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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, 2000.
[ ] 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
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PHYSICIAN HEALTHCARE PLAN OF NEW JERSEY, INC.
(Name of small business issuer as specified in its charter.)
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New Jersey 22-3273637
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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c/o The Pace Group, Inc., 2828 N. Haskell, B5 F6, Dallas, Texas 75204
(Address of principal executive offices) (zip code)
Issuer's telephone number: c/o (214) 887-7947
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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
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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, 2000 there were 4,629
shares of Common Stock outstanding.
Transitional Small Business Disclosure Format (Check one): Yes No X
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Index to Form 10-QSB
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Part I - Financial Information 3
Item 1. Financial Statements
Statements of Net Assets in Liquidation as of
March 31, 2000 and December 31, 1999 3
Statements of Changes in Net Assets in Liquidation
for the Three Months Ended March 31, 2000 and 1999 4
Notes to Financial Statements 5
Item 2. Management's Plan of Operations 6
Part II - Other Information 8
Item 1. Legal Proceedings 8
Item 2. [Omitted] 9
Item 3. [Omitted] 9
Item 4. [Omitted] 9
Item 5. [Omitted] 9
Item 6. Exhibits and Reports on Form 8-K 9
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Part I - Financial Information
Item 1. Financial Statements
PHYSICIAN HEALTHCARE PLAN OF NEW JERSEY, INC.
STATEMENTS OF NET ASSETS IN LIQUIDATION
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March 31 December 31
2000 1999
(unaudited)
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ASSETS
Cash $305,925 $294,443
Investments 4,288,950 4,299,014
Other 72,007 71,810
LIABILITIES
Accounts Payable $207,931 $200,399
Due to Management Company 0 14,000
Other Liabilities 76,256 76,256
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Net Assets in Liquidation $4,382,695 $4,374,612
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See accompanying notes.
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PHYSICIAN HEALTHCARE PLAN OF NEW JERSEY, INC.
STATEMENTS OF CHANGES IN NET ASSETS IN LIQUIDATION
(UNAUDITED)
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For the Three Months Ended
March 31, 2000 March 31, 1999
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Net Assets in Liquidation at Beginning of
Period: $ 4,374,612 $ 5,022,113
Investment Income 47,091 146,705
Professional Services (21,645) (106,598)
General and Administrative (16,913) (92,720)
Other (450) (607)
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Increase (Decrease) 8,083 (53,220)
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Net Assets in Liquidation at End of Period: $ 4,382,695 $ 4,968,893
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Net Income/(Loss) per Common Share $ 2 $ (12)
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Weighted Average Number of Shares 4,629 4,629
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See accompanying notes.
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PHYSICIAN HEALTHCARE PLAN OF NEW JERSEY, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 2000
(UNAUDITED)
1. UNAUDITED FINANCIAL STATEMENTS
The financial information for the three months ended March 31, 2000 and March
31, 1999 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 Statements of Changes in Net Assets in
Liquidation in accordance with accounting principles generally accepted in the
United States. 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,
1999. 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 Horizon Healthcare of New Jersey,
Inc. ("Horizon") 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, 1999 and March 31,
2000 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 Horizon (the "Purchaser"), 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 Horizon, the Company remains
responsible for the payment of claims incurred prior to the December 19, 1997
date of the closing of the Transaction with Horizon. 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 was assumed by the Purchaser effective December 19,
1998. In early 1999, the Company completed payment of claims incurred prior to
December 19, 1997. Subsequent to December 31, 1999, Horizon notified the Company
that it believes the Company is responsible for approximately $30,000 of claims
because they were incurred prior to December 19, 1997. The Company believes it
has no responsibility for these claims because they were reported to the Company
after December 19, 1998 and that they are Horizon's responsibility pursuant to
the agreements entered into in connection with the transaction. 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 all of its liabilities,
which is expected to occur some time in 2000. After such surrender,
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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.
4. MANAGEMENT AGREEMENT
Pursuant to a Management Services Agreement dated December 19, 1997, and amended
on July 16, 1999, the Company has engaged Horizon as its management company to
provide a substantial portion of the Company's management and administrative
services. The company pays Horizon an hourly fee of $75 for services rendered to
PHPNJ. The agreement can be terminated by either PHPNJ or Horizon, with or
without cause, provided that the terminating party has furnished not less than
thirty (30) days prior written notice of such termination to the other party.
For the period January 1 through March 31, 2000 the Company incurred
approximately $17,000 related to this arrangement.
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 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 was to be filed by Dr.
Levine by July 8, 1999; however, Dr. Levine contacted the Appellate Division
Clerk on July 8, 1999 requesting an additional 45 days to complete his briefing
period, which was granted. Dr. Levine filed a brief to appeal on August 20,
1999. On August 31, 1999, the Company filed a brief in opposition to the appeal
filed by Dr. Levine. A letter brief, concluding the briefing process, was filed
by Dr. Levine on September 21, 1999. The court has scheduled a hearing for April
4, 2000. The Company believes that it has excellent defenses, which it intends
to pursue vigorously.
As of March 31, 2000, the Company's investments include restricted assets of
approximately $566,000 on deposit with the State of New Jersey for solvency
protection.
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.
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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 2000 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, 2000, 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 Horizon, the Company remained
responsible for the payment of claims incurred prior to the December 19, 1997
date of the closing of the transaction with Horizon. 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. As of December 31, 1999, that liability had been paid out. Any claims
for services provided after December 19, 1997 or any claims for services
provided prior to December 19, 1997, but first discovered after December 19,
1998, are the responsibility of Horizon. Subsequent to December 31, 1999,
Horizon notified the Company that it believes the Company is responsible for
approximately $30,000 of claims because they were incurred prior to December 19,
1997. The Company believes it has no responsibility for these claims because
they were reported to the Company after December 19, 1998 and that they are
Horizon's responsibility. 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.
The Company has ongoing discussions with the New Jersey insurance regulators to
reach agreement on the most expeditious way to surrender the COA. It is
anticipated that the Company will reach agreement with the New Jersey insurance
regulators on this process sometime in 2000 and surrender the COA at such point.
Subsequent to December 31, 1999, legislation was passed in New Jersey, which may
provide for additional assessments to HMOs in the future. The State of New
Jersey has not assessed the Company for any amount to date. While New Jersey
legislation may provide for additional assessments upon HMOs in the future, the
Company is unable at this time to estimate the applicability or amount of any
such assessment on the company.
Changes in Net Assets
The increase in net assets in liquidation for the three months ended March 31,
2000 was $8,083 as compared to an decrease of $53,220 for the three month period
ended March 31,1999. The $8,083 increase in net assets for the three month
period ended March 31, 2000 represents investment income of approximately
$47,000 offset by general and administrative expenses and professional services
of approximately $39,000. As the Company continues to wind-down it affairs, the
administrative and professional fees associated with this wind-down continue to
decrease.
For the three months ended March 31, 2000, the Company incurred general and
administrative costs of $16,913 as compared to $92,720 for the three months
ended March 31, 1999. The Company also incurred professional service cost of
$21,645 for the three months ended March 31, 2000 as compared to $106,598 for
the three months ended March 31, 1999. In 2000 and 1999, such costs and expenses
relate to the limited management activities of the Company including, but not
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limited to, costs and expenses incurred due to legal fees, actuarial and
accounting assistance and insurance. As the Company continues to wind-down it
affairs, the administrative and professional fees associated with this wind-down
continue to decrease. See Note 4 of the Notes to Financial Statements for March
31, 2000.
Financial Condition
As of March 31, 2000 the Company had approximately $4.6 million in
cash and cash equivalents and investments in U.S. Treasury obligations compared
to approximately $4.6 million as of December 31, 1999. 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, 2000 the company reported approximately $208,000 in accounts
payable related to various service providers. As of March 31, 2000 the company
reported approximately $76,000 in other liabilities which were composed of
unclaimed checks.
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. 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 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 was to be filed by Dr.
Levine by July 8, 1999; however, Dr. Levine contacted the Appellate Division
Clerk on July 8, 1999 requesting an additional 45 days to complete his briefing
period, which was granted. Dr. Levine filed a brief to appeal on August 20,
1999. On August 31, 1999, the Company filed a brief in opposition to the appeal
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filed by Dr. Levine. A letter brief, concluding the briefing process, was filed
by Dr. Levine on September 21, 1999. The court has scheduled a hearing for April
4, 2000. The Company believes that it has excellent defenses, which it intends
to pursue vigorously.
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 E-1.
(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.
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INDEX TO EXHIBITS
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EXHIBIT NO. EXHIBIT
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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 (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)
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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)
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
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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.
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Joseph Billotti, M.D.
Chairman
/S/ Russell F.Mohawk
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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: July 28, 2000
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