<PAGE> 1
U.S. Securities and Exchange Commission
Washington, DC 20549
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, 1999.
[ ] TRANSACTION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____ to _____.
COMMISSION FILE NUMBER 000-22719
---------
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.)
c/o The Pace Group, Inc., 12160 Abrams Road, Suite 409, Dallas, Texas 75243
(Address of principal executive offices) (zip code)
Issuer's telephone number: c/o (800) 422-5611
------------------
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 No X
--- ---
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 March 31, 1999, there were
4,629 shares of Common Stock outstanding.
Transitional Small Business Disclosure Format (Check one): Yes No X
--- ---
<PAGE> 2
Index to Form 10-QSB
Part I - Financial Information
Item 1. Financial Statements
Statements of Net Assets in Liquidation as of March 31, 1999
(unaudited) and December 31, 1998
Statement of Changes in Net Assets in Liquidation for the Three Months
Ended March 31, 1999 (unaudited)
Statement of Changes in Net Assets in Liquidation for the Three Months
Ended March 31, 1998(unaudited
Notes to Financial Statements (unaudited)
Item 2. Management's Plan of Operations
Part II - Other Information
Item 1. Legal Proceedings
Item 2. [Omitted]
Item 3. [Omitted]
Item 4. [Omitted]
Item 5. [Omitted]
Item 6. Exhibits and Reports on Form 8-K
Page 2
<PAGE> 3
Part I - Financial Information
Item 1. Financial Statements
PHYSICIAN HEALTHCARE PLAN OF NEW JERSEY, INC.
STATEMENTS OF NET ASSETS IN LIQUIDATION
<TABLE>
<CAPTION>
March 31 December 31
1999 1998
(unaudited)
<S> <C> <C>
ASSETS
Cash $ 398,033 $ 268,217
Investments 5,040,264 5,387,101
Other 130,998 79,493
LIABILITIES
Claims Payable $ 34,086 $ 21,371
Accounts Payable 197,102 181,012
Due to Management Company 261,770 383,385
Other Liabilities 107,444 126,930
----------
Net Assets in Liquidation $4,968,893 $5,022,113
========== ==========
</TABLE>
See accompanying notes.
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PHYSICIAN HEALTHCARE PLAN OF NEW JERSEY, INC.
STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three
Months Ended
March 31, 1999
<S> <C>
Net Assets in Liquidation at Beginning of Period: 5,022,113
Investment Income 146,705
Professional Services (106,598)
General and Administrative (92,720)
Other (607)
----------
Increase (Decrease) (53,220)
==========
Net Assets in Liquidation at End of Period: 4,968,893
==========
Net Income/Loss per Common Share (12)
==========
Weighted Average Number of Shares 4,629
==========
</TABLE>
See accompanying notes.
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<PAGE> 5
PHYSICIAN HEALTHCARE PLAN OF NEW JERSEY, INC.
STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION
(UNAUDITED)
<TABLE>
<CAPTION>
For the Three
Months Ended
March 31, 1998
<S> <C>
Net Assets in Liquidation at Beginning of Period: 4,798,268
Investment Income 109,359
Professional Services (150,899)
General and Administrative (100,248)
Other 341,546
----------
Increase (Decrease) 199,758
==========
Net Assets in Liquidation at End of Period: 4,998,026
==========
Net Income/Loss per Common Share 43
==========
Weighted Average Number of Shares 4,629
==========
</TABLE>
See accompanying notes.
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PHYSICIAN HEALTHCARE PLAN OF NEW JERSEY, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 1999
(UNAUDITED)
1. UNAUDITED FINANCIAL STATEMENTS
The financial information for the three months ended March 31, 1999 and March
31, 1998 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 Statements
of Net Assets in Liquidation and Statement of Changes in Net Assets in
Liquidation 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, 1998. The interim
results are not necessarily indicative of the results for the full fiscal year.
2. LIQUIDATION BASIS OF ACCOUNTING
As a result of the sale of its operations to HMO Blue on December 19, 1997, the
Company changed from a going-concern basis of accounting to a liquidation basis
of accounting effective December 31, 1997.
The Statements of Net Assets in Liquidation at December 31, 1998 and March 31,
1999 do not distinguish between current and long-term balances as would be
reflected if such statements had been prepared on a going-concern basis.
3. SALE OF GROUP CONTRACTS AND PROVIDER AGREEMENTS
On December 19, 1997, the Company consummated the transfer and assignment of
certain provider and subscriber contracts constituting its HMO and PPO
operations (the "Transaction") to Medigroup of New Jersey, Inc. (the "Purchaser"
or "HMO Blue"), the health maintenance organization affiliated with Blue Cross
Blue Shield of New Jersey, Inc. The Company received a cash payment of
$1,839,300 as consideration for that transfer and assignment.
Although the Company has sold its operations to HMO Blue, the Company remains
responsible for the payment of claims incurred prior to the December 19, 1997
date of the closing of the Transaction with HMO Blue. The Company's liability
for claims payment after December 19, 1998, the first anniversary of the
Transaction, is limited to claims asserted by a claimant for services prior to
December 19, 1997 and previously acknowledged or otherwise known to the Company.
Any other claims liability will be assumed by the Purchaser effective December
19, 1998. The Company expects that it will surrender its Certificate of
Authority ("COA") to New Jersey insurance regulators at such time as the
regulators approve, based on the regulators' determination that the Company has
satisfied its liabilities, expected in some time in 1999. After such surrender,
it is expected that the Company will be dissolved and assets remaining, if any,
after satisfaction of the Company's liabilities will be distributed to
shareholders. Amounts distributed in respect of each outstanding share of the
Company's common stock are expected to be substantially lower than the purchase
price paid for such shares. However, the Company is unable to determine the
final amount that would be available for distribution. Dissolution would require
additional shareholder action.
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4. MANAGEMENT AGREEMENT
Effective September 1, 1994, the Company entered into a management agreement
with Medical Group Management, Inc. ("MGM"), a subsidiary of New Jersey State
Medical Underwriters, Inc. ("NJSMU"). The management agreement with MGM
provided, among other things, that MGM was responsible for all administration
and management of the company. That agreement was terminated effective as of
July 31, 1997.
Effective July 1, 1997, the Company entered into a Management Services Agreement
(the "Management Agreement") with the Purchaser. Under the terms of the
Management Agreement, the Purchaser is providing the Company management and
administrative services necessary for the operation of the Company including,
but not limited to, claims processing, member services, enrollment, provider
assistance, utilization management and financial services. The cost of such
services was based upon a per member per month fee, and was lower than
management fees previously paid by the Company. After the Transaction on
December 19, 1997, the Company's Management Agreement transitioned to a payment
arrangement based on hourly fees.
In addition, effective August 1, 1997, the Company engaged The Pace Group, Inc.
("Pace") to provide certain management transition services and certain corporate
financial and reporting assistance not otherwise provided by the Purchaser.
5. COMMITMENTS AND CONTINGENCIES
The Company is a defendant in an action entitled Beharie v. Physician Healthcare
Plan of New Jersey, et.al., Docket No. L-2397-97, in the Superior Court of
Morris County, New Jersey. Dr. Beharie claimed he was wrongfully terminated as
an employee and subsequently defamed by PHPNJ (and other unrelated corporate
entities). The Plaintiff seeks to recover unspecified compensatory and punitive
damages together with interest and litigation costs from the Defendants. The
Company believes that is has excellent defenses which it intends to vigorously
pursue.
In addition, the Company was a third party defendant in an action entitled
Valley National Bank v. Dr. Hussein Matari v. Physician Healthcare Plan of New
Jersey, docket number DC-10412-98, filed in Superior Court of New Jersey, Law
Division, Special Civil Part - Civil, Bergen County. The action was brought by
Valley National Bank to recover a loan made to Dr. Matari for the purchase of
stock in PHPNJ. Dr. Matari sought to recover his initial investment in PHPNJ and
hold the Company responsible for his defaulted loan. On March 15, 1999, a order
was filed dismissing the third party complaint without prejudice.
The Company is a defendant in an action entitled Benjamin Levine, M.D. v.
Physician Healthcare Plan of New Jersey, docket number DC-2841-98, filed in
Superior Court of New Jersey Law Division, Special Civil Part, Mercer County.
The Plaintiff sought to recover $10,000 together with interest and litigation
costs from the Defendants for redemption of stock. On August 14, 1998, the Court
issued a summary judgement to dismiss the action. In November 1998, the
Plaintiff filed an appeal. On March 1, 1999, Dr. Levin filed a motion before the
trail judge, who previously dismissed the action, to be declared indigent and
entitled to free transcripts for the appeal which was denied. On March 31, 1999,
Dr. Levine made a request for the transcripts. A brief must be filed by Dr.
Levine by July 8, 1999. The Company believes that it has excellent defenses
which it intends to vigorously pursue.
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ITEM 2.
MANAGEMENT'S PLAN OF OPERATIONS
The following discussion should be read in conjunction with the
Financial Statements and the Notes thereto provided herein.
The Company sold its operations to the Purchaser on December 19, 1997,
following the December 9, 1997 shareholder meeting at which the sale was
approved, and has continued efforts through 1999 year to date to wind down
operations. As a result, effective December 31, 1997, the Company changed its
basis of accounting from a going-concern basis to a liquidation basis. During
the three months ended March 31, 1999, management activities have been limited
to continuing the Company's payment of existing liabilities, stewardship of
remaining assets, and maintaining compliance as appropriate in reporting to
applicable regulatory agencies.
Although the Company has sold its operations to HMO Blue, the Company remained
responsible for the payment of claims incurred prior to the December 19, 1997
date of the closing of the transaction with HMO Blue. The Company's liability
for claims payment after December 19, 1998, the first anniversary of the
Transaction, is limited to claims asserted by a claimant for services prior to
December 19, 1997 and previously acknowledged or otherwise known to the Company.
Any other claims liability will be assumed by the Purchaser effective December
19, 1998. The Company expects that it will surrender its COA to New Jersey
insurance regulators at such time as the regulators approve, based on the
regulators' determination that the Company has satisfied its liabilities,
expected in sometime in 1999.
Changes in Net Assets
The decrease in net assets in liquidation for the three months ended
March 31, 1999 was $53,220 as compared to an increase of $199,758 for the three
month period ended March 31,1998. The $53,220 decrease in net assets for the
period ended March 31,1999 represents investment income offset by general and
administrative expenses and professional services.
During the three months ended March 31, 1999, the Company earned $146,705 in
investment income, as compared to $109,359 earned during the three months ended
March 31, 1998.
For the three months ended March 31, 1999, the Company incurred general
and administrative costs of $92,720, as compared to $100,248 for the three
months ended March 31, 1998. The Company also incurred professional service cost
of $106,598 for the three months ended March 31,1999, as compared to $150,899
for the three months ended March 31, 1998. In 1999 and 1998, such costs and
expenses relate to the limited management activities of the Company including,
but not limited to, costs and expenses incurred due to legal fees, actuarial and
accounting assistance and insurance. See Note 4 of the Notes to Financial
Statements for March 31, 1999.
The Company has not expended any funds to date, and does not expect to
do so in the future, in connection with preparing its system to be Year 2000
compliant. The Company conducts no operations and as such believes that the Year
2000 issue will not create any material exposures.
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Financial Condition
As of March 31, 1999, the Company had approximately $5.4 million in
cash and cash equivalents and investments in U.S. Treasury obligations.
Management believes sufficient liquid funds are available to satisfy any
remaining liabilities, medical or otherwise, likely to occur in the near future
(including, without limitation, costs and expenses related to the administration
of liquidation such as legal and actuarial fees, insurance, accounting fees, and
printing and shareholder communication expenses).
As of March 31, 1999, the company reported approximately $34,000 in
accrued medical claims liabilities attributable to the accrual that was made on
December 31, 1998 for all unpaid claims incurred prior to December 19,1997,as
described in the Notes to Financial Statements, Item 2., as well as claims
adjustments made to previously paid claims. As of March 31, 1999 the company
reported approximately $200,000 in accounts payable related to various
miscellaneous trade vendors. As of March 31, 1999 the company reported
approximately $260,000 management fees payable related to the Management
Agreement described in the Notes to the Financial Statements, Item 4. As of
March 31, 1999 the company reported approximately $110,000 in other liabilities
which included unclaimed checks as well as unallocated revenue.
The Company has not made any liquidating distributions since assuming a
liquidation status and does not anticipate a future distribution until such time
as outstanding liabilities are confirmed as extinguished and net assets
available for liquidation are entirely complete. Additionally, the New Jersey
Department of Banking and Insurance and Department of Health and Senior Services
must approve the surrender of the Company's COA as a precondition for any such
liquidating distributions.
The discussion in this Quarterly Report contains certain forward-looking
statements that involve risks and uncertainties, such as statements of the
Company's plans, objectives, expectations and intentions. The statements should
not be regarded as a representation by the Company that the expectations or
plans of the Company will be achieved. Actual results or events could differ
materially from those discussed herein. Factors that could cause or contribute
to such differences include, but are not limited to, the effect of requirements
imposed by regulatory agencies and the returns on the Company's investments.
PART II -- OTHER INFORMATION
ITEM 1.
The Company is a defendant in an action entitled Beharie v. Physician Healthcare
Plan of New Jersey, et.al., Docket No. L-2397-97, in the Superior Court of
Morris County, New Jersey. Dr. Beharie claimed he was wrongfully terminated as
an employee and subsequently defamed by PHPNJ (and other unrelated corporate
entities). The Plaintiff seeks to recover unspecified compensatory and punitive
damages together with interest and litigation costs from the Defendants. The
Company believes that is has excellent defenses which it intends to vigorously
pursue.
Page 9
<PAGE> 10
In addition, the Company was a third party defendant in an action entitled
Valley National Bank v. Dr. Hussein Matari v. Physician Healthcare Plan of New
Jersey, docket number DC-10412-98, filed in Superior Court of New Jersey, Law
Division, Special Civil Part - Civil, Bergen County. The action was brought by
Valley National Bank to recover a loan made to Dr. Matari for the purchase of
stock in PHPNJ. Dr. Matari sought to recover his initial investment in PHPNJ and
hold the Company responsible for his defaulted loan. On March 15, 1999, a order
was filed dismissing the third party complaint without prejudice.
The Company is a defendant in an action entitled Benjamin Levine, M.D. v.
Physician Healthcare Plan of New Jersey, docket number DC-2841-98, filed in
Superior Court of New Jersey Law Division, Special Civil Part, Mercer County.
The Plaintiff sought to recover $10,000 together with interest and litigation
costs from the Defendants for redemption of stock. On August 14, 1998, the Court
issued a summary judgement to dismiss the action. In November 1998, the
Plaintiff filed an appeal. On March 1, 1999, Dr. Levin filed a motion before the
trail judge, who previously dismissed the action, to be declared indigent and
entitled to free transcripts for the appeal which was denied. On March 31, 1999,
Dr. Levine made a request for the transcripts. A brief must be filed by Dr.
Levine by July 8, 1999. The Company believes that it has excellent defenses
which it intends to vigorously pursue.
ITEM 2. [Omitted]
ITEM 3. [Omitted.]
ITEM 4. [Omitted.]
ITEM 5. [Omitted]
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
Reference is made to the Index of Exhibits hereinafter contained on Page nn.
(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.
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)
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EXHIBIT NO. EXHIBIT
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 (incorporated
by reference to Exhibit 10.3 to the Registrant's Form 8-K
filed on December 29, 1997)
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)
10.8 Assignment and Assumption of Lease Agreement dated February
11, 1997 (incorporated by reference to Exhibit 10.8 in the
Registrant's Registration Statement Form SB-2)
10.9 Agreement between the Registrant and Medigroup of
New Jersey, Inc. dated as of June 26, 1997 (incorporated
by reference to Exhibit 10.9 to the Registrant's Form 10-QSB
for quarter ended September 30, 1997)
10.10 Management Services Agreement between the Registrant and
Medigroup of New Jersey, Inc. dated as of June 26, 1997
(incorporated by reference to Exhibit 10.9 to the Registrant's
Form 10-QSB for quarter ended June 30, 1997)
10.11 Termination and Release Agreement by and between Medical Group
Management, Inc. and Physician Healthcare Plan of New Jersey,
Inc., dated as of July 31, 1997 (incorporated by reference to
Exhibit 10.11 to the Registrant's Form 10-QSB for quarter
ended September 30, 1997)
10.12 Letter Agreement between Medigroup of New Jersey, Inc. and
Physician Healthcare Plan of New Jersey., dated as of August
26, 1977, relating to the sale of certain fixed assets
(incorporated by reference to Exhibit 10.12 to the
Registrant's Form 10-QSB for quarter ended September 30, 1997)
10.13 Services Agreement between The Pace Group, Inc. and Physician
Healthcare Plan of New Jersey, Inc., dated as of August 1,
1997 (incorporated by reference to Exhibit 10.13 to the
Registrant's Form 10-QSB for quarter ended September 30, 1997)
10.14 Agreement between Medigroup of New Jersey, Inc. and Physician
Healthcare Plan of New Jersey, Inc., dated July 25, 1997,
relating to the use of certain computer equipment
(incorporated by reference to Exhibit 10.14 to the
Registrant's Form 10-QSB for quarter ended September 30, 1997)
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10.15 Management Services Agreement dated as of December 19, 1997
between Physician Healthcare Plan of New Jersey, Inc. and
Medigroup of New Jersey, Inc. (incorporated by reference to
Exhibit 99.3 to the Registrant's Form 8-K filed December 29,
1997)
27 Financial Data Schedule
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: /S/ JOSEPH BILLOTTI, M.D.
---------------------------
Joseph Billotti, M.D.
Chairman
/S/ Russell F.Mohawk
--------------------------
Russell F.Mohawk
Senior Consultant of The Pace Group, Inc.
(Acting in the capacity of Principal Accounting Officer and Principal
Financial Officer of the Registrant)
DATED: December 15, 1999
Page 12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF NET ASSETS IN LIQUIDATION AT MARCH 31, 1999 (UNAUDITED) AND THE
STATEMENT OF CHANGES IN NET ASSETS IN LIQUIDATION FOR THE THREE MONTHS ENDED
MARCH 31, 1999 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 398,033
<SECURITIES> 5,040,264
<RECEIVABLES> 130,998
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,569,295
<CURRENT-LIABILITIES> 600,402
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 4,968,893
<TOTAL-LIABILITY-AND-EQUITY> 5,569,295
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (53,220)
<INCOME-TAX> 0
<INCOME-CONTINUING> (53,220)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (53,220)
<EPS-BASIC> (12)
<EPS-DILUTED> (12)
</TABLE>
