolitan Life Insurance Co., The
Prudential Insurance Company of America, The Guardian and
Connecticut General Insurance Company Corp.
Management believes that most dental insurance coverage in
New York and New Jersey, as well as in the rest of the United
States, is provided through indemnity insurance. To date, such
dental insurance coverage has obtained substantially greater
market penetration than prepaid dental plans and is sponsored by
major insurance companies which have greater financial and other
resources than the Company. The Company believes that its
prepaid dental plans provide several advantages over traditional
indemnity or fee-for-service insurance programs.
Management believes that dental patients generally pay less
through prepaid dental plans than through indemnity insurance
companies since fee-for-service insurance, as customarily
provided by insurance carriers, generally has monetary limits on
its coverage and deductible amounts prior to coverage. In
addition, Management believes that private dentists' charges are
generally higher than the co-payments charged by plan providers.
The Plans may also compete with health maintenance
organizations ("HMOs") which include dental plans. In the New
York and New Jersey areas, U.S. Healthcare, Oxford and PruCare
are currently offering prepaid dental plans. There is no
assurance that the prepaid and fee-for-service dental plans of
8
the Plans will obtain general market acceptance with consumers,
or that prepaid and fee-for-service dental plans will be able
successfully to compete against large commercial insurance
carriers.
EMPLOYEES
As of December 31, 1995, the Company had 53 full-time and
11 part-time employees. Seven employees are engaged in
electronic data process services, five in managerial positions,
three in marketing and 38 in general, administrative and support
positions. The employees of the Company are not subject to
collective bargaining and the Company does not have a profit
sharing or retirement plan for employees. The Company believes
its labor relations are good.
ITEM 2. DESCRIPTION OF PROPERTY.
-----------------------
The Company leases approximately 10,168 square feet of
executive and administrative offices in Uniondale, New York. The
lease expires on January 31, 2003. The base annual rent is
$230,952.00, plus real estate taxes, for the rental year ended
January 31, 1996, with an increase of 4% each rental year
thereafter during the term of the lease.
ITEM 3. LEGAL PROCEEDINGS.
-----------------
There are no material pending legal proceedings, other than
ordinary routine litigation incidental to the business, to which
the Company or any of its subsidiaries is a party or by which any
of their properties is subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
----------------------------------------------------
No matters were submitted during the fourth quarter of
fiscal 1995 to a vote of security holders.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER
--------------------------------------------------------------
MATTERS.
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The Company's Common Stock is traded in the over-the-counter
market under the National Association of Securities Dealers
Automated Quotation System ("NASDAQ") under the symbol HPLX. The
following table sets forth the high and low bid prices in the
NASDAQ system for the Common Stock for each calendar quarter
indicated, as reported by NASDAQ. The prices represent
quotations between dealers and do not include certain mark-ups,
mark-downs or commissions, and do not necessarily represent actual
transactions.
9
Common Stock
------------
High Low
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Calendar 1994
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First quarter 3 1 7/8
Second quarter 4 1 3/4
Third quarter 2 1/2 1 3/4
Fourth quarter 2 1 1/16
Common Stock
------------
High Low
---- ---
Calendar 1995
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First quarter 1 9/32 1
Second quarter 1 1/2 7/8
Third quarter 1 11/16 1 1/16
Fourth quarter 1 1/8 3/4
Based upon information provided by the Company's transfer
agent, as of March 15, 1996, the Company had 128 stockholders of
record. The Company believes that there are in excess of 500
beneficial holders of the Company's Common Stock.
The Company has paid no dividends to date and it does not
anticipate paying dividends in the foreseeable future. It is
expected that the Company will retain earnings, if any, to
finance the development and expansion of its business.
10
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS.
---------------------
For The Years Ended December 31, 1995 and 1994
- ----------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
Net income decreased to $70,926 during 1995 as compared to
$91,128 during 1994. Gross margins increased 2.8% or $99,054 to
$3,667,501 during 1995 as compared to $3,568,447 during 1994.
Contributing to this increase in gross margin was an increase in
administrative service income of $139,961 resulting from the
fruition of continuing marketing efforts to obtain new
administrative business. Gross margins from service revenues
decreased to 55.5% during 1995 from 55.0% during 1994. Gross
margins from premium income decreased to 16.8% during 1995 from
17.4% during 1994, primarily as a result of increased claims
utilization.
The Company recognized interest and dividend income of
$120,533 during 1995 as compared to $109,668 during
1994,resulting from the Company's decision to commit a greater
portion of its cash in short-term investments over the last two
years.
LIABILITY AND CAPITAL RESOURCES
- -------------------------------
During 1995, the Company had a decrease in cash and cash
equivalents of $33,291. Operating activities accounted for a
$259,541 increase in cash and $4,996 was provided by a decrease
in short-term investments. These increases were offset by, among
other things, repayment of $132,217 of long-term bank debt and
the purchase of fixed assets of $163,242.
11
ITEM 7. FINANCIAL STATEMENTS.
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LIBERO & KAPPEL
CERTIFIED PUBLIC ACCOUNTANTS
57 OLD COUNTRY ROAD
WESTBURY, NY 11590
(516) 333-5511
INDEPENDENT AUDITOR'S REPORT
----------------------------
To the Board of Directors and Stockholders of
Healthplex, Inc.
60 Charles Lindbergh Boulevard
Uniondale, New York 11553
We have audited the consolidated balance sheets of Healthplex, Inc. and
Subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of operations, stockholders' equity and cash
flows for the years then ended. These financial statements are
the responsibility of the Company'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 audited
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statement referred to above
present fairly, in all material respects, the consolidated financial
position of Healthplex, Inc. and Subsidiaries as of December 31, 1995 and
1994, and the results of their operations and their cash flows for the years
then ended in conformity with generally accepted accounting principles.
Libero & Kappel
Westbury, New York
March 20, 1996
12
HEALTHPLEX, INC. & SUBSIDIARIES
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CONSOLIDATED BALANCE SHEETS
- ---------------------------
AS OF DECEMBER 31, 1995 AND 1994
- --------------------------------
ASSETS 1995 1994
- ------ --------- ---------
Current assets:
- ---------------
Cash and cash equivalents $ 440,989 $ 474,280
Investments-available for sale (note 5) 691,509 621,049
Accounts receivable 426,459 349,128
Note receivable - current portion (note 17,050 26,916
4)
Other receivables 22,933 19,717
Prepaid expenses 0 5,861
--------- ---------
Total current assets 1,598,940 1,496,951
Fixed assets, net of depreciation 867,890 758,715
(notes 2 & 3)
Note receivable - less current portion 77,533 73,054
(note 4)
Investments-available for sale (note 5) 758,243 722,516
Security deposits 24,138 16,382
Goodwill, less accumulated amortization
of $10,832 in 1995 and $9,478 in 1994 16,251 17,605
Other assets 7,278 14,433
Loan to Dentcare Delivery Systems, Inc. 515,820 515,820
(note 10)
--------- ---------
$ 3,866,093 $ 3,615,476
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
- --------------------
Accounts payable $ 437,126 $ 387,847
Current portion of capitalized lease 140,391 107,697
obligations (note 6)
Accrued expenses and taxes 179,462 184,569
Due to Dentcare Delivery Systems, Inc. 134,199 120,110
Federal Income tax payable (notes 2 & 7) 35,748 52,291
--------- ---------
Total current liabilities 926,926 852,514
Capitalized lease obligations, less 160,104 161,546
current portion (note 6)
Deferred Federal income tax payable 37,941 42,403
(notes 2 & 7)
--------- ---------
Total liabilities 1,124,971 1,056,463
Commitments and Contingencies (note 8)
Stockholders' equity:
Common stock $.001 par value, authorized
20,000,000 shares; issued & outstanding
3,586,682 in 1995 and 1994 3,587 3,587
Paid-in capital 1,971,328 1,971,328
Unrealized gain (loss) on investments- 39,249 (71,934)
available for sale
Retained earnings 726,958 656,032
--------- ---------
Total stockholders' equity 2,741,122 2,559,013
--------- ---------
$ 3,866,093 $ 3,615,476
--------- ---------
--------- ---------
The accompanying notes are an integral part of the financial statements.
13
HEALTHPLEX, INC. & SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF OPERATIONS
- -------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
- ----------------------------------------------
Revenues 1995 1994
- -------- ---------- ----------
Service fee income (note 10)$ 2,253,903 2,284,035
Administrative service income 2,222,163 2,082,202
---------- ----------
Total service fee income 4,476,066 4,366,237
Premium income 6,801,010 6,238,706
Sales-computer services 79,564 109,265
---------- ----------
Total revenues 11,356,640 10,714,208
---------- ----------
Cost of Revenues
- ----------------
Direct expenses - related to service fees 1,991,921 1,919,604
Dental expenses - related to premium income 5,658,191 5,155,693
Cost of sales-computer services 39,027 70,464
---------- ----------
7,689,139 7,145,761
---------- ----------
Gross Margin on Revenues 3,667,501 3,568,447
- ------------------------ ---------- ----------
Interest expense 39,293 32,061
Selling, general and administrative expense 3,649,267 3,439,447
---------- ----------
3,688,560 3,471,508
---------- ----------
Income (loss) from operations (21,059) 96,939
Other income (expenses)
(Loss) on sale of securities 0 (21,546)
Dividend income 16,492 37,678
Interest income 104,041 71,990
Miscellaneous (7,155) (2,463)
---------- ----------
Income before income taxes 92,319 182,598
Provision for income taxes (notes 2 & 7) 21,393 91,470
---------- ----------
Net income 70,926 91,128
---------- ----------
---------- ----------
Earnings per share (note 2)
Primary 0.02 0.03
---------- ----------
---------- ----------
Fully diluted 0.02 0.03
---------- ----------
---------- ----------
Weighted average number of shares
of common stock outstanding
Primary 3,586,682 3,586,682
---------- ----------
---------- ----------
Fully diluted 3,627,500 3,627,500
---------- ----------
---------- ----------
The accompanying notes are an integral part of the financial statements.
14
HEALTHPLEX, INC. & SUBSIDIARIES
- -------------------------------
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
- -----------------------------------------------
Unrealized
Gain (Loss)
Common Paid-In On Retained
Stock Capital Investments Earnings Total
----- --------- ----------- -------- ----------
Bal., December 31, 1993 3,587 $ 1,971,328 $ 0 $ 564,904 $ 2,539,819
- -----------------------
Net income for the year
ended December 31, 1994 0 0 0 91,128 91,128
Unrealized (loss) on investments
available for sale 0 0 (71,934) 0 (71,934)
----- --------- -------- ------- ----------
Bal., December 31, 1994 3,587 1,971,328 (71,934) 656,032 2,559,013
- -----------------------
Net income for the year
ended December 31, 1995 0 0 0 70,926 70,926
Unrealized gain on investments
available for sale 0 0 111,183 0 111,183
----- --------- -------- ------- ----------
Bal., December 31, 1995 $ 3,587 $ 1,971,328 39,249 $ 726,958 $ 2,741,122
- ----------------------- ----- --------- ------- ------- ----------
----- --------- ------- ------- ----------
The accompanying notes are an integral part of the financial statements.
15
HEALTHPLEX, INC. & SUBSIDIARIES
- -------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
- -------------------------------------
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
- ----------------------------------------------
1995 1994
-------- --------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
Cash flows from operating activities:
Net income $ 70,926 $ 91,128
Adjustments to reconcile net income
(loss) to net cash
provided by operating activities:
Depreciation and amortization 218,890 247,762
(Increase) decrease in:
Accounts receivable (77,331) (7,718)
Other receivables (3,216) (1,691)
Due from plans 0 6,000
Prepaid expenses 5,861 6,055
Other assets 7,155 2,463
Increase (decrease) in:
Accounts payable 49,279 (46,294)
Accrued expenses and taxes (5,107) 126,711
Due to Dentcare Delivery Systems, 14,089 (88,084)
Inc.
Federal income tax payable (16,543) 52,291
Deferred federal income tax payable (4,462) (5,797)
-------- --------
Net cash provided by operating activities 259,541 382,826
-------- --------
Cash flows from investing activities:
Security deposits (7,756) 22,000
Capital expenditures (163,242) (95,028)
Sale of investments 4,996 17,006
Reduction of notes receivable 5,387 10,355
--------- --------
Net cash used in investing activities (160,615) (45,667)
Cash flows used in financing activities:
Repayment of long-term debt (132,217) (107,697)
--------- ---------
Net increase (decrease) in cash (33,291) 229,462
Cash and cash equivalents at beginning of 474,280 244,818
year --------- ---------
Cash and cash equivalents at end of year $ 440,989 $ 474,280
--------- ----------
--------- ----------
Supplemental disclosures of cash flows
Cash paid during the year for:
Interest $ 39,293 $ 32,061
--------- ----------
--------- ----------
Income taxes $ 51,560 $ 16,735
--------- ----------
--------- ----------
Schedule of non-cash investing and
financing transactions:
Unrealized gain (loss) on investments $ 111,183 $ (71,934)
available for sale ---------- ----------
---------- ----------
Purchase of equipment with capitalized $ 163,470 $ 0
lease obligation ---------- ----------
---------- ----------
The accompanying notes are an integral part of the financial statements.
16
HEALTHPLEX, INC. & SUBSIDIARIES
- -------------------------------
NOTES TO FINANCIAL STATEMENTS
- -----------------------------
NOTE 1: NATURE OF BUSINESS
- --------------------------
The Company and its subsidiaries furnish marketing, claims processing,
electronic data processing, printing, consulting and related services
under an exclusive agreement with an affiliated dental health service
corporation, Dentcare Delivery Systems, Inc. ("Dentcare"). The Company
operates a second plan through a wholly-owned subsidiary, International
Healthcare Services, Inc. (together, "The Plans"). The Company also
provides services to other plans on an administrative services only
basis. OASYS Corporation (OASYS) is a wholly-owned subsidiary that
markets document imaging systems, including hardware and software
components.
Most of the Company's business activity is with customers located in
New York and New Jersey. A significant portion of the revenues that the
Company reports are derived from the Plans. The Company has entered
into service agreements with the Plans, subject to provisions providing
for annual renewal. The termination of the service agreements would
have a material adverse effect on the business of the Company.
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- --------------------------------------------------
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of the
Company and its wholly-owned subsidiaries International Healthcare
Services, Inc.; and OASYS Corporation. All intercompany transactions
and accounts have been eliminated.
Cash and Cash Equivalents
-------------------------
For purposes of the statements of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months
or less to be cash equivalents.
Allowance for Doubtful Accounts
-------------------------------
The Company considers accounts receivable to be fully collectible;
accordingly, no allowance for doubtful accounts is required.
Fixed Assets
------------
Property and equipment are carried at cost. Depreciation for financial
reporting purposes is on a straight-line basis over the estimated
useful lives of the assets.
Expenditures representing maintenance and repairs are charged to
operations as incurred. Major expenditures, renewals and betterments
are capitalized and depreciated over their useful life. At the time
properties are retired or otherwise disposed of, appropriate
adjustments are made in property accounts and the gain or loss is
reflected in operations.
17
HEALTHPLEX, INC. & SUBSIDIARIES
- -------------------------------
NOTES TO FINANCIAL STATEMENTS
- -----------------------------
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
- -------------------------------------------------------------
Revenue Recognition
-------------------
The Company derives revenues from the exclusive service agreements it
has entered into with the plans. Under these agreements, the service
fee revenue permitted to the Company is determined by applicable state
law (a percentage of premium revenue of the applicable Plan). Premium
income and administrative service income are recognized on an as billed
basis according to the contracts with each group. Sales of computer
services are recognized when the sale is made.
Income Taxes
------------
The provision for income taxes include federal and state taxes currently
payable and deferred taxes arising from temporary differences between
financial and tax accounting income. These temporary differences
principally result from additional deductions available through the use
of accelerated depreciation methods for income tax accounting purposes.
Earnings Per Share
------------------
Primary earnings per share are computed based on the weighted average
number of shares of common stock outstanding during each year.
Fully diluted earnings per share are computed based on an increased
number of shares to be issued by the exercise of options.
Goodwill
--------
Goodwill represents the excess of the cost to acquire one of the
Company's subsidiaries over the fair value of its net assets at
acquisition and is being amortized over a twenty-year period.
Amortization expense charged to operations was $1,354 in 1995 and 1994.
Concentration of Credit Risk
----------------------------
Concentrations of credit risk with respect to accounts receivable are
limited due to the large number of customers comprising the Company's
customer base. The Company does not require collateral from its
customers.
The Company maintains cash balances with several banks, which frequently
exceed federally insured limits and invests its cash primarily in U.S.
Government backed securities.
Major Customers
---------------
The Company received more than 10% of its revenues from two customers
that accounted for approximately $4,500,000 of revenue in 1995 and 1994.
The Company has receivables of approximately $80,000 from one customer
which represents more than 10% of the Company's total receivables in
1995 and 1994.
18
HEALTHPLEX, INC. & SUBSIDIARIES
- -------------------------------
NOTES TO FINANCIAL STATEMENTS
- -----------------------------
NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
- -------------------------------------------------------------
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.
Reclassification
----------------
Certain accounts relating to the prior year have been reclassified to
conform to the current year presentation with no effect on previously
reported net income. These reclassifications relate primarily to
investments - available for sale and the corresponding equity component.
NOTE 3: FIXED ASSETS
- --------------------
1995 1994
---- ----
Fixed assets at December 31, consist of:
Furniture, fixtures & equipment $ 1,094,516 $ 1,358,024
Capitalized leased equipment 969,465 805,995
Leasehold improvements 43,598 40,129
Leasehold 38,853 38,853
--------- ---------
2,146,432 2,243,001
Accumulated depreciation and amortization 1,278,542 1,484,286
--------- ---------
$ 867,890 $ 758,715
--------- ---------
The annual depreciation rates used by the Company are as follows:
Furniture, -fixtures & equipment 5 - 8 Years
Capitalized leased equipment 8 Years
Leasehold improvements 5 Years
Leasehold 1 0 Years
Depreciation and amortization expenses charged to operations was
$218,890 and $247,762 in 1995 and 1994, respectively.
19
HEALTHPLEX, INC. & SUBSIDIARIES
- -------------------------------
NOTES TO FINANCIAL STATEMENTS
- -----------------------------
NOTE 4: NOTE RECEIVABLE
- -----------------------
1995 1994
-------- --------
Note receivable at December 31, consists of:
Compu-Lan Inc. monthly payments of $2,000
including interest at 10 %, due August 1, 1999. $94,583 $99,970
Less: current maturities 17,050 26,916
-------- --------
$77,533 $73,054
-------- --------
-------- --------
NOTE 5: INVESTMENTS
- -------------------
Investment securities consist of bond funds, governmental obligations
and United States Treasury Notes with a maturity of more than three
months when purchased.
The Company's investment securities are classified as "available-for-
sale". Accordingly, unrealized gains and losses are excluded from
earnings and reported in a separate component of stockholders' equity.
Realized gains or losses are computed on specific identification of the
securities sold.
Investment securities at December 31, consist of:
1995 1994
---------- -----------
U.S. treasury notes $ 731,931 $ 652,930
Governmental obligation 76,359 69,586
Bond funds 641,462 621,049
---------- ----------
$ 1,449,752 $ 1,343,565
---------- ----------
The following is an analysis of investment securities available for sale
Balance at amortized cost $ 1,410,503 $ 1,415,499
Gross unrealized gains 39,249 901
Gross unrealized losses 0 (72,835)
--------- -----------
$ 1,449,752 $ 1,343,565
--------- -----------
All investments available for sale which are classified as current
mature in 1996.
20
HEALTHPLEX, INC. & SUBSIDIARIES
- -------------------------------
NOTES TO FINANCIAL STATEMENTS
- -----------------------------
NOTE 6: LEASES
- --------------
The Company leases executive and administrative office space and
equipment under leases expiring at various dates through 2003. The
Company has classified its lease of executive and administrative office
space as an operating lease. This lease provides for an annual increase
of 4% throughout the entire term of the lease.
The Company capitalized its equipment leases and depreciates them over
the useful life of the assets. The corresponding lease obligations
reflect the present value of the future rental payments, discounted at
the interest rate implicit in the lease:
Future minimum lease payments for all leases at December 31, 1995 are as
follows:
Year Ended December 31, Operating Capital
---------------------- --------- --------
1996 239,420 182,364
1997 248,996 112,938
1998 258,956 43,514
1999 269,315 43,514
2000 280,088 10,878
Subsequent years 607,211 0
---------- ----------
Total minimum lease payments: $ 1,903,986 393,208
Less amount representing interest 92,713
---------
Present value of net minimum lease payments 300,495
Less current portion of obligations under
capital leases 140,391
---------
Capitalized lease obligations, less current portion $ 160,104
--------
The rent expense under the operating lease was $237,351 and $233,833 for
the years ended December 31, 1995 and 1994, respectively.
21
HEALTHPLEX, INC. & SUBSIDIARIES
- -------------------------------
NOTES TO FINANCIAL STATEMENTS
- -----------------------------
NOTE 7: INCOME TAXES
- --------------------
The provision for income taxes consisted of the following at December 31:
1995 1994
---- ----
Federal
Current $35,748 $64,116
Prior Year (32,955) 0
Deferred (4,462) (5,797)
State
Current 23,062 33,151
--------- ---------
$ 21,393 $ 91,470
--------- ---------
The provision for income taxes varies from the federal statutory income tax
rate due to the following at December 31,
1995 1994
---- ----
Federal statutory rate
applied to pre-tax income 39.0% 39.0%
State income taxes,
net of federal tax benefit 19.5 11.1
Prior years over accrual (35.7) 0.0
Other 0.4 0.0
------ ------
23.2% 50.1%
------ -------
NOTE 8: COMMITMENTS AND CONTINGENCIES
- -------------------------------------
On October 3, 1984, the Company entered into employment agreements with
Drs. Stephen J. Cuchel, Martin Kane, and Bruce H. Safran, each a founder,
principal stockholder, executive officer and director of the Company.
These agreements may be terminated by either party upon thirty days
written notice. Pursuant to these agreements, Drs. Cuchel, Kane and
Safran each devote substantially all of their time and efforts to the
business of the Company.
22
HEALTHPLEX, INC. & SUBSIDIARIES
- -------------------------------
NOTES TO FINANCIAL STATEMENTS
- -----------------------------
NOTE 9: STOCK OPTIONS
- ---------------------
1985 Incentive Stock Option Plan
--------------------------------
On April 1, 1985, the board of directors of the Company adopted an
incentive stock option plan pursuant to Section 422A of the Internal
Revenue Code. An aggregate of 300,000 shares of the Company's common
stock have been reserved for issuance under the plan.
The following is a summary of transactions:
Shares Under Option
-------------------
1995 1994
------ ------
Outstanding - beginning of year 32,818 32,818
Granted during the year 0 0
Canceled during the year 0 0
Exercised during the year 0 0
------ ------
Outstanding - end of year 32,818 32,818
====== ======
At December 31, 1995 and 1994, there were 32,818 and 32,818 shares,
respectively, excercisable at a price of $.60156250 per share.
1985 Non-Qualified Stock Option Plan
------------------------------------
On April 1, 1985, the Company adopted a non-qualified stock option plan.
An aggregate of 100,000 shares of the Company's common stock have been
reserved for issuance under this plan.
The following is a summary of transactions:
Shares Under Option
-------------------
1995 1994
----- -----
Outstanding - beginning of year 8,000 8,000
Granted during the year 0 0
Canceled during the year 0 0
Exercised during the year 0 0
-------- --------
Outstanding - end of year 8,000 8,000
===== =====
At December 31, 1995 and 1994, there were 8,000 and 8,000 shares
respectively, excercisable at a price of $.60156250 per share.
23
HEALTHPLEX, INC. & SUBSIDIARIES
- -------------------------------
NOTES TO FINANCIAL STATEMENTS
- -----------------------------
NOTE 9: STOCK OPTIONS, CONTINUED
- --------------------------------
1992 Stock Incentive Plan
-------------------------
On April 17, 1992, the Company reserved 1,500,000 shares of its common
stock to be used under this plan. Both incentive stock options and
non-qualified stock options, as defined under section 422 of the Internal
Revenue Code, may be issued under this plan.
The following is a summary of transactions:
Shares Under Plan
-----------------
1995 1994
------- -------
Outstanding - beginning of year 317,500 0
Granted during the year 317,500 317,500
Canceled during the year 317,500 0
Exercised during the year 0 0
--------- --------
Outstanding - end of year 317,500 317,500
======= =======
Eligible, end of year for exercise currently at prices ranging from
$1.089 to $1.1979 per share.
1992 Director Stock Incentive Plan
----------------------------------
On April 17, 1992 the Company reserved 500,000 shares of its common stock
to be used under this plan. Only non-qualified stock options as defined
under section 422 of the Internal Revenue Code, may be issued under this
plan.
The following is a summary of transactions:
Share Under Plan
----------------
1995 1994
------ ------
Outstanding - beginning of year 55,000 0
Granted during the year 55,000 55,000
Canceled during the year 55,000 0
Exercised during the year 0 0
------- -------
Outstanding - end of year 55,000 55,000
====== ======
Eligible, end of year for exercise currently at a price of $1.089
per share.
24
HEALTHPLEX, INC. & SUBSIDIARIES
- -------------------------------
NOTES TO FINANCIAL STATEMENTS
- -----------------------------
NOTE 9: STOCK OPTIONS, CONTINUED
- --------------------------------
On November 29, 1994 the Company granted an option to purchase 8,000
shares of the Company's common stock to a consultant to the Company.
These options were canceled on November 28, 1995. The Company then
granted an option to purchase 8,000 shares of the Company's common stock
to the same consultant on November 28, 1995. These new options are
exercisable at $1.089 per share and expire on November 27, 2005.
NOTE 10: DENTCARE DELIVERY SYSTEMS. INC.
- ---------------------------------------
On June 26, 1990, the Company advanced $250,000 to Dentcare Delivery
Systems, Inc. (Dentcare) as part of a loan of $561,377 with a stated
interest rate of 10% per year. The remainder of the loan was advanced
over the eighteen-month period subsequent to July 1, 1990 in equal
quarterly installments of $51,896.17. In addition, the Company advanced
additional funds aggregating $111,761 under the same terms during 1992.
No amounts have been advanced to Dentcare since 1992. Payment of
principal and/or interest on the loan is subject to the approval of the
Superintendent of Insurance of the State of New York and the availability
of excess funds. Due to the uncertainty as to Insurance Department
approval of payment of the interest, the Company has elected not to
recognize any interest income in the financial statements at this time.
Additionally, the Company expects to receive full payment of its loan to
Dentcare Delivery Systems, Inc. As such, no allowance has been provided
against this loan.
In February 1994, the New York State Insurance Department and Dentcare
entered into an agreement which required Dentcare to seek reimbursement of
certain expenses from the Company for expenses paid by Dentcare during
1985 and 1986, which were originally incorporated as part of the loan
between the Company and Dentcare. The Insurance Department agreed that
this reimbursement would be met by a reduction of the loan by the Company
to Dentcare. On February 23, 1994, the Company and Dentcare agreed to
this reimbursement.
Service fee income from this affiliate amounts to $2,253,903 and
$2,284,035 in 1995 and 1994, respectively.
NOTE 11: EMPLOYEE BENEFIT PLAN
------------------------------
The Company has adopted a 401 (K) plan which allows employees to defer a
percentage of their wages. The plan requires the Company to match 25% of
employee deferrals up to 5% of the employee's wages. The Company's
matching contribution was approximately $8,000 in 1995 and $11,000
in 1994.
25
HEALTHPLEX, INC. & SUBSIDIARIES
- -------------------------------
NOTES TO FINANCIAL STATEMENTS
- -----------------------------
NOTE 12: FAIR VALUE- OF FINANCIAL INSTRUMENTS
- ---------------------------------------------
Estimated fair values of the Company's financial instruments are as follows
at December 31:
1995 1994
---- ----
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ---------- ---------- ----------
Cash & short-term investments $ 1,102,498 $ 1,102,498 $ 1,095,329 $ 1,095,329
Receivables 117,516 117,516 119,687 119,687
Long-term investments 758,243 758,243 722,516 722,516
Capitalized lease obligations 300,495 300,495 269,243 269,243
The fair value of financial instruments classified as current assets or
liabilities approximate carrying value due to the short-term maturity of the
investment. The fair value of receivables approximates market. For long-term
investments, fair values are estimates based on quoted market prices. The
fair value of capitalized lease obligations is based on current rates at
which the Company could borrow funds with similar remaining maturities.
The fair value of the loan to Dentcare Delivery Systems, Inc. is not disclosed
because it is not practicable to estimate its fair value (note 10).
26
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE.
--------------------
None.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
-------------------------------------------------------------
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
-------------------------------------------------
Each of the Directors serves from the date of his election until the next
annual meeting of stockholders and until his successor is elected and
qualified. Officers serve at the discretion of the Board of Directors.
Information concerning the executive officers and directors of the
Company are set forth below:
Name Age Office Held
---- --- -----------
Stephen J. Cuchel 57 Chairman of the Board,
Co-Chief Executive Officer
and a Director
Martin Kane 56 President, Co-Chief Executive
Officer and a Director
Bruce H. Safran 46 Vice President, Secretary and a
Director
George Kane 52 Vice President, Treasurer
and a Director
Philip J. Rizzuto 52 Vice President, Management
Information Systems and
a Director
Douglas L. King 54 a Director
John Forte 53 Vice President and Chief
Accounting Officer
Dr. Stephen J. Cuchel has been Chairman of the Board, Co-Chief Executive
Officer and a Director of the Company for more than the past five years. He
is a Director of IHS, President of the American Dental Research Foundation, a
partner in a group dental practice with Drs. George Kane and Martin Kane,
Assistant Professor at New York University Medical Center and a lecturer at
C.W. Post Long Island University. He is a member of the 9th Dental Society,
North Eastern Conference of Health, Welfare and Pension Plans. He is also a
member of the board of directors of the Health Services Administration, Nassau
and Suffolk counties. Dr. Cuchel received a B.S. from Union College in 1960
27
and a D.D.S. from New York University College of Dentistry in 1964. He has
also completed post-graduate training at New York Institute of Clinical Oral
Pathology, and a residency at Long Island College Hospital in Anesthesiology
and Dentistry for Handicapped Children.
Dr. Martin Kane has been President, Co-Chief Executive Officer and a
Director of the Company for more than the past five years. He is also a
Director of IHS. He, with Drs. George Kane and Stephen Cuchel, operate a
group dental practice from four private offices in New York City and environs.
Between 1964 and 1976 he and Dr. Cuchel established various dental offices in
the New York metropolitan area. Dr. Kane received a B.S. from City College of
New York in 1960 and a D.D.S. from New York University College of Dentistry in
1964. He is a member of the American Dental Association, SED Professional
Fraternity for Continuing Education, Conference of Oral Medicine, North
Eastern Conference of Health, Welfare and Pension Funds and is dental care
adviser to Local 1125 Retail Menswear Union.
Dr. Bruce H. Safran has been a Secretary, Vice President and a Director
ofthe Company for more than the past five years. His duties include
professional relations and the marketing of image services. He is also
President and a Director of IHS (having served since 1981). Dr. Safran is
licensed to practice dentistry in New York and New Jersey, was a solo
practitioner between 1974 and 1982 and occasionally serves as a dental
consultant to private dental offices. Dr. Safran attended Ohio State
University between 1967 and 1970, received a D.D.S. in 1974 from the
University of Maryland and an M.B.A. in 1989 from the University of New
Haven. He is a member of the American, New York State and Nassau County
Dental Societies, as well as the American Health Information Management
Association, the American Records Management Association, the Self Insurance
Institute of America, the Council of Dental Benefit Processing Stardards, the
National Association of Dental Plans, the International Foundation of
Employee Benefit Plans and the Association for Information and Image
Management.
Dr. George Kane has been a Vice President and a Director of the Company
since July 1984, and has been Treasurer of the Company since February 1988.
He is a Director and Vice President of IHS. Together with his brother,
Martin Kane, and Stephen J. Cuchel, Dr. Kane operates a group dental practice
from four offices in New York City and environs. He is a member of the
American Dental Association, SED Professional Fraternity for Continuing
Education, Academy of General Dentistry, American Endodontic Society, American
Society of Preventive Dentistry and Yonkers New York Chamber of Commerce. He
received his B.A. from The State University, Rutgers, New Jersey in 1965 and a
D.D.S. from New York University College of Dentistry in 1969.
Philip J. Rizzuto has been a Director of the Company and Vice President
of Management Information Systems since March 1990. He was a Director, Chief
28
Executive Officer, Secretary and Treasurer of the Healthplex Computer Group
from December 1987 until July 31, 1993. His duties include providing
technical support services for in-house computer and imaging systems and
providing market support for all products. Prior thereto, and at various times
since 1982, he was a self-employed consultant to the Company and to other
companies. From August 1982 through 1986, Mr. Rizzuto was a Director and
Vice President of Management Information Systems for AGS International, Ltd.,
a privately-held concern. From 1981 to August 1982, Mr. Rizzuto was a Senior
Director of Information Systems for the New York City Transit Authority.
Mr. Rizzuto received his B.S., Cum Laude, in Computer Technology in 1975 from
New York Institute of Technology.
Douglas L. King has been a Director of the Company for more than the past
five years. Mr. King has also been President and Chief Executive Officer of
Smyth, Sanford and Gerard Reinsurance Intermediaries, Inc. and a director of
United States Surgical Corporation for more than the past five years. He is
also President and Chief Executive Officer of C.C. King & Co., Inc. Mr. King
received his B.A. in 1963 from Stanford University, his J.D. from Stanford
University in 1966 and a Masters of Philosophy from the University of London
in 1968. He is a member of the Association of the Bar of the State of
California.
John Forte has been with the Company for more than the past five years
and is a Vice President and Chief Accounting Officer of the Company. Since
July 1991, Mr. Forte has served as a Vice President of the Company. Mr.Forte
received his A.A.S. from Brooklyn College, New York in 1962 and his B.B.A.
from the City College of New York in 1966. He is a certified public
accountant and has been a member of the New York State Society of Certified
Public Accountants and A.I.C.P.A. since 1969. Mr. Forte also maintains a
private accounting practice for his own clients and devotes approximately one
day per week to such practice.
Drs. Martin Kane and George Kane are brothers.
Based on a review of the Forms 3 and 4, and any amendments thereto, filed
during the year ended December 31, 1995 by those individuals required to file
and furnish to the Company such reports and the written representation furnished
to the Company by each such individual that he is not required to file a Form 5,
the Company knows of no delinquent filing of, or failure to file, any such Form
which was required to be filed during such year other than the following: Mr.
Philip Rizzuto had one late report relating to one transaction and he was
unaware of the need to file at the relevant time. The transaction related to
the disposition of 75,000 shares in May 1995 in connection with a property
settlement with his former spouse, and Mr. Rizzuto accurately reported his
shareholdings in connection with a subsequent Form 4 filing made in connection
with an unrelated transaction. A Form 5 has been filed to report the May 1995
disposition of shares.
29
ITEM 10. EXECUTIVE COMPENSATION.
----------------------
The Summary Compensation Table below sets forth the compensation for
services paid or accrued for services in all capacities during the last three
fiscal years by the Company and its subsidiaries to the two Co-Chief Executive
Officers and the other most highly compensated executive officers whose annual
compensation exceeded $100,000:
SUMMARY COMPENSATION
Annual Compensation Long Term Compensation
------------------- ----------------------
Name and
Principal Position
- ------------------
Fiscal Options/ All other
Year Salary SARs (No.) Compensation1
------ -------- ---------- --------
Stephen J. Cuchel, 1995 $158,445 65,000 (2) $12,000
Chairman of the 1994 $140,861 65,000 $ 7,158
Board 1993 $122,180 -- $ 6,552
Co-Chief Executive
Officer and a
Director
Martin Kane, 1995 $158,185 65,000 (2) $ 8,900
President, 1994 $140,861 65,000 $ 7,676
Co-Chief Executive 1993 $122,524 -- $ 6,545
Officer and a
Director
Bruce H. Safran, 1995 $136,597 50,000 (2) $ 7,402
Vice President, 1994 $128,112 50,000 $ 8,820
Secretary and a 1993 $114,014 -- $ 3,632
Director
John F. Forte, 1995 $103,290 25,000 (2) $ 6,468
Vice President, 1994 $ 98,600 25,000 $ 5,768
Chief Accounting 1993 $ 91,650 -- $ 5,418
Officer
1 Consists of (i) matching contributions to the Retirement Savings Plan
of the Company for the years 1993, 1994 and 1995 for each of Drs. Cuchel
($ 1,552, $1,701, $1,627), Martin Kane ($1,545, $1,701, $1,646) and
Safran ($1,507, $1,418, $1,323) and (ii) insurance premiums paid by the
Company for the years 1993, 1994 and 1995 for each of Drs. Cuchel ($5,000,
$5,457, $12,000), Martin Kane ($5,000, $5,975, $8,900), Safran ($2,125,
$7,402, $7,402),and John Forte ($5,418, $5,768, $6,468) on life insurance
policies payable to beneficiaries respectively designated by each insured.
2 These options were issued in replacement of a like numbers of
options granted to the named executive in 1994.
30
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
/ OPTION VALUES AT FISCAL YEAR END
----------------------------------
During 1995, neither the co-Chief Executive Officers of the Company nor
any of the most highly compensated executive officers whose annual
compensation exceeded $100,000 exercised options to purchase Common Stock of
the Corporation.
The following table presents information regarding the number of options
to purchase the Company's Common Stock granted by the Company to the named
executive officers during the year ended December 31, 1995, the percentage of
each named executive officer's share of all such options granted to all
employees of the Company, the exercise price of each such executive officer's
options, and the expiration date of each such executive officer's options.
Option Grants in Last Fiscal Year
(Individual Grants)
-------------------
No. of Percent Exercise Expiration Date
Securities of Total or
Name Underlying Options Base
Options Granted price
Granted (#) to ($/Sh)
Employees (1)
in Fiscal
Year
- ----------------- ----------- --------- ------ -------------------
Stephen J. Cuchel 65,000 17.08 1.1979 November 27, 2000
Martin Kane 65,000 17.08 1.1979 November 27, 2000
Bruce H. Safran 50,000 13.14 1.089 November 27, 2005
John Forte 25,000 6.57 1.089 November 27, 2005
(1) Consists of Incentive Stock Options which were granted to the named
executive officers on November 28, 1995. In the case of Messrs. Cuchel and
M. Kane, the options are exercisable for a period of five years from the date
of grant and were granted at 110% of the Formula Price. The options granted
to Messers. Safran and Forte exercisable for a period of ten years and were
granted at the Formula Price. The "Formula Price" is equal to the average of
the mean between the closing bid and ask prices for the Company's Common Stock
on the National Association of Securities Dealers Automatic Quotation System
during the 20 trading days preceding the date of grant, eliminating from such
calculation the two high and two low bid and asked prices.
31
During 1995, the Company paid a director's fee of $12,000 to one outside
director and a director's fee of $25,000 to another director of the Company.
During 1995, the Company, acting upon the unanimous written consent of
the Company's Stock Option Committees which administer the Company's various
Stock Option Plans, issued replacement grants of stock options to the named
executive officers at a reduced exercise price in order to take into acoount
the declining market price of the Company's stock. The replacement grants
were issued to the named executive officers in exchange for the cancellation
of certain stock options to purchase an identical number of shares of Common
Stock which were granted by the Company to the named executive officers in
fiscal 1994. The replacement grants were undertaken in accordance with the
terms and conditions of the Company's various Stock Option Plans.
The exercise price of the replacement grants of stock options to the
named executive officers were determined by calculating the amount equal to
the average of the mean between the closing bid and ask prices for the
Company's Common Stock on the National Association of Securities Dealers
Automatic Quotation System during the 20 trading days immediately preceding
the date of grant, which was November 28, 1995, eliminating from such
calculation the two high and low bid and asked prices.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
--------------------------------------------------------------
The following table sets forth the number and percentage of shares of
the Company's Common Stock, par value $.001 per share, held by each director,
by each executive officer named in the compensation tables of Item 10, by
each person known by the Company to own in excess of five percent of the
Company's Common Stock and by all directors and officers as a group as of
March 15, 1996.
Name and address of Shares Percent
Beneficial owner Beneficially Owned of Class
- --------------------- ------------------ --------
Stephen J. Cuchel (1) 519,918 14.23%
60 Charles Lindbergh Blvd.
Uniondale, NY 11553
Martin Kane (2) 499,400 13.67
60 Charles Lindbergh Blvd.
Uniondale, NY 11553
Bruce H. Safran (3) 342,200 9.40
60 Charles Lindbergh Blvd.
Uniondale, NY 11553
George Kane (4) 477,000 13.15
50 Rustic Gate Lane
Dix Hills, NY 11746
Douglas L. King (5) 23,000 0.63
535 Center Island Road
Oyster Bay, NY 11771
Philip J. Rizzuto (6) 132,818 3.64
1904 Gardenia Avenue
North Merrick, NY 11566
All Directors and 2,019,336 51.65
Officers as a group
(seven persons)(7)
32
(1) Includes 10,280 shares held in custody for certain members of Mr.
Cuchel's family; and 65,000 shares which Mr. Cuchel may acquire upon
exercise of an Incentive Stock Option which is exercisable at a price
of $1.1979 per share.
(2) Includes 65,000 shares which Mr. Kane may acquire upon exercise of an
Incentive Stock Option which is exercisable at a price of $1.1979 per
share. George Kane and Martin Kane are brothers. Each disclaims any
voting or investment power over the shares of Common Stock owned by the
other.
(3) Includes 50,000 shares which Mr. Safran may acquire upon exercise of
an Incentive Stock Option which is exercisable at a price of $1.089 per
share.
(4) Includes 45,000 shares which Mr. Kane may acquire upon exercise of an
Incentive Stock Option which is exercisable at a price of $1.089 per share.
George Kane and Martin Kane are brothers. Each disclaims any voting or
investment power over the shares of Common Stock owned by the other.
(5) Includes 6,000 shares held in a trust of which Mr. King is a one-
third beneficiary; 10,000 shares which Mr. King may acquire upon exercise
of a Non-Qualified Stock Option which is exercisable at a price of $1.089
per share; and 5,000 shares which Mr. King may acquire upon exercise of a
Non-Qualified Stock Option which is exercisable at a price of $.6015625 per
share.
(6) Includes 25,000 shares which Mr. Rizzuto may acquire upon exercise of
an Incentive Stock Option which is exercisable at a price of $1.089 per
share; and 32,818 shares which Mr. Rizzuto may acquire upon exercise of an
Incentive Stock Option which is exercisable at a price of $.6015625 per
share.
(7) Includes the shares and options referred to in Footnotes (1) through
and 25,000 shares issuable to an officer of the Company upon exercise of an
Incentive Stock Option exercisable at a price of $1.089 per share.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
-----------------------------------------------
During the year ended December 31, 1995, the Company derived
revenues from Dentcare of $2,253,903.
Drs. Martin Kane, Stephen J. Cuchel, Bruce H. Safran and George
Kane are directors of IHS and Drs. Bruce H. Safran and George Kane are
also officers of IHS.
33
ITEM 13. EXHIBITS, LIST AND REPORTS ON FORM 8-K.
--------------------------------------
Financial Statements and Schedules
- ----------------------------------
The following financial statements and schedules are included in PART
II, Item 7.
Independent Auditor's Report
Consolidated Balance Sheets - December 31, 1995 and December 31, 1994
Consolidated Statements of Operations for the Two Years Ended
December 31, 1995
Consolidated Statement of Stockholders' Equity for the Two Years Ended
December 31, 1995
Consolidated Statements of Cash Flows for the Two Years Ended
December 31, 1995
Notes to Consolidated Financial Statements
Supplementary Schedules:
Report of Independent Auditors on Schedules
Schedule I - Marketable Securities - Other Investments
Schedule V - Fixed Assets
Schedule VI - Accumulated Depreciation of Fixed Assets
Schedule X - Supplementary Income Statement Information
Information required by other schedules called for under
Regulation S-X is either not applicable or is included in the
consolidated financial statements or notes thereto.
EXHIBITS
- --------
3.1 Certificate of Incorporation of the Company, as amended,
incorporated herein by reference to Exhibit 3.1 to the
Company's Annual Report on Form 10-K for the year ended 1987,
Commission File No. 0-14236.
3.2 By-Laws of the Company incorporated herein by reference to
Exhibit 3.2 to the Company's Registration Statement on Form S-
18, Commission File No. 2-98215-NY.
10.1 Service Agreement, dated April 30, 1986, between the Company
and International Healthcare Services, Inc. ("IHS")
incorporated herein by reference to Exhibit 10.2 to the
Company's Annual Report on Form 10-K for the year ended 1986,
Commission File No. 0-14236.
34
10.2 Service Agreement, dated September 28, 1984, as amended on
November 4, 1985, between the Company and Garden State Dental
Service Corporation ("Garden State") incorporated herein by
reference to Exhibits 10.3 and 10.28 to the Company's
Registration Statement on Form S-18, Commission File No. 2-
98215-NY.
10.3 Service Agreement between the Company and Dentcare Delivery
Systems, Inc. ("Dentcare") incorporated herein by reference to
Exhibit 10.4 to the Company's Annual Report on Form 10-K for
the year ended 1986, Commission File No. 0-14236.
10.4 Agreement, dated December 13, 1983, between Dentshield and
Dascit/White & Winston, Inc. incorporated herein by reference
to Exhibit 10.5 to the Company's Registration Statement on Form
S-18, Commission File No. 2-98215-NY.
10.5 General Agent Agreement, dated October 1983, between Dentshield
and The Only Company t/a Capital Marketing incorporated herein
by reference to Exhibit 10.6 to the Company's Registration
Statement on Form S-18, Commission File No. 2-98215-NY.
10.6 Incentive Stock Option Plan incorporated herein by reference to
Exhibit 10.10 to the Company's Registration Statement on Form
S-18, Commission File No. 2-98215-NY.
10.7 Non-Qualified Stock Option Plan incorporated herein by
reference to Exhibit 10.11 to the Company's Registration
Statement on Form S-18, Commission File No. 2-98215-NY.
10.8 Incentive Stock Compensation Plan incorporated herein by
reference to Exhibit 10.8 to the Company's Annual Report or
Form 10-K for the year ended 1989, Commission File No. 0-14236.
10.9 Employment Agreement, dated October 3, 1984, as amended on
October 17, 1985, between the Company and Martin Kane
incorporated herein by reference to Exhibits 10.14 and 10.25 to
the Company's Registration Statement on Form S-18, Commission
File No. 2-98215-NY.
10.10 Employment Agreement, dated October 3, 1984, as amended on
October 17, 1985, between the Company and Stephen J. Cuchel
incorporated herein by reference to Exhibits 10.15 and 10.25 to
the Company's Registration Statement on Form S-18, Commission
File No. 2-98215-NY.
10.11 Employment Agreement, dated October 3, 1984, as amended on
October 17, 1985, between the Company and Bruce H. Safran
incorporated herein by reference to Exhibits 10.17 and 10.25 to
the Company's Registration Statement on Form S-18, Commission
File No. 2-98215-NY.
10.12 Agreement, dated August 30, 1985, among the Company and certain
individuals, regarding certain computer, telephone and printing
35
equipment incorporated by reference to Exhibit 10.22 to the
Company's Registration Statement on Form S-18, Commission File
No. 2-98215-NY.
10.13 1992 Stock Incentive Plan, incorporated herein by reference to
Exhibit 4.7 to the Company's Registration Statement on Form S-
8, Commission File No. 33-56758.
10.14 1992 Director Stock Incentive Plan, incorporated herein by
reference to Exhibit 4.11 to the Company's Registration
Statement on Form S-8, Commission File No. 33-56758.
10.15 Lease Agreement between Reckson Associates and the Company
dated as of February 1, 1993, incorporated herein by reference
to Exhibit 10.16 to the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1992, Commission File No. 0-
14236.
10.16 Stock Purchase Agreement dated as of July 30, 1993 by and
between the Company and Compu-Lan, Inc., incorporated herein by
reference to Exhibit 10.1 to the Company's Quarterly Report on
Form 10-QSB for the quarter ended June 30, 1993, Commission
File No. 0-14236.
10.17 Nonqualified Stock Option Agreement dated as of November 28,
1995 between the Company and Paul Osher.
22.1 Subsidiaries of the Company incorporated herein by reference to
Exhibit 22.1 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1992, Commission File No. 0-14236.
23.1 Consent of Independent Auditors relating to the Company's
Registration Statement on Form S-8, Commission File No. 33-
56758.
28.1 Flexible Benefits Cafeteria Plan of the Company and its
affiliates effective January 1, 1989 incorporated herein by
reference to Exhibit 28.1 to the Company's Annual Report on
Form 10-K for the year ended 1988, Commission File No. 0-14236.
28.2 Retirement Savings Plan of the Company effective January 1,
1989 incorporated herein by reference to Exhibit 28.2 to the
Company's Annual Report on Form 10-K for the year ended 1988,
Commission File No. 0-14236.
Reports on Form 8-K
- -------------------
No report on Form 8-K was filed during the fiscal quarter ended
December 31, 1995.
36
SIGNATURES
In accordance with Section 13 or 15(d) of the Securities Exchange Act of
1934, the registrant has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
HEALTHPLEX, INC.
By:/s/ MARTIN KANE
---------------
Martin Kane, President
Date: March 30, 1996
In accordance with the Securities Exchange Act of 1934, this report has
been signed below by the following persons on behalf of the registrant and in
the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Stephen J. Cuchel Chairman of the Board March 30, 1996
- --------------------- of Directors, Co-Chief
Stephen J. Cuchel Executive Officer and a
Director (Co-Principal
Executive Officer)
/s/ Martin Kane President, Co-Chief March 30, 1996
- --------------- Executive Officer and a
Martin Kane Director (Co-Principal
Executive Officer)
/s/ Bruce H. Safran Vice President, March 30, 1996
- ------------------- Secretary and a
Bruce H. Safran Director
/s/ George Kane Vice President, March 30, 1996
- --------------- Treasurer and a
George Kane Director
/s/ Douglas L. King a Director March 30, 1996
- -------------------
Douglas L. King
/s/ Philip J. Rizzuto Vice President and a March 30, 1996
- --------------------- Director
Philip J. Rizzuto
/s/ John Forte Vice President and March 30, 1996
- -------------- Chief Accounting
John Forte Officer
37
INDEX TO EXHIBITS
-----------------
Sequentially
Exhibit Number Description Numbered Page
- -------------- ---------------------- -------------
10.17 Nonqualified Stock --
Option Agreement dated
as of November 28,
1995
23.1 Consent of Certified --
Public Accountant
38
EXHIBIT 10.17
-------------
Nonqualified Stock
------------------
Option Agreement dated
----------------------
as of November 28, 1995
-----------------------
39
NON-QUALIFIED STOCK OPTION AGREEMENT
------------------------------------
Healthplex, Inc., a Delaware corporation (the "Company"), has granted to
Dr. Paul Osher (the "Grantee") an option (the "Option") to purchase 8,000
shares (the "Shares") of the Company's Common Stock, par value $.001 per
Share, for a total purchase price (the "Option Price") of $1.089 per share,
subject to adjustment pursuant to Section 11. The Option has been granted as
a bonus in respect of services rendered as a dental services provider under
dental health plans operated by one of the Company's affiliates
(the "Plans"), and shall be subject to the terms and conditions of this
Agreement:
1. Cancellation of Outstanding Option. The Option is granted in exchange
for the cancellation of a Non-Qualified Stock Option (the "Canceled Option")
to purchase 8,000 shares of Common Stock at an exercise price of $1.5762 per
share, which was granted by the Company to the Grantee on November 29, 1994.
The Canceled Option is hereby deemed null and void and of no further force or
effect.
2. Term. The Option shall be exercisable at any time on or after
November 28, 1995 and prior to November 28, 2005; provided that the Grantee
continues to be, at the time of exercise, a dental services provider under
one or more of the Plans.
3 Method of Exercise. At any time when the Option is exercisable under
this Agreement, the Option shall be exercisable from time to time by written
notice to the Company which shall:
3.1 state that the Option is thereby being exercised, the number of
Shares with respect to which the Option is being exercised, each
person in whose name any certificates for the Shares should be
registered and his or her address and social security number;
3.2 be signed by the person or persons entitled hereunder to exercise
the Option and, if the Option is being exercised by anyone other
than the Grantee, be accompanied by proof satisfactory to counsel
for the Company of the right of such person or persons to
exercise the Option hereunder and under all applicable laws and
regulations; and
3.3 confirm that the representations and agreements with respect to
the investment intent set forth in the letter attached hereto as
Annex 1 continue, as of the date of such exercise, to be true and
binding upon the Grantee and any such person or persons.
4. Payment of Price. Upon exercise of the Option with respect to any
of the Shares as described above, the Company shall deliver a certificate or
certificates for those Shares to the specified person or persons upon receipt
of the full purchase price for those Shares by certified or bank cashier's
check.
40
5. Transferability. The Option shall not be transferable by the Grantee
other than by will or by the laws of descent and distribution. During the
lifetime of the Grantee, the Option shall be exercisable (subject to any other
applicable restrictions on exercise) only by the Grantee or, in the case of
his mental disability, his guardian or legal representative, for his own
account. Upon the death of the Grantee, the Option shall be exercisable
(subject to any other applicable restrictions on exercise) only by the
executor or administrator of the Grantee's estate.
6. Termination of Relationship. If the Grantee ceases to be a dental
services provider, or in the sole judgment of the Company fails to provide
sufficient levels of dental services, under the Plans or if Grantee breaches
any obligation owed by him to the Company or any of the Plans, then the
Option or any unexercised portion of the Option which otherwise would be
exercisable shall immediately terminate; provided that, if the Grantee ceases
to be a dental services provider under the Plans by reason of his disability,
as determined by the Company in its discretion, or death, then the Option
(or any unexercised portion of the Option) shall continue to be exercisable
for a period of six months after the date of disability or death or until the
expiration of the original term of the Option, if sooner.
7. Non-qualified Stock Option. The Option is not intended to qualify as
an "incentive stock option" under Section 422 of the Internal Revenue Code of
1986, as amended.
8. Listing and Registration of Shares. The Company shall not be required
to issue or deliver any Shares upon the exercise of the Option prior to (a)
the admission of such Shares to listing on any stock exchange on which the
Company's Common Stock may then be listed, and (b) the completion of such
registration or other qualification of such Shares under any State or Federal
law, rule or regulation, as the Company shall determine to be necessary or
advisable. The Company shall not be required to issue or deliver any Shares
upon the exercise of the Option free of transfer restrictions, of any kind or
character, imposed upon applicable State or Federal law, rules or regulations.
9. Restrictions on Exercise. The Option is subject to all restrictions
in this Agreement. As a condition of any exercise of the Option, the Company
may require the grantee or his successor to make any representation and
warranties to the Company as may be necessary to comply with any applicable
law or regulation or to confirm to the Company as may be necessary any factual
matters reasonably requested by counsel for the Company.
10. Rights as Stockholder. Neither the Grantee nor his heirs, legatees,
guardians or legal representatives shall be or have any rights or privileges
of a stockholder of the Company in respect of any of the Shares unless and
until certificates representing such Shares shall have been issued, executed,
delivered and registered on the Company's transfer books.
11. Adjustment of Option Price. The Option Price may be adjusted by the
Board of Directors of the Company in the event of any change in the
outstanding shares of Common Stock by reason of stock splits, stock dividends
or any other increase or reduction of the number of outstanding shares of
Common Stock without receiving consideration in the form of money, services or
property or any other recapitalization or merger, consolidation or other
reorganization of the Company.
41
12. Binding Agreement. The Grantee agrees to be bound by all of the terms
and conditions of this Agreement. The Board of Directors of the Company is
vested with final authority to interpret and construe this Agreement and the
terms of the Option granted hereunder.
13. Governing Law. This Agreement shall be construed and enforced in
accordance with, and governed by, the laws of the State of New York.
DATE OF GRANT: November 28, 1995
HEALTHPLEX, INC.
By: /S/Bruce H. Safran
----------------------
42
ACCEPTANCE OF AGREEMENT
-----------------------
The Grantee hereby accepts this Agreement and the Option granted to him/her
under this Agreement, subject to all provisions of this Agreement.
/S/ Paul Osher
-------------------------
Grantee's Signature
###-##-####
-----------
Grantee's Social Security No.
43
Dr. Paul Osher
170 Eva Drive
Lido Beach, New York 11561
As of November 25, 1995
Healthplex, Inc.
60 Charles Lindbergh Boulevard
Uniondale, New York 11553
Gentlemen:
This is to advise you that I am acquiring an option to purchase (the
`Option'') 8,000 shares (the ``Shares'') of Common Stock, per value $.001 per
share, of Healthplex, Inc., a Delaware corporation (the `Company''), as
compensation for my services as a dental services provider under the dental
health plans operated by one of the Company's affiliates. Upon exercise of
the Option, I or the executor or administrator of my estate or my heirs,
legatees, guardians or legal representatives, as the case may be, shall
acquire the Shares for investment and not with a view to or intention of
distributing, selling or otherwise disposing of all or any part of such
Shares. My financial condition and investments are such that I am in a
financial position to hold the Shares purchased by me for an indefinite
period of time and to bear the economic risk of, and withstand a complete
loss of, my investment in the Shares.
By virtue of my expertise, the advice available to me and my previous
investment experience, I have sufficient knowledge and experience in financial
and business matters, investments, securities and private placements to
evaluate the merits and risks of acquiring the Shares.
I or my representatives have been granted such access to the Company's
books, records and financial statements, as well as any, information
concerning its securities as I have requested and have had the opportunity to
question and to receive answers from representatives of the Company with
respect to the acquisition of the Shares. We understand that the Shares have
not been registered under the Securities Act of 1933, as amended (the
`Securities Act'), by reason of their issuance in a transaction exempt from
the registration requirements of the Securities Act pursuant to the exemption
provided in Section 4(2) thereof, and that, upon issuance, such Shares may not
be sold or otherwise disposed of unless registered under the Securities Act or
exempted from registration. We further understand that the exemption from
registration afforded by Rule 144 promulgated under the Securities Act ("Rule
144) depends on the satisfaction of various conditions and that, if
applicable, Rule 144 may afford the basis for the sale of the Shares only in
limited amounts. As evidence of the restrictions on transfer, a restrictive
legend will be placed on the certificates representing the Shares.
44
Healthplex, Inc.
As of November 25,1995
Page 2
In furtherance of the restrictions imposed hereunder, I acknowledge that
the certificate evidencing the Shares shall bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933. THE SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF
SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT AND AN
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY TO THE EFFECT THAT
SUCH SALE OR TRANSFER WILL NOT RESULT IN A VIOLATION OF SAID ACT".
I have received and had the opportunity to review the Company's Form 10-K
for the fiscal year ended December 31, 1994 and the Company's Form 10-Q for
the quarter ended September 30, 1995. I have had access to all pertinent
business records and the opportunity to discuss the Company's affairs with its
management. I have had the opportunity to discuss this acquisition with my
attorney and accountant, if any, who also have had the opportunity to review
all relevant documents and financial information. I have been thoroughly
advised of the high risks involved with this acquisition. I do not desire to
receive any further information. I am aware that there is no assurance that
the future operations of the Company, if any, will be profitable.
Accordingly, I understand that my investment is subject to substantial risk
and may become worthless.
Very truly yours,
/S/ Paul Osher
Paul Osher
PW/lac
45
EXHIBIT 23.1
------------
Consent of Certified
--------------------
Public Accountant
-----------------
46
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in the Registration Statement of Form S-8 (Registration No.
33-56758) pertaining to the 1992 Stock Incentive Plan , 1992 Director Stock
Incentive Plan, 1989 Incentive Stock Compensation Plan, 1985 Nonqualified
Stock Option Plan and 1985 Incentive Stock Option Plan. Healthplex, Inc.,
and related prospectuses, of our reports dated March 20, 1996 with respect to
the consolidated financial statements and the financial statement schedules
included in the Healthplex, Inc. Annual Report on Form 10-KSB for the year
ended December 31, 1995.
Libero & Kappel
Certified Public Accountants
Westbury, New York
March 20, 1996
47
New York, New York
March 29, 1996
Securities and Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Healthplex, Inc.
Commission File No. 0-14236
1995 Form 1O-KSB
-----------------
Gentlemen:
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, we deliver herewith a Form 10-KSB for Healthplex, Inc. (the
"Company") for the fiscal year ended December 31, 1995, which form is being
filed with the Securities and Exchange Commission (the "SEC") electronically
via the Electronic Data Gathering, Analysis and Retrieval (EDGAR) System.
The amount of $250.00, representing the filing fee payable in connection with
the filing, has been paid to the SEC via wire transfer to the Mellon Bank in
Pittsburgh, Pennsylvania.
Very truly yours,
HEALTHPLEX, INC.
By: /s/ John Forte
---------------------
Name: John Forte
Title: Vice President
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