UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: September 30, 1998
------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
--------------- ---------------
Commission file number 0-14236
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Healthplex, Inc.
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(Exact name of small business issuer as specified in its charter)
Delaware 11-2714365
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
60 Charles Lindbergh Blvd., Uniondale, New York 11553
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(Address of principal executive offices)
516-542-2200
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Issuer's telephone number, including area code
Check whether the issuer (1) has 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
--- ---
State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practical date:
3,600,382 shares of common stock, par value $.001 per share,
outstanding at October 31, 1998.
Not applicable
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(Former name, former address and former fiscal year, if changed
since last report)
<PAGE>
HEALTHPLEX, INC. & SUBSIDIARIES
-------------------------------
INDEX
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Page
Part I. Financial Information
Consolidated balance sheets - 3
September 30, 1998 unaudited and
December 31, 1997 audited.
Consolidated income statements - 4
nine months ended September 30, 1998 and 1997
unaudited and three months ended
September 30, 1998 and 1997 unaudited.
Consolidated statements of cash flows - 5
nine months ended September 30, 1998 and 1997
unaudited.
Notes to consolidated financial statements 6
Management's discussion and analysis of 7-8
financial condition and results of operations.
Part II. Other Information
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults upon Senior Securities 9
Item 4. Submission of Matters to a Vote
of Security Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
Signatures
-2-
<PAGE>
HEALTHPLEX, INC. & SUBSIDIARIES
-------------------------------
CONSOLIDATED BALANCED SHEETS
----------------------------
September 30, December 31,
1998 1997
(Unaudited) *
------------- -------------
ASSETS
------
Current assets:
--------------
Cash and cash equivalents $1,491,469 $ 784,709
Investments - available for sale 766,485 800,773
Accounts receivable 284,402 541,836
Notes receivable - current portion 57,341 33,331
Other receivables 10,541 40,832
Prepaid expenses 0 6,827
--------- ----------
Total current assets 2,610,238 2,208,308
Fixed assets, net of depreciation 1,095,640 1,000,509
Notes receivable - less current
portion 22,992 78,516
Investments - available for sale 493,296 597,856
Security deposits 70,773 55,406
Deferred investment banking fees 219,937 263,925
Goodwill, less accumulated
amortization 12,528 13,543
Loan to Dentcare Delivery Systems, Inc. 515,820 515,820
---------- ----------
$5,041,224 $4,733,883
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
-------------------
Accounts payable $ 392,927 $ 395,536
Current portion of capitalized
lease obligations 121,173 134,988
Accrued expenses and taxes 156,401 278,883
Due to Dentcare Delivery Systems, Inc. 65,960 161,328
Income taxes payable 356,807 188,422
Deferred rent payable 5,184 2,594
---------- ----------
Total current liabilities 1,098,452 1,161,751
Capitalized lease obligations, less
current portion 37,367 124,794
Deferred rent payable 117,570 122,143
Deferred income taxes payable 61,735 61,735
---------- ----------
Total liabilities 1,315,124 1,470,423
---------- ----------
Minority interest 13,656 10,159
---------- ----------
Stockholders' equity:
--------------------
Common stock $.001 par value, 3,607 3,592
authorized 20,000,000 shares;
issued 3,606,682 in 1998 and
3,591,682 in 1997
Paid-in capital 2,281,914 2,255,018
Unrealized loss on investments-
available for sale (59,986) (44,871)
Retained earnings 1,497,992 1,042,212
Less: Treasury stock, 6,300 shares
in 1998 and 1,600 shares in 1997 11,083 2,650
---------- ----------
Total stockholders' 3,712,444 3,253,301
equity ---------- ----------
$5,041,224 $4,733,883
========== ==========
See notes to financial statements which are an integral part hereof.
*Derived from audited financial statements.
-3-
<PAGE>
HEALTHPLEX, INC. & SUBSIDIARIES
-------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
(UNAUDITED)
-----------
For the Nine Months Ended
----------------------------
September 30, September 30,
1998 1997
------------- --------------
(Reclassified)
Revenues
--------
Service fee income $ 2,529,732 $ 1,940,672
Administrative service income 3,865,227 3,049,036
----------- -----------
Total service fee income 6,394,959 4,989,708
Premium income 5,715,141 5,335,864
Sales-computer services 13,125 6,948
----------- -----------
Total revenues 12,123,225 10,332,520
----------- -----------
Cost of Revenues
----------------
Direct expenses - related to
service fees 2,549,964 1,709,668
Dental expenses - related to
premium income 4,682,417 4,528,073
Cost of sales - computer 0 12,827
services ----------- -----------
7,232,381 6,250,568
----------- -----------
Gross Margin on Revenues 4,890,844 4,081,952
------------------------ ----------- -----------
Selling, general and
administrative expense 4,144,051 3,647,884
Interest expense 20,348 34,709
----------- -----------
4,164,399 3,682,593
----------- -----------
Income from operations
Other Income 726,445 399,359
Gain on sale of securities 3,111 854
Interest income 70,218 73,312
Dividend income 25,711 9,367
----------- -----------
Income before income taxes 825,485 482,892
Provision for income taxes 366,208 249,437
----------- -----------
Income before minority interest 459,277 233,455
Minority interest 3,497 2,749
----------- -----------
Net income $ 455,780 $ 230,706
=========== ===========
Earnings per share (Note 3):
Basic $ 0.127 $ 0.064
=========== ===========
Diluted $ 0.121 $ 0.062
=========== ===========
Weighted average number of
shares of common stock
outstanding
Basic 3,592,612 3,590,082
=========== ===========
Diluted 3,776,646 3,749,622
=========== ===========
For the Three Months Ended
----------------------------
September 30, September 30,
1998 1997
------------- --------------
(Reclassified)
Revenues
--------
Service fee income $ 926,911 $ 602,996
Administrative service income 1,330,923 1,122,235
----------- -----------
Total service fee income 2,257,834 1,725,231
Premium income 1,932,179 1,778,909
Sales-computer services 7,350 5,025
----------- -----------
Total revenues 4,197,363 3,509,165
----------- -----------
Cost of Revenues
----------------
Direct expenses - related to
service fees 857,552 570,055
Dental expenses - related to
premium income 1,534,522 1,513,168
Cost of sales - computer services 0 4,766
----------- -----------
2,392,074 2,087,989
----------- -----------
Gross Margin on Revenues 1,805,289 1,421,176
------------------------ ----------- -----------
Selling, general and
administrative expense 1,510,119 1,263,077
Interest expense 6,783 6,191
----------- -----------
1,516,902 1,269,268
----------- -----------
Income from operations
Other Income 288,387 151,908
Gain on sale of securities 0 854
Interest income 21,762 21,837
Dividend income 14,336 4,216
----------- -----------
Income before income taxes 324,485 178,815
Provision for income taxes 143,061 117,388
----------- -----------
Income before minority interest 181,424 61,427
Minority interest 1,654 (1,017)
----------- -----------
Net income $ 179,770 $ 62,444
=========== ===========
Earnings per share (Note 3):
Basic $ 0.050 $ 0.017
=========== ===========
Diluted $ 0.048 $ 0.017
=========== ===========
Weighted average number of shares
of common stock outstanding
Basic 3,596,407 3,590,082
=========== ===========
Diluted 3,780,441 3,749,622
=========== ===========
See notes to financial statements which are an integral part hereof.
-4-
<PAGE>
HEALTHPLEX, INC. & SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
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(UNAUDITED)
-----------
September 30, September 30,
1998 1997
------------- -------------
(Restated)
INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS
Cash flows from operating
activities $ 455,780 $ 230,706
Net income
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 175,062 163,882
Deferred rent expense (1,983) 5,526
Deferred investment banking
fees 43,988 0
Minority interest 3,497 2,749
Gain on sales of securities (3,111) 854
Stock awards 26,909 0
(Increase) decrease in:
Accounts receivable 257,434 41,684
Other receivables 30,291 (10,349)
Prepaid expenses 6,827 (11,766)
Increase (decrease) in:
Accounts payable (2,609) 48,597
Accrued expenses and taxes (122,482) 54,644
Due to Dentcare Delivery
Systems, Inc. (95,368) 13,492
Income taxes payable 168,385 84,927
----------- -----------
Net cash provided by operating
activities 942,620 624,946
----------- -----------
Cash flows from investing activities:
Proceeds from sale of
investments 126,846 186,581
Capital expenditures (269,178) (85,808)
Repayment of notes receivable 31,514 38,704
Security deposits paid (15,367) (39,350)
----------- -----------
Net cash provided by (used in)
investing activities (126,185) 102,127
----------- -----------
Cash flows from financing activities:
Proceeds from issuance of
capital stock 0 5,446
Purchase of treasury stock (8,433) 0
Repayment of long-term debt (101,242) (143,265)
----------- -----------
Net cash used in financing
activities: (109,675) (137,819)
----------- -----------
Net increase in cash 706,760 589,254
Cash and cash equivalents at
beginning of period 784,709 268,340
----------- -----------
Cash and cash equivalents at
end of period $ 1,491,469 $ 857,594
=========== ===========
Cash paid during the period for:
Interest $ 20,348 $ 34,709
=========== ===========
Income taxes $ 197,538 $ 162,351
=========== ===========
See notes to financial statements which are an integral part hereof.
-5-
<PAGE>
HEALTHPLEX, INC. & SUBSIDIARIES
-------------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
NOTE 1 - BASIS OF PRESENTATION
------------------------------
The accompanying unaudited consolidated financial statements have
been prepared in accordance with Generally Accepted Accounting
Principles for interim financial information and with the
instructions to Form 10-QSB and Rule 310(b) of Regulation S-B.
Accordingly, they do not include all of the information and
footnotes required by Generally Accepted Accounting Principles
for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals)
considered necessary for fair presentation have been included.
Operating results for the nine months ended September 30, 1998
are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998.
In previously issued interim financial statements for 1997, the
Company's majority-owned subsidiary, DHG, Inc., was reported
under the equity method of accounting. The statements of
operations for the nine and three months ended September 30, 1997
have been reclassified to reflect the revenues and expenses (and
related minority interest) of this subsidiary (rather than the
single amount for the Company's two-thirds interest in the
subsidiary's net income previously presented) so as to conform to
the consolidated presentation for 1998. Such change had no
effect on reported net income in 1997. The consolidated
statement of cash flows for 1997 has been restated to include the
cash balances and cash flows of this subsidiary.
For a summary of significant accounting policies, refer to Note 2
of Notes to Financial Statements included in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1997.
NOTE 2 - COMPREHENSIVE INCOME
-----------------------------
For the nine months ended September 30, 1998 comprehensive income
amounted to $440,665. The difference between net income and
comprehensive income is due to unrealized losses of $15,115 on
investments classified as available-for-sale.
NOTE 3 - EARNINGS PER SHARE
---------------------------
The Company has adopted Statement of Financial Accounting
Standards No. 128 "Earnings Per Share", ("SFAS No. 128") which
superseded Accounting Principles Board Opinion No. 15. Under
SFAS No. 128, earnings per share are computed by dividing net
income by the weighted-average number of common shares
outstanding during the period. Diluted earnings per share are
reported when applicable to reflect the potential dilution that
could occur if outstanding options and warrants to purchase
common stock were exercised. SFAS No. 128 has been retroactively
applied to 1997; however, such per share results were unchanged.
NOTE 4 - STOCK REPURCHASE PROGRAM
---------------------------------
On August 25, 1998, the Board of Directors adopted a resolution
approving a stock repurchase program. Under this program, the
Company may, from time to time, buy up to 150,000 shares of the
Company's common stock on the open market. During September of
1998 the Company purchased 4,700 shares pursuant to this plan.
-6-
<PAGE>
HEALTHPLEX, INC. & SUBSIDIARIES
-------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
-----------------------------------------------------
Results of Operations - Revenue Overview
----------------------------------------
Revenue increased by $1,790,705, or 17.3%, to $12,123,225 from
$10,332,520. Approximately $816,000, or 45.6% of the increase,
represented an increase in revenue from the Company's
administrative service income business. Such increase is the
result of servicing major groups added during 1997. The Company
continues to emphasize its administrative business through
focused marketing efforts targeting specific entities.
The amounts for administrative service income, total service fee
income and total revenue reported herein for the nine months
ended September 30, 1997 have each been increased by $232,151
from the amounts previously reported therefor. (For the three
months ended September 30, 1997, the amount of such increase was
$75,349). Such amounts represent the administrative service
income of the Company's majority owned subsidiary, DHG, Inc. In
previously issued 1997 interim financial statements, the Company
accounted for its two-thirds interest in this subsidiary on the
equity method. For 1998, the accounts of this subsidiary have
been fully consolidated with that of the Company and its wholly-
owned subsidiaries. The 1997 financial statements have been
revised accordingly to reflect the components of the subsidiary's
revenues, expenses and related minority interest. The revisions
to reclassify the components of the subsidiary's net income had
no effect on the reported net income for the 1997 periods.
The following table illustrates the changes in revenue:
For the nine months Increase
ended September 30, 1998 1997 (Decrease)
----------------------------------------------------------------
Service fee income $ 2,529,732 $ 1,940,672 $ 589,060
Administrative service
income 3,865,227 3,049,036 816,191
----------- ----------- ----------
Total service fee income 6,394,959 4,989,708 1,405,251
Premium income 5,715,141 5,335,864 379,277
Sales-computer service 13,125 6,948 6,177
----------- ----------- ----------
Total $12,123,225 $10,332,520 $1,790,705
=========== =========== ==========
Results of Operations - Gross Margin, Expenses & Income
-------------------------------------------------------
Gross margin on revenue increased by $808,892 or 19.8%, during
the first nine months of 1998 as compared to $4,081,952 during
the comparable period of 1997. Of the increase in gross margin,
$564,955, or 69.8%, was due to the increase in gross margin from
service fee income due to the continuing expansion of the
administrative service business.
The amount of gross margin reported for the first nine months of
1997 has been increased by $232,151 ($75,349 for the three months
ended June 30, 1997) from that previously reported, which
revision is due to the inclusion of DHG, Inc.'s revenues. There
are no costs of revenues reported therefor - expenses and
related overhead are included in selling, general and
administrative expense.
-7-
<PAGE>
HEALTHPLEX, INC. & SUBSIDIARIES
-------------------------------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
-----------------------------------------------------
The following table illustrates the changes in gross margin:
For the nine months Increase
ended September 30, 1998 1997 (Decrease)
---------------------------------------------------------------
Service fee income $3,844,995 $3,280,040 $564,955
Premium income 1,032,724 807,791 224,933
Sales - computer
services 13,125 (5,879) 19,004
---------- ---------- --------
Total $4,890,844 $4,081,952 $808,892
========== ========== ========
Selling general and administrative expenses increased by $496,167, or
13.6%, to $4,144,051 in 1998 from $3,647,884 in 1997, primarily as a
result of $421,085 in increased payroll related costs incurred to meet
the demands of the expanding administrative service business. The
amount of selling, general and administrative expenses reported for the
first nine months of 1997 has been increased by $229,402 from that
previously reported due to the inclusion of DHG, Inc.'s expenses for
such period. (For the first three months of 1997 the increase was
$76,366).
Pre-tax income increased by $342,593, or 70.9%, to $825,485 for the
first six months of 1998 from $482,892 in 1997, principally as a result
of an increase in administrative service business. The amount reported
for 1997 has been increased by $2,749 from that previously reported.
Such amounts represent the one-third minority interest in DHG, Inc.
which is deducted after the provision for income taxes. (For the first
three months of 1997 the change was a decrease of $1,017).
The provision for income taxes increased by $116,771, or 46.8%, to
$366,208 in 1998 from $249,437 in 1997.
As a result, net income increased by $225,074, or 97.6%, to $455,780 in
1998. Net income of $230,706 for the 1997 period was not affect by the
inclusion of DHG, Inc.
The Company's adoption of SFAS No. 128 had no impact on reported
earnings per share.
The Company has also adopted SFAS No. 130 "Reporting Comprehensive
Income". See Note 2 of Notes to Financial Statements.
Liquidity and Capital Resources
-------------------------------
The Company's cash, cash equivalents and short-term investments
increased by $672,472 to $2,257,954 at September 30, 1998 from
$1,585,482 at December 31, 1997. Cash and cash equivalents, exclusive
of short-term investments increased by $706,760 to $1,491,469.
Earnings before depreciation, deferred items and minority interest
amounted to $676,344 for the nine months ended September 30, 1998 and
were the principal reason for the $942,620 of cash flows provided by
operating activities. In addition, these same elements continue to be
the Company's primary source of liquidity.
The Company used $269,178 to purchase additional equipment and for
improvements relating to the expansion of its office. Cash inflow of
$126,846 were generated by the sale of investments. Other net cash
inflows of $16,147 brought the total cash used in investing activities
to $126,185.
The Company used $101,242 to repay long-term debt, and $8,433 to
repurchase shares of the Company's stock.
The Company continues in a strong cash position with good liquidity.
-8-
<PAGE>
HEALTHPLEX, INC. & SUBSIDIARIES
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
---------------------------
Neither the Registrant nor its subsidiaries are a party, nor is
any of their property subject, to material pending legal
proceedings or material proceedings known to be contemplated by
governmental authorities.
Item 2. Changes in Securities
-------------------------------
None
Item 3. Defaults Upon Senior Securities
-----------------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
-------------------------------------------------------------
None
Item 5. Other Information
---------------------------
None
Item 6. Exhibits and Reports on Form 8-K
------------------------------------------
Exhibit Description
------- -----------
27.1 Financial Data Schedule
27.2 Restated Financial Data Schedule for
September 30, 1997
-9-
<PAGE>
HEALTHPLEX, INC. & SUBSIDIARIES
-------------------------------
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
HEALTHPLEX, INC.
----------------
Registrant
Date: November 12, 1998 By: /s/ MARTIN KANE
--------------------------------
Martin Kane, President
Date: November 12, 1998 By: /s/ JOHN FORTE
--------------------------------
John Forte, Chief Financial
Officer
-10-
<PAGE>
EXHIBIT INDEX
Exhibit Description
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27.1 Financial Data Schedule
27.2 Restated Financial Data Schedule for
September 30, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,491
<SECURITIES> 1,260
<RECEIVABLES> 284
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,610
<PP&E> 2,059
<DEPRECIATION> 963
<TOTAL-ASSETS> 5,041
<CURRENT-LIABILITIES> 1,098
<BONDS> 0
0
0
<COMMON> 4
<OTHER-SE> 3,708
<TOTAL-LIABILITY-AND-EQUITY> 5,041
<SALES> 12,123
<TOTAL-REVENUES> 12,123
<CGS> 7,232
<TOTAL-COSTS> 7,232
<OTHER-EXPENSES> 4,144
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20
<INCOME-PRETAX> 825
<INCOME-TAX> 366
<INCOME-CONTINUING> 459
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 456
<EPS-PRIMARY> .127
<EPS-DILUTED> .120
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1997
<CASH> 858
<SECURITIES> 1,420
<RECEIVABLES> 379
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,180
<PP&E> 2,130
<DEPRECIATION> 1,172
<TOTAL-ASSETS> 4,453
<CURRENT-LIABILITIES> 1,106
<BONDS> 0
0
0
<COMMON> 4
<OTHER-SE> 2,966
<TOTAL-LIABILITY-AND-EQUITY> 4,453
<SALES> 10,333
<TOTAL-REVENUES> 10,333
<CGS> 6,251
<TOTAL-COSTS> 6,251
<OTHER-EXPENSES> 3,648
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 35
<INCOME-PRETAX> 483
<INCOME-TAX> 249
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<EPS-PRIMARY> .064
<EPS-DILUTED> .062
</TABLE>
