U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB/A-1
(Mark
One)
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30,
1996
|_| TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE
SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM ____________
TO
___________
Commission file number 0-23524
PHC, INC.
(Exact name of small business issuer as specified in its
charter)
Massachusetts 04-2601571
(State or other jurisdiction of (I.R.S.
Employer incorporation or organization) Identification No.)
200 Lake Street, Suite 102, Peabody MA 01960
(Address of principal executive offices) (Zip Code)
508-536-2777
(Issuer's telephone number)
(Former Name, former address and former fiscal year, if changed since last
report)
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_____ PHC, Inc. became subject to the Exchange
Act on March 3, 1994 .
Applicable only to corporate issuers
Number of shares outstanding of each class of common equity, as of October
31, 1995:
Class A Common Stock 1,557,755
Class B Common Stock 847,300
Class C Common Stock 199,964
Transitional Small Business Disclosure Format
(Check one): Yes No X
<PAGE>
The obligated payments to the Surviving Company has been redefined in Part
II, Item 5 below: Also, the number of nursing homes in "Nursing Home
Contracts" has been increased to 35 from 31.
PART II. OTHER INFORMATION
Item 5. Other Information
Effective November 1, 1996, the Company acquired Behavioral Stress
Centers, Inc. ("BSC"), a New York corporation which provides management and
administrative services to psychotherapy and psychological practices in the
greater New York City Metropolitan Area. The acquisition was consummated
through the merger of a newly formed wholly owned subsidiary of the Company,
BSC-NY, Inc., and BSC with BSC-NY, Inc. being the surviving company (the
"Surviving Company") pursuant to an Agreement and Plan of Merger (the
"Merger") between the Company, BSC, the subsidiary, and Messrs. Irwin
Mansdorf and Yakov Burstein, each a stockholder of BSC (collectively,
Messrs. Mansdorf and Burstein are referred to as the "Sellers"). In
connection with the Merger, the Company issued 150,000 shares of its Class A
Common Stock to the Sellers. The Agreement provides that the Company is also
obligated to pay the Sellers 49% of the profits of the Surviving Company over
the next three years plus an additional amount equal to four times 49% of the
profits of the Surviving Company during the third year. The profits of the
Surviving Company will also include profits, if any, from the professional
corporation (defined below). The earn-out consideration is payable 50% in
Class A Common Stock shares and 50% in cash provided that the Sellers are not
obligated to receive more than $200,000 in the form of Class A shares based
on its fair market value at time of payment. Each Seller agreed not to
compete directly or indirectly with the Surviving Company during the four
years following Closing.
At Closing, the Company and Perlow Physicians P.C., a professional
corporation (the "Professional Corporation") of which Gerald M. Perlow, M.D.,
a director of the Company, is a principal stockholder, entered into an Asset
Purchase Agreement (the "Purchase Agreement") with the Sellers pursuant to
which the Company purchased certain assets of Clinical Associates, a
partnership of which the Sellers are the general partners ("CA"), and certain
assets of Mansdorf, which were used in a business operated by Mansdorf doing
business as Clinical Diagnostics ("CD"), for $1,500,000 and the Professional
Corporation purchased contracts between CA or CD and 31 nursing homes (the
"Nursing Home Contracts") under which CA and/or CD provides psychotherapy and
psychological consulting services to patients at the nursing homes for a
$750,000 note of which the Company is the maker. Also at Closing, the
Professional Corporation entered into a five year Management Agreement,
renewable for five additional years, with the Surviving Company pursuant to
which the Surviving Company agreed to provide management, administrative and
billing services to the Professional Corporation and will receive a fee in
connection therewith plus reimbursement of all the practice expenses (as
defined in the Management Agreement) of the Professional Corporation. The
Management Agreement also requires the Professional Corporation to repay up
to $750,000, plus interest at 8% per annum, to the extent payments are made
on the $750,000 note issued to the Sellers under the Purchase Agreement. The
note is subject to pro rata reduction for each nursing home which terminates
its contract with the Professional Corporation during the 90-day period
following Closing.
Also at closing, Dr. Burstein, who is a psychologist and has a Ph.D.
degree, entered into a three year employment agreement and Dr. Mansdorf, who
is a psychologist and has a Ph.D. degree, entered into a three year
consulting agreement with the Professional Corporation pursuant to which Dr.
Burstein agreed to continue to provide psychotherapy services to the
Professional Corporation and to be involved in its business and operations
and Dr. Mansdorf agreed to provide consulting services to the Professional
Corporation. Dr. Mansdorf will also provide psychotherapy services to the
Professional Corporation. The Professional Corporation also employs
approximately 20 psychotherapists, psychologists and psychiatrists in the
greater New York City Metropolitan Area to provide psychiatric and
psychotherapy services to patients, in clinical settings including those at
the nursing homes. CA and CD were providing professional services in
excessive of 30,000 patient visits per year at more than 30 nursing homes and
other institutions.
The foregoing is only a summary of the principal terms of the Merger
Agreement, the Purchase Agreement, the Employment Agreement, the Consulting
Agreement and the Management Agreement, and reference is made to the
agreements, copies of which accompany this filing, for additional information.
BSC, which has been in operation since 1978, provides management,
administrative and billing services to psychiatrists and psychologists,
including CA and CD, and furnishes them with office facilities, secretarial
assistance, billing and general support. It also provides assessment
counseling referral and follow-up services to governmental agencies or
employee associations, while CA and CD provide psychotherapy and
psychological clinical services to businesses, governmental entities and
nursing home patients.
The Company intends to continue the business and operation of BSC and,
pursuant to the Management Agreement with the Professional Corporation, to
provide services to the Professional Corporation, and the Professional
Corporation intends to continue the business and operation of CA and CD.
For the seven month period ended July 31, 1996, the acquired companies
had aggregate net cash flow of approximately $970,000 on cash receipts of
approximately $2,100,000 and expenditures of approximately $1,130,000.
<PAGE>
Signatures
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
PHC, Inc.
Registrant
Date: December 5, 1996 /s/ Bruce A. Shear
Bruce A. Shear
President
Chief Executive Officer
Date: December 5, 1996 /s/ Paula C. Wurts
Paula C. Wurts
Controller
Assistant Treasurer
