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: March 31, 1998
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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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:
3,590,082 shares of common stock, par value $.001 per share,
outstanding at May 11, 1998.
Not applicable
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(Former name, former address and former fiscal year, if changed
since last report)
<PAGE>
HEALTHPLEX, INC. & SUBSIDIARIES
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INDEX
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Part I. Financial information Page
Consolidated balance sheets - 3
March 31, 1998 unaudited and
December 31, 1997 audited.
Consolidated income statements - 4
three months ended March 31, 1998 and 1997
unaudited.
Consolidated statements of cash flows 5
three months ended March 31, 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.
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Default 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 From 8-K 9
Signatures
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<PAGE>
HEALTHPLEX, INC. & SUBSIDIARIES
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CONSOLIDATED BALANCE SHEETS
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March 31, December 31,
1998 1997
(Unaudited) *
ASSETS ----------- ------------
------
Current assets:
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Cash and cash equivalents $ 794,152 $ 784,709
Investments-available for sale 874,925 800,773
Accounts receivable 457,768 541,836
Notes receivable-current portion 53,733 33,331
Due from Dentcare Delivery Systems, Inc. 95,587
Other receivables 15,832 40,832
Prepaid expenses 0 6,827
----------- ----------
Total current assets 2,291,997 2,208,308
Fixed assets, net of depreciation 980,269 1,000,509
Note receivable - less current portion 44,929 78,516
Investments-available for sale 548,141 597,856
Security deposits 35,406 55,406
Deferred investment banking fees 249,263 263,925
Goodwill, less accumulated
amortization 13,205 13,543
Loan to Dentcare Delivery Systems, Inc. 515,820 515,820
----------- ----------
$4,679,030 $4,733,883
=========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
--------------------
Accounts payable $ 394,529 $ 395,536
Current portion of capitalized lease
obligations 134,989 134,988
Accrued expenses and taxes 286,956 278,883
Due to Dentcare Delivery Systems, Inc. 0 161,328
Income taxes payable 198,145 188,422
Deferred rent payable 5,184 2,594
---------- ----------
Total current liabilities 1,017,803 1,161,751
Capitalized lease obligations, less
current portion 91,046 124,794
Deferred rent payable 118,892 122,143
Deferred income taxes payable 61,735 61,735
---------- ----------
Total liabilities 1,289,476 1,470,423
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Minority interest 12,386 10,159
---------- ----------
Stockholders' equity:
Common stock $.001 par value,
authorized 20,000,000 shares;
issued 3,591,682 3,592 3,592
Paid-in capital 2,255,018 2,255,018
Unrealized loss on
investments-available for sale (46,806) (44,871)
Retained earnings 1,168,014 1,042,212
Less: Treasury stock, 1,600 shares 2,650 2,650
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Total stockholders' equity 3,377,158 3,253,301
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$ 4,679,030 $ 4,733,883
========== ==========
See notes to financial statements which are an integral part hereof.
*Derived from audited financial statements.
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<PAGE>
HEALTHPLEX, INC. & SUBSIDIARIES
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CONSOLIDATED INCOME STATEMENTS
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FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
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(UNAUDITED)
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1998 1997
---- (Reclassified)
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Revenues
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Service fee income $ 820,561 $ 646,520
Administrative service income 1,261,271 956,752
----------- ----------
Total service fee income 2,081,832 1,603,272
Premium income 1,898,564 1,771,423
Sales-computer services 3,375 1,923
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Total revenues 3,983,771 3,376,618
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Cost of Revenues
----------------
Direct expenses - related to
service fees 826,838 524,663
Dental expenses - related to
premium income 1,569,661 1,510,729
Cost of sales - computer services 0 4,989
----------- ----------
2,396,499 2,040,381
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Gross Margin on Revenues 1,587,272 1,336,237
------------------------ ----------- ----------
Selling, general and
administrative expense 1,364,037 1,202,154
Interest expense 6,997 13,810
----------- ----------
1,371,034 1,215,964
----------- ----------
Income from operations 216,238 120,273
Other income
Interest income 24,516 27,739
Dividend income 4,857 2,139
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Income before income taxes 245,611 150,151
Provision for income taxes 117,582 64,962
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Income before minority taxes 128,029 85,189
Minority interest 2,227 3,100
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Net Income $ 125,802 $ 82,089
=========== ==========
Earnings per share (Note 3):
Basic $ 0.035 $ 0.023
=========== ==========
Diluted $ 0.034 $ 0.022
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Weighted average number of shares
of common stock outstanding:
Basic 3,590,082 3,585,082
=========== ==========
Diluted 3,694,921 3,716,508
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See notes to financial statements which are an integral part hereof.
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<PAGE>
HEALTHPLEX, INC. & SUBSIDIARIES
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
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(UNAUDITED)
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1998 1997
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(Restated)
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INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Cash flows from operating activities:
Net income $ 125,802 $ 82,089
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 54,994 53,807
Deferred rent expense (661) 1,842
Deferred investment banking fees 14,662 0
Minority interest 2,227 3,100
(Increase) decrease in:
Accounts receivable 84,068 92,550
Due from Dentcare Delivery Systems, Inc. (95,587) 0
Other receivables 25,000 982
Prepaid expenses 6,827 10,655
Increase (decrease) in:
Accounts payable (1,007) (57,628)
Accrued expenses and taxes 8,073 39,256
Due to Dentcare Delivery Systems, Inc. (161,328) (13,166)
Income taxes payable 7,723 (75,722)
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Net cash provided by operating activities 70,793 137,765
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Cash flows from investing activities:
Purchase of investments (26,372) 0
Proceeds from sale of investments 0 88,580
Capital expenditures (34,416) (40,462)
Repayments of secured note receivable 13,185 11,304
Security deposits refunded (paid) 20,000 (850)
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Net cash provided by (used in) investing
activities (27,603) 58,572
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Cash flows from financing activities:
Repayment of long-term debt (33,747) (55,821)
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Net cash used in financing activities (33,747) (55,821)
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Net increase (decrease) in cash 9,443 140,516
Cash and cash equivalents at beginning of
period 784,709 344,109
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Cash and cash equivalents at end of period $ 794,152 484,625
=========== ===========
Cash paid during the year for:
Interest $ 6,997 $ 13,810
============ ===========
Income taxes $ 109,481 $ 140,058
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See notes to financial statements which are an integral part hereof.
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<PAGE>
HEALTHPLEX, INC. & SUBSIDIARIES
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NOTES TO FINANCIAL STATEMENTS
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NOTE 1 - BASIS OF PRESENTATION
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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 three months ended March 31, 1998 are not necessarily
indicative of the results that may be expected for the year ended December
31, 1998.
In previously issued quarterly financial statements, the Company's
majority-owned subsidiary, DHG, Inc., was reported under the equity method
of accounting. The statement of income for the three months ended March
31, 1997 has 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 three months ended March 31, 1988 comprehensive income amounted to
$123,867. The difference between net income and comprehensive income is
due to unrealized losses of $1,935 on investments classified as available-
for-sale.
Note 3 - EARNINGS PER SHARE
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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 applied retroactively to 1997 and the per
share results have been restated accordingly.
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<PAGE>
HEALTHPLEX, INC. & SUBSIDIARIES
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
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Results of Operations - Revenue Overview
----------------------------------------
Revenue increased by $607,153, or 18.0%, to $3,983,771 from $3,376,618.
Approximately $304,000, or 50.1% of the increase represented an increase in
revenue from the Company's administrative service income business. Such
increase is the result of continued growth of the customer base. 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 three months ended March 31, 1997,
have each been increased by $79,615 from the amounts previously reported
therefor. Such amount represents the administrative service income of the
Company's majority-owned subsidiary, DHG, Inc. In previously issued
quarterly 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 three months ended March 31, 1997.
The following table illustrates the changes in revenue:
For the three months Increase
ended March 31, 1998 1997 (Decrease)
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Service fee income $ 820,561 $ 646,520 $ 174,041
Administrative service
income 1,261,271 956,752 304,519
---------- ---------- ----------
Total service fee income 2,081,832 1,603,272 478,560
Premium income 1,898,564 1,771,423 127,141
Sales computer service 3,375 1,923 1,452
---------- ---------- ----------
Total $3,983,771 $3,376,618 $ 607,153
========== ========== ==========
Results of Operations Gross - Margin, Expenses & Income
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Gross margin on revenue increased by $251,035, or 18.8% to $1,587,272
during the first three months of 1998 as compared to $1,336,237 during the
comparable period of 1997. Of the increase in gross margin, $176,385, or
70.3%, 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 1997 has been increased by $79,615
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.
The following table illustrates the changes in gross margin:
For the three months Increase
ended March 31, 1998 1997 (Decrease)
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Service fee income $ 1,254,994 $ 1,078,609 $ 176,385
Premium income 328,903 260,694 68,209
Sales - computer services 3,375 (3,066) 6,441
------------- ----------- -----------
Total $ 1,587,272 $ 1,336,237 $ 251,035
============= =========== ===========
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<PAGE>
HEALTHPLEX, INC. & SUBSIDIARIES
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
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Results of Operations - Gross Margin, Expenses & Income (Cont'd)
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Selling, general and administrative expenses increased by $161,883, or
13.5%, to $1,364,037 in 1998 from $1,202,154 in 1997, primarily as a result
of $149,576 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 1997 had been increased by
$76,515 from that previously recorded due to the inclusion of DHG, Inc.'s
expenses for such year.
Pre-tax income increased by $95,460, or 63.6%, to $245,611 in 1998 from
$150,151 in 1997, principally as a result of an increase in administrative
service business. The amount reported for 1997 has been increased by
$3,100 from that previously reported. Such amount represents the one-third
minority interest in DHG, Inc. which is deducted after the provision for
income taxes.
The provision for income taxes increased by $52,620, or 81.0%, to $117,582
in 1998 from $64,962 in 1997.
As a result, net income increased by $43,713, or 53.3%, to $125,802 in
1998. Net income of $82,089 for 1997 was not affected by the inclusion of
DHG, Inc.
The Company's adoption of SFAS No. 128 had very little impact on reported
earnings per share. Application of the new standard resulted in diluted
earnings per share being one-tenth of one cent less than basic earnings per
share in each of the three-month periods ended March 31, 1998 and 1997.
The Company has also adopted SFAS No. 130 "Reporting Comprehensive Income".
See note 2 to the consolidated financial statements.
Liquidity and Capital Resources
-------------------------------
The Company's cash, cash equivalents and short term investments increased
by $83,595 to $1,669,077 at March 31, 1998 from $1,585,482 at December 31,
1997. Cash and cash equivalents, exclusive of short-term investments
increased by $9,443 to $794,152. Earnings before depreciation, deferred
items and minority interest amounted to $197,024 for the three months ended
March 31, 1998 and were the principal reason for the $70,793 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 $34,416 to purchase additional equipment. Cash outflows
of $26,372 were used to purchase investments. Other cash inflows of
$33,185 brought the total cash used in investing activities to $27,603.
The Company used $33,747 to repay long-term debt.
The Company continues in a strong cash position with good liquidity.
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<PAGE>
HEALTHPLEX, INC. & SUBSIDIARIES
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PART II - OTHER INFORMATION
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Item 1. Legal Proceedings
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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
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None
Item 6. Exhibits and Reports on Form 8-K
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Exhibit Description
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27 Financial Data Schedule
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<PAGE>
HEALTHPLEX, INC. & SUBSIDIARIES
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SIGNATURES
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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: May 14, 1998 By: /s/ MARTIN KANE
-------------------------
Martin Kane
President
Date: May 14, 1998 By: /s/ JOHN FORTE
-------------------------
John Forte
Chief Financial Officer
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<PAGE>
EXHIBIT INDEX
Exhibit Description
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27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 794
<SECURITIES> 1,423
<RECEIVABLES> 458
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2,292
<PP&E> 1,846
<DEPRECIATION> 866
<TOTAL-ASSETS> 4,679
<CURRENT-LIABILITIES> 1,018
<BONDS> 0
0
0
<COMMON> 4
<OTHER-SE> 3,374
<TOTAL-LIABILITY-AND-EQUITY> 4,679
<SALES> 3,984
<TOTAL-REVENUES> 3,984
<CGS> 2,396
<TOTAL-COSTS> 2,396
<OTHER-EXPENSES> 1,364
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7
<INCOME-PRETAX> 246
<INCOME-TAX> 118
<INCOME-CONTINUING> 128
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 126
<EPS-PRIMARY> .035
<EPS-DILUTED> .034
</TABLE>
