<PAGE>   1


                     U.S. Securities and Exchange Commission
                             Washington, D.C. 20549
                                   FORM 10-KSB

(Mark One)

[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934

                   For the fiscal year ended December 31, 2000

[ ] TRANSITION REPORT UNDER 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 in its charter)

New Jersey                                                22-3273637
(State or other jurisdiction of                      (I.R.S.Employer
or incorporation organization)                       IdentificationNo.)


c/o The Pace Group, Inc., 202 Courtney Lane, McKinney, Texas 75070
(formerly 2828 N. Haskell, B5 F6, Dallas, TX 75204)
-----------------------------------------------------------------------
(Address of principal executive offices) (zip code)

Issuer's telephone number:  (972) 562-3979 (formerly (972) 887-7947)

Securities registered under Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act: Common Stock, no
par value.

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]

Check if there was no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosures will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]

State issuer's revenues for the most recent fiscal year: $304,000



                                       1
<PAGE>   2

There is no current market for this stock. However, the aggregate value of
voting stock held by non-affiliates as of December 31, 2000, computed by
reference to the book value as of December 31, 2000, was approximately
$4,356,000. As of December 31, 2000, there were 4,629 shares of Common Stock
outstanding.

Transitional Small Business Disclosure Format (Check one): Yes [ ] N[X]

DOCUMENTS INCORPORATED BY REFERENCE

None



                                       2
<PAGE>   3

PART I

ITEM 1.  DESCRIPTION OF BUSINESS

Overview

      Physician Healthcare Plan of New Jersey, Inc. (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
and directed health maintenance organization ("HMO"). The Company's HMO and
preferred provider organization ("PPO") operations were sold on December 19,
1997, as described below. Beginning in December 1998, the Company initiated the
process of seeking approval from state regulators to surrender its Certificate
of Authority ("COA"). In May 2000, after discussions between the Company and its
regulators, the New Jersey Department of Banking and Insurance (the
"Department")required among other things, a Custody Agreement in the amount of
$350,000 be established for the payment of future liabilities, if any, as a
condition of surrender of the COA. The Company's Board of Directors approved the
Custody Agreement on November 15, 2000, along with a Plan of Dissolution subject
to the Department's approval of the surrender of the COA. The Custody Agreement
was established on February 26, 2001 and on March 7, 2001 the surrender of the
COA was approved. The Company intends to proceed with dissolution in 2001.

      In December 1994, the Company filed an application for a COA to operate as
an HMO in five counties in New Jersey, which application was approved effective
August 28, 1995. The Company was not permitted to solicit business until a
Certificate of Authority was obtained. The Company commenced marketing its HMO
plans to persons living in the five county area and issued its first policy in
November 1995. In September 1995, the Company filed an application to amend its
COA to expand its service area to cover the entire State of New Jersey. The
amendment was approved effective January 29, 1996. The Company received federal
trademark registration for its name, for the acronym PHPNJ and for the stylized
"P" logo which contains a cutout in the shape of New Jersey.

      The Company devoted substantial efforts to developing and credentialing
its health care delivery network, and health plans particularly for the small
employer marketplace in New Jersey. The Company had entered into approximately
1,400 Physician Participation Agreements with physicians who had been
credentialed, and 81 contracts with inpatient care facilities. In addition, the
Company had negotiated contracts for the provision of certain ancillary services
such as prescription benefits. The Company had developed HMO, PPO and
point-of-service ("POS") products.

Management

      Since inception, the Company had no employees. As such, the Company had
engaged a management company to provide substantially all management and
administrative services, including but not limited to, financial services,
member and provider support services, provider credentialing, and claims
processing. Until July 1997, the Company was managed by Medical Group
Management, Inc. ("MGM"), a subsidiary of the New Jersey State Medical
Underwriters, Inc., which in turn was a



                                       3
<PAGE>   4

subsidiary of the Medical Society of New Jersey. That arrangement with MGM
terminated in July 1997 and the Company entered into a Management Agreement with
Medigroup of New Jersey, Inc. ("Horizon" or the "Purchaser") effective July 1,
1997. Horizon managed the Company's operations until December 19, 1997, when it
purchased the Company's HMO and PPO operations pursuant to an Agreement dated as
of June 26, 1997 (the "Agreement"). Currently, Horizon provides limited
management services on an hourly basis, and the Company has a contract with The
Pace Group, Inc. ("Pace") to provide management transition services and certain
corporate financial and reporting assistance not otherwise provided by the
Purchaser, such as assistance in making required filings with state insurance
regulators and with the Securities and Exchange Commission.

Strategic Initiatives and Sale of Operations

      By April 1996, the Company's leadership recognized the impact of changing
market conditions, coupled with attendant network, pricing and product issues,
and acknowledged that membership goals were not being met and that expenses were
being incurred in excess of the Company's revenues. The Company developed a
three-part strategy to improve operating results. The components of that
strategy were: (a) capital preservation, (b) marketing and sales, and (c) new
product initiatives. To preserve capital, the Company implemented a new staffing
model which reduced monthly salaries and compensation expenses. Beginning in
September, 1996 staffing was reduced and sales efforts were shifted from a staff
of sales employees to a broker-driven sales effort. In addition, the Company
reduced the amount of space it leased, effective October 1, 1996, and cut its
monthly advertising budget by approximately two-thirds. The Company proposed to
develop special marketing arrangements with local medical communities, and
marketed one of its existing products under a marketing arrangement called
"Skyland Select".

      Notwithstanding the implementation of this strategy, the Company continued
to incur losses. Early in 1997, the Company's leadership charged the Board of
Directors' Due Diligence Committee with identifying strategic options and
recommending a course of action that would be most beneficial to the Company and
its stockholders, ultimately resulting in the negotiation of the Agreement and
Management Services Agreement with Horizon. In addition, the Company has sold
most of its fixed assets to MGM, sold certain equipment to Horizon and sold its
automobiles to other parties.

      On December 19, 1997 the Company consummated the transfer and assignment
of certain provider and subscriber contracts constituting its HMO and PPO
operations to Horizon, the HMO affiliated with Blue Cross Blue Shield of New
Jersey, Inc. The Company received a cash payment of $1,839,300 as consideration
for the transfer and assignment. As of the date of closing, the Management
Services Agreement dated as of June 26, 1997 between the Company and Horizon
terminated and the parties entered into a new Management Services Agreement
pursuant to which Horizon provided certain limited management services through
March 1, 1999. The Company has agreed to pay Horizon an hourly fee of $75 for
services provided under that agreement. In early 1999 the Company and Horizon
renegotiated an extension of this agreement from March 1, 1999 forward. The
agreement can be terminated by either PHPNJ



                                       4
<PAGE>   5

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. Horizon currently continues to provide services
to the Company as described above.

      Although the Company 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. This liability is limited
to those claims asserted by a claimant on or before December 19, 1998, and
previously acknowledged or otherwise known to the Company. In early 1999, the
Company completed payment of claims incurred prior to December 19, 1997. The
Company continued to fulfill the reporting requirements of regulatory agencies
through its contracts with The Pace Group and Horizon. During 1999 and 2000 the
Company had ongoing discussions with the New Jersey insurance regulators to
reach agreement on the most expeditious way to surrender the COA. The New Jersey
Department of Banking and Insurance required a Custody Agreement in the amount
of $350,000 be established for the benefit of any future liabilities as a
condition of surrender of the COA. Subsequent to December 31, 2000 the Company
established the Custody Agreement and on March 7, 2001 the New Jersey insurance
regulators approved the surrender of the COA. It is expected that sometime
during 2001 the Company will be dissolved and any assets remaining after
satisfaction of the Company's liabilities will be distributed to stockholders.
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 estimate the amount, if any, that
would be available for distribution. Dissolution requires additional stockholder
action.

ITEM 2.  DESCRIPTION OF PROPERTY

The Company has no leased or owned real property.

ITEM 3.  LEGAL PROCEEDINGS

The Company was 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. The court held a hearing on April 4, 2000 and issued
a decision on May 15, 2000 denying Dr. Levine's appeal. On May 18, 2000 Dr.
Levine submitted a Motion for Reconsideration. On May 24, 2000 the Company filed
an Order denying the Notice of Motion filed by Dr. Levine. On June 2, 2000 the
Court rejected Dr. Levine's Motion for Reconsideration. On June 6, 2000 Dr.
Levine filed a Notice of Petition for Certification to the New Jersey Supreme
Court and subsequently on July 14, 2000 submitted a brief requesting a hearing.
The Company filed a brief in opposition to Dr. Levine's request that the New
Jersey Supreme Court hear the appeal. Although not entitled to a reply under the
current procedure, on July 29, 2000 Dr. Levine submitted a letter brief in
response to the Company's brief in opposition. The Supreme



                                       5
<PAGE>   6

Court denied Dr. Levine's Petition for Certification on September 26, 2000.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         No meetings for shareholders were held in 2000

PART II

ITEM 5.  MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS

      There is no public market for the common stock of the Company. At December
31, 2000, the Company had 4,629 shareholders. The Company's shares could only be
purchased by eligible purchasers (4,629), which were physicians who were
licensed to practice medicine and surgery in New Jersey and who were actively
practicing. Each eligible purchaser is limited to one share. The By-Laws of the
Company prohibit the transfer of stock to any person or entity to ensure that
only physicians participating in the network maintained ownership in the
Company. However, the By-Laws do provide for mandatory redemption by the Company
in Exchange for the book value of the stock upon the occurrence of certain
events, such as death, retirement, disability, loss of medical license,
cessation of practice in New Jersey and termination of an effective Physician
Participation Agreement. Discretionary redemption by the Board of Directors is
also permitted.

      The Company is not permitted to redeem a share if the Company is insolvent
or if doing so would cause the Company to be in a precarious financial
condition, as determined by the Board of Directors.

      In November 1996, the Board of Directors adopted a resolution to the
effect that discretionary redemptions would not be made for a period of 12
months after the adoption of such resolution. In July 1997, the Board of
Directors adopted a resolution that placed a moratorium on all redemptions, for
any reason, to prevent a potentially large redemption obligation from causing
the Company to be in precarious financial condition.

      The Company has not paid any dividends and does not intend to pay
dividends in the future. Earnings, if any, have been retained for use in the
operation and expansion of the Company's business. Additionally, the Company
must obtain approval from the New Jersey Department of Banking and Insurance
prior to declaring any dividends.

ITEM 6.  MANAGEMENT'S PLAN OF OPERATIONS

      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 HMO. 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 1998 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 year ended December 31, 2000, management activities have been
limited to continuing the Company's payment of existing liabilities, stewardship
of remaining assets, maintaining



                                       6
<PAGE>   7

compliance as appropriate in reporting to applicable regulatory agencies and
working with applicable regulatory agencies to gain approval to surrender its
COA and dissolve.

      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 no later than December 19, 1998. As of December 31, 1999 that liability
had been fully 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 18, 1998 are the responsibility of Horizon. In early
2000, 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. No further communications have taken place with Horizon
regarding this matter since early 2000. During 1999 and 2000 the Company had
ongoing discussions with the New Jersey insurance regulators to reach agreement
on the most expeditious way to surrender the COA. The New Jersey Department of
Banking and Insurance required a Custody Agreement in the amount of $350,000 be
established for the payment of any future liabilities as a condition of
surrender of the COA. Subsequent to December 31, 2000 the Company established
the Custody Agreement and on March 7, 2001 the New Jersey insurance regulators
approved the surrender of the COA. It is expected that sometime during 2001 the
Company will be dissolved, and after approval by the stockholders, any assets
remaining after satisfaction of the Company's liabilities will be distributed to
stockholders. 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 estimate the
amount, if any, that would be available for distribution. Dissolution requires
additional stockholder action.

Changes in Net Assets

      The decrease in net assets in liquidation for the year ended December 31,
2000 was approximately $19,000, which represents total return on investments of
approximately $304,000, offset by a state insurance department assessment of
approximately $26,000 and by general and administrative expenses of
approximately $297,000.

      For the year ended December 31, 2000, the Company incurred general and
administrative costs of approximately $297,000. In 2000, such costs and expenses
relate to the management activities of the Company including, but not limited
to, costs and expenses incurred due to management fees, legal fees, accounting
and audit fees and insurance. During 2000, an assessment of approximately
$26,000 was paid to the New Jersey Individual Health Coverage Program. The
assessment was based on a reconciliation of net earned premium reported for
calendar year 1998.



                                       7
<PAGE>   8

      Investment income was $243,000 in 2000 compared to $286,000 in 1999. The
decrease of $43,000 relates to a slight decline in invested assets and a
declining interest rate environment as compared to the prior year.

      Unrealized gains of $85,000 were generated during 2000 due to the
Company's investments in debt securities in a declining interest rate
environment. This compares to unrealized losses of $103,000 generated during
1999, which was a result of an increasing interest rate environment.

      The State of New Jersey Small Employer Health Benefit Plan assessments of
$26,000 and $211,000 in 2000 and 1999 respectively represented an original
assessment based on a previous year's premiums collected and an adjustment to
that assessment. Future assessments, if any, are not currently estimable.

      General and administrative expenses have declined by $316,000 from
$613,000 in 1999 to $297,000 during 2000. The decline is a result of reduced
costs associated with administering the Company as it nears ultimate
dissolution.

Financial Condition

      Cash and invested assets: Total investments, including cash and short term
investments were approximately $4,596,000 at December 31, 2000 and $4,643,000 at
December 31, 1999. The decrease in invested assets between December 31, 2000 and
December 31, 1999 resulted primarily from cash outflow from payment of general
and administrative expenses.

      The Company's investments on December 31,2000 were in debt securities
comprised of investment grade securities, with the highest ratings assigned by
Standard & Poor's (AAA) or Moody's (Aaa;P-1), respectively.

      Net assets in liquidation: Total net assets in liquidation were
approximately $4,356,000 at December 31, 2000 and approximately $4,375,000 at
December 31, 1999. The decrease is primarily due to general and administrative
expenses in excess of total return on investments.

ITEM 7.  FINANCIAL STATEMENTS

      The financial statements of the Company as required by this item are
submitted as a separate section of this report. Reference is made to the Index
of Financial Statements hereafter contained on page F-1.

ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

      No change in accountant and/or disagreements on any matter of accounting
principles or financial statement disclosures have occurred within the last two
years.



                                       8
<PAGE>   9

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT

Directors of the Registrant

      The following table lists the Company's current Board of Directors and
their ages. The Company has no executive officers other than its Chairman and
President. Employees of Pace, with whom the Company contracts for certain
management services, serve as acting Chief Executive Officer and Principal
Accounting Officer.

<TABLE>
<CAPTION>
NAME                            DATE ELECTED   TERM     AGE        TITLE
----                            ------------   ----     ---        -----
<S>                             <C>          <C>       <C>   <C>
Joseph Billotti, M.D.              12/95      3 yrs.    53    Chairman of Board
                                                              & President

Stanley Bloom, M.D.                12/95      1 yr.*    62    Director

William F. Brennan, D.O.           12/95      3 yrs.    53    Director

Lee Hindin, M.D.                   12/95      1 yr.*    50    Director

Alexander Horowitz, M.D.           12/95      2 yrs.    58    Director

Louis Keeler, M.D.                 12/95      1 yr.*    68    Director

Linda Korman, M.D.                 12/95      1 yr.*    49    Director

Mark Levy, M.D.                    12/95      1 yr.*    63    Director

Martin S. Levine, D.O.             12/95      1 yr.*    46    Director

Nancy L. Mueller, M.D.             12/95      2 yrs.*   51    Director

Mark T. Olesnicky, M.D.            12/95      2 yrs.*   58    Director

Emmons G. Paine, M.D.              12/95      3 yrs.    71    Director

Fred M. Palace, M.D.               12/95      2 yrs.*   65    Director

Barry Prystowsky, M.D.             12/95      2 yrs.*   46    Director

R.C. Reutter, Jr., D.O.            12/95      2 yrs.*   61    Director

David L. Sirota, D.O.              12/95      2 yrs.*   61    Director

Bessie Sullivan, M.D.              12/95      3 yrs.    59    Treasurer and
                                                              Director

Vincent Vivona, D.O., J.D.         12/95      2 yrs.*   51    Director
</TABLE>

*  Will serve until successor is elected and qualified. The Company did not hold
   an annual meeting in 1997, 1998,1999 or 2000.




                                       9
<PAGE>   10

JOSEPH BILLOTTI, M.D., has conducted a private medical practice in Orthopedic
Surgery in Bergen County, New Jersey since 1978. Dr. Billotti is a Diplomate of
the American Board of Orthopedic Surgery, Fellow of the American Academy of
Orthopedic Surgeons, and is a Fellow of the American and International College
of Surgeons. Dr. Billotti is a member of the Federal Health Care Financing
Administration Advisory Committee. He served as a Delegate for the State of New
Jersey Medical Society, and was a member of the Board of Directors of the New
Jersey State Orthopedic Society. Dr. Billotti was the Medical Director of the
Valley Regional Medical Center and a Clinical Assistant Professor of Orthopedic
Surgery at the University of Medicine and Dentistry of New Jersey. Dr. Billotti
is a member of the Bergen County Medical Society, the American Medical
Association, the Eastern Orthopaedic Society and the American College of Managed
Care, Inc.

BESSIE SULLIVAN, M.D., has conducted a private medical practice in Rheumatology,
Allergy and Immunology in Central New Jersey since 1974. She is a Diplomate of
the American Boards of Internal Medicine, Rheumatology, and Allergy and
Immunology. Dr. Sullivan is a Clinical Associate Professor of Medicine at the
University of Medicine and Dentistry of New Jersey. She is also a founding
Fellow of the American Rheumatology Association. She served as Vice President of
the New Jersey Chapter of the Arthritis Foundation, was a member of its
Executive Committee, and continues to serve on its Board of Governors and its
Medical and Scientific Committee, and she has served as Chairperson of several
of the Chapter's other committees. Dr. Sullivan served as President of the
Medical Staff at Muhlenberg Regional Medical Center from 1992-1993, has served
as Chairperson of Muhlenberg's Medical Records Committee, and as a member of its
Executive Committee and the Planning Committee of its Board of Trustees. She was
the Chairperson of the Legislative Council of the New Jersey Medical Society and
is currently a member of its House of Delegates, Consultant to the Board of
Trustees, and the Board's Strategic Planning Committee. From 1990-1991, she
served as President of the Union County Medical Society. Dr. Sullivan is a
member of the Board of Directors of The MIIX Group, Incorporated.

STANLEY BLOOM, M.D., has conducted a private medical practice in Urology in
Essex County, New Jersey since 1970. He is a Board Certified Urologist and a
Fellow of the American College of Surgeons. Dr. Bloom is a member of the Essex
County Medical Society, the American Urological Association and the Society of
Endolaparoscopic Surgeons. He is also past Chairman of the Department of Surgery
at East Orange General Hospital and of the Departments of Urology at St.
Barnabas Medical Center and East Orange General Hospital.

WILLIAM F. BRENNAN, D.O., Board Certified in Family Practice by the American
Osteopathic College of Family Practice, has conducted a private medical practice
in Family Medicine in Gloucester County since 1980. In addition to his private
practice, he currently serves as a Student Health Physician for Rowan College.
Dr. Brennan is also a Delegate to the New Jersey Osteopathic House of Delegates.
In 1995, he was appointed Clinical Associate Professor of Family Practice at the
University of Medicine and Dentistry of New Jersey - School of Osteopathic
Medicine. Previously, in addition to his private practice,



                                       10
<PAGE>   11

Dr. Brennan served as Medical Director of the Gloucester County Sheriff's
Medical Department, school physician for the Cherry Hill School District and as
a medical officer in the United States Navy.

LEE HINDIN, M.D., conducted a private practice in psychiatry in Essex County
from 1982-1995. Since 1995 his practice has been in Passaic County. Prior to
that, he was an instructor at the University of Medicine and Dentistry of New
Jersey. He is Board Certified in Psychiatry by the American Board of Psychiatry
and Neurology. He is a member of the American Psychiatric Association, the New
Jersey Psychiatric Associates, American Society of Addiction Medicine, and
American Academy of Psychiatrists in Alcoholism and Addictions. He is founder
and Medical Director of Creative Intervention for Mental Health and Chemical
Dependency. He has been the Associate Medical Director of the Department of
Psychiatry, Medical Director of the Division of Drug and Alcohol Services and is
currently on the Medical Board of St. Barnabas Medical Center.

ALEXANDER R. HOROWITZ, M.D., has conducted a private practice in Pediatrics in
Madison, New Jersey since 1977. Dr. Horowitz is a Diplomate of the American
Board of Pediatrics and the American Board of Quality Assurance and Utilization
Review Physicians. He is past Chairman of the Pediatric Audit Committee at
Overlook Hospital and the Joint Patient Care Committee at Morristown Memorial
Hospital. He has served as a utilization reviewer at both institutions. He is an
Instructor of Clinical Pediatrics at the College of Physicians and Surgeons,
Columbia University, New York. He holds and has held multiple positions in the
Morris-Somerset IPA.

LOUIS KEELER, M.D., has conducted a private practice in Urology in Camden County
since 1967. He is Board Certified and a member of the American Urologic
Association. He is immediate past President of the Medical Society of New
Jersey. Dr. Keeler is a Clinical Associate Professor of Urology at Thomas
Jefferson University in Philadelphia. He has been President of the Camden County
Medical Society and President of the Medical Staff of Our Lady of Lourdes
Medical Center in Camden, New Jersey.

LINDA KORMAN, M.D., has conducted a private practice in Internal Medicine in
Central New Jersey since 1985. She practices Internal Medicine in Edison with an
emphasis on preventative medicine. She is Board Certified in Internal Medicine
by the American Board of Internal Medicine. She served on the Board of Trustees
of the Middlesex County Medical Society. Dr. Korman was recently appointed Vice
President of their Public Relations Committee. She is a member of the American
Medical Association and the American Board of Internal Medicine. The SUNY Health
Science Center appointed Dr. Korman as Clinical Assistant Professor of Medicine.
She is Medical Director of Family Medical Group and has also been Medical
Director and Consultant for several wellness programs.

MARK LEVEY, M.D., has conducted a private medical practice in Otolaryngology in
Essex County, New Jersey since 1969. Dr. Levey is a Fellow of the American
Academy of Facial, Plastic and Reconstructive Surgery, the American Academy of
Ophthalmology and Otolaryngology, the American College of Surgeons, and the
American Society for Head and Neck Surgery. He is currently an Associate
Clinical Professor of



                                       11
<PAGE>   12

Surgery at the Robert Wood Johnson Medical School. Dr. Levey has served as
Treasurer of the Medical Staff at Saint Barnabas Medical Center and currently
serves as Director of MetroWest IPA.

MARTIN S. LEVINE, D.O., has conducted a Family and Sports Medicine practice in
Jersey City, New Jersey since 1983. Dr. Levine is past President of the New
Jersey Association of Osteopathic Physicians and Surgeons. He is the past
National and New Jersey Delegate of the American College of Osteopathic Family
Practitioners. Dr. Levine is the Assistant Clinical Professor of the Department
of Family Practice at the University of Medicine and Dentistry of New Jersey
School of Osteopathic Medicine.

NANCY L. MUELLER, M.D., has conducted a private medical practice in Neurology in
Englewood, New Jersey since 1982. Dr. Mueller is Board Certified by the American
Board of Quality Assurance and Utilization Review Physicians and is Board
eligible with the American Board of Psychiatry and Neurology. She has been an
active member of the utilization Review Committee of the Englewood Hospital
since 1983. She is currently President-Elect of the Bergen County Medical
Society and has been a member of its Board of Trustees since 1990. She has been
a delegate to the Medical Society of New Jersey since 1988. She was appointed to
the Transition Committee for the State of New Jersey Department of Health. She
is a member of the State Medical Service Committee, as well as a reviewer and
expert for the Professional Review Organization of New Jersey. She is a member
of the American Academy of Neurology, the American College of Physicians and the
American Women's Medical Association. She has been part of the National Health
Care Advisory Board and is currently working as a bipartisan member of the
Committee on National Healthcare for the Democratic National Committee. Dr.
Mueller is presently serving on the Executive Board of Princeton Preferred.

MARK T. OLESNICKY, M.D., has conducted a private practice in Internal Medicine
in Essex County, New Jersey since 1975. He is currently President of the Medical
Staff of Saint Barnabas Medical Center, Livingston, New Jersey. He also serves
as Trustee of the Medical Society of New Jersey as well as an Alternate Delegate
to the American Medical Association. He is a Diplomate of the American Board of
Quality Assurance and Utilization Review Physicians. Dr. Olesnicky has also
served as President of the Essex County Medical Society and President of the
Essex County Health Organization.

EMMONS G. PAINE, M.D., has conducted a private medical practice in Cardiology in
Camden County, New Jersey since 1962. He has been past-president of the Camden
County Medical Society, and has served on its Executive Committee for several
years. Dr. Paine is a Diplomate of the American Board of Internal Medicine and
is a Fellow of the American College of Cardiology. Dr. Paine has served on the
Governor's Committee for Mobile Intensive Care Units from 1972 to 1975. He
recently ended an eleven-year period as Chief of Cardiology of the West Jersey
Health System and he served as Chairman of West Jersey Hospital's Medical
Subcommittee for Quality Assurance for nine years. Dr. Paine has also served on
the Board of Trustees of West Jersey Hospital. He is presently Chief of Staff of
West Jersey Hospital.



                                       12
<PAGE>   13

FRED M. PALACE, M.D., is an Attending Radiologist at Morristown Memorial
Hospital, Morristown, New Jersey. He is Board Certified by the National Board of
Medical Examiners, the American Board of Radiology and the American Board of
Nuclear Medicine. He is a Fellow of the American College of Radiology and the
American College of Nuclear Physicians. Dr. Palace is a former President of the
Radiology Society of New Jersey. He is a past-President of the Medical Society
of New Jersey. He is also a member of the Board of Directors of The MIIX Group,
Incorporated.

BARRY PRYSTOWSKY, M.D., has conducted a private practice in Pediatrics in
Nutley, New Jersey since 1984. Dr. Prystowsky is a Diplomate of the American
Board of Pediatrics. Dr. Prystowsky is President of the New Jersey Pediatrics
Society. He is on the Council of the American Academy of Pediatrics, New Jersey
Chapter. Dr. Prystowsky has served as the Chairman of the New Jersey Medical
Society Subcommittee on Violence Prevention and Chairman of the New Jersey
Academy of Pediatrics Practice Management Committee. Dr. Prystowsky served on
the Pediatric Clinical Advisory Committee at the New Jersey Department of
Health. Dr. Prystowsky served on the medical advisory committee for Blue Cross
Blue Shield, First Option and Prucare. In addition, he currently serves on the
Credential Committee for Horizon and the pharmacy and therapeutic committee for
Horizon Blue. He is Secretary of the Primary Care Physician of NJ IPA and
President of the Quality Physicians Network of America. Dr. Prystowsky is one of
the cofounders and current Secretary/Treasurer of the Children's Emergency
Medical Fund of New Jersey. Dr. Prystowsky served on the health advisory
committees for Governor Whitman and Senator Rice, and was the health chairman
for Senator Rice's mayoral election team in Newark, New Jersey. Dr. Prystowsky
was the principal health advisor for Senator Bradley's bill on women's mandatory
48 hour hospital stay after giving birth. Dr. Prystowksy also serves as a
Clinical Assistant Professor of Pediatrics at the University of Medicine and
Dentistry of New Jersey and has been appointed to the Governor's Task Force on
Child Abuse.

THOMAS R.C. REUTTER, JR., D.O., has conducted a Family and Sports Medicine
Practice in Gloucester County, New Jersey since 1969. He is a past President of
the New Jersey Association of Osteopathic Physicians and Surgeons and of the
American Academy of Family Practice of New Jersey in Osteopathic Medicine. He
sits on the Board of Executive Peer Review of New Jersey. He is a Fellow of the
Academy of Family Practice and a Board member of the Southern New Jersey
Individual Practice Association. Dr. Reutter is a Clinical Assistant Professor
in Family Practice at the University of Medicine and Dentistry of New Jersey
School of Osteopathic Medicine. He is also the physician for Logan Township and
Westville schools. In addition, Dr. Reutter is the team physician for Rowan
College.

DAVID L. SIROTA, D.O., has conducted a private medical practice in General
Practice in Passaic and Essex Counties in New Jersey since 1972. He is currently
Medical Director of the Out-Patient Department and Occupational Health Services
at Holy Name Hospital. Dr. Sirota is a past President of the New Jersey
Association of Osteopathic Physicians and Surgeons. He is an active member of
the American Osteopathic Association and the New Jersey Association of
Osteopathic Physicians and Surgeons. He was Director of Medical Education at
Saddlebrook Hospital and is active in peer review activities.



                                       13
<PAGE>   14

VINCENT J. VIVONA, D.O., J.D., has conducted a private medical practice in
Cardiology in Ocean County, New Jersey since 1979. Dr. Vivona is a Diplomate of
the Board of Internal Medicine (1996). He is also a lawyer currently admitted to
the New Jersey and Pennsylvania bars. He is a Fellow of the American College of
Legal Medicine and an Adjunct Instructor in Healthcare Law at Ocean County
College.

The Company presently has no full-time employees. Pace provides certain services
pursuant to an agreement with the Company. Its employees serve as acting Chief
Executive Officer and Principal Accounting Officer.

Notwithstanding these arrangements with Pace, the Company's operations were
managed by MGM from January - June 1997 and by Horizon from July - December 1997
pursuant to management agreements. Horizon purchased the Company's operations on
December 19, 1997. Pace and Horizon continues to provide certain administrative
and corporate services to the Company.

There are no familial relationships among the directors of the Company.

Section 16(a) Beneficial Ownership Reporting Compliance

The Company believes that no reports were required to be filed during the fiscal
year ended December 31, 1999 because no transfers of the Company's stock were
permitted in 1999.

ITEM 10. EXECUTIVE COMPENSATION

      No director of the Company receives any remuneration for serving as a
director.

      The Company has no employees.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

      With the exception of the Class F and G Director(s), each of the directors
of the Company owns one share of stock of the Company. As a group, directors own
 .38% of outstanding stock.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

      Each shareholder of the Company executed a Physician Participation
Agreement for the provision of healthcare services to the Company's Members.
Accordingly, a large portion of the claims payable and incurred medical costs
were paid to shareholders. On December 19, 1997, the Company consummated the
transfer of its provider contracts to the Purchaser as previously described. No
shareholder individually received any consideration in connection that
transaction.




                                       14
<PAGE>   15

ITEM 13. 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

      The Company has not filed any reports on Form 8-K.

                                   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, MD       DATE
                                      Joseph Billotti, M.D.
                                      Chairman and President


-----------------------------------
/s/RUSS MOHAWK                 DATE
Russ Mohawk
Senior Consultant of The Pace Group, Inc.
Acting in the capacity of Principal Accounting Officer
and Principal Financial Officer of the Registrant)

DATED:  June 20, 2001




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

/s/JOSEPH BILLOTTI, M.D.          Chairman of the Board and
Joseph Billotti, M.D.             President

/s/BESSIE SULLIVAN, M.D.          Treasurer and Director
Bessie Sullivan, M.D.

/s/STANLEY BLOOM, M.D.            Director
Stanley Bloom, M.D.

/s/WILLIAM F. BRENNAN, D.O.       Director
William F. Brennan, D.O.



                                       15
<PAGE>   16

/s/LEE HINDIN, M.D.               Director
Lee Hindin, M.D.
SIGNATURE                         TITLE                         DATE

/s/ALEXANDER R. HOROWITZ, M.D.    Director
Alexander R, Horowitz, M.D.

/s/LOUIS KEELER, M.D.             Director
Louis Keeler, M.D.


/s/LINDA KORMAN, M.D.             Director
Linda Korman, M.D.

/s/MARK LEVEY, M.D.               Director
Mark Levey, M.D.

/s/MARTIN S. LEVINE, D.O.         Director
Martin S. Levine, D.O.

/s/NANCY L. MUELLER, M.D.         Director
Nancy L. Mueller, M.D.

/s/MARK T. OLESNICKY, M.D.        Director
Mark T. Olesnicky, M.D.

/s/EMMONS G. PAINE, M.D.          Director
Emmons G. Paine, M.D.

/s/FRED M. PALACE, M.D.           Director
Fred M. Palace, M.D.

/s/BARRY PRYSTOWSKY, M.D.         Director
Barry Prystowsky, M.D.

/s/THOMAS R.C. REUTTER, JR., D.O. Director
Thomas R.C. Reutter, Jr., D.O.

/s/DAVID L. SIROTA, D.O.          Director
David L. Sirota, D.O.

/s/VINCENT J. VIVONA, D.O., J.D.  Director
Vincent J. Vivona, D.O., J.D.



                                       16
<PAGE>   17


                  Physician Healthcare Plan of New Jersey, Inc.

                              Financial Statements

                                December 31, 2000


                                    CONTENTS


<TABLE>
<S>                                                                             <C>
Report of Independent Auditors....................................................F-2
Statements of Net Assets in Liquidation...........................................F-3
Statements of Changes in Net Assets in Liquidation................................F-4
Notes to Financial Statements.....................................................F-5
</TABLE>



                                       F-1

<PAGE>   18


                         Report of Independent Auditors


The Board of Directors
Physician Healthcare Plan of New Jersey, Inc.

We have audited the accompanying statements of net assets in liquidation of
Physician Healthcare Plan of New Jersey, Inc. as of December 31, 2000 and 1999,
and the related statements of changes in net assets in liquidation for the years
then ended. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets in liquidation of Physician Healthcare
Plan of New Jersey, Inc. as of December 31, 2000 and 1999, and the changes in
net assets in liquidation for the years then ended, in conformity with
accounting principles generally accepted in the United States.




June 20, 2001
New York, New York


                                                        Ernst & Young LLP


                                       F-2

<PAGE>   19


                  Physician Healthcare Plan of New Jersey, Inc.

                     Statements of Net Assets in Liquidation
                                 (In thousands)


<TABLE>
<CAPTION>
                                                                DECEMBER 31
                                                            2000            1999
                                                       ------------------------------
<S>                                                    <C>             <C>
        ASSETS
        Cash and cash equivalents                       $    521        $    344
        Investments, at fair
        value                                              4,075           4,299
        Accrued investment income                             58              72
                                                       ------------------------------
        Total assets                                       4,654           4,715

        LIABILITIES
        Accounts payable and accrued liabilities             167             200
        Due to management company                              9              14
        Cash Overdraft Liability                             122             126
                                                       ------------------------------
        Net assets in liquidation                       $  4,356        $  4,375
                                                       ==============================
</TABLE>


See accompanying notes.



                                       F-3
<PAGE>   20


                  Physician Healthcare Plan of New Jersey, Inc.

               Statements of Changes in Net Assets in Liquidation
               (In thousands, except per share and share amounts)


<TABLE>
<CAPTION>
                                                                          YEARS ENDED DECEMBER 31
                                                                           2000              1999
                                                                    -------------------------------
<S>                                                                <C>                  <C>
        Net assets in liquidation, beginning of year                    $ 4,375           $ 5,022

        Interest and investment income                                      243               286
        Realized losses on sale of investments                              (24)               (6)
        Net change in unrealized gains (losses) on investments               85              (103)
        State Insurance Department assessment                               (26)             (211)
        General and administrative expenses                                (297)             (613)
                                                                    -------------------------------
        Net loss for the period                                             (19)             (647)
                                                                    -------------------------------

        Net assets in liquidation, end of year                          $ 4,356           $ 4,375
                                                                    ===============================

        Net loss per common share                                       $    (4)          $  (140)
                                                                    ===============================

        Weighted average number of shares                                 4,629             4,629
                                                                    ===============================
</TABLE>


See accompanying notes.


                                       F-4
<PAGE>   21


                  PHYSICIAN HEALTCARE PLAN OF NEW JERSEY, INC.

                          NOTES TO FINANCIAL STATEMENTS

                                DECEMBER 31, 2000

1. ORGANIZATION AND RELATED MATTERS

Physician Healthcare Plan of New Jersey, Inc. (the "Company", or "PHPNJ"), a New
Jersey corporation, was formed January 10, 1994, under the sponsorship of
private practicing physicians for the purpose of developing a statewide,
physician-owned Health Maintenance Organization ("HMO"). The Company's
Certificate of Authority ("COA") to operate as an HMO throughout New Jersey was
approved in 1996. The Board of Directors, comprised solely of shareholders,
oversees the activities of the Company.

On December 19, 1997, the Company consummated the transfer and assignment of
certain provider and subscriber contracts constituting its HMO, POS and PPO
operations (the "Transaction") to Horizon Healthcare of New Jersey, Inc.
("Horizon"), the health maintenance organization affiliated with Horizon Blue
Cross Blue Shield of New Jersey, Inc. The Company received a cash payment of
$1,839,300 as consideration for the transfer and assignment.

Although the Company 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. However, in accordance with
the Transaction Agreement, claims incurred prior to December 19, 1997, but first
reported to the Company after December 19, 1998, are the responsibility of
Horizon. In early 2000, 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. No further
communications have taken place with Horizon regarding this matter since early
2000. During 1999 and 2000 the Company had ongoing discussions with the New
Jersey insurance regulators to reach agreement on the most expeditious way to
surrender the COA. The New Jersey Department of Banking and Insurance required a
Custody Agreement in the amount of $350,000 be established for the benefit of
any future liabilities as a condition of surrender of the COA. Subsequent to
December 31, 2000 the Company established the Custody Agreement and on March 7,
2001 the New Jersey insurance regulators approved the surrender of the COA. It
is expected that sometime during 2001 the Company will be dissolved, and after
approval by the stockholders, any assets remaining after satisfaction of the
Company's liabilities will be distributed to stockholders. 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 estimate the amount, if any , that would be available
for distribution. Dissolution would require additional stockholder action.

2. SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

As a result of the sale of its operations to Horizon on December 19, 1997, the
Company implemented a liquidation basis of accounting effective December 31,
1997. The statements of net assets in liquidation at December 31, 2000 and

                                      F-5
<PAGE>   22

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.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting principles
generally accepted in the United States ("GAAP") requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.

INVESTMENTS

All investments are carried at their fair values, with unrealized gains and
losses included in net income.

Investment income, net of investment expenses and amortization of bond premium
and discount, is recognized in income when earned.

Realized gains and losses on sales of investment securities, determined on the
specific identification basis, are included in the statements of changes in net
assets in liquidation.

INCOME TAXES

The Company accounts for income taxes in accordance with SFAS No. 109,
Accounting for Income Taxes. SFAS No. 109 prescribes an asset and liability
method for accounting for deferred taxes, the objective of which is to recognize
an asset or liability for the expected future tax effects due to temporary
differences between financial reporting and tax basis of assets and liabilities,
based on enacted tax rates and other provisions of the tax law. The principal
item giving rise to such differences are net operating loss carryforwards. Under
SFAS No. 109, deferred tax assets are recognized unless it is more likely than
not that some portion of the deferred tax assets may not be realized. At
December 31, 2000 and 1999, no deferred tax assets have been recognized.
Further, for the years ended December 31, 2000 and 1999 or any prior period, no
tax benefit has ever been recognized. At December 31, 2000, the total amount of
net operating losses carried forward and available to offset future income
subject to federal income taxes was approximately $18.5 million.

NET INCOME (LOSS) PER COMMON SHARE

Net income (loss) per common share is based upon the weighted average number of
shares outstanding during the year, in accordance with SFAS No. 128.

RECLASSIFICATION

Certain 1999 balances have been reclassified to conform to the 2000
presentation.

3. MANAGEMENT AGREEMENTS

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


                                     F-6
<PAGE>   23

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. During 2000 and 1999, the Company incurred fees
of $29,275 and $149,363, respectively, related to this arrangement.

The Company also has an agreement with The Pace Group, Inc. ("Pace") to provide
management services and certain corporate financial and reporting assistance not
otherwise provided by Horizon, such as assistance in making required filings
with state insurance regulators and with the Securities and Exchange Commission.
Pace has provided the Company with an "Acting CEO" and "Acting CFO" since its
sale to Horizon.

4. COMMITMENTS AND CONTINGENCIES

The Company was 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. The court held a hearing on April 4, 2000 and issued
a decision on May 15, 2000 denying Dr. Levine's appeal. On May 18, 2000 Dr.
Levine submitted a Motion for Reconsideration. On May 24, 2000 the Company filed
an Order denying the Notice of Motion filed by Dr. Levine. On June 2, 2000 the
Court rejected Dr. Levine's Motion for Reconsideration. On June 6, 2000 Dr.
Levine filed a Notice of Petition for Certification to the New Jersey Supreme
Court and subsequently on July 14, 2000 submitted a brief requesting a hearing.
The Company filed a brief in opposition to Dr. Levine's request that the New
Jersey Supreme Court hear the appeal. Although not entitled to a reply under the
current procedure, on July 29, 2000 Dr. Levine submitted a letter brief in
response to the Company's brief in opposition. The Supreme Court denied Dr.
Levine's Petition for Certification on September 26, 2000.

As of December 31, 2000, the Company's investments included restricted assets of
approximately $316,000, on deposit with the State of New Jersey for solvency
protection.

In 2000 and 1999 the Company was assessed and paid $26,224 and $211,421,
respectively for the Company's portion of a New Jersey State assessment on
HMO's. These amounts assessed by the New Jersey Individual Health Coverage
Program are subject to adjustment in the future. The Company is currently unable
to estimate adjustments to the assessments or future assessments, if any, that
may become due to the Company.

5. SHAREHOLDERS' EQUITY AND DIVIDEND RESTRICTIONS

On March 4, 1994, the Company sought to raise capital through an initial
offering of up to 15,000 shares of stock at a price of $5,000 per share to
physicians who were eligible purchasers. Only physicians who both practiced and
resided in the State of New Jersey were eligible purchasers. The Company issued
3,569 shares as a result of this offering, representing approximately $17.8
million in initial capital.

The Company's registration statement was filed with the SEC and declared
effective November 9, 1995. The purpose of the second offering to physicians who
practice in the State of New Jersey was to raise additional capital of up to
10,000 shares of stock at a price of $5,500 per share. All shares have the same
rights and privileges. In 1996, the Company issued 1,136 shares as a result of
this offering, representing approximately $6.3 million of additional capital.


                                      F-7
<PAGE>   24

In order to ensure the Company operates as a physician-owned HMO whereby
shareholders represent participating physicians in the HMO, the Articles of
Incorporation and by-laws provide certain restrictions on this stock. It is
non-transferable and can only be redeemed by the Company. Circumstances
requiring redemption of stock at current book value in order to preserve the
integrity of the network include death, retirement, disability, loss of license
to practice medicine in New Jersey and termination of an effective Physician
Participation Agreement with the Company. In addition, physicians who fail to
become credentialed by the Company must redeem their shares at the original
purchase price without interest. Physicians who otherwise wish to redeem their
shares may do so at the sole discretion of the

Board of Directors at current book value. After approval, the Board may take up
to six months to redeem such shares. The Company shall not be required to redeem
a shareholder's stock if the Company is insolvent, if doing so would cause the
Company to become insolvent, or if the Company is, or the redemption would cause
the Company to be, in a precarious financial condition.

On July 15, 1997, the Board of Directors of the Company approved a resolution to
place a moratorium on redemptions of the Company's common stock for any reason,
including reasons set forth in the Company's by-laws, because of the prospect
that the satisfaction of all prospective redemption obligations could cause the
Company to be in "precarious financial condition" as that term is defined in the
Company's registration statement on Form SB-2. As a result the Company will not
be required to redeem a stockholder's shares of the Company's common stock in
the event that the stockholder requests such redemption in connection with an
event described in the Company's by-laws, or in connection with the failure of
the Company to credential the stockholder as a provider under the Company's
health care plans, or for any other reason. Seventy-six shares were redeemed
prior to July 15, 1997.

The Company is required to file its Annual Statement prepared in accordance with
accounting practices prescribed or permitted by the New Jersey State Insurance
Department (statutory basis). Such accounting practices vary in certain respects
from GAAP.

The following is a reconciliation of the 2000 and 1999 net loss and December 31,
2000 and 1999 capital and surplus of the Company as determined in accordance
with statutory accounting practices to net income and net assets in liquidation
reported in accordance with GAAP:

<TABLE>
<CAPTION>
                                                                       2000                        1999
                                                                   -------------------------------------
                                                                               (In thousands)
<S>                                                               <C>                         <C>
Statutory basis net loss, as reported                               $  (104)                    $  (544)
Net change in unrealized gains (losses) on
investments                                                              85                        (103)
                                                                   -------------------------------------
Net loss for the period--GAAP                                       $   (19)                    $  (647)
                                                                   =====================================

Statutory basis capital and surplus--as reported                    $ 4,306                     $ 4,410
Net unrealized gains (losses) on investments                             50                         (35)
                                                                   -------------------------------------
Net assets in liquidation--GAAP                                     $ 4,356                     $ 4,375
                                                                   =====================================
</TABLE>

New Jersey State law provides that dividends or other distributions may be paid
only from retained earnings and to the extent statutory capital and surplus is
in excess of the minimum net worth requirement of $1,000,000. The Company is
unable to pay any dividends or make any other distributions of its capital and
surplus without the permission of the New Jersey Department of Banking and
Insurance.


                                      F-8
<PAGE>   25

6. EMPLOYMENT COSTS

The Company currently has no employees. All persons providing services on behalf
of the Company during 2000 and 1999 were employees of Horizon. In addition, Pace
continues to provide certain management services and certain corporate,
financial and reporting assistance not otherwise provided by Horizon, as
previously described. The costs of the Horizon and Pace services are included in
general and administrative expenses on the statement of changes in net assets in
liquidation.

7. INVESTMENTS

DEBT SECURITIES

The following summarizes the amortized cost and the estimated fair value of the
Company's investments in debt securities as of December 31, 2000 and 1999. The
estimated fair values for the Company's investments in debt securities are based
on quoted market prices.


<TABLE>
<CAPTION>
                                                                            GROSS
                                                    AMORTIZED             UNREALIZED            ESTIMATED
                                                                    ----------------------
                                                      COST           GAINS          LOSSES      FAIR VALUE
                                                 ------------------------------------------------------------
                                                                       (In thousands)
<S>                                              <C>               <C>             <C>         <C>
2000
U.S. Treasury and other governmental units          $3,727          $   47          $    -          $3,774
Corporate                                              298               3               -             301
                                                 ============================================================
Total Debt Securities                               $4,025          $   50          $    -          $4,075

1999
U.S. Treasury and other governmental units          $4,334          $    -          $   35          $4,299
</TABLE>

The following summarizes the amortized cost and estimated fair value of the
Company's investments in debt securities by contractual maturity as of December
31, 2000:

<TABLE>
<CAPTION>
                                              AMORTIZED    ESTIMATED
                                                COST      FAIR VALUE
                                            ---------------------------
                                                  (In thousands)
<S>                                        <C>           <C>
Maturity
Within one year                               $   316      $   317
After one year through five
years                                           3,709        3,758
                                            ---------------------------
Total investments                             $ 4,025      $ 4,075
                                            ===========================
</TABLE>


                                      F-9
<PAGE>   26



                                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)

         10.8     Assignment and Assumption of Lease Agreement dated February
                  11, 1997 (incorporated by reference to Exhibit 10.8 in the
                  Registrant's Registration Statement Form

         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 June 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 of 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)


                                       E-1
<PAGE>   27


         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)



                                      E-2