The Company recognized interest and dividend income of $120,533 during 1995 as compared to $109,668 during 1994,resulting from the Company's decision to commit a greater portion of its cash in short-term investments over the last two years.
LIBERO & KAPPEL CERTIFIED PUBLIC ACCOUNTANTS 57 OLD COUNTRY ROAD WESTBURY, NY 11590 (516) 333-5511
We conducted our audits in accordance with generally accepted audited standards. 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 consolidated financial statement referred to above present fairly, in all material respects, the consolidated financial position of Healthplex, Inc. and Subsidiaries as of December 31, 1995 and 1994, and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles.
Current assets: - --------------- Cash and cash equivalents $ 440,989 $ 474,280 Investments-available for sale (note 5) 691,509 621,049 Accounts receivable 426,459 349,128 Note receivable - current portion (note 17,050 26,916 4) Other receivables 22,933 19,717 Prepaid expenses 0 5,861 --------- --------- Total current assets 1,598,940 1,496,951
HEALTHPLEX, INC. & SUBSIDIARIES - ------------------------------- CONSOLIDATED STATEMENTS OF OPERATIONS - ------------------------------------- FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994 - ----------------------------------------------
Revenues 1995 1994 - -------- ---------- ---------- Service fee income (note 10)$ 2,253,903 2,284,035 Administrative service income 2,222,163 2,082,202 ---------- ---------- Total service fee income 4,476,066 4,366,237 Premium income 6,801,010 6,238,706 Sales-computer services 79,564 109,265 ---------- ---------- Total revenues 11,356,640 10,714,208 ---------- ----------
Cost of Revenues - ---------------- Direct expenses - related to service fees 1,991,921 1,919,604 Dental expenses - related to premium income 5,658,191 5,155,693 Cost of sales-computer services 39,027 70,464 ---------- ---------- 7,689,139 7,145,761 ---------- ---------- Gross Margin on Revenues 3,667,501 3,568,447 - ------------------------ ---------- ---------- Interest expense 39,293 32,061 Selling, general and administrative expense 3,649,267 3,439,447 ---------- ---------- 3,688,560 3,471,508 ---------- ---------- Income (loss) from operations (21,059) 96,939 Other income (expenses) (Loss) on sale of securities 0 (21,546) Dividend income 16,492 37,678 Interest income 104,041 71,990 Miscellaneous (7,155) (2,463) ---------- ---------- Income before income taxes 92,319 182,598 Provision for income taxes (notes 2 & 7) 21,393 91,470 ---------- ---------- Net income 70,926 91,128 ---------- ---------- ---------- ----------
Earnings per share (note 2) Primary 0.02 0.03 ---------- ---------- ---------- ---------- Fully diluted 0.02 0.03 ---------- ---------- ---------- ---------- Weighted average number of shares of common stock outstanding Primary 3,586,682 3,586,682 ---------- ---------- ---------- ----------
HEALTHPLEX, INC. & SUBSIDIARIES - ------------------------------- CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - -----------------------------------------------
Net income for the year ended December 31, 1994 0 0 0 91,128 91,128
Unrealized (loss) on investments available for sale 0 0 (71,934) 0 (71,934) ----- --------- -------- ------- ---------- Bal., December 31, 1994 3,587 1,971,328 (71,934) 656,032 2,559,013 - -----------------------
Net income for the year ended December 31, 1995 0 0 0 70,926 70,926
HEALTHPLEX, INC. & SUBSIDIARIES - ------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS - ------------------------------------- FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994 - ----------------------------------------------
Cash flows from operating activities: Net income $ 70,926 $ 91,128 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 218,890 247,762
(Increase) decrease in: Accounts receivable (77,331) (7,718) Other receivables (3,216) (1,691) Due from plans 0 6,000 Prepaid expenses 5,861 6,055 Other assets 7,155 2,463 Increase (decrease) in: Accounts payable 49,279 (46,294) Accrued expenses and taxes (5,107) 126,711
Cash flows used in financing activities: Repayment of long-term debt (132,217) (107,697) --------- ---------
Cash paid during the year for: Interest $ 39,293 $ 32,061 --------- ---------- --------- ---------- Income taxes $ 51,560 $ 16,735 --------- ---------- --------- ----------
Most of the Company's business activity is with customers located in New York and New Jersey. A significant portion of the revenues that the Company reports are derived from the Plans. The Company has entered into service agreements with the Plans, subject to provisions providing for annual renewal. The termination of the service agreements would have a material adverse effect on the business of the Company.
Allowance for Doubtful Accounts ------------------------------- The Company considers accounts receivable to be fully collectible; accordingly, no allowance for doubtful accounts is required.
Expenditures representing maintenance and repairs are charged to operations as incurred. Major expenditures, renewals and betterments are capitalized and depreciated over their useful life. At the time properties are retired or otherwise disposed of, appropriate adjustments are made in property accounts and the gain or loss is reflected in operations.
Concentration of Credit Risk ---------------------------- Concentrations of credit risk with respect to accounts receivable are limited due to the large number of customers comprising the Company's customer base. The Company does not require collateral from its customers.
Estimates --------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure 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.
Fixed assets at December 31, consist of: Furniture, fixtures & equipment $ 1,094,516 $ 1,358,024 Capitalized leased equipment 969,465 805,995 Leasehold improvements 43,598 40,129 Leasehold 38,853 38,853 --------- --------- 2,146,432 2,243,001 Accumulated depreciation and amortization 1,278,542 1,484,286 --------- --------- $ 867,890 $ 758,715 --------- ---------
The annual depreciation rates used by the Company are as follows:
Furniture, -fixtures & equipment 5 - 8 Years Capitalized leased equipment 8 Years Leasehold improvements 5 Years Leasehold 1 0 Years
NOTE 4: NOTE RECEIVABLE - ----------------------- 1995 1994 -------- -------- Note receivable at December 31, consists of: Compu-Lan Inc. monthly payments of $2,000 including interest at 10 %, due August 1, 1999. $94,583 $99,970
The Company's investment securities are classified as "available-for- sale". Accordingly, unrealized gains and losses are excluded from earnings and reported in a separate component of stockholders' equity. Realized gains or losses are computed on specific identification of the securities sold.
U.S. treasury notes $ 731,931 $ 652,930 Governmental obligation 76,359 69,586 Bond funds 641,462 621,049 ---------- ---------- $ 1,449,752 $ 1,343,565 ---------- ----------
Balance at amortized cost $ 1,410,503 $ 1,415,499 Gross unrealized gains 39,249 901 Gross unrealized losses 0 (72,835) --------- ----------- $ 1,449,752 $ 1,343,565 --------- -----------
The Company leases executive and administrative office space and equipment under leases expiring at various dates through 2003. The Company has classified its lease of executive and administrative office space as an operating lease. This lease provides for an annual increase of 4% throughout the entire term of the lease.
Federal Current $35,748 $64,116 Prior Year (32,955) 0 Deferred (4,462) (5,797) State Current 23,062 33,151 --------- --------- $ 21,393 $ 91,470 --------- ---------
1995 1994 ---- ---- Federal statutory rate applied to pre-tax income 39.0% 39.0% State income taxes, net of federal tax benefit 19.5 11.1 Prior years over accrual (35.7) 0.0 Other 0.4 0.0 ------ ------ 23.2% 50.1% ------ -------
On April 1, 1985, the board of directors of the Company adopted an incentive stock option plan pursuant to Section 422A of the Internal Revenue Code. An aggregate of 300,000 shares of the Company's common stock have been reserved for issuance under the plan.
At December 31, 1995 and 1994, there were 8,000 and 8,000 shares respectively, excercisable at a price of $.60156250 per share.
Eligible, end of year for exercise currently at prices ranging from $1.089 to $1.1979 per share.
On April 17, 1992 the Company reserved 500,000 shares of its common stock to be used under this plan. Only non-qualified stock options as defined under section 422 of the Internal Revenue Code, may be issued under this plan.
The following is a summary of transactions: Share Under Plan ---------------- 1995 1994 ------ ------ Outstanding - beginning of year 55,000 0 Granted during the year 55,000 55,000 Canceled during the year 55,000 0 Exercised during the year 0 0 ------- ------- Outstanding - end of year 55,000 55,000 ====== ======
On November 29, 1994 the Company granted an option to purchase 8,000 shares of the Company's common stock to a consultant to the Company. These options were canceled on November 28, 1995. The Company then granted an option to purchase 8,000 shares of the Company's common stock to the same consultant on November 28, 1995. These new options are exercisable at $1.089 per share and expire on November 27, 2005.
The Company has adopted a 401 (K) plan which allows employees to defer a percentage of their wages. The plan requires the Company to match 25% of employee deferrals up to 5% of the employee's wages. The Company's matching contribution was approximately $8,000 in 1995 and $11,000 in 1994.
Cash & short-term investments $ 1,102,498 $ 1,102,498 $ 1,095,329 $ 1,095,329
The fair value of financial instruments classified as current assets or liabilities approximate carrying value due to the short-term maturity of the investment. The fair value of receivables approximates market. For long-term investments, fair values are estimates based on quoted market prices. The fair value of capitalized lease obligations is based on current rates at which the Company could borrow funds with similar remaining maturities.
The fair value of the loan to Dentcare Delivery Systems, Inc. is not disclosed because it is not practicable to estimate its fair value (note 10).
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND --------------------------------------------------------------- FINANCIAL DISCLOSURE. --------------------