<PAGE> 1
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
--------------
[ ] TRANSACTION REPORT PURSUE TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______
COMMISSION FILE NUMBER 33-94826-NY
-----------
PHYSICIAN HEALTHCARE PLAN OF NEW JERSEY, INC.
(Name of small business issuer as specified in its charter)
New Jersey 22-3273637
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Princeton Pike Corporate Center, 1009 Lenox Drive, Lawrenceville, NJ 08648
(Address of principal executive offices) (zip code)
Issuer's telephone number: (609) 896-1233
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of share outstanding of each of the issuer's classes of common
equity, as of the latest practicable date: As of May 15, 1997, there were 4,635
shares of Common Stock outstanding.
Transitional Small Business Disclosure Format (Check one): Yes _____ No __X__
<PAGE> 2
PHYSICIAN HEALTHCARE PLAN OF NEW JERSEY, INC.
INDEX TO FORM 10-QSB
<TABLE>
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
Balance Sheets as of March 31, 1997 and December 31, 1996 3
Statements of Operations for the Three Months Ended
March 31, 1997 and 1996 4
Statements of Shareholders' Equity for the Three Months Ended
March 31, 1997 and the Year Ended December 31, 1996 5
Statements of Cash Flows for the Three Months Ended
March 31, 1997 and 1996 6
Notes to Financial Statements 7
ITEM 2. Management's Plan of Operation 7
PART II - OTHER INFORMATION 9
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PHYSICIAN HEALTHCARE PLAN OF NEW JERSEY, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
- ----------------------------------------------------------------------------------------------------
UNAUDITED
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 4,954,257 $ 5,563,345
Short-term investments 1,307,185
Advances to management company 337,061 430,929
Reinsurance recoverable on claims payable 195,984 300,000
Prepaid and other assets 356,978 321,714
------------ ------------
TOTAL CURRENT ASSETS 5,844,280 7,923,173
Investments 3,938,420 2,651,139
Furniture and equipment, net 1,202,626 1,320,867
Other assets 18,107
------------ ------------
TOTAL ASSETS $ 10,985,326 $ 11,913,286
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Claims payable $ 1,962,972 1,544,647
Accounts payable and accrued expenses 788,096 782,428
Funds held for reinsurer 261,922 328,789
Other liabilities 23,033 85,679
------------ ------------
TOTAL LIABILITIES 3,036,023 2,741,543
------------ ------------
SHAREHOLDERS' EQUITY
Common Stock, subject to redemption 23,744,722 23,750,222
(no par; 20,000 authorized; 4,635
and 4,636 issued and outstanding)
Paid in capital 46,980 43,214
Net unrealized loss on investments (10,941) (5,476)
Retained deficit (15,831,458) (14,616,217)
------------ ------------
TOTAL SHAREHOLDERS' EQUITY 7,949,303 9,171,743
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 10,985,326 $ 11,913,286
============ ============
</TABLE>
See accompanying notes.
3
<PAGE> 4
PHYSICIAN HEALTHCARE PLAN OF NEW JERSEY, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE FOR THE THREE
MONTHS ENDED MONTHS ENDED
MARCH 31, 1997 MARCH 31, 1996
- ---------------------------------------------------------------------------------
<S> <C> <C>
REVENUE
Premiums, net of reinsurance $ 2,056,263 $ 93,156
Interest income, net 204,551 127,277
Other revenue 43,445 396
----------- -----------
TOTAL REVENUE 2,304,259 220,829
----------- -----------
EXPENSES
Medical costs 1,642,136 79,563
Professional services 1,093,468 1,112,949
Compensation and benefits 375,112 889,187
General and administrative 373,876 567,868
Insurance 34,918 49,278
----------- -----------
TOTAL EXPENSES INCURRED 3,519,500 2,698,845
----------- -----------
NET LOSS $(1,215,241) (2,478,016)
=========== ===========
Net loss per common share $ (262) $ (681)
- ----------------------------------------------===========-----------===========
</TABLE>
See accompanying notes.
4
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PHYSICIAN HEALTHCARE PLAN OF NEW JERSEY, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
THREE MONTHS ENDED MARCH 31, 1997 AND THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
NET
UNREALIZED TOTAL
COMMON PAID IN (LOSS) GAIN RETAINED SHAREHOLDERS'
STOCK CAPITAL ON DEFICIT EQUITY
INVESTMENTS
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, $17,575,000 $24,838 $ 21,645 $ (6,106,450) $11,515,033
1995
Common stock issued, net 6,250,222 (700,000) 5,550,222
Common stock redeemed (75,000) 18,376 (56,624)
(15 shares)
Net unrealized losses (27,121) (27,121)
Net loss (7,809,767) (7,809,767)
----------- ------- ----------- ------------ -----------
BALANCE AT DECEMBER 31,
1996 $23,750,222 $43,214 $ (5,476) $(14,616,217)$ 9,171,743
=========== ======= =========== ============ ===========
Common stock redeemed (5,500) 3,766 (1,734)
(1 share)
Change in net unrealized (5,465) (5,465)
losses
Net loss (1,215,241) (1,215,241)
----------- ------- ----------- ------------ -----------
BALANCE AT MARCH 31,
1997 $23,744,722 $46,980 $ (10,941) $(15,831,458) $ 7,949,303
=========== ======= =========== ============ ===========
</TABLE>
See accompanying notes.
5
<PAGE> 6
PHYSICIAN HEALTHCARE PLAN OF NEW JERSEY, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE FOR THE THREE
MONTHS ENDED MONTHS ENDED
MARCH 31, 1997 MARCH 31, 1996
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES :
Net Loss $(1,215,241) $(2,478,016)
Adjustment to reconcile net loss to net cash used for
operating activities :
Depreciation and amortization 81,601 139,572
Advances to management company 93,868 (3,922)
Prepaid and other current assets (35,264) (119,577)
Accounts payable and accrued expenses 5,668
Claims payable 418,325 343,633
Reinsurance recoverable on unpaid losses 104,016
Other liabilities (62,646) 72,440
Other assets 18,107
Funds held for reinsurer (66,867) (2,844)
----------- -----------
NET CASH USED IN OPERATING ACTIVITIES (658,433) (1,879,924)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES :
Proceeds from sale of equipment 20,373
Purchase of equipment (114,560)
Proceeds from investments matured 2,455,701
Cost of investments acquired (2,424,995)
----------- -----------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 51,079 (114,560)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES :
Common stock subscribed 1,320,000
Increase in deferred offering costs (150,000)
Redemption of common stock (1,734) 7,070
----------- -----------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES (1,734) 1,177,070
----------- -----------
NET INCREASE (DECREASE) IN CASH AND CASH (609,088) (817,414)
EQUIVALENTS
Cash and cash equivalents, beginning of period 5,563,345 5,308,465
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 4,954,257 $ 4,491,051
=========== ===========
</TABLE>
See accompanying notes.
6
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PHYSICIAN HEALTHCARE PLAN OF NEW JERSEY, INC.
NOTES TO FINANCIAL STATEMENTS
1. UNAUDITED FINANCIAL STATEMENTS
The financial information for the quarter ended March 31, 1997 and 1996 included
herein is unaudited. Such information includes all adjustments, consisting of a
normal and recurring nature, which in the opinion of management, are necessary
for a fair presentation of the Company's Balance Sheets, and Statements of
Operations, Changes in Shareholders' Equity and Cash Flows in accordance with
generally accepted accounting principles. Such information should be read in
conjunction with Management's Plan of Operation included herein and the Notes to
Financial Statements included in the Company's Annual Report on Form 10-KSB for
the year ended December 31, 1996.
ITEM 2.
MANAGEMENT'S PLAN OF OPERATION
The Company is a New Jersey corporation, formed on January 10, 1994 under
the sponsorship of private practicing physicians for the purpose of developing a
statewide, physician-owned Health Maintenance Organization ("HMO").
On March 4, 1994, the Company commenced an Initial Offering on an
intra-state basis for the purpose of raising capital necessary to fund
operations until the Company received its Certificate of Authority ("COA") and
subsequently to fund operational deficits until such time as the Company begins
operating at a profit. In 1996, the Company completed a Second Offering (on an
interstate basis) for the purpose of expanding the Company's existing network of
physicians, expanding the Company's programs and infrastructure and enhancing
the Company's capital position. All net proceeds of these Offerings were added
to the Company's working capital.
As of March 31, 1997, the number of shares outstanding from the Initial
Offering and the Second Offering is 4,635, resulting in net paid-in capital of
$23,791,702. More than 90% of the physician shareholders have completed the
credentialing process and have executed Physician Participation Agreements.
Management believes that substantially all of the remaining physicians will
complete the credentialing process and will meet the standards for participation
in the Company's network.
The Company's COA to operate as an HMO in five counties in New Jersey
(Bergen, Essex, Hudson, Passaic, and Union) was approved on August 28, 1995. The
Company commenced marketing its HMO plans to persons living in the five county
area in November, 1995. An amendment to the Company's COA to expand its service
area to cover the entire State of New Jersey was approved by the New Jersey
Department of Banking and Insurance (the Department) and the Department of
Health and Senior Services on January 29, 1996.
The Company continues to provide quarterly reports to the Department,
describing progress on a three-part strategy to improve operating results. This
strategy was first described to the Department in September 1996. On March 13,
1997, Company representatives met with personnel from the Department to review
the Company's financial performance for the preceding two fiscal quarters, and
to provide the Department with projected financial statements for the following
four fiscal quarters. The Department requires such meetings with any HMO
experiencing two or more consecutive fiscal quarters of operating losses.
After the March 13 meeting, the Department required the following
additional reporting from the Company: (a) monthly profit-and-loss statements,
comparing budget to actual data, filed by the 20th day of the following month,
(b) quarterly itemized listings of all administrative costs greater than $10,000
per quarter, to be filed with the Company's Quarterly Statements, and
7
<PAGE> 8
pro forma financial statements for the Company's proposed Medicare line of
business, including a description of assumptions used. Since receiving the
Department's requirements, the Company has placed the Medicare product
development process and filing on hold, awaiting further discussion. The Company
has committed to providing the Department with all actuarial data and schedules
from any filing with the Health Care Financing Administration when such filing
occurs.
In April 1997 the Company renewed its two-part reinsurance coverage under
similar terms effective through December 31, 1997.
Management believes the Company has sufficient capital to fund operations
over the next twelve months.
No tax benefits for operating losses has been recognized in the financial
statements because the realization of such benefits would be dependent upon
achieving future operating profits, which cannot be reasonably assured.
The Company continues to view the very competitive nature of the New
Jersey managed care marketplace as presenting on-going and increasing challenges
to the Company's ability to achieve the subscriber levels necessary to generate
acceptable levels of profitability. The Company has considered, and will
continue to consider, alternative sources of capital and other strategies for
meeting its growth objectives, including, without limitation, third-party
partnering opportunities, additional equity financings and mergers or
acquisitions.
Operations
During the three months ended March 31, 1997, the Company's revenues
increased from the comparable 1996 fiscal period by $2,083,430, with $1,963,107
attributable to increased enrollment in the HMO and Point-of-Service ("POS")
products sold by the Company. Results for 1996 reflected limited sales dependent
on the timing of COA approval. At March 31, 1997, the Company reported total
enrollment of 5,443, compared to only 323 at March 31, 1996. As reported in
prior periods, the Company continues to record almost 80% of member-months (each
representing one enrollee for one month of coverage) in its POS products.
Medical costs increased $1,562,563 primarily reflecting the enrollment
increase described earlier. Offsetting the effect of the increased enrollment
was favorable development on 1996 claims of approximately $150,000 net of
reinsurance, which resulted from lower than anticipated claim payments.
All other expense categories (Professional services, Compensation and
benefits, General and administrative, and Insurance) decreased a total of
$741,908, primarily reflecting (a) reduced advertising, (b) reduced permanent
staffing partially offset by consultants and other temporary staffing, and (c)
reduced occupancy costs resulting from an assignment-sublease arrangement
effective October 1, 1996.
Financial Condition
As of March 31, 1997, total assets were $10,985,326, representing a
decrease of $927,960 from $11,913,286 at December 31, 1996. This change is due
primarily to a decrease of $609,088 in Cash and Cash Equivalents, which were
used to fund the Company's operations during the first quarter. The change is
accounted for by the Net Loss of $1.2 million, partially offset by increases of
$294,480 in liabilities, and declines of $197,884 in certain asset accounts
(Advances and Reinsurance recoverable). Claims Payable increased $418,325 with
enrollment increases, as described in the earlier discussion of loss reserves.
This increase was partially offset by declines in other liability accounts.
8
<PAGE> 9
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is not involved in any legal proceedings.
ITEMS 2 THROUGH 5 ARE NOT APPLICABLE.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
Reference is made to the Index of Exhibits hereinafter contained on Page
10.
(b) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed during the quarter for which this report
on Form 10-QSB is being filed.
9
<PAGE> 10
INDEX TO EXHIBITS
EXHIBIT NO. EXHIBIT
- --------------------------------------------------------------------------------
3.1 Amended and restated Certificate of Incorporation
(incorporated by reference to Exhibit 3.1 to the Registrant's
Registration Statement on Form SB-2)
3.2 Amended and restated By-Laws (incorporated by reference to
Exhibit 3.2 to the Registrant's Registration Statement on Form
SB-2)
4.1 Secondary Offering Prospectus, as approved by the Securities
Exchange Commission on November 9, 1995, detailing rights of
security holders (incorporated by reference to the
Registrant's Registration Statement on Form SB-2)
10.1 Physician Participation Agreement with Registrant, and
amendment thereto (incorporated by reference to the
Registrant's Annual Report on Form 10-KSB for the year ended
December 31, 1995)
10.2 Hospital Letter of Agreement with Registrant (incorporated by
reference to Exhibit 10.2 to the Registrant's Registration
Statement on Form SB-2)
10.3 Hospital Participation Agreement with Registrant E-1
10.4 Revised Management Agreement by and between Medical Group
Management, Inc. and the Registrant (incorporated by reference
to Exhibit 10.8 to the Registrant's Registration Statement on
Form SB-2)
10.5 Capital Management Agreement between New England Asset
Management and Registrant (incorporated by reference to
Exhibit 10.9 to the Registrant's Registration Statement on
Form SB-2)
10.6 Letter of Intent between Acordia of Southern California and
Medical Group Management, Inc. (incorporated by reference to
Exhibit 10.10 to the Registrant's Registration Statement on
Form SB-2)
10.7 Lease for Registrant's facility (incorporated by reference to
Exhibit 10.11 to the Registrant's Registration Statement on
Form SB-2)
27 Financial Data Schedule
<PAGE> 11
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
PHYSICIAN HEALTHCARE PLAN OF NEW JERSEY, INC.
BY: JOSEPH BILLOTTI, M.D.
----------------------------------
Joseph Billotti, M.D.
Chairman
KEN KOREYVA
- ------------------------------
Ken Koreyva
Chief Financial Officer
Medical Group Management, Inc.
DATED: May 15, 1997
In accordance with the Exchange Act, 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
- --------- ------------ ----
JOSEPH BILLOTTI, M.D. Chairman of the Board and May 15, 1997
- --------------------------- Director
Joseph Billotti, M.D.
RAJENDRA PRASAD GUPTA, M.D. Vice Chairman and Director May 15, 1997
- ---------------------------
Rajendra Prasad Gupta, M.D.
RAYMOND KENNY, M.D. Secretary and Director May 15, 1997
- ---------------------------
Raymond Kenny, M.D.
BESSIE SULLIVAN, M.D. Treasurer and Director May 15, 1997
- ---------------------------
Bessie Sullivan, M.D.
STANLEY BLOOM, M.D. Director May 15, 1997
- ---------------------------
Stanley Bloom, M.D.
WILLIAM F. BRENNAN, D.O. Director May 15, 1997
- ---------------------------
William F. Brennan, D.O.
LEE HINDIN, M.D. Director May 15, 1997
- ---------------------------
Lee Hindin, M.D.
ALEXANDER R. HOROWITZ, M.D. Director May 15, 1997
- ---------------------------
Alexander R. Horowitz, M.D.
LOUIS KEELER, M.D. Director May 15, 1997
- ---------------------------
Louis Keeler, M.D.
LINDA KORMAN, M.D. Director May 15, 1997
- ---------------------------
Linda Korman, M.D.
11
<PAGE> 12
SIGNATURE TITLE DATE
- --------- --------- ----
STEPHEN P. LANDAUER, M.D. Director May 15, 1997
- -----------------------------
Stephen P. Landauer, M.D.
MARK LEVEY, M.D. Director May 15, 1997
- -----------------------------
Mark Levey, M.D.
MARTIN S. LEVINE, D.O. Director May 15, 1997
- -----------------------------
Martin S. Levine, D.O.
NANCY L. MUELLER, M.D. Director May 15, 1997
- -----------------------------
Nancy L. Mueller, M.D.
MARK T. OLESNICKY, M.D. Director May 15, 1997
- -----------------------------
Mark T. Olesnicky, M.D.
EMMONS G. PAINE, M.D. Director May 15, 1997
- -----------------------------
Emmons G. Paine, M.D.
FRED M. PALACE, M.D. Director May 15, 1997
- -----------------------------
Fred M. Palace, M.D.
BARRY PRYSTOWSKY, M.D. Director May 15, 1997
- -----------------------------
Barry Prystowsky, M.D.
THOMAS R.C. REUTTER, JR., D.O. Director May 15, 1997
- -----------------------------
Thomas R.C. Reutter, Jr., D.O.
HENRY D. ROSIN, M.D. Director May 15, 1997
- -----------------------------
Henry D. Rosin, M.D.
DAVID L. SIROTA, D.O. Director May 15, 1997
- -----------------------------
David L. Sirota, D.O.
VINCENT J. VIVONA, D.O., J.D. Director May 15, 1997
- -----------------------------
Vincent J. Vivona, D.O., J.D.
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET AT MARCH 31, 1997 (UNAUDITED) AND THE STATEMENT OF OPERATIONS FOR THREE
MONTHS ENDED MARCH 31, 1997 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000948547
<NAME> PHYSICIAN HEALTHCARE PLAN OF NEW JERSEY, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 4,954,257
<SECURITIES> 3,938,420
<RECEIVABLES> 91,888
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,844,280
<PP&E> 2,126,993
<DEPRECIATION> 924,367
<TOTAL-ASSETS> 10,985,326
<CURRENT-LIABILITIES> 3,036,023
<BONDS> 0
23,744,722
0
<COMMON> 0
<OTHER-SE> (15,795,419)
<TOTAL-LIABILITY-AND-EQUITY> 10,985,326
<SALES> 0
<TOTAL-REVENUES> 2,304,259
<CGS> 0
<TOTAL-COSTS> 3,519,500
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,215,241)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,215,241)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,215,241)
<EPS-PRIMARY> (262)
<EPS-DILUTED> (262)
</TABLE>
